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Hits and Misses of 2000 in Europe

[London, ENGLAND] 2000 started with great promise for Internet companies in Europe, but is ending with uncertainty, despite a surge in Internet usage by the general public.

The "misses" have included auctioneer QXL.com which has seen its share price decline by 99 percent.

The "hits" have included AOL, which has accelerated its European growth by introducing unmetered access based on a viable business model.

But what have been the most important events and trends in the European Internet economy over the past twelve months -- and what do they mean for 2001?

At the top of the list has to be the auctions for third generation UMTS (Universal Mobile Telecommunications System) licenses which have threatened the telecoms industry with recession. The governments of the U.K. and Germany believed themselves to be the biggest winners, having gained around US $70 billion between them -- but in effect it has been just another "taxation" that will lead to higher prices for the consumer.

For 2001, the third generation licenses mean a debt burden without any product -- as the first 3G services are still a year away.

In the meantime, the imagination of the European public has been caught by Short Messaging Services (SMS), with mostly young people sending billions of short text messages to each other's mobile phones. Thousands of visitors to U.K. Web site SMSBoy.com have been sending free messages to mobile phones from the desktop over the Internet.

"SMS text messaging has become hugely popular with the 15-24 age group, thanks to the pay-as-you-go phone revolution -- people like students, those starting out in their first jobs and so on," said Shakil Khan, who launched SMSBoy.com in November.

At the beginning of 2000 most experts breathed a collective sigh of relief when the Y2K bug (remember the Y2K bug?) failed to materialize. The scene was set for the uninterrupted progress of the Internet revolution. But investors soon found that piling into Internet stocks was not a sure way to riches.

High profile sites such as boo.com and clickmango.com were among the biggest "misses" of the year, but there were dozens of others. In particular, American dot-coms began to have second thoughts about expanding into Europe. Dressmart.com pulled out, while Buy.com also closed its offices in France and Germany. Eventually, even The Street terminated TheStreet.co.uk, consigning it to Dotcom Graveyard in a cost-cutting exercise aimed at protecting its core U.S. business.

The demise of some dot-coms, however, did not signal the end of Internet growth in Europe. On the contrary, it was the initial success of the dot-coms that prompted "bricks and mortar" companies to hit back and become "clicks and mortar" companies with a presence on the Net. That very presence has helped to drive the weaker dot-coms into oblivion.

In 2001, Europe will have a new top level domain, .eu ("dot eu") which governments hope will pose a serious challenge to the worldwide dominance of the .com enterprises. Britain and Denmark will enjoy .eu status, despite not using the euro currency.

Broadband access is likely to be another "hit," despite the 2000 failure of United Pan-Europe Communications (UPC) and Excite@Home to conclude a deal that would have created the largest broadband enterprise outside North America.

In the U.K., BT's gradual and reluctant unbundling of the local loop will eventually lead to widespread broadband access over telephone wires. For content providers it is this uncertain evolution of the medium itself which poses the biggest problems, perhaps leading to more dot-com collapses even as the number of Internet users continues to rise.

When the shakeout is over, the Internet in Europe will be leaner and fitter -- and better able to cope with the brave new world of 2001.



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