Technology '98: A new era of communication that benefits all

In the past decade the Internet has changed from a system used by hobbyists and experts to an information network that will make a real difference to online commerce. Stephen Pritchard reports on the rise of the Internet and examines the chances of success for alternatives such as digital television

Ten years ago, the Internet was an esoteric network of computers linking universities and government research sites, mainly in North America. By the Millennium, it will be a popular communications and entertainment medium, with millions of subscribers in Britain alone.

The World Wide Web was instrumental in that change. When the Internet used the Unix computer standard, and was based around text, it had little to appeal to the casual user. The World Wide Web puts Internet information into an intuitive, graphical format. Increasingly, this means stereo-quality sound and moving images as well as ordinary text and photographs.

Evidence for the Internet's position as a mainstream medium comes from the roll-call of companies backing it. The telephone companies, in particular British Telecom and Cable and Wireless, are taking the Net very seriously. So, after some hesitation, is the mighty Microsoft, which has its own service, the Microsoft Network, and a popular browser, Explorer.

The Internet has moved from a niche to general acceptance, suggests Cliff Stanford, managing director of Demon Internet. Stanford expects that Demon alone will have a million subscribers by the year 2000, both businesses and consumers.

A similar prediction comes from Jonathan Bulkeley, head of America On Line in the UK. He points out that the Net is one of the fastest-ever growing media. Radio, for example, took 38 years to reach half a million listeners. The Net achieved half a million subscribers in just five years. "In the UK, we are looking at growth of 100 per cent a year, the figures could even be higher."

Individuals, Bulkeley believes, are attracted to the Net by the rich amount of information it offers, especially on the Web. But it is communications that they use most of all. "It is more a communications tool than an information resource."

That growth will depend largely on how people connect to the Internet. Jonathan Bulkeley believes there are two factors: the price of computers, and the success of alternatives, such as the Internet set top-box, which lets home users connect their TVs to the Internet. "It is likely to be three years before set-top boxes get there," he says. "It will be 2002 before they make a real impact. The PC makers have a chance to lower their prices."

Digital TV will greatly increase the Internet's reach, but existing Internet companies are unsure of its real impact. Currently, digital TV services limit access to their selection of Web sites, so it is not the same as full Internet access via a computer. "As digital TV arrives with a fanfare in 1998, will there be masses of access to the Internet? "asks Brian Mulligan, managing director of Internet provider Easynet. Its success, he thinks, is by no means guaranteed: "TV is not the best way to view much of the Web."

At Demon, Cliff Stanford is unsure how appropriate the TV is as a way to surf the Web. He believes there is a future for dedicated Internet devices, along the lines of the Nokia 9000 mobile phone and miniature computer he already uses. "I personally expect the dedicated device to make an impact," he says. However, he does suggest that Internet points will become as common in houses as TV points are now. This will not just be for e-mail and the Web. The Internet will carry a host of new services. It's already possible to pick up television or radio over the Internet, and use it for home banking and shopping. These applications will grow.

Businesses, too, will be drawn to the Internet by the opportunities it offers. "The area that is most promising is e-commerce," says Brian Mulligan at Easynet. At the moment, he believes the potential for online commerce is restricted by the relatively small percentage of households that have PCs. Real growth will not happen until cheaper alternatives arrive. Businesses, though, have good opportunities to sell to other businesses, where the office PC is already ubiquitous.

The Internet is changing from a way of gaining competitive advantage - stealing a march on rivals who are not yet online - to a real way to buy and sell goods. "We are seeing people really making money out of the Internet, and making more sales than they did through traditional channels," says Robert Offley of PSI Net, which specialises in connecting businesses. "The Internet bridges the gap between the manufacturer and the customer."

Businesses are benefiting from the Internet in more mundane ways too. For a large number of companies, especially in the service sectors, administration accounts for a large proportion of costs. Handled carefully, the Internet can cut those costs, whilst benefiting the customer, with applications such as online insurance claim forms.

Jonathan Bulkeley believes this is a critical development. "Businesses have a huge stake in doing business electronically," he says. "It is more efficient." He points to the Federal Express Web site, which lets customers track the progress of a parcel. For each person who uses the Web site, FedEx has one less call into its call centre, and less cost. He expects more firms to follow suit. "It gives me control, and it reduces their costs," he says.