More than half of European homes will be hooked up to digital television offering "triple play" services of TV, broadband Internet and telephony by the end of the decade, a new study forecast yesterday.
The study, by consultants Booz Allen Hamilton, found that the creation of the digital home will trigger €100bn (£60bn) of investment and generate 100,000 jobs, mainly among infrastructure providers such as cable and telecom operators. A further €35bn will be invested by content providers.
The consultants warned that heavy-handed regulation, blocking competition among the providers, could cut the cumulative investments by 40% to €59bn and wipe out 90% of the job creation.
The analysis came days after France Télécom, the incumbent operator in Europe's third-largest economy, confirmed it had lost 600,000 fixed-line subscribers last year - mainly to new "triple play" providers such as Neuf Cegetel and Alice. Issuing a profits and sales warning, Michel Combes, the group's finance director, said Internet-based telephony (VoIP) would account for 40% of fixed-line traffic by the end of this year, compared with 15% in 2005 and 1-2% in 2004.
Thomas Künster, Booz Allen Hamilton partner, said digital TV would be available in 60% of homes in the 25 EU states by 2010 and would overtake broadband Internet penetration, which would stabilise at 53%. "The long-term winners will be the players who are first to offer consumers the so-called 'triple play', access to all three services from a single source, on favourable terms and conditions."
About 20% of EU homes now have digital TV, including 11% in Germany and 57% in Britain, while 24% have broadband Internet, including 23% in Britain and 44% in the Netherlands.
According to Viviane Reding, EU commissioner for the information society and media, there are more than 50m broadband connections in Europe - up 60% in the last year. The information and communications sector accounts for 5.3% of GDP, 3.4% of employment and 25% of productivity growth.
Mr Künster said telecom incumbents such as France Télécom, which is stepping up its high-speed broadband and TV offerings, could dominate the digital home market as they were already much more dominant than cable operators. But given the right regulatory framework to promote competition among infrastructure providers, cable TV operators could emerge as the only credible contenders, generating a third of new jobs.
"The pressure to consolidate in the European cable TV industry is further increasing. Moreover, we can also expect to see mergers which cut across the traditional boundaries of the industry, as the example of Virgin Mobile and NTL/Telewest shows," he said.
Ms Reding, meanwhile, said in Munich that regulators must encourage new entrants to high-speed networks and avoid unilateral national solutions in a market that was becoming more and more European. "It is absolutely crucial we all understand this is a European process and that the [European] commission cannot tolerate fragmented national approaches which may favour only the former national incumbents and could thereby block competition and the development of a true European market for electronic communications," she said.
Ms Reding singled out Germany for concern, urging the regulator to ensure that the relevant access obligations under EU rules are fully complied with. "Otherwise, the German consumer will have to pay the price in a couple of years, lose interest and then turn his back on the so promising world of the digital economy."
She coupled this with a call for a pan-European system of intellectual property rights to enable EU content providers to compete with those on other continents. A revised "television without frontiers" directive should allow for a British video-on-demand provider to deliver services to all 25 EU states on the basis of British law.
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