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Digital television services are expected to rise in popularity during 2006, with the European market outstripping the US by the end of the year.

According to the latest report from market analysts Datamonitor, this year will be a "watershed" for high definition television HD TV), internet TV (IPTV) and mobile TV.

In Europe some 65m households will make the transition to digital TV services by the end of this year. Already, more than 100m houses in Europe and the US use digital services, with this figure rising to 187m by 2010.

However, digital TV penetration will remain higher in the US until the end of 2009. By this time, an estimated 63 per cent of households in both regions should be receiving digital TV services.

"Competition across the digital TV sector is now greater than ever before, prompting operators to develop their offerings in order to attract and retain subscribers," says Adrian Drozd, senior media and broadcasting analyst and author of the study. "The emergence of IPTV will act to boost levels of competition and add new impetus to the plans of established operators."

However, IPTV is expected to remain a niche market for the most part. The report points out that the medium is facing stiff competition from cable and satellite services, and now digital terrestrial television (DTT). IPTV is expected to account for 9.5m subscribers in Europe by the end of 2010, less than nine per cent of households.

"IPTV is primarily a defensive move by the major service providers rolling out services. While they have the potential to generate additional revenues for operators, the key driver of deployment in the short term at least will be improving customer loyalty and adding greater depth to the services provided to consumers over ADSL networks," says Drozd.

"In some cases, IPTV may prove to be a financial loss leader, albeit an essential one if telcos are to retain a significant position with regard to provision of consumer communication and entertainment services."

After the initial excitement over HD TV, the report is forecasting steady adoption over the next two years. The US is leading the way, with its sales of HD TVs some three years ahead of the European market. At the end of 2005, almost 20 per cent of US households owned a HD-capable TV, compared to about two million HD-ready households in Europe. Services in Europe are also limited.

The personal video recorder (PVR) market is disappointing in Europe, with fewer than two per cent of households expected to have a PVR by the end of the year. Sky will account for a significant number of these households; it currently has 1.6m Sky+ subscribers.

The digital TV market in Europe is also due for a boost in the coming years thanks to moves to switch off analogue broadcasts. The European Commission has already expressed its wish that the analogue television service be switched over to digital in the coming years; 2012 has been mentioned as a target date.

Ireland's digital service is still in its infancy, although British broadcaster Sky has a considerable foothold in the market. The broadcaster has more than 427,000 subscribers in Ireland.

However, the situation may change soon enough; Ireland's digital terrestrial television (DTT) pilot programme is getting underway, and will run for two years. Broadcasts will take place from two separate sites.

Copyright © 2006, ENN

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