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The report says that one of the key possibilities for 2007 is that the internet could be approaching its capacity.

'The twin trends causing this are an explosion in demand, largely fuelled by the growth in video traffic and the lack of investment in new, functioning capacity,' said Igal Brightman, global managing partner at Deloitte. 'Bottlenecks are likely to become apparent in some of the Internet's backbones, the terabit-capable pipes exchanging traffic between continents.'

He said that investment, either in laying new cable or lighting existing fiber, may be stifled by continuing

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falls in wholesale capacity prices.

Brightman added that similar capacity constraints may well appear in the ISP and telecommunications networks that provide broadband connectivity to consumers.

'The impact may be most noticeable in the form of falling quality of service,' he said. 'Surfers are most likely to be annoyed by the slowdown in service. And it may only take an unexpected upsurge in video usage to turn the inconvenience caused by a drop in access speeds into full-scale consumer dissatisfaction.'

He said that the debate over net neutrality will continue this year and will become more polarised if the Internet's capacity is threatened. Advocates of net neutrality argue that any attempts to prioritise traffic undermine fundamental freedoms of the Internet, while opponents say that their business models are undermined by bandwidth hungry applications.

'Future growth will likely require considerable investment in new infrastructure. But infrastructure owners may believe they are able to recover too little of the cost to justify the investment,' said Brightman.

He said legislation was unlikely to resolve this argument and both sides would be more likely to have to seek alternative routes to agreement.