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In its latest report, 'Consumer broadband markets: approaching maturity?', the company predicts that in the next 18 to 24 months the aggressive pace of broadband adoption across Europe will follow a similar pattern to the uptake of dial-up and begin to plateau.

'The current situation in many markets can be best described as one of rapidly increasing penetration, where broadband has effectively entered its growth sweet spot,' says Tim Gower, enterprise communications analyst at Datamonitor and author of the report. 'With some markets potentially experiencing changes in the household penetration of broadband of up 10 per cent in a calendar year, service providers must be well positioned to take advantage of the forthcoming penetration acceleration, prior to the inevitable slowdown.'

Gower told us that although he expected these growth rates to cool over the next two years, he didn't expect the markets in the US and Europe to hit a 60 per cent broadband penetration

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point until nearer the end of the decade.

Although the Office of National Statistics recently reported that 57.4 per cent of Internet-connected households were on broadband, this is in respect of Internet-connected homes, so the saturation level of 60 per cent may still be some way off.

Even so, the UK is on track for 8m broadband connected homes by the end of the year. In June, BT released figures stating 7.4m homes were connected to broadband, with 2m using cable and 5.4m on DSL.

This growth has been driven by a mix of companies vying for business by cutting prices and increasing speeds, as well as new services. The greater bandwidths now available have meant that broadband is finally able to start delivering on its promise, with video, voice and other services being delivered over these connections.

Gower still expects companies to focus on ruthless price competition for the foreseeable future in the rush to add sign-ups, boosting subscriber figures. This will increasingly show DSL as the broadband connection of choice. 'ISPs will always look to compete on factors such as bandwidth and price. As it becomes harder to differentiate in these areas, value-added applications and content will become more important,' he said. 'Smaller independent service providers may struggle to compete with the marketing power of the incumbents, while alternative service providers (e.g. offering Fibre to the home, satellite, fixed wireless) will need to develop strategies to compete in areas covered by DSL or cable in order to survive.'