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According to UK market research firm ScreenDigest, the broadband growth rate in the third quarter for Europe's five largest markets - Germany, Britain, France, Italy and Spain - was five percent, down from 11 percent the previous year as a smaller and smaller segment of the mass market opts for the upgrade.

'No market, in either Europe or in the U.S., will hit the saturation point [for broadband growth], but what we are looking at is significantly reduced growth rate' said Dan Cryan, a broadband analyst with ScreenDigest. He added most major territories can expect gradually decreasing broadband growth rates until 2010 when it will either flatten or decline.

The significant drop-off in the growth rate was expected as the market begins to mature in Western Europe, but the flattening trend arrives just as increased competition begins to put a significant pressure on pricing across the region.

In the UK, the likes of BSkyB, Carphone Warehouse and Orange are all offering 'free' broadband services for existing contract customers.

The new entrants seem to be taking business away from ISPs. 'We've heard from a number of ISPs that

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the churn rate has gone up quite appreciably' since Sky, Carphone Warehouse, and, to a lesser degree, Orange, began offering "free" bundles,' said Cryan.

The picture is considerably rosier in Britain than in France. In the UK, 62 per cent of PC-equipped homes have made the switch to broadband compared with 72 per cent in France, suggesting the growth potential is considerably stronger north of the Channel.

Britain's third quarter broadband growth rate was 7 per cent while France notched a 3 per cent growth rate. And, the UK outpaced France this year to become the second largest broadband market in Europe, after Germany, in terms of absolute subscribers.

Britain is expected to have 13.4 million broadband subscribers by year-end, up from 9.8 million at the end of 2005. France is expected to have 11.9 million by year-end while Germany continues to rank first with an expected year-end tally of 14.6 million broadband subscribers, ScreenDigest reported.

One factor that could extend the life of broadband would be IPTV and VOIP, two services that could appeal to non-techy consumers, though not to the extent of traditional net broadband, Cryan added.

Across the Channel Telecom Italia in Italy is trying to lure away satellite customers with an IPTV service of its own, Alice. France Telecom, Orange's parent company, also has an IPTV service available in urban areas of France, reporting some 230,000 subscribers in March of this year.

France is expected to outpace Britain in the IPTV market simply because British consumers will be more likely to obtain their television services from satellite and cable operators going forward; satellite and cable TV remain a comparatively under-developed market in France.