Europe is now home to 30 internet protocol television (IPTV) providers and by the end of this year the service will be available in nearly every European country, IDC has predicted.
The analyst firm also said the market could grow 71pc a year from US$500m to be worth US$4.3bn by 2010.
IDC forecast that in the next five years household penetration of IPTV services will increase from 1pc this year to 11pc by 2010.
The countries that will make up a large portion of this growth are France, Italy and Spain, where the pay TV markets are less developed than elsewhere in Europe, where the first large IPTV services were launched and where some of the more innovative providers are based.
However, while IPTV promises a major new source of revenues for service providers, it also requires massive network investments as well as the ability to navigate the complex world of content.
In addition to their existing competitors in the service provider environment, telcos entering this area will encounter a new range of competitors in pay TV providers.
“IPTV providers should be aware that negotiating content deals is a tricky and time-consuming business and may take longer than they may anticipate,” said Jill Finger Gibson, research director of European Consumer Multiplay Services.
“Rather than negotiating individual deals with a wide array of content providers, service providers should seek out content aggregators wherever possible to help improve their time to market for content,” Gibson said.
Gibson also believes that IPTV infrastructure gives service providers an additional platform to the world of user-generated content and online communities.
She said the popularity of companies such as YouTube and Myspace.com has shown how consumers have embraced video as a means of communication as well as entertainment.
Adding TV to the range of end terminals will foster growth in more of these types of services, IDC claimed.
By John Kennedy