Costly calls will kill Euro Net market

The research reveals the number of homes wired to the Internet will triple over the next three years to 47 million -- much of the growth spurred by free Internet packages -- but low Internet usage across Europe will be a major problem.

Since the start of this year, a whole raft of household names have joined the growing free ISP market, including Dixons, Tempo, Tesco and Arsenal Football Club, offering access for the price of telephone call. Some are now offering free off-peak Internet calls too.

But Jupiter analysts warn the European system of metered charges for local telephone usage will be a barrier to growth.

"There is a misperception that the European Internet market is simply one or two years behind the US; however, structural differences exist between the two markets," said Jupiter analyst Phil Dwyer.

Jupiter also warned existing ISPs that the current system of high, metered fees levied on consumers is under increased threat. "Telephone usage is metered and that alone will continue to hold back the growth of online advertising, content and commerce ventures in Europe by inhibiting Internet usage."

Instead, companies should adopt "free-to-air" strategies -- free access, unlimited use -- to further boost market growth, said Noah Yasskin, an analyst for Jupiter's European Internet Strategies group.

In addition to "free-to-air" packages, companies should focus on advertising, commerce, and content partners to increase Internet usage.

Customers should be enticed online by packages that offer free, unmetered calls, discounts and subsidised Internet access which varies from country to country.