OBSERVER: Television and mobile phones and computers are all involved in the exciting new world of digital media. The apparent convergence of all these communication technologies makes it very difficult to understand this market, both for participants and onlookers.

Not only are the firms serving these three sectors competing with each other, but they are also facing indirect competition from areas they never had to consider before in which the rules of the game may be quite different.

At the National Digital Media Conference in Belfield last week, however, there seemed to be a consensus among the participants that television would continue to dominate entertainment and will not face a serious challenge, either from PCs or phones. The latter just do not offer the same quality of either vision or sound to be a credible alternative to the standard TV screen.

It must be comforting for the television companies to hear this, but they have their own problems in trying to manage the transition from analogue to digital transmission.

The current problems of ITV Digital have been much publicised in recent weeks and have been largely attributed to the collapse of a contract with the British football league to broadcast their matches.

In fact, however, digital television has more fundamental problems caused by the huge level of investment required to set up the infrastructure for this service, and the failure of the market to subscribe for the service as quickly or as widely as expected.

Carlton and Granada who jointly own ITV invested £1 billion in setting up this service and is still losing £1 million per day. Rupert Murdoch's Sky Broadcasting has invested as much again but has had better success in attracting subscribers.

At the time digital TV was launched in 1999, it was thought that it would cause an almost immediate transformation of the market, with digital replacing analogue just as colour had replaced black and white TV many years before.

In fact, only about 25 per cent of British homes have opted for the new service to date, which is similar to the experience in the US. Ireland is the exception to this rule with 39 per cent of homes signed up, thanks to the very generous offer by Sky who entered this market very aggressively.

What all this suggests is that RTÉ is quite right to avoid trying to compete directly with these big players by launching its own digital service.

Its decision to give digital access to its programmes via the Sky service seems like the best possible option for a relatively small player with limited resources.

While TV may still dominate the digital airwaves for entertainment, it seems equally likely that PCs and mobiles will become and remain the most popular method for communicating information and, increasingly also, for making commercial transactions.

Checking newspaper headlines, stock market prices, property listings, recruitment advertisements and so on are easy and up-to-date on the internet and are becoming standard routines for so many consumers.

Researching markets or any other subjects of interest is also becoming an obvious and effective use of the internet, particularly for business users.

The big question facing information providers of this type is how to make money from the information that they dispense.

Many companies, both old and new, raced to get a foothold in this market by providing free information. This includes such venerable publications as The Irish Times, Financial Times, Wall Street Journal etc.

The rapid uptake of these information services, as measured by consumer impressions, vindicated their strategy, but they still face the difficult question of how to turn these page impressions into revenues and profit.

They are all now turning their websites into subscriber services, for at least some of their output, and it seems likely that this will work for those publications with a strong name and customer franchise, where there is believed to be genuine value in the information they provide.

Commenting on the internet recently, Jeff Bezos of Amazon said that only 1 per cent of commerce is being transacted over the internet currently but he expects this to rise to at least 15 per cent in a few years time.

Gartner Dataquest quoted a figure of 2.4 per cent as the proportion of retailing conducted over the internet in Europe in 2001. No doubt this will grow exponentially over the remainder of this decade.

A high growth scenario like this is obviously very attractive for internet content providers, provided they have the strong brand names and merchandise consumers want.

The greatest probability of success lies with those companies with strong, well-known brand names who already have an established consumer franchise but who can expand their geographic reach by using the internet to supplement their normal sales outlets.

The growth of activity on the internet, however, does not spell expansion for all areas of that industry.

For, example, worldwide PC sales fell by 5.1 per cent in 2001 and mobile phone sales fell 3.1 per cent according to Gartner Dataquest.

It is becoming widely accepted now that those markets are reaching saturation and are unlikely to experience any significant sales growth in the near term. Mobile phone penetration in Europe is now 75 per cent and there are more mobiles in use than fixed line phones, so the room for further growth is quite slight.

These industries are likely to become much more competitive, therefore, as the main players fight to hold their market shares. This could mean pressure on profit margins, particularly if they resort to price competition.

• Mary Lambkin is Professor of Marketing at Smurfit School of Business, UCD