Making cheap telephone calls over the internet could be much more popular among consumers than has been previously estimated, leaving incumbent telecom firms highly vulnerable.

More than 50 million western European consumers with a broadband internet connection at home may use telephony software and special phones by 2008, a survey by British research group Analysys said yesterday.

"The impact on traditional telephony providers' revenues could reach €6.4 billion in 2008, representing 13 per cent of the residential fixed-line voice market," said Mr Stephen Sale, an analyst with the firm, adding this was a worst case scenario.

Previous estimates forecast that up to five per cent of revenues could be eaten away by internet telephony.

The results of the survey will cause concern in Ireland among the two biggest fixed line firms Eircom and Esat BT.

Earlier this month the regulator sanctioned the launch of a new number range for people who want to use internet telephony systems.

Voice over Internet Protocol (VoIP), as internet telephony is officially known, has become popular among consumers in the last year thanks to free software from providers such as Skype.

Two weeks ago, Luxemburg-based Skype said it had reached the milestone of one million simultaneous callers. Calls are usually made from computer to computer, although Skype sells a service where computer users can call normal phones at low per minute charges.

Skype and rivals like Popular Telephony are working with hardware manufacturers like Siemens, Cisco and Plantronics to develop VoIP-enabled home phones that plug into broadband modems.

This will open the way to call VoIP users - at the moment this is not possible, because VoIP users have to be online if they want to be reached via the Internet.

It is creating a critical mass for rapid adoption, Sale said. Most calls from home phones are made to a handful of friends and relatives, and it is easier to convince a small group to move to internet telephony, than a large group.

Operators are divided over what they should do.

The chief executives of Deutsche Telekom and British Telecom , two of Europe's top phone carriers, differed in their views on how to counter the decline of their traditional fixed-line sales.

British Telecom's Mr Ben Verwaayen said the telecoms industry has to prepare for next-generation internet networks.

Kai-Uwe Ricke, meanwhile, saw his voice telephony business threatened mainly by mobile phones. - (Reuters)