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In The Digital Bomb II (2002-21), we asserted that the worldwide switch to digital TV would take place more slowly than most commentators expect. We base this view on our assessment that there is no financial incentive for the operator to make the switch from analogue to digital TV.

1. The evidence of a rapid slowing of the growth in multichannel homes is increasingly clear. We predict that Sky will miss its target of 7 million subscribers by the end of 2003 by 300,000 homes, if current trends continue.

2. TV viewing levels appear to have returned to 2001 levels, after a fall in the first months of this year. The evidence for a secular decline in overall viewing is weak. But ITV1 continues to plummet.

Digital terrestrial television in the UK and elsewhere faces three enormous problems: (1) the paucity of attractive programming available for free distribution; (2) the uncertainty of the coverage and picture quality; and (3) the low channel capacity compared to satellite and cable. The four bids for the UK DTT licences try to address these problems, but with limited success. In the next two weeks the Independent Television Commission will try to choose the least worst proposal.

The rationale behind the deal appears to be that management needed to demonstrate their continued commitment to building a successful US business, an ambition that all EMI managers have had for the last twenty years. Robbie Williams has never sold well in the US, and we regard EMI’s public commitment to make him in a star in America as an extremely testing challenge. Robbie’s brand of cheery mainstream pop is not as attractive to US record buyers as, say, Radiohead’s gloomy rock. And the market for European music in the US has rarely been weaker.

The last three years have seen huge concentration in the marketing services industry. One source suggests that 56% of the world’s advertising billings now pass through just seven buying groups, up from 32% in 1999. Though the advertising recession in major economies shows little sign of abating, the major groups continue to grow by acquisition, often financed by debt. At the same time, media planning and media buying have moved to the centre of these groups after a century of being little more than a clerical activity at the periphery of their business.

The last few weeks have seen several enthusiastic announcements from telecom operators eager to start public Wi-Fi services. In this note we look at the prospects for public Wi-Fi. Our analysis suggests that Wi-Fi is likely to suffer from three major problems

Our central projection – that about 50% of households will have access to multi-channel TV in 2006 – is far lower than other forecasters. Indeed, if we are wrong, it will probably be because we are too pessimistic. However, more sanguine observers should note that Zenith, probably the most quoted industry analyst, has quietly reduced its digital TV penetration forecasts by 5 million homes (over 20% of UK households) in the past year.

Camera phones represent the best hope of the mobile operators. Proven demand in Japan gives European operators reason for optimism that cameras will increase ARPU. Handset manufacturers believe it will ignite replacement demand.

This report provides our analysis of the main factors in the evolution of the global music market in the period 2002-2006.

This note provides an update on the state of the UK broadband market at the end of the summer. The number of broadband users in the UK is rising fast, but much of this growth has arisen from the introduction of NTL's 128k product. 128k is not usually considered a data speed consistent with the term 'broadband'. However, ISPs should note the level of interest in this product and its highly competitive price point (£14.99). We continue to say that to be a product of appeal to the majority of Internet users, broadband has to be priced at no more than £20 per month. We also look briefly at options facing non-BT ISPs and suggest that the best strategy may be to launch a broadband product but only make it available to those that ask for it, rather than actively promoting it.

Those that defend E4 and ventures like it point to the importance of programmes like Big Brother, which was hugely successful on the satellite service. We try to demonstrate that even this undoubted success brought little financial benefit to E4. Big Brother, broadcast day and night on E4 over the summer, generated about half of E4’s total viewing for 2002. Nevertheless, it probably brought in no more than £8m advertising revenue, not enough to cover two months costs of running E4. The competition for the 18-34 audience on satellite is beginning to become acute. The best thing for Channel 4 to do would be to close E4, blaming government for allowing the BBC to sink £100m a year into programming a similar, but publicly funded service.

On Wednesday Orange announced a simple new single tariff range for all its new contract users. Although there are some benefits to both consumers and Orange of tariff simplification, the main impact appears to be to increase the price of calls for off-peak users, which is a sensible strategy for Orange and consistent with other tariff increases we have seen recently. Orange may lose customers because of this, but it has helpfully given four weeks warning of the change to the other operators, who may react with changes of their own.

Weak economic growth is usually blamed, but we believe that other forms of communication are substituting for fixed voice calls. Substitution of fixed line calls by calls from mobile phones is increasingly less important. By contrast, our conclusion is that Internet-based communication (email and instant messaging) has recently become a far more important source of competition to fixed line voice calls.

In this report, we look at the components of a theoretical DCF valuation of European mobile operators, focusing on Vodafone as the most salient example, and compare our views with those of the ‘analyst consensus’. Perhaps unsurprisingly, we are more conservative on revenue and margin forecasts than most forecasters, but an area in which we are uncharacteristically optimistic is cost of capital; the one benefit of the mobile industry’s transformation to low but stable growth is that WACCs should fall through both reduced betas and the ability to take on more debt. Our resulting value per share for Vodafone is lower than the analyst consensus forecasts would give, but is still a healthy 115p. We should stress that this is not a price target or a recommendation, as many other factors affect stock prices apart from theoretical projections. The Vodafone share price is currently trading below the valuation implicit in our low growth assumptions, perhaps because of cynicism about the company's excessive past promises, the possibility of further expensive acquisitions or many other potential concerns.