Europe’s digital terrestrial TV (DTT) isn’t quite dead, but it’s barely surviving. Because its inherent limitations make it unprofitable, governments should give up their plans of forcing DTT rollouts and let market forces determine the analog switch-off date, according to a new brief by Forrester Research B.V. (Nasdaq: FORR).

“Governments and public broadcasters across the EU remain gung-ho about the public utility and commercial prospects of DTT,” said Forrester Analyst Hellen K. Omwando. “Compared with cable and satellite, the limitations of DTT have always been known, but not acknowledged. Basically, free or cheap DTT lacks an operator business model. Interactivity is far too costly to help DTT retain customers; no one will be able to afford DTT mobility; and most importantly, a forced analog switch-off will create consumer uproar. Why should consumers be forced to buy a €250 set-top box on a misguided whim?”

Forrester believes that DTT would have a share of 11% of digital European households by 2007. But even this modest forecast may turn out to be optimistic because making money from DTT looks impossible, and forcing consumers to take it up just won’t work. Instead, Forrester argues that European governments should recall digital audio broadcasting (DAB) — another technology that has never found its market — and stop pushing DTT. Governments should let market forces bring about the analog switch-off and use public broadcast over commercial platforms to serve citizens.

“Europe’s governments simply cannot justify funding DTT and bringing unfair competition into a market where highly leveraged commercial operators like Canal Satellite are struggling to survive,” Omwando added. “Just as the average price of DVD players has dropped by 70% in the past five years, set-top box prices will fall in the next few years. This in itself will spur consumer adoption of digital TV. Also, governments should require public channels like ARD to tie their interactive programs to community services, to help them retain their large audience while meeting their mandate to preserve quality and foster local content. It will cost less for governments to pay commercial platforms to distribute eGovernment channels and interactive services than to fund DTT services that would otherwise not be viable.”