New research from Gartner found the take-up of asymmetric digital subscriber line (ADSL) services in Western European homes was just 1.35%. The group said current delays of broadband rollout in Europe would hamper the European Union's chance of competing at a global level in an increasingly information-intensive society.
Gartner challenged the EU and its member states on their policy of unbundling the local loop, which, it said, was "currently a regulatory nightmare".
Jean-Claude Delcroix, research director of Gartner's European networking and communications group, said: "Governments need to determine whether they want to encourage unlimited competition or sustainable competition in favour of users."
He said government policy designed to open up the local loop had resulted in existing telecoms operators dominating both the infrastructure and the service market in most countries.
Delacroix's recommendations included governments putting in place regulatory regimes that, he said, "should anticipate a sustainable telecoms infrastructure and ensure regulation in which companies in the service sector can compete effectively, offering end-customers reliable continuity of service as well, as new services".
A recent report from Oftel found ADSL services in the UK were more expensive than in most competitor countries.
Speaking in November on the lack of tax breaks in the UK to aid broadband roll-out, David Harrington, director general of the Communications Management Association, said: "It is a great opportunity missed. There should be tax credits for suppliers and tax relief for users to make the outlay on broadband tax-deductible."