Telecoms companies are failing to make the most of the growing popularity of web 2.0, according to a new report.

The study by consultancy Arthur D. Little noted that, as more and more people access and distribute data on the move, telecom companies' lack of readiness to satisfy this new demand comes at the expense of potential future revenues.

"The key drivers of today's internet growth are the users, who through web 2.0 can create and distribute content instantaneously and globally in a manner not previously envisaged," said Richard Swinford, a senior manager at Arthur D. Little.

"Younger Europeans are already showing their readiness to interact on the move, with 38 per cent of them accessing email from mobile devices.

"Telecoms firms now need to offer access to the established web 2.0 services, for communication and the fulfilment of their wider social needs while on the move."

The research uncovered major hurdles surrounding the issue, such as sharing across companies and territories, high mobile data prices and the tricky legal restrictions around content and exclusive proprietary formats.

Telcos are now faced with the dilemma of whether to collaborate or compete with de facto web 2.0 leaders, which would mean lower margins, or to create competing communities which will take time to build up.

The consensus seems to be for collaboration, as demonstrated by Vodafone's partnership with MySpace and 3's X-series deals with providers such as Skype, Google and YouTube.

Alternatively telcos could opt out of the fiercely competitive service-centric world and focus on pure bandwidth delivery, the so-called 'bit pipe' service.

Regardless of which route they take the report insists that no action could be a financial disaster.

"In order to harness and monetise web 2.0 the telcos will have to rapidly address the needs of this community," concluded Swinford.