The dream of the digital home – much hyped during the dotcom boom – is now becoming reality, thanks in large part to the growing popularity of the internet and of relatively easy to install and affordable home communication and entertainment network systems, according to IT experts attending last week's e-home conference and exhibition in Berlin.

"Manufacturers in several industries, including consumer electronics, IT, communications and home automation, have been working on home networking technologies for years, but often it's been each industry working on its own, with marginal success," said Ralf Schaefer, project manager for IP (internet protocol) video systems in the research and development division of Thomson.

"Now we're seeing a generation of PC users building their own home communication and entertainment networks with technology off the shelf and connecting these to the outside world via the internet. There's more interest in the digital home today than ever before because many home users can now buy and install the technology themselves, and see a benefit."

Market researcher IDC expects the worldwide base of households with a network to grow from 37m in 2003 to nearly 111m in 2008.

Schaefer believes way too much time and energy were exhausted in endless standardisation debates over bus systems. "Then the focus shifted to IP and IP-embedded devices," he said. "And since then, we've been seeing real progress on the digital home front."

Viktor Grinewitschus, director of embedded internet systems at the Fraunhofer Institute of Microelectronic Circuits and Systems, shares a similar view. "We are experiencing a strong shift from house automation to multimedia, which is now the driving force behind the home digital market," Grinewitschus said.

"A lot of people are genuinely interested in connecting their PCs, TVs, digital cameras and music devices. And once they get a handle on that, they could get interested in connecting other devices, like heating systems, security cameras and lighting."

This view comes from a researcher whose institute has played a key role in launching an experimental smart-house project in Duisburg, Germany, called inHaus, where a key emphasis has been on networking numerous home appliances and devices.

Despite progress in home networking, interoperability still remains a huge challenge, especially when devices from different domains, such as consumer electronics, IT and home security or utility automation, are to be connected, according to Grinewitschus.

"What we really need is to find a way to describe tasks, such as adjusting the brightness of a light bulb," he said. "This task needs to be understood by other devices connecting to it within the system."

Grinewitschus is conducting research into the use of XML (Extensible Markup Language) as a means to describe functions of devices within a web-based home infrastructure.

But Robert Lamson, managing director of the Beyond unit of appliance manufacturer Salton, warned that consumers need to see a reason for investing in digital home technology. "The technology must offer value over and above turning on lights," he said.

Earlier this year, Beyond launched its first product, called icebox, which the company calls an "all-in-one family digital living centre." The device, which retails in the USA for $2,200 (£1,235), offers users information, communication and entertainment networking services, in addition to limited connectivity with home appliances and security devices.

The value proposition could increase even further with the use of sensors, according to Park Hyun, vice president and research fellow at the home network division of South Korea's LG Electronics.

"We envision a ubiquitous services-oriented home environment where sensors will play a big role," he said. "They will be embedded in numerous devices, providing intelligence essentially everywhere in and around the home."

But a home full of services, Hyun admitted, may not be for everyone. Some people, he said, may become concerned about the technology infringing on their privacy.

"A sensor monitoring your child at a playground is one thing but do you want to be monitored everywhere within your own home?" Hyun asked. "The use of sensors isn't just a technology issue; it's a social issue that manufacturers and consumers need to discuss together."