Will TV or PC rule the living room? Andrew North on the future of digital and online technology
While 1995 has been a year of innovation, 1996 will be a year of consolidation: that is what my crystal ball tells me. We have come to the end of a frenetic period of development, in every field from telecommunications to television. Now we are going to settle down and find a use for all these discoveries.

This does not mean we will not see new products in the shops: we will, but most of them will be upgrades of existing technology. "All sorts of things are technically possible," says a spokesperson for the electronics giant Philips, "but we've got to show that people need them."

The first important product to hit the shops will be the high-density CD, or Digital Video Disc. HDCD can carry up to 18 gigabytes of data, compared with 650 megabytes on current CDs. This is enough for a two-hour film in broadcast quality, which will revolutionise the multimedia market. The first HDCD players, aimed at PC/CD-Rom users, will cost about pounds 500.

After all the hype about PCs and Windows 95, the humble TV set has acquired a dowdy, old-fashioned image. That will change with the first digital broadcasts by the BBC and ITV, and the arrival of Widescreen TV (there are several models in the shops now), which will bring much higher picture and sound quality into our living rooms.

We may also see the first ultra-slim "flat screen" TVs in British shops, which do away with conventional cathode ray technology. Sony will soon release its "Plasmatron" model, which is just 7cm deep - that means it can be hung on a wall.

Cheap digital photography will not arrive this year. Manufacturers such as Canon will be releasing new models, but they will still cost about pounds 900. It will be a while before the digital Brownie is a stocking filler.

Unfortunately for those who are heartily sick of it, the Internet will continue to make news this year. The main thrust will be to bring the Net closer to the mainstream - it is easy for people who are already connected to forget that they are still in a tiny minority. Many electronics companies are looking at providing Net access through their TV sets. Philips already sells an add-on TV/Net pack, which works with its CD-i player.

This may be the start of a tug-of-war between the PC and TV for the position of key entertainment provider in the home. Dedicated Net access machines, such as Netsurfer, will also be pitching into the fray. The result will be a mix of both: interactive TV, bringing us closer to Bill Gates's vision of a box of tricks that does everything. But that will not materialise this year.

What will also not happen in 1996 is the completion of the high-capacity fibre-optic network necessary for the information superhighway to work. It will be a long time before every household is linked up. Only then will calling up movies and music via your phoneline be feasible. Media, software, hardware and telecoms giants will continue to bet large sums on this becoming a reality, in the hope of cashing in on the bonanza. The year will see yet more strategic partnerships along the lines of Microsoft's recent deal with NBC and News Corporation's link-up with MCI.

Meanwhile, what matters is the battle between Microsoft and the big Net software developers, such as Netscape and Sun Microsystems. The race is on to produce an easy-to-use application that will make accessing and ordering Net services as simple and intuitive a task as changing channels on TV.

Sun's groundbreaking Java and HotJava could be crucial. This software system works on all computer platforms and combines the capabilities of CD-Rom with the real-time interactivity of the web. Netscape is bundling Java with its latest Web browsers and Sun is giving it away free on the Net. With Microsoft due to ship in a rival, the Blackbird, in the next six months, this year will probably decide which format wins.

The new year will see a punch-up between the no-frills Net access providers, such as NetCom in the US and the UK's Demon Internet, and the online companies, such as CompuServe and America Online. All the main online companies now provide full Net access, and are gaining customers at a prodigious rate. But as their special services become widely available on the Net, their long-term future looks far from certain.

Europe will be one of the key battlegrounds over the next 12 months, with Europe Online and the America Online/Bertelsman combine challenging CompuServe's current monopoly across the region. Demon is joining in too, with plans to become a Europe-wide provider by the end of the year. But lurking in the shadows is BT, which is set to become a mass-market Net provider in the UK within the next six months. Other European telecoms giants may follow suit in their respective areas. Can Demon and the other Net start-ups survive?

Net shopping will take off this year. Some analysts predict more than $500m worth of goods and services will be purchased via the Web, compared with an estimated $60m in 1995. This will boost efforts to develop digital cash and encourage more transactions on to the Net. Online banks already exist in the US and such services should appear in the UK soon.

But hackers are likely to become more active in response. Security consultants are warning of an upsurge in attacks over the next few years, as more and more people use the Net.

On the hardware side, even more powerful PCs will emerge, but there are unlikely to be any great innovations. Sony will enter the PC market for the first time. With luck we will see smaller and longer-lasting batteries, with which it will become feasible to build mobile phones and even Global Positioning Systems into laptop computers. The news that mobile phone charges are falling, and the spread of high-quality digital networks such as GSM, will boost demand for mobile communication.

Unfortunately, the 1996 consolidation process may spell the end of one of the most important innovators of the past 15 years - Apple Macintosh. Takeover rumours were rife last year and the company was expected to make a fourth-quarter loss for 1995. Battered by the Windows juggernaut, it has done well to hold on to its 10per cent market share, but drastic job cuts are expected soon. If it goes under, it will be further proof that the best technology does not necessarily come out on top - and yet another victory for big Bill.