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Broadband Ventures Into Value

As the broadband access market gathers steam, the rise of value-added services has created a $3.3 billion market for service providers, according to Point Topic Ltd.’s latest broadband analysis.

Revenues from consumer broadband access worldwide were running at an estimated $32 billion per year at the beginning of 2004, making value-added services worth an additional 10 percent in revenues.

Aside from security services, which Point Topic assumes every customer is using in some way, there are 49 million value-added service accounts on 90 million broadband lines worldwide. Of these, home networks and online gaming currently attract the most users and annual revenues; they accounted for a total of 25.8 million users and $1.6 billion by early this year (see table below).

Service providers looking to develop products with potential for the highest monthly revenue per user are more likely to focus on video-on-demand services and IP telephony, which bring in average revenue per user (ARPU) of $29.21 and $10.58 per month, respectively.

Table 1: Summary of the world consumer broadband value-added services market
Key service Total users (m) Monthly ARPU ($) Annual revenues ($m)
File transfer 4.5 0 0
Game downloads 0.9 2.1 23
Gaming online 11.4 6.12 839
Home networks 14.4 4.5 778
Internet voice 2 0.13 3
IP telephony 3.7 10.58 469
Music downloads 0.5 7.31 46
Security 90 1.02 1098
Teleworking 9.9 0 0
Video-on-demand (DSL) 0.2 29.21 54
Total active accounts 137.5
Totals 90 3.06 3310
Source: Point Topic Ltd.




Since adoption of these services is still in the early stages, the problem for providers is guessing which ones will generate the most cash down the line. Of course, they also want to avoid those that don't. File transfers and teleworking, for example, account for a combined 14.4 million users, but contribute nothing to revenues.

— Nicole Willing, Reporter, Light Reading
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sevenbrooks 12/5/2012 | 2:05:13 AM
re: Broadband Ventures Into Value
Anybody with a teenager probably has seen one or more of the following:
- Everquest
- Counter Strike
- Dark Age of Camelot
- Unreal Tournament
- Half Life
- etc etc etc ya da ya da ya da

All of these are running today primarily over broadband connections. There are litterally 100s of 1,000s of users. Some of them have subscription fees (Everquest as an example), some of them run on servers that are free to connect to (Counter Strike as an example).

In all cases, $0 is being derived by the service provider in a value added method. I think we need to seriously rethink the revenue opportunities around services like this.

seven

stephenpcooke 12/5/2012 | 2:05:12 AM
re: Broadband Ventures Into Value How much do they make from Instant Messaging via yahoo or MSN?
technonerd 12/5/2012 | 2:05:05 AM
re: Broadband Ventures Into Value I think this is something that can generate revenue. I tried to set it up myself and was unable to do it. The problem is not me, it's Microsoft. Their instructions for networking two PCs running Windows XP are impenetrable. Just like Microsoft's other "help" instructions.

Now that I've moved to Seattle, I am getting to know some Mircosofties and the stories I am hearing about how that place actually works are making me understand why they don't bother to consider ease of use in anything they do. Folks, you heard it here first: Microsoft is a sitting duck, just like the Big Three automakers were in the 1960s.

Linux ain't going to beat them because open source demands too much from average users. Apple isn't going to beat them because they won't make their OS available for PCs. (Please, propellerheads, don't jump in and tell me about emulations. You know what I mean.)

What will happen is that some company out of India will come out with an OS that's backward compatible, well documented and easier to use. It will be like Toyota, whose mission was always to delight the customer by exceeding their expectations.

In the meantime, broadband service providers can make money by setting up home networks. In doing so, they're basically acting as maintenance outfits for Microsoft.
lollapalooka 12/5/2012 | 2:05:05 AM
re: Broadband Ventures Into Value So are users of broadband that don't create revenue for carriers (like gamers) parasites?
They create revenue for games, don't they?

Is there a point where narrowband applications and wideband applications drive demand?

What lessons can be learned for carriers and vendors about enabling these technologies even if it happens under the radar?
lollapalooka
sevenbrooks 12/5/2012 | 2:05:04 AM
re: Broadband Ventures Into Value
No, this is talking about getting advanced service revnues for cariers. What I am trying to say is that these services exist today in some volume and are creating no additional revenue for carriers. 400,000 users of Everquest. God knows how many Counter Strike servers.

But wait these can't be real-time, multi-player live graphics games can they? Of course they are. Some are more multiplayer. Some are more real-time. But there is an entire culture out there that does this.

For things like Counter Strike there is only game sales revenue. For others like Everquest there is subscription + game revenue.

My point is this, what value added services? Unless there is going to be some dramatic way that the service provider/content provider split is going to change, then only things associated with the line are going to become "advanced services" (see security).

Why do you think that "AOL for Broadband" became such a horrible business for AOL? Not only did these users use a lot more bandwidth, they did so without paying for a lot of AOL's content. With dropping rates on Broadband, it became hard to justify the premium that AOL tried to extract.

seven
sevenbrooks 12/5/2012 | 2:05:03 AM
re: Broadband Ventures Into Value
Wow, buy a Linksys (now Cisco) or Netgear box for either wireless or CAT5. They have step by step instructions on how to set them up and provide DHCP, NAT and PPOE login. All for less than $100 (including a 4 port hub if you want one). They are up and operational in under 15 minutes.

From there just used shared folders and shared printers and you should be all set.

seven
sevenbrooks 12/5/2012 | 2:05:03 AM
re: Broadband Ventures Into Value
Wow, buy a Linksys (now Cisco) or Netgear box for either wireless or CAT5. They have step by step instructions on how to set them up and provide DHCP, NAT and PPOE login. All for less than $100 (including a 4 port hub if you want one). They are up and operational in under 15 minutes.

From there just used shared folders and shared printers and you should be all set.

seven
stephenpcooke 12/5/2012 | 2:05:02 AM
re: Broadband Ventures Into Value Online gaming is not the only high-bandwidth application that is gaining very little revenue for carriers. Online video chat, for example, online video surveilance, etc., etc. These applications drive bandwidth requirements on the carriers but provide little or no revenue growth.

Looking at this from the carrier's point of view, what is the business case for installing more equipment? Well, lets see, we have bandwidth demand increasing but we see no additional revenue coming in. How are we to pay for that new equipment?
jeb_knucklehead 12/5/2012 | 2:05:02 AM
re: Broadband Ventures Into Value

I find it hard to believe that video on demand is more ARPU than gaming. Who pays for video online? I don't know anyone who does this. It's too expensive and not all that enjoyable.

First off, gamers rent servers (not all gamers rent servers but some do). A typical server rents for $8 per player per month. A GOOD server has between 32 and 42 players. This is $256 to $336 PER MONTH for a single game server. Now gamers also use VOIP servers with software like Teamspeak and Ventrilo. The VOIP servers are also rented for about $1-2 per user per month. Typical server can have about 20 players on it. A server can run only 1 game at a time. So now repeat this for every online game imagineable.

Now gamers also use PREMIUM DSL services that guarantee high priority routing and have higher upload capacity. These DSL services start at $59 per month.

As sevenbrooks said, now add in subscription fees and multiply by 1000s of users and you have a huge pile of money.

Remember that most people don't play online multiplayer yet. But when they do, they seldom go back to playing single person games.

Now when the game console makers figure out how to do this right, the market will get even bigger.

Finally, it isn't kids who are playing online games. It's mostly adult males in the 25-40 age bracket. These people have the cash to drop on all this connectivity.

In my humble opinion, online gaming will be a killer app and a big revenue generator. It wasn't but a few years ago that "video" game revenue overtook movies.
technonerd 12/5/2012 | 2:05:01 AM
re: Broadband Ventures Into Value From there just used shared folders and shared printers and you should be all set.

Therein lies the rub. Microsoft has made it so inscrutable to do this setup that they've really inhibited the development of home networks. XP is an absolute joke. I'd have a home network today but for that.
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