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Analysis of the economic impact of eliminating net neutrality projects a $2B boost in telco revenues by 2010, according to Light Reading Insider
May 19, 2006
NEW YORK -- Incumbent network operators hoping to boost revenues by charging premium fees for delivery of some broadband content are likely to realize modest gains if current rules that guarantee so-called "network neutrality" are eliminated, according to a groundbreaking new report from Light Reading Insider (www.lightreading.com/insider), a paid research service of Light Reading Inc. (www.lightreading.com).
The End of Net Neutrality: An Economic Analysis offers a thorough and impartial assessment of the revenue opportunity that would be available to network operators if regulators set aside requirements that prohibit those operators from charging fees for different tiers of Internet connectivity service. It analyzes how operators might charge for preferential content delivery and quantifies the additional revenue they might generate. It also considers the potential reactions of competitors, content providers, and access customers to such a move and draws conclusions about the commercial appeal of the strategy for broadband access network operators.
"At first glance, charges for the delivery of Internet content look as though they could provide an additional $10.7 billion in carrier revenues by 2010," notes Simon Sherrington, research analyst for Light Reading Insider and author of the report. But a variety of factors – including potential customer churn, competitive pressures from operators that maintain net-neutrality policies, and the ongoing threat of re-regulation – would likely diminish those revenue gains, Sherrington says.
"If operators could persuade companies representing 20 percent of the consumer content market to pay a premium for improved content delivery, they could open a market worth around $309 million in the U.S. by 2010," he says. "Accessing 20 percent of the business information and ecommerce markets could deliver a further $1.8 billion by 2010."
Other key findings of the report include:
In practice, the widespread imposition of content delivery charges looks highly unlikely. The difficulties associated with collecting fees from content providers, managing churn among consumers and businesses, and fending off competitors make it highly unlikely that any individual broadband operator could successfully and unilaterally impose fees for content delivery.
Although the introduction of selective charges to save revenue seems to more attractive financially than the wider imposition of charges, operators using selective charging mechanisms to prevent competitors from undercutting them or to prevent revenue losses are likely to face close scrutiny from regulators.
Broadband operators hoping to generate revenues from content delivery need to offer improved services that content providers will buy. Operators must identify and provide significant value-adds that enable content providers to improve the customer experience.
Network operators would essentially become direct competitors to providers of content delivery networks, such as Akamai, Mirror Image Internet, PantherExpress, Savvis, and VitalStream.
The End of Net Neutrality: An Economic Analysis, a 21-page report, is available as part of an annual subscription (12 monthly issues) to Light Reading Insider, priced at $1,350. Individual reports are available for $900.
To subscribe, or for more information, visit: www.lightreading.com/insider. For more information about all of Light Reading's Insider research services, visit: www.lightreading.com/research.
To request a free executive summary of the report, or for details on multi-user licensing options, please contact:
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About Light Reading
Reaching a core audience of more than 917,000 enterprise IT managers and executives, Light Reading Inc. publishes www.lightreading.com, the leading global content site for the telecom industry; www.byteandswitch.com, a storage networking site; www.unstrung.com, dedicated to wireless networking; and www.darkreading.com, an IT security site. Light Reading is also affiliated with www.heavyreading.com, a market research site offering quantitative analysis of telecom technology to carriers, service providers, and vendors. Light Reading was acquired by United Business Media in August 2005, and operates as a unit of CMP Technology.
About CMP Technology
CMP Technology (www.cmp.com) is a marketing solutions company serving the technology industry. Through its market-leading portfolio of trusted information brands, CMP has earned the confidence of more technology professionals than any other media company. As a result, CMP is the premier provider of access, insight and actionable programs designed to connect sellers and buyers in ways that yield superior return on investment. CMP Technology is a subsidiary of United Business Media (www.unitedbusinessmedia.com), a global provider of news distribution and specialist information services with a market capitalization of more than $3 billion.
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