Bumper year for broadband as added value boosts revenues

Consumer Broadband Value Added Services (CBVAS) revenues added an extra third to total broadband revenues through 2009

The market for consumer broadband value-added services (BVAS) grew by 30% during 2009 in revenue terms, and by 13% in terms of subscribers. These are the top level findings of the latest edition of Point Topic’s Consumer Broadband Value Added Services report, covering 2009.

The run rate for consumer BVAS revenues went from $39.6 billion to $48.9 billion during 2009. This was a greater rate of increase than that for consumer broadband lines which grew 14%, from 366 million to 417 million from Q408 to Q409.

For comparison plain subscription revenues increased from a run rate of $113 billion at the end of 2008 to $129 billion at the end of 2009. In that context, BVAS revenues contributed an extra 37.9% to standard access revenues by the end of 2009.

“Value added services, like VOIP, security and IPTV grew more quickly than the number of broadband lines in 2009. The operators and ISPs are starting to increase the proportion of their revenues that they generate selling add on services for broadband and they are doing it successfully at least in revenue terms,” says John Bosnell, Senior Analyst at Point Topic.

In terms of value, the leading services were IP Telephony, security, online gaming, IPTV and online music. IP Telephony overtook security as the service earning the most revenue during 2006.

Telephony, frequently part of a triple or quad play bundle alongside broadband and TV, generates the most revenue. PSTN replacement services such as those provided by France Telecom or Vonage generate reliable subscription revenues, along the lines of the PSTN billing model.

Internet Telephony services such as Skype rely on individual payments to make or receive calls from the Internet cloud to the PSTN. The revenue generated is much smaller than for IP Telephony services. Skype is a disruptive technology and growing fast, and it is starting to account for a significant proportion of international minutes. But in revenue terms it currently remains relatively small compared to most telcos.

Services, like security, achieve high revenues because they have relatively high penetration. Even if a service has a low unit price and offers a low margin to the supplier it can be a success if it manages to appeal to enough users.

“Margins for basic broadband access are reducing all the time. That, along with pressure from competitors, is driving operators push bundles. They help operators retain customers and increase revenues, so the importance of value-added services to operators’ revenue stream increases. The increasing penetration of super-fast broadband worldwide will only fuel this significance and ISPs have to live up to their acronym and service their customers across a range of products,” says Bosnell.