Friday, May 9, 2014

Quality of Service Revenue Will be Tough to Generate

Enhanced services revenue always has been tough to generate.

Some years ago, when conducting an analysis of enhanced services potential for dial-up and broadband access providers, it became clear that the overwhelming percentage of total direct revenue available to most ISPs, especially independent and smaller ISPs, was the basic access service itself, and not the value of bundled security apps, advertising or public Wi-Fi hotspot access.

In the voice services market, voice mail once was a separate, add-on feature, as was caller identification. Both those former revenue-generating services now are merely features of a voice line, fixed or mobile, in the U.S. market, for example.

In some respects, one might consider long distance revenues an ancillary revenue source generated by a voice line. But even that revenue stream has, for domestic calls, been eliminated, in the U.S. market and some others.

In growing markets, such as China, enhanced services might still add up to 22 percent of basic access revenues. But the point is that even there, the actual access line generates nearly 80 percent of gross revenue.

So it would not be a surprise to predict that new forms of ancillary or enhanced services will likewise represent a small percentage of total access line revenue, even if such services prove attractive to end users.

“Sponsored data,” like toll-free calling services, where a commercial or other enterprise pays for customer usage, might be used by Internet app providers, as Amazon uses AT&T access to support delivery of Kindle content.

But there are a number of practical obstacles, argues analyst Dean Bubley. Bubley sees similar problems for quality of service features which could be created by mobile service providers.

That would be in keeping with historic patterns, where the bulk of revenue comes from “access.” That is likely to remain the case for hosting and cloud services as well, not simply cable TV or linear video service, voice, Internet access and messaging.

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