Consumer value-added services will be a hot growth ticket for ISPs to the tune of hundreds of billions in new revenue over the next decade - at least for the ISPs that figure out the right bundling strategy.
Oliver Johnson, CEO of analyst firm Point Topic, released a study at the CommunicAsia2012 Summit on Thursday that predicts consumer VAS revenues will triple from $125 billion worldwide last year to $420 billion in 2020.
That's a critical metric for broadband service providers faced with narrowing margins in the basic broadband business, Johnson said. With penetration of broadband value-added services on the rise, their contribution to revenues is becoming increasingly more important.
Examples of consumer VAS covered in the study include VoIP, gaming, IPTV, music downloads, teleworking, file transfer/cloud, home networks and security services. While VoIP is currently the top moneymaker in the consumer VAS segment, that will be overtaken by IPTV by 2020.
The catch, Johnson said, is that revenue growth for individual service providers will be slower for VAS services that either face stiff competition from online and traditional offline services, or are already close to the saturation point.
"For example, security already has a penetration rate of over 85%, so being able to grow this further will depend on developing other security related services, or on the advent of a virulent and destructive online threat," Johnson said.
The secret to success will be a matter of offering the right bundles for their consumers in a particular market, signing the right deals and maintaining a customer base in the face of global competition, Johnson said.
"Get it wrong and they won't see growth - get it right and their prize will be an income base work several multiples of its yearly value," he said. "Challenges lie ahead for all and the internet can be fickle, but the right player with the right service, or more likely set of services, has the chance to sweep all before them."