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Broadband Spending of 32 Million Households Will Be in Play in 2006

By Sophia Mayengbam

The advent of broadband service has changed the way Internet operates. Today broadband is has taken over the standard dialup 56K modem connection, which was not only slow but has several other restrictions. Broadband’s speed is ten times faster than a dial-up connection and also allows the use of phone while browsing on the net. The use of broadband is not limited to web browsing, or telephone service; now it is slowly moving into IPTV.

Considering the advantage and utility, broadband penetration is taking place at a fast pace. 32 to 35 million households will make a broadband service decision every year for the next 3 years; that is, they will decide to subscribe to a voice, video or data service from a cable, satellite or phone company, said a study.

The study conducted by Yankee Group said that these households constitute the annual opportunity market for broadband service providers because they are the total number of households that are actually in play every year. This number is composed of households changing their current providers, households adding new services and new households attributable to population growth.

The average spending during the subscription lifetime of each of these households will vary between USD 3,854 and USD 4,481 in the next 3 years. Consequently, the annual revenue opportunity for the US triple-play market for service providers will grow from USD 137.5 billion in 2006 to USD 145.3 billion by 2009.

According to the report, "Defining the Opportunity Market: A Study of the Annual Revenue Opportunity for Residential Broadband Service Providers," developing an effective bundling strategy will be critical to influence customer acquisition and retention as traditional voice and cable providers encroach on each other’s territory.

As more households adopt bundles, the number of households in play each year will decline. By reducing churn, bundles lower the number of households that are up for grabs annually, but they also increase the average revenue per user (ARPU) and therefore the opportunity value of each household.

"Bundling is increasingly critical in influencing the adoption of service providers’ broadband services," said Aditya Kishore, Yankee Group Media & Entertainment Strategies director.

Kishore said consumers’ interest in bundles is increasing to top it with increasing parity of provider preferences. With these two factors backing, the provider that can up-sell more services first will be best positioned.

"High-speed data will be the linchpin for the bundle and is the most important product up-sell for service providers," he said.


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