Consumer broadband value-added services (BVAS) revenues increased by 74% during 2005. At the start of the year, revenues were running at an annual rate of US$6.9bn. This had increased to US$11.9bn 12 months later. And the contribution of value-added services to overall broadband revenues was bigger in 2005 than in 2004. This data comes from the third edition of Point Topic’s report ‘The Consumer BVAS Market’. The increase in value-added services revenues was steeper than the growth in the number of consumer broadband lines (49% increase to 183mn lines) or total broadband access revenues (29% increase to US$54bn) during the same period. Therefore, by the beginning of 2006, value-added services were adding an extra 22% to access revenues. This compares with a contribution of 18% at the start of 2005 and 10% at the start of 2004. For the year 2005 as a whole, Point Topic estimates that consumer BVAS revenues were US$9.1bn, with access revenues of US$47.8bn. In value terms, the top 5 contributions were, in order, security, IP telephony, online gaming, home networks and music downloads. Whilst security and home networks are support tools that enable the use of broadband, VoIP, gaming and music are all services that need broadband to work effectively. These results show that value-added services revenues are steadily increasing in relative importance, when compared with revenues from the supporting technologies and infrastructure of broadband.

In percentage terms, music downloads saw the strongest revenue growth during 2005, with an increase in revenue of 237%. The continuing popularity of digital music players has driven demand for digital music content. Apple’s iTunes has established a strong brand presence in this sector in many territories, due in part to the popularity of the iPod music player. This, together with a cost per song of just under a dollar, has made music the most successful online content service to date. The number of people using music services has increased during the year, and this is reflected in the revenue increase noted above. Point Topic has revised down its estimate of the average revenue per user (ARPU). This is to take into account the fact that the ‘per song’ charging model of iTunes has become increasingly important during 2005, whilst the subscription model of charging has declined relatively. Music ARPU is based on an estimated average of 3 tracks per user per month.

IP Telephony services, which Point Topic defines as full-service telephone services using the Internet for part or all of the call, have seen revenues grow by 89%. This reflects the growing importance of VoIP in Japan, France and with North American cable operators. Services like VoIP and TV/video, which can be bundled with broadband access, are about more than revenue. They are just as important in reducing churn and increasing service differentiation in competitive markets.

Whilst broadband access tariffs have reduced slightly during 2005, value-added services average revenues per user (ARPU) has increased, from an average rate of US$52 per user per year at the start of 2005 to US$65 per user at the end of the year. This is an increase of just over 25%, which reflects the fact that consumers are using an increasing number of services, as well as increased charges for certain services such as gaming and voice. Excluding security, which the report assumes every broadband subscriber to be using in some form, there was a total of 138 million BVAS accounts at the end of 2005. This means that every broadband subscriber was using an average of 0.75 value-added services per line. That compares to 0.59 per line at end-2004 and 0.53 at end-2003.
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