Value-Added Broadband Services Push Market Past $50 Billion

Businesses are spending $2.3 billion each year on broadband services in addition to the $13 billion they spend on basic broadband access. According to a news analysis released by Point Topic, the total market for broadband, including both business and consumer spending, tops $50 billion annually.

Point Topic, a British firm dedicated to studying the broadband communications market, analyzed what they refer to as broadband value-added services (BVAS). They define these services as broadband applications as well as the platforms for these applications such as security services and Internet protocol virtual private networks (IP VPN). In early 2004, BVAS services accounted for approximately 18 percent of business broadband revenue. The Point Topic analysis indicates that the BVAS market has the potential to grow more quickly than basic broadband access.

By far the largest portion of today's BVAS market is security services and IP VPN. The average per-line cost for security services is approximately $10 per month according to Point Topic; that calculates to a $1.3 billion per year. The analysis also projected $1.2 billion in annual spending on IP VPN connections this year for the approximately 250,000 business sites using these connections over low-cost broadband lines. Approximately 25 percent of this projected spend is for BVAS with the rest allocated to broadband access costs.

As of March 2004, Point Topic's analysis estimated the total number of broadband lines worldwide at 1.117 billion. That benchmark is a 12.3-million-line increase from the firm's estimates at the close of 2003. According to the analysis, 66 percent of broadband lines use DSL. Cable modems and other broadband technologies comprise the remaining 34 percent.

Looking to the future, Point Topic focused on application services providers (ASPs), videoconferencing, voice-over-IP (VoIP), and remote data backup. According to the analysis, total ASP revenue is approximately $500 million annually, VoIP and video conferencing each account for $40 million, and remote data backup generate $125 million. Many businesses spend significantly to operate legacy versions of these types of applications over frame-relay, ISDN, or private networks while other companies use free versions available over the Internet.