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U.S. Broadband Consumer Spending Forecast

According to Yankee Group research, as large U.S. telcos start to deploy television services, following on the heels of cable telephony deployments, the market for service providers will enter a new phase of competition. Telcos face line losses driven by wireless substitution, cable telephony and internet-based VoIP providers.

Similarly, cable operators are competing in a mature pay-TV market without significant potential for new growth, while satellite attacks their existing subscriber base. Even satellite operators have seen a slowdown in net new subscriber additions in the last few quarters.

As traditional voice and traditional cable providers encroach on each other�s territory, developing an effective bundling strategy has become more critical. When consumers adopt multiple products from the same provider, the service provider yields several benefits, including an additional revenue stream, reduced churn and a better ability to price their product competitively. As consumer awareness and service providers� focus increases, bundle momentum will grow.

In January 2006, Yankee Group began an assessment of the opportunity market for broadband service providers. For the purpose of the study, they defined a broadband service provider as a company delivering high-speed data (HSD) service, local telephone service or subscription television. The study took an in-depth look at the effect of the bundle as well as shifts in churn metrics and traditional service adoption dynamics.

Based on this study, Yankee Group estimates the broadband service spending of 32 million to 35 million households will be in play every year for the next 3 years. The average spending over the subscription lifetime of each of these households will be between $3,854 and $4,481. At the same time, the revenue opportunity these household service decisions represent will grow from $137.5 billion in 2006 to $145.3 billion in 2009.

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