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Exploring Telco 2.0 Broadband Business Models

Both the fixed and mobile broadband service provider markets will continue to grow in revenues -- up to $416 billion in 2020 -- according to the latest market study published by the Telco 2.0 Initiative at STL Partners.

Their report finds that broadband service providers will benefit from both new types of broadband wholesale and more sophisticated direct-to-consumer retail propositions and service tariffs. They believe that recent introductions of new tiered and capped wireless Internet data plans are early evidence of this trend.

Key findings from the Telco 2.0 report include:

- Global broadband access is forecast to increase from $274 billion in 2010, to $416 billion in 2020, an increase of 52 percent in revenue terms.

- More than half the revenue growth will come from wholesale and two-sided fees for improved access capacity and quality.

- By 2020, mobile broadband will be worth $138 billion, or 32 percent of the total broadband industry revenues.

- Three new revenue streams are identified as: Bulk Wholesale, Comes with data and Slice and Dice.

- New upstream customers are forecast to generate over $90 billion in broadband revenues globally by 2020.

Many operators fear the supposed risks of becoming "dumb pipes," but their study suggests the forecast market value means the term "happy pipe" is more appropriate for some. Certain telecom carriers will be able to add further value through enhanced Telco 2.0 services and platforms.

That said, the basic carriage of IP data can be profitable and a source of substantial service provider growth.

On the conventional retail broadband side, the big winners are fiber-based fixed services and mobile data for smartphones. ADSL and cable revenues will peak in mid-decade, and then decline with substitution from the progressive deployment of fiber.

PC-based mobile broadband retail revenues will grow strongly in the short term, before being impacted by price competition and a shift from user-paid retail subscriptions to new wholesale-enabled models.

According to Chris Barraclough, co-author of the report and Managing Director of Telco 2.0, "it's not about throwing away existing operator business models, but about evolving them to generate additional value. In two-sided business models, there are upstream and downstream customers -- upstream customers are typically enterprises or merchants seeking to reach their markets -- the so-called downstream customers."

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