The Next Broadband Business Models

In the beginning, broadband was broadband. There were a few different speeds, defined by price tier, provider type and access infrastructure. But essentially, the industry offered chocolate, vanilla and strawberry. By comparison, the next broadband business models will be a bit more like Baskin-Robbins.

As new broadband subscribers become harder to find — this year saw one of the worst quarters ever for DSL — offerings will diversify and be tailored to more sophisticated preferences, aimed at driving revenue per user growth rather than subscriber growth. Carriers will be able to test a slew of business models and applications, from quality of service tiers to performance management and application prioritization, from “turbo buttons” and caps to ad-supported downloads and cheaper downloads for off-peak hours, from managed applications and tech support to sticky new services such as security monitoring and energy-efficiency control, from home networks to mobility.

All of these options allow carriers to tailor offerings for different user types. Perhaps most importantly, they will help providers start to tie broadband revenue more closely to bit consumption. The first, and perhaps most lasting, challenge will be getting users to understand what they're buying.

“People have no clue how much bandwidth they consume,” said Teresa Mastrangelo, principal analyst with broadbandtrends.com. To sell more nuanced forms of broadband, providers will need to express them in terms of experiences, she said: “If you download more than 20 songs per week, you may need this.”

And providers will have to pace themselves. Introducing offerings for all of the new potential revenue models likely would overwhelm consumers with options, analysts said.

“If people have too many choices, they can never figure it out,” said Danny Briere, CEO of Telechoice, a consultancy.

There are ways to pare down that complexity, however. KPN, the Netherlands' incumbent carrier, found a way to offer a range of choices without being confusing. The company created multiple brands targeted at specific market segments, each with multiple offerings.