In-Stat: IMS no revenue boon

IP multimedia subsystem technology represents the architecture of the future for service providers, but applications built on IMS may not generate large amounts of new revenue, according to new research from In-Stat.

Instead, the main revenue benefits from IMS will come from the integration of wireless and wireline services and the creation of integrated multimedia service bundles with premium content, In-Stat Analyst Keith Nissen said.

“If you looked at spending on communications services over the last many years in the U.S. and look at household spending on communication services and consumer spending in general, you see that spending on communication services represents about 3% of household spending and that stays constant,” Nissen said. “What leads anybody to believe they can come out with a new application and have huge amounts of people spend inordinately more money on communications?”

So instead of banking on revenues from new services, service providers need to build a more solid business case on capturing revenue currently spent on entertainment and on executing on known trends such as wireless-wireline integration.

“You don’t bet the shop on new stuff coming down the pipe because you don’t know what is going to catch on,” he said. “There will be new spending, there will be new applications that teenagers and the like will spend money on. The problem is you don’t know what that is going to be. So you can’t build a business model around that.”

By integrating services, service providers earn more revenue per customer, assuming they don’t drive prices down to where they are customer-rich and revenue-poor, he said.

“What other kinds of spending is happening on a consumer basis that the telephone industry can tap into? Entertainment is one,” Nissen said. “There is a whole other area of existing consumer spending that can be tapped into with the right service. You are not trying to go out and convince that customer of this new application that requires completely new spending – instead you fight for that existing spending.”

His report, “Consumer IMS Revenue Strategies” advises service providers to retain legacy PSTN revenues as long as possible and to build up the broadband base that represents the best opportunity for increasing Average Revenue Per User (ARPU).

The rising cost of content and of new services will also limit consumer demand, Nissen said.