Apple iTunes fuels broadband value-add explosion

Apple's iTunes has helped to make music downloads the most successful online content service to date

Consumer broadband value-added services revenues rocketed by 74 per cent during 2005 fuelled by unprecedented demand for digital music, VoIP and online gaming.

A report from research firm Point Topic found that revenues were running at an annual rate of $6.9bn at the start of 2005. This had increased to $11.9bn 12 months later.

In value terms, the top five contributions were identified as security, IP telephony, online gaming, home networks and music downloads.

While security and home networks are support tools that enable the use of broadband, the analyst firm observed that VoIP, gaming and music are all services that need broadband to work effectively.

In percentage terms, music downloads saw the strongest revenue growth during 2005 with an increase of 237 per cent.

Point Topic noted that the continuing popularity of digital music players and services, particularly Apple's iPod and iTunes, have helped fuel this growth.

Together with a cost per song of just under $1, iTunes has helped to make music downloads the most successful online content service to date.

The number of people using music services has increased during the year, prompting the revenue increase. But Point Topic has lowered its estimate of average revenue per user.

This is to take into account the fact that the 'per song' charging model of iTunes became increasingly important during 2005, while the subscription model of charging declined relatively.

Music average revenue per user is based on an estimated average of three tracks per user per month.

The results show that value-added services revenues are steadily increasing in relative importance, when compared with revenues from the supporting technologies and infrastructure of broadband.

This increase was steeper than the growth in the number of consumer broadband lines (49 per cent increase to 183 million lines) or total broadband access revenues (29 per cent increase to $54bn) during the same period.

By the beginning of 2006, therefore, value-added services were adding an extra 22 per cent to access revenues. This compares with a contribution of 18 per cent at the start of 2005 and 10 per cent at the start of 2004.

For 2005 as a whole, Point Topic estimates that consumer broadband value added services revenues were $9.1bn, with access revenues of $47.8bn.

IP telephony services, which Point Topic defines as full-service telephone services using the internet for part or all of the call, have seen revenues grow by 89 per cent.

This reflects the growing importance of VoIP in Japan and France, and with North American cable operators.