Today, most broadband service providers are focused on launching and installing high-speed Internet access to their market targets. This is analogous to the early cable pioneers that strung cable to enable their neighbors to watch two or three broadcast stations that weren't receivable via an off-air antenna.

Next, broadband service providers will develop and expand their online content offering so that their customers will further value and continue to retain their broadband services. This also follows the evolution of cable television, when basic programming, such as WTBS, was added to basic channel lineups in some southeastern systems via microwave.

Finally, broadband service providers will monetize broadband by offering new and optional a la carte services, including eCablevision (see "The eCablevision Opportunity" October 2000, Private & Wirless Broadband), quality of service (QOS), remote client CDROM functionality, software leasing, and video conferencing. As cable operators utilized pay television and pay-per-view to monetize their investment in headends and plant infrastructure, broadband service providers will use a la carte and premium services to increase their companies' revenues, margins, and equity valuations.

Currently, broadband service providers' most important objective is to make available and install high-speed access to their potential customers. Most providers offer a high-speed access product in MDUs that includes:

* High speed access - preferably a two-way (not requiring a telephone connection for upstream connectivity) and "always on" (service that remains continuously activated and does not require the dialing of a telephone modem for connectivity) service, but always a Internet access with sufficient upstream and downstream bandwidth that meets customer uploading and downloading requirements,
* System efficiency - through distributive local hosting (placing servers at the local POP to offer added speed and reliability) and caching (storing frequently requested content on a local server which reduces backbone expenses and increases customers' download and access speeds),
* System reliability - accomplished through multi-homing (maintaining access to the Internet via multiple backbone providers), diverse routing network and Point of Presence (POP) redundancy (redundant distribution connections to minimize the possibility of service interruptions), fault tolerant connectivity (through self-healing and redundant architecture), and standby and backup systems,
* Email - the Internet's "killer application" and the most popular and often used online service,
* Start page with and MDU specific content - a start page (the first page an Internet users views when connected to the Internet) or graphical user interface (GUI) that is reflective of the customers' local community and provides users' a communication vehicle with the property management and useful information and updates about the MDU complex where they reside, and
* Customer service excellence - customer support (including frequently asked questions (FAQs) available online, easy-to-understand billing, and 24-by-7 customer service and help desk availability,

While access to broadband is many property owners' and customers' most important concern today, as broadband access proliferates, property owners and customers will expect more than merely reliable and efficient high-speed access. Broadband service providers will also seek to expand their online offerings so that they become an increasingly important component of their customers' lives - a place where they spend more time and money; and value as a time-saving solution to many of their offline problems.

"Content is king" is the familiar mantra that transcends the entertainment industry, and broadband service providers will enhance their service through content aggregation and partnering with content portals, content providers and content syndicators. The elements in a content offering should be customized to meeting the needs, interests, and requirements of the customer base. Most services will offer:

* Enhanced start page with customizable content - an enhanced GUI that highlights the benefits of broadband (such as incorporating streaming media into the site) and permit the user to customize the page with relevant content,
* Expanded local content - aggregating additional and useful local content beyond the boundaries of the MDU complex, which could include local community events, news, weather, yellow pages, and sports,
* National and international information - an aggregation of news, sports, financial information, entertainment, hobby and other information,
* Additional ISP services - including access to chat, instant messaging, search, remote email access, and newsgroups,
* Broadband centric content - access to or navigational functionality to streaming video and audio content, content sites that contain larger files but provide an enhanced look and feel, and gaming sites, and
* Internet efficiency sites - aggregation of sites that offer software downloading, productivity tools, online banking, insurance quotes, online brokerage services, travel discount websites, video plug in sites, basic email faxing websites, calendar sites, online photo exchange and purchase sites

The proliferation of broadband service providers offering service via direct broadcast satellite, cable modems, DSL, and fixed wireless will provide consumers additional choice. By the end of this year, Forrester predicts that more than half of the US residents will be able to choose from multiple terrestrial broadband service providers. This increasing competition will begin to commoditize broadband (much as long distance telephone service has been commoditized) and place broadband providers under increasing pressure to reduce prices to expand their market share and remain competitive.

Rather than reacting to competition by reducing pricing, the most successful broadband service providers will increase the diversity of their product offering through product extensions to differentiate their service from competitors. This will also help them establish a brand identity as innovators, and avoid the characterization of becoming known as a service that can only compete by cutting its prices. A focus on offering optional and a la carte services will be the next evolution of broadband service providers, since it satisfies the objectives of product differentiation, diversifying revenue streams, and increasing revenue, margins, and therefore, the broadband service providers' equity valuations. For those operators that bundle high-speed access with a video product, these a la carte services will be synergistic and help package their products.

The first a la carte service offerings will focus on products that provide operators the greatest immediate potential revenue opportunities for the least risk and capital investment. Some a la carte services may require operators to promote them and provide product exclusivity in return for a share of the revenue. Others will require operators to invest in their infrastructure and assume most of the risks for a product's success. Some of the a la carte services that will be considered include:

* Optional and a la carte ISP services - beyond the foundational ISP services offered to all of a broadband service provider's customers, some of a broadband operator's customers will have unique requirements and seek additional or enhanced services including domain name hosting (the ability to host a customer's uniquely named website), video conferencing via the Internet, wireless LAN service (the ability to interconnect multiple computers through use of local area network in a single facility or home utilizing a wireless solution), QOS minimums (guarantees of download and upload speeds), remote dial-up access (the ability for customers to access the Internet when not at the facility where a customer's Internet service is connected), low latency service for gamers (a service geared to "twitch" gamers to offer them a product designed to provide them the ability to react more quickly while gaming), premium service level agreements (SLA - guarantees that customers will receive a premium level of service, including but not limited to enhanced customer service, help desk support or downtime guarantees), and additional IP addresses (for additional websites), email accounts (for businesses or family members), and website building software (to enable customers to construct their own website) and others,
* Revenue sharing services - via establishing partnerships with third party companies, broadband operators can develop new revenue streams while minimizing incremental capital costs and new business risks. These include a premium level of online file storage and backup protection (that allow customers to automatically store their files online in case of a computer crash or share work with others that are online, remote client CDROM client functionality (the ability to rent software games and other applications normally available only on a CDROM or the capability to "try before you buy", application service provider (ASP) and software leasing services through electronic software downloading (ESD - or the ability of a customer to purchase software from an online software store and instantly download the software directly to their computer), and premium email faxing services over the internet with enhanced storage and functionality - and without the requirement to purchase a fax machine and others,
* New business opportunities - these additional premium services include enhanced parental filtering (the ability to offer a human reviewed rather than software driven analysis of websites on an inclusive - or an environment that includes a limited number of websites but all of them having content ratings - or on an exclusive basis - or a rating service of the most popular websites but without guaranteeing a complete review of the entire Internet, unified messaging (the linking of a customer's cell phone, pager, home and business telephones, and email together), and eCablevision services (providing streaming media on both a subscription and pay-per-view basis) and others, and
* Advertising and e-commerce revenues - only partly dependant upon the critical mass of a broadband operators' number of customers, partnering with the right content providers offer operators the ability to earn money each time a customer conducts a search, click on banner advertising, or purchase a product online. Notwithstanding the number of customers a broadband operator services, search engines will pay operators up to $.025 per each search conducted by a customer, up to 30% of the revenue for selected "clicking through" banner ads, up to 35% for participation in certain affiliate programs, and up to a flat 7% of revenue generated from e-commerce revenue generated by customers that purchase a e-malls. "Link sharing" (trading banner advertising) utilizes excess banner ad inventory and creates brand equity and sales by extending a broadband service operators' presence into pre-selected website that contain prospects like to subscribe to the service.

When determining which a la carte services a broadband operator should deploy and how they should be prioritized, several important questions should be asked. They include:

* Customer requirements and stakeholder benefits - who are the broadband service provider's customers and what are their unmet requirements? What new services would they welcome and be most likely to purchase? Are these the products that are most synergistic to existing or legacy product lines? Are there products whose development would also benefit an important stakeholder, such as the MDU's property owner?
* Competitive analysis - what new services are the competitors offering? How does the operator seek to differentiate themselves from other competitors? What services are most likely to maintain customer loyalty, or to minimize churn and reduce the susceptibility of customers disconnecting based upon competitive offers?
* Broadband operator's ability to take risk - how is the broadband operator capitalized and do they possess the financial resources to assume the downside risk of an unsuccessful product launch? Can the company self-finance the new service, or does it have additional equity or debt sources to raise the necessary capital?
* Relative attractiveness of alternative new products - what are the capital requirements, potential revenue, projected expenses, likelihood of success, internal rate of return (IRR), and return on investment (ROI) of each product and how do they meet the company's annual budgeted projections and long term objectives?
* Strength of the management team - does the existing management team possess the knowledge, experience, and capacity to deploy the new products? Alternatively, should the company recruit additional human resources or consider partnering with another company to successfully deploy the new product?
* Exit strategy - does the operator have an exit strategy and if so, what is its timing? Which of the alternative new products would most likely increase the value of the operator or least likely to create an encumbrance that could complicate the transaction or reduce the number of potential suitors?

Broadband is a service that is still early in its product lifecycle. After broadband operators have completed deployment of their service, they will begin to focus on how best to increase the yield of their infrastructure investment. This will satisfy two objectives - first, it will establish a basis other than price on which to compete. In other words, they will ensure that their product is not commoditized as merely "broadband connectivity" and differentiated from other operators only by the price that is charged. Secondly, through the deployment of a la carte and value added services, new and diversified revenue streams will be generated. So through more completely and better meeting its existing customers' requirements and offering amenities that make the properties served more valuable, the equity valuation of the broadband services providers will be maximized.

Stay tuned to Private and Wireless Broadband Magazine for an in depth discussion of the new revenue generating products that will increase broadband service providers' revenues and enhance their bottom line. In a bimonthly column in subsequent issues of this magazine, I'll be discussing in detail the elements to consider when deploy these new services, and will provide projections of the revenues, expenses, and capital costs of each new service. Selecting one or two new services at a time, I'll also offer examples of vendors whose companies provide the a la carte services. Finally, and as an aspect of each discussion, I'll include the pitfalls to be wary of and synergistic benefits to be cognizant of when launching a particular new service.

About the Author
Don Kent is CEO of eCablevision Broadband Consulting and has spent over 26 years in executive management with early stage companies specializing in the delivery of broadband and digital content services. The author can be reached via email at DonaldAKent@Prodigy.net.