One More Example of How Internet Apps Can Grow ISP Revenue

With the caveat that a mobile or fixed network Internet access provider has to be able to charge for greater consumption by end users, Internet apps possibly have harmed telecom revenue less than imagined.

In fact, even cannibalization of text messaging by over the top services might not be as big a hit to revenue (globally), as often is assumed.

A shift to greater amount of video streaming actually should help Internet service provider revenues, assuming some rather direct correlation between consumption and revenue is possible.

For the sake of argument, assume a household shifts consumption from a linear video TV subscription to some form of online delivery.

Ignore for the moment any revenue the Internet service provider can earn from providing TV content that once was consumed using a cable TV, satellite TV or telco TV connection, and focus only on the impact on purchased Internet access service.

Assume a one-hour TV show streamed to a TV requires 1GB at standard definition, and 2 GB, for an hour of HDTV. Assume you are a typical users and consume five hours of video a day. Assume half your consumption if HDTV and half is standard definition.

That implies 75 hours of standard definition TV consumed per person per month. At 1 GB per hour, that’s 75 GB of data. The 75 hours of HDTV represent 150 GB of data consumption, for a total of about 225 GB of data consumption a month, for linear entertainment television.

That might not be an issue for a single-person household with a monthly usage allowance of 300 GB. Assume the monthly cost is about $70 for such a plan.

The math gets tricker for multiple-person households, especially if many users are watching different programs. But the revenue logic is simple enough. If two residents watch five hours a day of TV, and that consumption is shifted (for the sake of argument) to online delivery, then that household has to buy an access plan with a bigger data allowance, to account for the 450 GB of video consumption by the household.

As this one example illustrates, demand for Internet apps drives enough incremental usage that one might argue the Internet sometimes directly drives ISP revenue.

It’s complicated, but not quite a zero-sum game, as some might fear.