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Finding More Revenue in Connected Homes

Finding More Revenue in Connected Homes

Internet service providers (ISPs) must continue seeking ways to differentiate beyond offering faster speeds for the same prices, especially with the increasingly competitive gigabit broadband market. Value-added services present a significant revenue opportunity for North American digital service providers. According to research conducted by Omdia, it is expected that by 2028, the home market will be worth $632 billion, with a 17% growth in annual revenue since 2023. Fixed broadband remains the largest market in this sector and is expected to be worth $128 billion by 2028, while online video will be worth $89 billion.

“[If we] dive a little deeper into the fixed customer broadband market, we can see in the forecast that subscriptions and revenue growth over the five years will be quite significant [in growth], even though the North American market is quite saturated and developed, said Alzbeta Fellenbaum, 5G & Broadband, Pricing & Strategy, Omdia. “But we still expect the subscriptions to grow from 144 million in 2023 to 260 million in 2028, now that fiber and FWA are going to be the fastest-growing access technologies. We also forecast the residential broadband penetration to reach 97% of North American households.”

Subscriber households will grow from using an average of 588 megabits per second in 2023 to 1.4 gigabits in 2028, showing a considerable growth in speed. With more and more homes subscribing to faster services, the number of providers offering broadband with multi-gig and 10-gigabit services has increased as well.

“This practice, if not done right, can actually harm the market and lead to cannibalization of the high premiums that these multiple 10-gigabit offers should be associated with. If service providers are not careful, they will get dragged into promotional frenzies that can see them offering premium speeds for only marginal price increases,” noted Fellenbaum.

Looking at Canadian and US markets, where broadband has seen growth over the last five years, there is still a disproportionate trend between the two. In the US, speeds are growing by 500% and Canadian speeds are growing at 600%, largely because of decades-long marketing focusing on speed and price.

Fellenbaum recommends that service providers focus more on the quality of service and experience over simple price and speed offerings to avoid a race to the bottom on price. Previous Omdia research found that consumers value a highly reliable and consistent connection. ISPs should turn their attention to providing and marketing an overall superior quality of broadband service that meets all of these requirements, allowing them the potential to capture greater market share and convince many customers to pay more.

In addition, offering value-added services such as lower latency for gaming, dedicated wildfire traffic streams for prioritization, and parental controls are products that can add revenue and offer marketplace differentiation. New services continue to be developed, such as Wi-Fi sensing, which allows users to keep an eye on activity in the home, such as being able to monitor “age in place” adults and serve as a home security monitor.

For more on the key trends in the North American residential broadband and connected home markets, listen to the latest Fiber for Breakfast podcast.

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