Connectivity is King?

While newspapers and other businesses provide the internet content that keeps us hooked, service providers are reaping all the profits.

For all the talk about Rupert Murdoch attempting to re-establish the pay wall for content and online start-ups struggling to make free services viable through advertising or freemium plans, one thing that doesn’t get a lot of attention is how internet service providers are happily raking in the dough.

The more people use the web, the more services they consume, including growing amounts of video, and the more they want a better, faster online connection, even if it means paying more for it. The high-speed service providers have been more than happy to meet this demand by offering new tiers of premium services. Rogers, for example, has five broadband services, capped off – for now – by an “Ultimate” package that delivers 50Mbps for $99.99 a month.

In other words, high-speed access is a good, high-margin market even taking into account that cable companies and carriers have had to make major investments in their infrastructure to offer better, faster service.

At the other end of the spectrum are the players that supply the content that makes high-speed access so valuable and necessary. This group include newspapers, magazines, video sites, software-as-a-service for businesses and consumers, and games. Without high-speed access, it would be difficult to deliver a good experience.

As a group, the content players are struggling. Newspapers, for example, are trying to figure out how to generate enough advertising revenue to support shrinking infrastructures. Google is still working away on making the ever-expanding YouTube profitable, while online start-ups are hoping that subscriptions may emerge as an alternative to advertising as a revenue source.

In other words, one group – the high-speed players – is thriving, while the other is scrambling to make money. At some point, something has to give, because the current situation doesn’t appear to be viable in the long-run. You can’t have a healthy ecosystem when one group is fat and happy and the other is sick.

While the broadband players are working with content suppliers to expand their distribution and, in the process, hopefully make more revenue, something that struck me is how high-speed companies such as Rogers are starting to drive even more revenue by expanding their service footprint.

Rogers, for example, recently launched video-on-demand online, and offers access to content through its wireless network. The strategic thrust for Rogers is “convenience” so consumers can access content any time, anywhere, on any device. Of course, you have to pay for convenience but, again, consumers seem to be willing to pay for access to get content.

Content may be king but on the web, connectivity is where you’ll find the money.

This essay originally appeared here. For more about the author, Mark Evans, visit his website.