The Lightwave Blog

Posted by Meghan Fuller Hanna

Last week, I spoke with Kevin Walsh, vice president of marketing for startup Zeugma Systems, about the company's flagship product, the Zeugma Services Node. (See our coverage of the product launch here.)

Basically, the ZSN is a service delivery router that enables service providers to identify and monitor each and every session flow traversing their networks, which, in turn, enables them to better manage and even customize those flows.

One of the potential new sources of revenue that the ZSN's visibility would enable is something Walsh calls "content acceleration," which posits that subscribers would be willing to pay incremental fees in order to enjoy faster downloading of content, specifically video content.

Walsh cites a June 2007 IDC study in which analysts forecast that almost 50% of traffic growth between now and 2012 will be attributable to over-the-top (OTT) video or Internet video services delivered by the likes of Joost or Hulu. "If you're a service provider," he says, "it's this over-the-top video that scares you the most, because it's the source of the greatest growth."

To test its content acceleration theory, Zeugma Systems retained IDC to conduct a survey of 800 U.S. consumers this past March. Respondents were asked a number of questions related to their video consumption habits--and their willingness to pay for value-added services.

"We asked first, would you even be interested in finding, buying, and watching video delivered over the Internet directly to your 50-inch flat-panel television using only your remote control?" Walsh recalls. "In other words, no computer is involved, and this is high-definition video suitable for what we call living-room-quality video."

Thirty-five percent of the respondents said they were very interested, with an additional 41% of respondents indicating somewhat to moderate interest. The question played even more favorably among the 18-34 age group, with 54% of respondents expressing high interest and 41% indicating moderate interest.

But now comes the tricky part: If a movie costs $5 to rent and takes several hours to download, would you pay more for a faster download so you could begin watching that video immediately?

The survey revealed the following:
• 38% of respondents expressed a moderate to high interest in paying an additional $0.25 for faster downloading capabilities, while an additional 18% said they'd be somewhat to moderately interested.
• 14% said they would be moderately to highly interested in paying an extra $1.00 for faster service, while 26% said they would be somewhat to moderately interested.
• 41% of respondents said they would be willing to watch a 30-second ad for the privilege of faster downloads.

"The take-away from this is not how much subscribers would be willing to pay," says Walsh, "rather, that they are willing to pay."

"A lot of service providers are sitting there right now scratching their heads, wondering what sorts of services they can roll out that will generate revenue," he continues. "Here's just one example of the many that consumers are saying they would be willing to pay for."

So now I'm asking the Lightwave audience the same questions: Would you be interested in receiving video content over the Internet straight to your TV set? And would you be willing to pay more to download that video content faster?