Verizon’s Value-Added Security Services

Doug Williams | May 15, 2008, 12:05 PM

Today Verizon issued a press release indicating that it has one million consumer subscriptions to its Internet Security Suite, which represents 13 percent penetration into its residential broadband consumer base (DSL and FiOS). The Suite, which utilizes technology from Radialpoint, offers a variety of security protections, including recently added fraud protection and PC tune-up features for $4.99 per month. That represents annual revenue of nearly $60 million. Not bad, not bad at all.

I’m still a bit bearish on the long-term outlook for revenue generation from value-added services. Already, many BSPs (AT&T, Comcast, Time Warner, Cox, Charter, Cablevision…) are bundling security service into their broadband access product. And as the broadband market continues to mature, BSPs will look for ways to sweeten their offers in order to retain current customers and encourage defectors from competitors. I’d argue that nickel-and-diming consumers is not the best long-term strategy here, based on our consumer survey data demonstrating relatively low interest in paying additional fees for value-added services. In terms of attracting and retaining customers, I think this is a good example of how free is worth more than $5 per month. It only takes 50,000 triple-play customers to generate $60 million in annual revenue.

I can’t help but wonder whether a $5 Internet security fee is today’s version of the ILECs’ inside wire maintenance charge. And that in turn makes me wonder whether Verizon has an inside wire charge for its FiOS-wired homes, and whether it is the same as the charge for copper-clad households. I’ll find that out and report back here.