AT&T (News - Alert) post paid customers will be paying a new 61 cent a month “administration fee” that will raise $512 million a year in revenue ($7.32 per year per post paid customer), on a base of roughly 70 million customers.

That might seem a "small" thing, and in one sense it is. But it another sense it is a big deal. The amount of money AT&T makes from that 61-cent charge will be roughly equal, every month, to the amount of gross revenue Verizon (News - Alert) Communications fixed network operations makes from all small business customer operations every month.

That is a practical example of the ways large telcos most easily can create new $1 billion annual revenue streams, namely by building off things they already do. Generating $1 a month in incremental revenue from 70 million customers creates $840 million a year in incremental revenue.

The leverage is substantial whenever a carrier can boost revenue from every customer, rather than just “new customers” or “saved customers.”

Assume average revenue per user for a smart phone account is $65 a month. Adding 100,000 customers generates $780 million dollars worth of incremental revenue. That is roughly the number of net new subscribers AT&T in recent years might be expected to add in any particular month of a quarter.

In other words, a 61-cent increase on the postpaid customer base generates nearly as much revenue, and vastly more “profit” than adding 100,000 new smart phone customers.

New lines of business ultimately will be important, no doubt. Still, revenue lift frequently is most meaningful and most immediate when it is generated by some extension of the core revenue model.

Most other truly new lines of business initially will be tougher. The new fee generates about $42.7 million a month.

By way of comparison, Verizon Communications generates about $42.7 million a month from its fixed network “small business” segment. In other words, the new AT&T fee generates about as much revenue per month as Verizon Communications generates from its fixed network small business operations.

And you can be sure the profit margin from AT&T’s fee is much higher than Verizon’s small business profit margin.

The point is that it often is easier to generate high profit margin new services from a tier-one telco’s existing high-volume operations, than to create a whole new line of business, whether that is cloud computing or mobile payments or app stores.

In fact, one reason the machine-to-machine business makes so much sense is that it nearly directly builds off of high-volume core mobile service provider capabilities.