« How BT Vision manages Digital Content | Main | Femtocells - What are they and why are they important? »

Broadband Incentive Problem - some new data points

A useful post here by Jeremy Penston from the IP Development Network about the online video market and the effect on ISPs and telcos (summary stats below, here). It supports, of course, our premise that the ‘Broadband Incentive Problem’ is getting worse - providing broadband services will increasingly become less economically viable, as the trends in South Korea and Japan are showing us.

What to do about it? Well, that’s what we’ll be debating with Cameron Rejali, MD of BT Wholesale, Hossein Moiin, VP Group Tech Strategy and T-Mobile International, and Antony Walker, CEO of the Broadband Stakeholder Group on the first day of the Telco 2.0 brainstorm.. I’ve asked Cameron to cover the following points in his stimulus presentation:

What are the current European broadband consumption patterns? How are they forecast to change? How are end-users (really) changing in terms of their requirements? What strains is the above making on broadband retailers? What does thewhole value chain needs to address these strains?

Hossein Moiin, will give his perspective as a retailer of mobile broadband services, and how the mobile industry is re-engineering it’s technical architecture (see post on NGMN.org here) to support end-users’ ‘personal broadband’ requirements.

And Antony Walker will describe the imperative for governments and regulators to get a much better understanding of the above issues.

Online Video and Broadband Incentive Problem. Some data points:
* South Korea and Japan: 4% of users make up 75% of traffic
* Bandwidth demands exploding: Ripped HD video files are freely available using p2p. 20 GB downloads are a reality. HD files are x10 size of normal online movie. 1 second of HD is 65x larger than 1 second of audio.
* One HD video costs as much to download as 340 albums, yet it costs the same to post them. Explain that to your customers!
* All current “solutions” aim to deter use: Traffic shaping is good technically, but has a negative impact on the quality of the customer experience. Capping and Fair Usage Policies are also good in theory, until the time comes to enforce them. Usage Based Charging (PAYG) is less confrontational, but bandwidth is not the same as real world value.
* YouTube shows there is a market that wants online video services.
* Content owners have problems. Pirates are cracking their DRM keys - HD DVD and BluRay already cracked.
* New bandwidth-hungry services entering the market: Joost, Babelgum.
* P2P platforms becoming legal: Bit Torrent signing deals with Hollywood studios, Zudio (HD Content Distribution site) signing deal with BBC Worldwide, Verisign’s Kontiki being used by Sky, AOL etc…
* Can you stop users arbitraging what is fairly priced against what is legal?
* iTunes shows there are large numbers who will pay a fair price for a legal, high quality version of popular media. But those who own it are nervous to sell it in case it gets ripped and shared…
* And thus ISPs are nervous to deliver it in case it overloads their networks…

So, some heavy re-structuring of the business model needed to address these issues. ‘Free’ broadband offers are no longer viable. There’s probably some short term upside for telcos (to upgrade their customers to new tiering levels), but we need some very creative thinking in the longer term.

James Enck will be telling us more about these ‘fat applications’ at the Telco 2.0 event and what the opportunities are for telcos, esp in hosting and transit.

To share this article easily, please click:

Post a comment

(To prevent spam, all comments need to be approved by the Telco 2.0 team before appearing. Thanks for waiting.)

Telco 2.0 Strategy Report Out Now: Telco Strategy in the Cloud

Subscribe to this blog

To get blog posts delivered to your inbox, enter your email address:


How we respect your privacy

Subscribe via RSS

Telco 2.0™ Email Newsletter

The free Telco 2.0™ newsletter is published every second week. To subscribe, enter your email address:

Telco 2.0™ is produced by: