OTT Video Could Speed Metered Billing
"Some of our consumers are using much more bandwidth than our enterprise customers," said Paul Bertino, director of product management and marketing for HickoryTech Corp. (Nasdaq: HTCO), an independent CLEC and fiber optic network operator in Minnesota.
With consumer groups clamoring for broadband prices to go down to enable more people to connect, and network costs going up to handle the growing bandwidth demands, someone has to pay, Bertino said. "If not those who are consuming most of the bandwidth, then who?"
Bertino was the service provider representative on a breakfast panel addressing the impact of over-the-top video on telecom service provider networks, and he agreed with the other panelists that OTT video is a reality that Internet service providers have to address.
HickoryTech is currently responding by monitoring its network to determine how much bandwidth is being consumed, what the peak usage periods are, and what kind of congestion is arising, Bertino said. Service providers need to determine the impact of OTT video and then figure out how to monetize the extra network bandwidth being delivered, he added.
And that may bring metered billing into play, even though that is unpopular with consumers and regulators. (See Congressman Mad About TWC's Internet Meter .)
Service providers aren't yet seeing the full impact of OTT video viewing, because only a tiny percentage of TV watching is being done online, said Yoav Schreiber, senior analyst for digital media infrastructure at Current Analysis . Schreiber, who said he has not only cut the cord but thrown away the TV set in his own household, cited the most recent Nielsen report showing traditional TV viewing has increased 1.5 percent year-over-year to 141 hours per month, while Internet video watching has increased much faster -- at a 46 percent rate -- but still represents just over 3 hours a month.
"The difference between the two is still significant," Schreiber said. "This year, there is an extra two hours of plain old TV watching each month and only one more hour of viewing over the Internet."
"If service providers use this time to build a broadband infrastructure in a way to support IP video so that the Internet viewing can be additive, not competitive, there is hope," said Jim Riley, chief revenue officer of Avail-TVN , which sponsored the breakfast. But even Riley admitted that would be "tricky" because of the many players involved, including content owners, and the many political issues. Avail-TVN's strategy is to be the bridge between content owners and telecom service providers and enable or even help provide that infrastructure for telcos, Riley said.
"Service providers are well positioned to take advantage of your current assets and to take a long-term view here," Riley said. "You ignore [the coming wave of OTT] at your peril."
With the Federal Communications Commission (FCC) poised to implement net neutrality rules, the telecom service providers' ability to recoup the additional investment in network technology required to support OTT video will be affected, said Bob Schattner, senior business development manager for U.S. service provider sales at Cisco Systems Inc. (Nasdaq: CSCO).
"The challenge is aligning the needs of consumers and everyone in the value chain, and then looking to improve the economics for everyone," Schattner said. Programmers want high-quality, reliable, and secure networks, and they want to get paid.
In general, the panelists agreed that there must be new business models -- possibly including targeted advertising or subscriptions -- to let service providers monetize their network infrastructure investments.
HickoryTech already partners with Synacor Inc. to deliver premium content, but it's found that only 75 of its 20,000 video subscribers were willing to pay more for the content, Bertino said. His company recently decided not to offer ESPN 360 as a premium service because of the cost and the belief that consumers wouldn't pay.
One potential model is to view OTT video as a way to offer à la carte programming, Schreiber said.
"As a switched digital video provider, our network could easily handle à la carte," Bertino responded. "I would love to test that model." — Carol Wilson, Chief Editor, Events, Light Reading