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Worries over costs of move toward IPTV world and beyond
Wednesday 08 March 2006 18:42:00 by Andrew Ferguson

In the UK we have become used to the idea of capped or traffic managed products, with a shrinking contingent of providers offering 'unlimited' broadband access. There are several reasons that seem the most likely reasons why the UK is at the forefront of this area, such as: Consumer pressure for cheaper products, so providers are squeezing everything out of what they have, rather than spending vast sums to constantly expand networks. Add the implementation of capacity based charging by BT Wholesale, which while making 2Mbps and faster connections affordable does mean providers are very careful to avoid unduly large spikes in peak time traffic. Also the UK may be in a fairly unique position in that perhaps many people are accessing films and TV series over peer to peer networks prior to their release in the UK. Thus making the average UK broadband usage higher than other countries.

It was interesting to read BellSouth’s Chief Architect Henry Kafka talking about the economic problems that the forthcoming changes in broadband usage may bring about. For those that don't know, BellSouth is a regional telephone/DSL provider in the United States. The full text can be read over at telephonyonline.com. It would seem BellSouth are looking at a 2GB (GigaByte) average usage from its residential broadband customers, the figures bandied about in the UK suggest a UK average is in the 5GB to 10GB area, so would seem higher. What was interesting was that Mr Kafka estimates the cost of the 2GB of bandwidth to be $1, or 50 cents per GB. Roughly speaking the cost to service providers in the UK for bandwidth is around 50p per GB, which given a commonplace conversion of 1:1 between the UK Pound and the US Dollar is very close.

What is perhaps worrying for UK providers as much as those in the US and other countries is what is projected for usage by IPTV users and subsequent HDTV users. Mr Kafka estimates that with just basic feature film downloading taking off, usage may rise to 9GB a month, and once IPTV takes off we may be looking at 224GB per month, and a whopping 1 TerraByte per month if High Definition TV delivered over an IP network takes off. If usage does explode to these sort of average levels, then the current pricing models are doomed to failure. The alternate network providers using unbundled services or other alternative technologies would be able to weather growth in usage better, as their costs are generally lower, but even then may struggle.

With the appetite for music and video downloading in the UK already taking off, it is only a matter of months before Video on Demand via IPTV starts to ramp up the usage figures. The big question with no answer currently is what will Ofcom and the telecoms providers of which the BT Group and NTL Incorporated are the largest do to ensure that UK can continue its growth into a digital economy. As a late starter in the broadband world the UK has done very well, but if this were to stall due to the pricing models, we could very quickly find ourselves slipping down the league tables, and investment in innovative services moving to other countries.

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