Online Video Will Change Lots of Things, Including Peering and Transit Pricing

Most observers who regularly follow such things have noted for some time that online video consumption is growing so fast that it will inevitably affect the way ISPs--wireless and wireline--price the use of access facilities. Bandwidth caps, higher fees and other changes to terms and conditions are conceivable.

But the new peering dispute between Level 3 Communications and Comcast also points out the coming changes in backbone interconnection agreements as well. Online video is extremely asymmetrical. Unlike voice or chat, where the volume of traffic is about equal in both directions, video is unbalanced in the downstream path.

That's why cable and satellite networks have been built the way they are, to favor delivery of lots of downstram bits, but few or much-fewer upstream bits. Broadcast TV and broadcast radio are other networks historically designed for media delivery, not two-way communications.

Broadband networks mostly have been designed around asymmetrical traffic flow.

Voice and similar radio networks, on the other hand, always have been designed around symmetrical traffic flow.

Asymmetrical bandwidth has not been a particular cost driver for media delivery networks. But asymmetrical traffic always drives carrier interconnection costs, pricing arbitrage, and revenue models in the communications business.

If one network imposes hugely unequal traffic load on another, the receiving network gets paid for that unequal use of facilities. But if video content gets as big as most observers think it will be, unbalanced traffic will occur on a scale never seen before. So will payments by "sending" networks to "receiving" networks.

That means higher costs for "sending" networks and higher revenue for "receiving" networks. To put matters another way, the historic value of access networks is about to be shown, and access network operators will get a revenue boost. If you think "carrier compensation" fights have been interminable before, just watch. Inter-carrier compensation is about to get more complicated than we've ever seen it.