Eventually, all ISPs Will Have to Shift Bandwidth from "Linear Video" to Internet Access

Why is high speed access the strategic foundation of future fixed network business models? That is where the enduring value lies. No matter how important mobile becomes, there are some applications and features a fixed network can provide better than any other alternative, including mobile networks.

Consider only end user demand for video entertainment. If one assumes that a typical television viewer watches four hours a day, and that, someday, that will shift largely to over the top delivery, huge new bandwidth demands result.

And the demand grows with image quality. With standard definition as the baseline, high-definition, 4K and eventually possibly-higher resolutions will put huge stress on access networks.

Before compression is applied, 4K video requires four times the bandwidth as HDTV. In some cases, the bandwidth required to support HDTV was about eight to 10 times that of a standard definition signal.

In other words, 4K video, delivered over the top, might require 20 Mbps to 45 Mbps per stream. So bandwidth is one issue. Usage caps are the other issue. Without compression, a standard two-hour movies represents a 100-GB file.

You see the problem. Even a fixed connection might well have a 300-GB usage cap. Many mobile usage plans have effective per-device usage caps of perhaps 5 GB to 10 GB.

Looking at mobile services, Wi-Fi offload has become an important mechanism for allowing devices to consume data at rates that far exceed the actual mobile network usage cap.

That makes mobile data offload a primary value of the fixed network. Voice and messaging require such minimal bandwidth they do not affect the bandwidth demand requirement.

For telcos, cable TV companies or Internet service providers, high speed access is the foundation of the business, going forward. Video already dominates overall demand for gigabytes, and will over time grow even more important, as image resolution increases and most apps acquire the ability to incorporate video into their experiences.

What are the practical implications? The value of bandwidth will shift in the direction of Internet capabilities, over time, and away from bandwidth devoted to linear video.

Cable operators and satellite TV providers already have managed to reclaim significant amounts of bandwidth by shifting from analog to all-digital video delivery.

Might AT&T have something similar in mind in its bid to acquire DirecTV. Out of region, AT&T gains the ability to sell a triple-play offer. The big question is what happens in region. It might be reasonable to expect U-verse video to remain the delivery mechanism, where AT&T already has it deployed.

Long term, it is questionable whether any supplier will want to “waste” bandwidth on linear video, if demand shifts dramatically to over the top delivery over the Internet.

Interestingly enough, that also should shed some light on current arguments about “not making the Internet cable TV.” The concern is legitimate, but misplaced.

There is nearly universal belief that, eventually, today’s linear video service will migrate to some form of OTT delivery.

So it is not that the Internet, overall, “becomes cable TV,” but that cable TV content and business models will shift to use of the Internet for content delivery.

Managed services, in fact, are likely to become more important over time, even when public Internet networks are the delivery mechanism. Carrier voice provides another example.

Carrier voice will use Internet Protocol, on both managed and unmanaged networks. But that illustrates the complexity of arguments about quality of service. Consumers are going to have different expectations of services they have paid for.

In any event, you get the point: high speed access has to be the foundation for fixed network service providers.
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