Without Zero Rating, Video Service Models Will Not Work

Though zero rating has been viewed through a “network neutrality” lens, it also, and equally, is a matter of content business models. To outlaw zero rating is to outlaw many content businesses as well.

For that reason, and ultimately, zero rating will have to be deemed lawful for content businesses that use the internet. That is why all four U.S. mobile service providers are moving to some form of zero rating for video consumption.

Historically, most media and content businesses have relied on zero rating. Cable TV subscribers buy content, and use the access network--without extra charge--simply as the delivery mechanism. Over the air TV and radio use the same model, as do satellite content providers. Streaming video services operate the same way.

Even print content subscriptions do not charge separately for “delivery” of magazines, newspapers or other content.

As the internet now has become the delivery mechanism for video and other content, business models and regulatory frameworks for managed content services will have to be allowed, or the media business model will not work.

The reasons for the change are simple enough. The consumer content business actually does not work if a content subscription also includes charges for use of the network.

Video is the most bandwidth-intensive application typically used by consumers, by an order of magnitude or more. In other words, consumption of one minute of video consumes more bandwidth than one minute of web browsing, and up to a few orders of magnitude more data than one minute of texting, voice or messaging.

Revenue per bit metrics likewise are skewed. By some estimates, where voice might earn 35 cents per megabyte , revenue per Internet app might generate a few cents per megabyte. It gets worse. Mobile operators earn nothing when customers watch over the top services such as Netflix, beyond the typical bigger data buckets such behavior will drive.

Forecasts that the typical smartphone user will require 4.4 GB per month of data completely fall apart if significant video consumption is factored into the model. Between 2016 and 2019 alone, video data consumption could increase by an order of magnitude.

A single viewed two-hour movie might consume 480 MB, a high-definition movie consumes perhaps 850 MB. As mobile video consumption becomes a major activity, it is not hard to predict the impact on networks and data consumption if a typical viewer watches only eight items a month of movie content, consuming between 4 GB and 7 GB per month.

And that might well prove to be an understated amount of consumption. Mobile video consumption might already have surpassed desktop video by the end of 2016.

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