The Difference Between Voice and Video Bandwidth

In a recent conversation with a financial analyst, the matter of Internet video bandwidth came up. The simple observation was that video consumes an order of magnitude (10 times) to two orders of magnitude (100 times) more bandwidth than voice does.

The implication, of course, is that if online video consumption becomes popular, it represents a network engineering and challenge potentially 10 to 100 times more complicated than was the case for access networks built for voice. 

That isn't to say costs scale precisely that way, but it suggests the dimensions of the cost problem for any network services provider charged with adding that much bandwidth. 

The cost of deploying a fiber-to-the-cabinet (fiber to the neighborhood) network in the United Kingdom, for example, has been estimated at £5.1 billion. The cost of a fiber-to-the-home network is estimated at £28.8 billion, according to the Broadband Stakeholder Group. 

The immediate difference in potential bandwidth might not be an order of magnitude. But the potential bandwidth difference ranges from an order of magnitude and up. 

Broadband: When a "Problem" Actually Isn't a Problem

Since broadband first became widely available to consumers in the late 1990s, adoption has hit the

halfway point faster than most other information and communication technologies, one easily can conclude. 

It took 18 years for the vpersonal computer to reach 50 percent of Americans, 18 years for color TV, 15 years for the cell phone, 14 years for the video cassette recorder, and 10.5 years for the compact disc player. 

It has taken about 10 years for broadband to reach 50 percent of adults in their homes.

The point is that, looking historically at the matter, there is not now, nor has there actually been, a "broadband adoption problem." One can quibble about costs, the rate at which speeds are increasing, traffic shaping or business models. 

But as a simple historical model, broadband was adopted faster than any other popular mass market service, ever. 

No SaaS Slowdown

Worldwide software-as-a-service revenue in the enterprise application markets is on pace to surpass $6.4 billion in 2008, a 27 per cent increase from 2007 revenue of $5.1 billion, according to Gartner, Inc. The market is expected to more than double with SaaS revenue reaching $14.8 billion in 2012.

Gartner analysts say the adoption of SaaS is growing and evolving within the enterprise application markets as new entrants challenge incumbents, popularity increases, and interest for platform as a service grows, despite the challenging economic climate. 

The fastest-growing markets for SaaS are office suites and digital content creation, albeit from small bases, says Sharon Mertz, Gartner research director.

Gartner estimates that the revenue attributed to SaaS within the office suites market will reach 99.2 per cent compound annual growth rate from 2007 through 2012, with a total SaaS revenue reaching $1.9 billion in 2012. 

By 2012, Gartner estimates that web-based freeware such as Google Apps, Adobe Buzzword, ThinkFree, Zoho and SaaS offerings will account for nine percent market share of total software revenue.

Gartner forecasts 96.1 percent CAGR for SaaS revenue in the digital content creation segment from 2007 through 2012.  

“DCC software is becoming increasingly important as organisations evolve toward a more Web-centric business model," she says.

The content, communications and collaboration  markets remains the largest contributor to the overall SaaS enterprise application markets with revenue exceeding $2.1 billion in 2008, and it is expected to amount to $4.7 billion in 2012. 

SaaS will represent two percent to three percent of enterprise content management and more than 70 per cent of Web conferencing in 2007.

The second largest contributor to the overall SaaS enterprise application markets is customer relationship management. In 2008, SaaS within the CRM industry is expected to exceed $1.7 billion in total software revenue. Gartner expects CRM SaaS revenue to exceed $3.2 billion in total software revenue in 2012.

Using Cable TV Analogy for Broadband

Net broadband subscriber adds, at least for U.S. cable and telephone providers, were much slower in the second and apparently third quarters of 2008. Part of that slowdown likely can be attributed to growing saturation of the broadband access market.

But it also is likely there is some contributing pressure from general economic conditions as well. Dial-up users might just decide to hold off on a move to broadband for a little while.

Cable TV marketers long have argued that multichannel video is a bigger and better value in tough times, representing a relatively-affordable source of entertainment for a family. An argument along those lines might help marketers of broadband access as well. 

"Product strategists responsible for the success of residential broadband services can continue to grow broadband penetration in a tough economic climate by positioning their service as a gateway to cheap content and communications," argues Sally M. Cohen, Forrester analyst. 

Downturn Behavior: True to Form So Far

What typically happens in an economic downturn, in the area of communications or network-based entertainment services, is that people reduce consumption of some "enhanced" features while retaining the base service.

In the cable TV segment, consumers tend to hand on their ad-supported services but skimp a bit on "premium" service. So you might see less use of fee-based video on demand, for example.

Taking a look at mobile service, Forrester Research analyst Pete Nuthall says "the economic downturn won't put a dent in the European mobile penetration rate of 84 percent, but mobile services providers are feeling the impact of reduced usage and spending as consumers review their regular outgoings."

That's confirmation that what has tended to happen in the past just might happen again. "The price of core services,  voice and SMS, is of growing importance to more mobile users, while advanced handsets and services are becoming less important to fewer mobile users than a year ago," he notes.

"Product strategy professionals are responding by de-emphasizing mobile data services and expanding the variety of SIM-only offers," he points out.

Using the same sort of logic, it is conceivable that some broadband users will downgrade their service plans. And it isn't hard to imagine some users ditching landline service, at least for the moment, so long as they can afford a mobile calling plan that covers their typical usage. 

Blyk Outsources to Nokia Siemens Networks

Blyk, a provider of  ad-supported mobile services for 16 to 24 year olds is outsourcing its Netherlands and Belgium operations to Nokia Siemens Networks. Nokia Siements will provide prepaid charging, messaging systems and device management services for Blyk in those two countries, as a hosted service. 

The move is but one example of something we are seeing lots more of: service providers and carriers are outsourcing important network operations and facilities to third parties. 

63% of U.S. Population Uses Internet

eMarketer estimates that 63.4 percent of the U.S. population uses the Web at least once per month, and that nearly seven out of 10 Americans will do so by 2013.

Some of us are shocked the numbers are that low. Once a month?