Several broadband service providers have suggested that the BBC should contribute to the cost of network capacity consumed by its iPlayer video download service. Current broadband economics could otherwise force them to restrict downloads, threatening to throttle the service before it gets up to speed.
“The internet was not set up with a view to distributing video,” said Mary Turner, the chief executive of Tiscali UK told the Financial Times. “We have been improving our capacity, but the bandwidth we have is not infinite. If the iPlayer really takes off, consumers accessing the internet will get very slow service and call their ISPs to complain.”
Tiscali also operates the Tiscali TV broadband video service that it acquired from Video Networks and plans to roll out nationally across major cities in the United Kingdom.
BT has distanced itself from such concerns. However, the real issue is that around 60% of broadband users in the country are still connected through the BT Wholesale service known as IPStream. One estimate suggests that an hour of video downloaded using the BBC iPlayer at peak time could cost a broadband service provider 67 pence using IPStream. In a brutally competitive broadband market this cost could be too much for the broadband service provider to absorb and too much to pass on to the consumer. As a result, they may be obliged to use traffic management techniques to throttle or limit usage.
The costs are significantly lower for broadband service providers that take advantage of local loop unbundling to operate their own networks and install their own equipment in exchanges. Customers of such services could therefore benefit from better download performance.
Broadband service providers should perhaps have seen this coming. In its Market Impact Assessment published in January, the communications regulator Ofcom estimated the cost of broadband capacity to support iPlayer services. Assuming an average additional usage of 3GB of data a month per broadband customer, it forecast that the total cost over five years to be between £400 million and over £800 million.
Ofcom is keen to encourage competition and investment in infrastructure, and services such as the BBC iPlayer will put pressure on BT to adjust its wholesale pricing policy, which is simply not economic for delivering video services.
The BBC is not the first broadcaster to offer programmes for download over broadband, but if the iPlayer is successful it could drive significant usage and begin to change consumer behaviour.
While the BBC pays millions for the distribution of broadcast signals, there is real question whether it should make a comparable contribution to the cost of broadband services that are sold by third parties as part of a commercial subscription.
Customers that are sold the promise of “unlimited” broadband at faster speeds that allow them to download audio and video may feel justifiably aggrieved. They may choose to move to providers that do not impose restrictive limits in the guise of a “fair use policy”.
Consumer demand for high-speed, high-performance networks will be driven by the availability of compelling services. This will make it easier for providers to promote and sell such connections.
Providers that take a long-term view will ultimately benefit, while those that find themselves unable to deliver an adequate service may suffer.