BBC is about to open its iPlayer

The BBC is about to open its iPlayer technology to other broadcasters. The iPlayers success in the UK with consumers is unquestionable. It’s a good technology delivering quality content. On the other hand it is an ISP’s nightmare come true. Consumers are now down loading or streaming vast amounts of video over the internet. Business cases built on end users looking at web pages, even those rich with graphics images and audio would not have been too much of a problem. Video files and streams demand higher bandwidth.

There has been a bit of a yo-yo going on between where the bottle neck in the internet is for most of the life of the internet. Initially last mile connections into the home where too small, then the internet backbone then content servers, then back to the last mile etc etc. Backbone congestion gave rise around the 1990’s to the CDN, the Content Delivery Network. A way of getting video files to the end user without the content going across the internet for the vast amount of its journey from source to end user. Most of this was around events like music concerts, and sports finals rather than the distribution of regular TV programmes. The source of the content would pay a CDN provider so as to improve the end user experience. They would stay with the video longer (generally not full screen) see more “banner” advertising or buy the CD etc. More money from the end user more than paid for the services of the CDN. There were and still are some PayPerView and subscription video services but none have been a significant success to impact on the ISP.

You notice that the ISP took no part in this simply selling the end user the internet connection. However with the iPlayer in the UK the volume an constant nature of video means that ISP’s are being hit in two ways.

• One they are struggling to balance users demands across what is ultimately a shared bandwidth. ISP had gambolled that not all end users would be using the internet at the same time. That is they charged 10 users for a 2Mbit connection (potentially 20Mbit peak demand) but only provided 8Mbit from the local exchange into the internet. If the total demand exceeded the 8Mbit then customers’ maximum speed was reduced to cope. In the same way your telephone provider couldn’t cope if everyone connected to the exchange picked up the phone at the same time. Luckily not everyone wants to make a transatlantic call at the same time as very few would make it. It is this telco mentality (not necessarily wrong in the beginning) that drove this business model. (to make the telephone analogy complete this is the connection charge or the potential to make a call)

• The second thing that ISP’s gambled on was that most people sleep, go to work or otherwise have a life outside the internet. How wrong can you be? Based on this assumption, they pay for Gbyts shipped (to continue the analogy with telephones this is the usage/call charges).

Video not only pushes up the bandwidth but also the total amount of traffic shipped. So ISPs are paying more for the likes of the BBC and ITV to deliver content to the end users. ITV gets increased advertising revenue (interestingly they make more money out of X factor online than they do from broadcasting it) but is costs the ISPs

Some ISP’s have, and are using “traffic shaping” reducing end users ability to access certain sites at peak times. No surprise that access the BBC site between 18:00 and 21:00 usually results in a slower connection with far more “buffering” messages than at off peak times.

ISP’s have a bit of a dilemma. The price for broadband is very competitive. ISP bundled in TV and mobile services to try and differentiate their offering but the broadband services are similar. So the ISP can’t charge the end user more for fear of losing customers to a competitor. If they do to much “traffic shaping” there customers may also walk to a competitor. One solution is that they charge the content owner. Content owners response is predictably hard ball and uses an instruction to take a sexual journey. So what is the ISP going to do – cut off the BBC web site or other who doesn’t pay.

All this is understandable and potentially manageable if you are just looking at the UK. What about content coming in from the US or Australia, India etc etc. It is too complicated for the ISPs to manage. From the content providers perspective it is equally too complicated they potentially have to deal with multiple ISPs.

A broker could sit in-between the two groups to aggregate content and ISP’s, but that has just added more cost. However if the CDN is also the broker and is able to remove cost elsewhere in the Mbit connection or the Gbyts shipped charges the exercise could be self funding. Another possibility is to insert targeted advertising. Targeting could use information about the way an end user is using the internet (specific profiling) or could be simple based on the time of day being used (statistical profiling). Advertisers could bid for the slot on the fly similar to the Google model.

Time will tell whether this or another solution is used but whatever, the rise of video on the internet needs to be paid for. The tension between the end user, the ISP and the content provider is set to rise and the opening of iPlayer is more fuel to that fire.