The Video Effect Part 1 - OTT Video & Device Explosion
Video is going to bring the Internet to it’s knees, the operators who provide the infrastructure cannot invest enough to support the sheer growth of traffic and the politicians are trying to regulate……sounds like a recipe for disaster.
By now everyone is aware of a few basic facts about what video is doing to the Internet. This series of entries doesn’t just look at the fact that video use is going to expand dramatically (because we already know that) or the fact that operators need a new model (because they already know that very well). It does try to follow a logical flow of thought through the whole value chain of Internet services and investment to allow everyone to make money and support the investment needed to support the growth that everyone is predicting. That investment number in Europe alone is predicted (by much smarter people than me) to be around €28 Billion. Otherwise the growth discussed here won’t happen. Period.
So first lets take a look at the predicted growth. While we are generally not in favor of ever referencing one of our competitors, Cisco do provide an interesting freely available service called the Cisco Visual Networking Index. This allows anyone to create a graph showing the growth of various types of traffic across the Internet. Cisco expect traffic to more than double every year for the next few years.
But it’s also important to understand what is driving this growth. Sandvine recently published a report that lays this out pretty clearly. They analyzed peak traffic across the world and categorized it and it became very clear that in North America Netflix has overtaken bitTorrent in being a peak user of bandwidth as people move away from the provider’s own VOD services to use of pure Over the Top (OTT) video services. Interestingly enough Youtube is still very significant but not as high as Netflix…..and as Netflix revenue expands they will be adding more and more to their already very extensive catalogue.
The advent of these services is leading to (or driven by) rapidly changing usage patterns by users. Such developments as tablets (the iPad), smartphones and video streaming being available on pretty much every conceivable gadget means that you can now view any type of video on any kind of device. A recent report by Accenture laid these changes out in detail by country. As you can see no longer is the TV the only device for viewing video!
So….this is the background. In the next few posts we will take a look at what this means from an investment point of view, the challenge facing the operator, how the imbalance in revenue chain will have to be addressed and what an operator can put in place to enable the investment. Watch this space!