Guest post: How Will Usage-Based Pricing on Internet Service Impact Streaming Services?

If you were to ask internet service providers, they would tell you that bandwidth is being dominated by streaming services like Netflix and Hulu, and that usage-based billing is necessary to deal with this trend.  There are several studies confirming that online video consumption has risen exponentially, including that Netflix alone has been cited repeatedly in the last year as being responsible for over 30% of all internet traffic.  Clearly, video streaming is a bandwidth-hungry activity, and it seems our current networks may be unable to accommodate any widespread consumer adoption of this technology for entertainment.

Is Bandwidth Really That Scarce?

As a nation, America has not been as aggressive as other nations at addressing our internet infrastructure issues, especially in terms of investing in broadband networks like fiber optics that can easily handle high volumes of bandwidth-hungry traffic, such as what video streaming would demand.   American consumers generally don’t have high bandwidth plans available to them; however, there are enough of us that have plans that certainly can accommodate moderate usage of a streaming subscription.  That could prove to be a strain on our networks.

In a related issue, mobile broadband technology has not kept pace with streaming technology, which likely is one of the predominant ways that consumers will want to view online content.

Upsetting the Business Model is Another Issue

Additionally, should streaming finally become a viable alternative to subscription television services, internet providers have a vested interest in discouraging it, because many of them bundle television services with broadband.  They have negotiated very expensive licensing agreements with entertainment companies for rights to the content, and if their subscribers start cutting the cord, that will begin draining their profits.

Killing Two Proverbial Birds with One Stone

Cable internet providers began their lives as television providers.  Internet was a lucrative way to improve their margins, but their primary business model started out as television.  A usage-based pricing model would not only handle the immediate scarce bandwidth issue by tempering growth of online video consumption, but will also protect internet providers from having consumers defect en masse from their television subscriptions, because people who relied solely on streaming will learn that they really aren’t saving as much when they find out how much their internet provider wants to charge them for bandwidth.

It would also provide them with time to shore up their networks with newer technologies that will handle the traffic surge that is surely inevitable in the very near future.  The big question is will they take the money and run, or will they reinvest in the infrastructure that we will need in order to compete globally and to enjoy everything that technological innovations will have to offer.

The Real Impact on Streaming Services

Usage-based caps are certainly a concern, particularly if internet providers are not reigned in through some type of legislation that is mindful ultimately of the consumer without throwing business entities under the bus.  However, streaming is quickly becoming the medium of choice, especially among the younger generation who have grown up with a mouse in their hand.

The writing is on the wall, and cable TV providers will have no choice but to change.  Their so-called adaption so far has been to provide pseudo streaming services that are meant to compete with the likes of Netflix and Hulu in a high priced bundled package.  But consumers are smart, and they will know a ploy when they see one.  The price of entertainment simply must come down.  It’s a matter of time before they will understand that the people have spoken.

 

Anne Madison has written a lot about streaming and related issues. You can learn more about Hulu Plus, as well as how to watch streamed video right on your television set with the Roku Player.

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