Commentary

OTT Set to Go Over the Top, Gorge on Bandwidth

For the time being, game consoles are the undisputed king of the hill when it comes to providing over-the-top (OTT) video services to the living room. But within the next few years look for Internet capable TVs and Blu-ray disc players to supplant the aging Xbox360s and Playstation3s as the preeminent connected sources of IP content to the TV. In a new report from IMS Research, the company predicts that access to IP video content to the living room will accelerate rapidly as "all but the lowest-end" TVs and disc players will carry network capabilities. In terms of raw bandwidth, the use per household of Internet video into the living room will increase by more than 50%, IMS foresees.

The leading revenue model for OTT will be subscription services rather than pay-per-view and purchase models. Subscriptions will accrue $32 billion worldwide over the next five years, IMS estimates.

The hockey stick growth in OTT access is going to create a problem for IPTV providers like telcos as the demand for bandwidth starts to challenge existing compression technologies. The problem will come in handling peak usage periods. In France, for instance, bandwidth demand over IPTV systems at peak demand in 2010 still amounted to only 37% of network capacity. By 2015, IMS finds that peak demand share of overall bandwidth will increase 60%. "In a country with a pronounced OTT content demand like the United States," the report states, "average data usage by an IPTV household will rise to nearly 25Mbps in 2015, up from the current 19Mbps. While the increase may not seem significant, IPTV households are expected to double, creating a need to address possible congestion issues." The telcos serving IPTV are out looking for technology solutions to maximize bandwidth. According to IMS analyst John Kendall, "OTT is here to stay, and the telcos have accepted that."

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The next question for all MSOs and for consumers will be whether that increase in bandwidth investment will be underwritten by increased Internet access fees and tiered pricing.

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