Analyst: Netflix, OTT to propel usage-based billing

Michelle Clancy ©RapidTVNews | 01-12-2011

Triple-play operators are set to adjust their broadband billing schemes for starting next year to compensate for the escalating amount of over-the-top (OTT) video traffic.

According to a report from Sanford Bernstein & Co. analyst Craig Moffett, with escalating traffic from YouTube and Hulu Plus, plus a raft of new TV Everywhere initiatives from everyone from HBO to Major League Baseball, consumers are likely to blow through their caps. Many Tier 1 ISPs allocate monthly data limits up to 250GB, charging incremental $10 overage fees for each 50GB of data used beyond that.
The move is being portrayed as an opportunity for cable and telco providers to create new packages that take into account this consumer thirst for bandwidth, or, a opportunity to move basic subscribers into higher premium tiers of broadband, where the margins for operators can be as much as 90%.
"As more video shifts to the Web, the cable operators will inevitably align their pricing models," Moffett told Bloomberg. "With the right usage-based pricing plan, they can embrace the transition instead of resisting it."
And indeed, online video streaming reached a crest in the US for October 2011, with 184 million Internet users watching an average of 21.1 hours of video each, according to the comScore Video Matrix. In total, 42.6 billion videos were watched, which amounts to an all-time high.
At issue of course is the fact that most consumer broadband providers in North America are also video incumbents or traditional pay-TV players, raising the spectre of providers setting up anti-competitive "toll roads" for certain rival traffic. "We don’t think ISPs should be able to use their exclusive control of their residential customers to force us to pay them to let in the data their customers desire [and already pay for]," Netflix CEO Reed Hastings wrote in a letter to Congress and the Canadian Radio-Television and Telecommunications Commission last spring.
The FCC and CRTC's Net neutrality guidelines both prohibit ISPs from slowing or de-prioritising traffic coming from online gaming or video services--traffic-throttling, in essence. From a network management standpoint, ISPs like Comcast and Rogers say they are as a result left with no choice but to charge more for usage or find new monetisation techniques in order to fund the appropriate network expansions necessary to support the increasing levels of OTT traffic.