jthibeault

Who's Going to Pay For All That Online Content?

Blog Post created by jthibeault on Jan 20, 2016

4K videos. 50GB game downloads. Virtual reality. There's no doubt about it: we are consuming more online content more often. Whether it's surfing heavy, rich-media intensive websites or downloading software and games or watching tons of online video (just take a look at Cisco's predictions to get a sense of where that's going), the amount of bandwidth that we need to satisfy our online cravings is on a meteoric ascent. Which brings us to the elephant in the room, a looming question that's jockeying for an answer: "who's going to pay for it all?"

 

But answering this question is difficult because there are a multitude of parties with a stake in the game: network providers, end users, and content owners. Let's look at the scenarios:

  • The network provider. In this scenario, the networks that control user access to that content (Comcast, Cox, TimeWarner, Verizon, AT&T, etc.) simply eat it. Their broadband margins (which are much larger than their pay TV margins) shrink. They continue to fill up their network without any form of compensation.
  • The end user. In this scenario, the networks pass on the additional broadband usage as higher premiums and costs to the end customer. In fact, one could argue that this is happening today as many access networks have instituted data caps, charging users for overages that occur naturally as the content becomes bigger.
  • The content owner. In this scenario, the network provider charges the content owner for the overage. Verizon announced a program that they have dubbed FreeBee Data. In this program, the content owner pays a fee to have their data delivered free-of-charge to end users (i.e., doesn't count against their data cap). This is very similar to zero-rated traffic on mobile networks.

 

Which scenario wins out? Again, it's complicated. Consider the scenario of the content owner paying for it. You probably already guessed this, but the content owner isn't going to eat that network provider cost. They will most likely pass it back onto the end user in the form of a subscription premium. "You want 4K content? You can watch all you want on your network (because we pay for the delivery costs) but it will cost you an additional $5.99 per month!" In a sense, isn't Netflix doing this already with their "premium" pricing package ($2.00 per month more than their "standard" package, and the only package offering UltraHD)? And if you think that end-users are going to foot-the-bill, think again. As access networks continue to raise their broadband prices, new ISPs will appear in the market with lower prices. It's a catch-22: raise prices to compensate for end-user usage at the risk of losing subscribers. But network providers need to monetize their network assets. They can't continue to upgrade network capacity (which they need to do to meet the demand for online content) and not be able to charge for it. You can see how quickly this gets complicated.

 

Although it's unclear what scenario (or combination of scenarios) will win in the long-run, it is clear that this problem needs to get solved...and fast.

 

What do you think? Are there other scenarios in play? How do you think the question, "who's going to pay for it all?" gets answered? I'd love to hear your thoughts in the comments.

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