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The Inevitable Video Data Wars

Photo of Tim Mulligan
by Tim Mulligan

Netflix’s recent filing to the FCC (Federal Communications Commission) inquiry on advanced broadband sets the stakes for a clash of world views between the TV and the tech worlds. The SVOD giant’s position in support of its argument for increased data caps by Internet providers is as follows:

“Watching television shows on the Internet is no longer a novelty. Consumers increasingly expect more from their broadband connection, and they expect that broadband Internet will deliver a television experience that is the same or better than what they receive from their cable service, satellite provider or local broadcaster.”

The filing goes onto say:

“The FCC should determine whether American households have access to broadband services sufficient to consume Internet television.”

According to Netflix, a data allowance of “300 GB of data per month is required to meet the Internet television needs of an average American.” To put the data demands of video streaming into perspective, one hour of watching Netflix in HD (High Definition) consumes 3GB of data.

The ISPs hold the balance of power

Netflix as the world’s leading SVOD (Subscription Video On Demand) service needs more people watching its video content if it wants to continue its aggressive rate of growth. The ISPs (Internet Service Providers) Comcast are able to throttle that demand through their data caps. Currently Comcast’s highest data allowance is one terabyte per month, but many of the smaller providers such as Cable One have their top data allowance capped at 300 GB, right at the minimum monthly requirement for one average American viewer. Netflix, Amazon and Hulu’s ability to grow is being severely curtailed by the data limits set by the ISPs.

With the biggest ISPs running their own Pay-TV services, there is a commercial incentive for maintaining low data caps to discourage existing consumers from engaging alternatives and to incentivize SVOD services “to pay an ISP to zero-rate its traffic to enable the ISP’s customers to access the online service” to quote again from the Netflix FCC filing. On the same day that Netflix submitted its filing, AT&T introduced zero rating for its DirecTV streams from its mobile user’s data caps.

Video is king but data is the queen

As MIDiA Research identified in its report, Video Eats The World 2016 is the year where video content has come to the fore in the digital landscape. The challenge now is how to effectively distribute in-demand video content to the digital consumer. As TV networks have become intricately linked with the Pay-TV operators in order to reach their audiences, SVOD services become dependent upon the ISPs and the Telcos in order to deliver their services. Many of these services are disruptive to the data distribution services business which provide them, making them very vulnerable to the underlying networks through which their content runs.

Although SVOD services have the video content which digital consumers prize highly, the data access and delivery underpinning the user experience is the real asset in the digital economy and without regulatory intervention, it will remain in the hands of the legacy content distribution networks, whose vested interests lie in controlling consumer access to competing video services.

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