There was a very interesting press release on 24 September from BT, concerning its 21st Century Network. Whilst it mainly featured its ADSL2+ roll-out across the UK, it also indicated plans to reduce bandwidth charges from January 2010 by almost 50%. This is very significant given the apparently inexorable growth in consumption of online video.
Almost a year ago, Ofcom published a report by Analysys Mason entitled Delivering high-quality video services online, which considered the economic and technical issues associated with this growing market. It is too early to tell yet, but some evidence from operators in Europe suggests that we are closer to the most aggressive scenario we considered in our report (see ‘TV moves online’ in Figure 1). In the long term, this scenario has most TV viewing taking place online, with significant spontaneous viewing on-demand (like iPlayer) in HD.
Figure 1: Average busy-hour bandwidth per home for two scenarios [Source: Analysys Mason]
However, this scenario can only be realised across the entire broadband market if bandwidth charges decrease significantly. Our report showed that the bandwidth charge per megabit per second may fall as the benefits of next-generation network (NGN) technologies are realised, reflecting the fact that the network costs are broadly fixed, yet traffic volume is growing dramatically. We estimated that bandwidth charges might fall by around 50% by mid-2010 – it turns out that this was very close to what BT has recently announced.
The economies of scale offered by NGN technologies are clearly essential if the growth in online video consumption is set to continue. BT’s announcement is the first step towards enabling this kind of future to become a reality, but if the ‘TV moves online’ scenario is going to be realised, further reductions in bandwidth charges will be critical.