Video, Bandwidth and Online Advertising

Video data is the prime mover behind massive increases in Internet bandwidth usage. According to Cisco Systems, video currently generates more traffic in the US than was transmitted across the entire Internet backbone in 2000.

By 2012, as Cisco puts it, “Internet video will be nearly 400 times the US Internet backbone in 2000.”




To be sure, the Internet is not about to collapse due to the video boom, nor will it slow down to an unbearable crawl. However, additional costs are involved. In response to this stupendous traffic growth, various ISPs—such as Comcast and Time Warner—are looking to limit their customers’ bandwidth usage through techniques such as monthly download caps (often called throttling) and differentiated service tiers. This budding trend in Internet broadband pricing means that unrestricted service plans might become a thing of the past.

As might be expected, consumers see little to like about such changes.

In a recent IDC survey for Zeugma Systems, a company that makes equipment for broadband networks, 81% of US consumers said they dislike the idea of ISP service changes that would eliminate unlimited broadband.

Further, only 5% of respondents said unequivocally that those who use more bandwidth should pay more, while 51% indicated they would try to change service providers if their ISP imposed bandwidth caps.




How might changing ISP business models shape all of online advertising?

When people have to pay additional fees for extra bandwidth or are threatened with slower service, they will likely think twice before watching “optional” video. Additionally, knowing they are paying based on the bandwidth they use, consumers might resent all forms of Internet advertising, since those ads will consume some of their metered service. That would especially be true for video ads.

In particular, the current increase of high-quality, long-form video content—TV shows and full-length movies—the types of high-bandwidth content necessary for substantial online video ad growth, would hit major roadblocks under changed ISP service plans.

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