Driven by the viewing of OTT services like Netflix across multiple devices, the average HH bandwidth requirements are expected to increase 31% annually over the next 5 years, from a peak hour average use per HH of 2.9 Mbps in 2014 to 7.3 Mbps in 2018, according to a recent study by network vendor Ciena and ACG Research. In addition, the use of Internet video, which includes smart TVs, is expected to grow from 12% of overall peak average bandwidth in 2014 to 25% in 2018, a compound annual growth rate (CAGR) of 56%. Again, the use of Internet video represents the largest contributor to HH bandwidth consumption by 2018. Additional use of 4K streaming video services, which consume 3 to 4 times more bandwidth than HDTV, will grow from 2% in 2014 to 12% in 2018. And recent moves by cable programmers like HBO and CBS to offer standalone OTT service would only accelerate the trend, Ciena’s dir of industry marketing Mitch Simcoe told us. “I believe that other pay-TV providers will also pursue this streaming video model.”
To protect their business model, MVPDs could potentially start unbundling to allow subs to pick their own bundle, he said, noting the Canadian government has already initiated a process toward unbundling TV channels. On the broadband side, ISPs will have to beef up their networks to meet the bandwidth growth of OTT by increasing the broadband access speeds in the last mile. Moving subs to higher broadband tiers creates new revenue opportunities, and cable ISPs are well-positioned with their hybrid-fiber coal plant, Simcoe said. Deploying high-performance packet-optical network could also improve OTT performance, he said. Simcoe also said that centralizing caching per metro area and high-performance packet-optical networks can reduce the need to push it any closer to the user.
Meanwhile, accessing OTT video via a WiFi connection in and out of home is becoming a necessity. “It is uncertain whether Wi-Fi represents a revenue opportunity for MSOs but rather a way to expand broadband coverage outside of the home. The way for MSOs to monetize Wi-Fi isn’t as a revenue service on its own but rather a way to promote the ‘content everywhere’ concept where subscribers can access their content outside of the home without consuming data capacity from their mobile plans,” Simcoe said. On the regulatory side, Verizon’s net neutrality victory against the FCC is expected to provide ISPs with the legal means and financial incentives to support the development of streaming video, the Ciena and ACG study said. However, that might not be the case if FCC chmn Tom Wheeler decides to implement Title II framework, following President Obama’s remarks calling for strong Open Internet rules (See full story in this issue).