Will the Demands of Online Video Throttle the Internet?

Remarkable movies like “Flash of Genius” can cause huge demands on bandwidth

Online video is creating huge increases in bandwidth usage. According to Cisco Systems, PC online video will make up 25.3% of each month’s worldwide consumer Internet traffic in 2008.

 Will the Demands of Online Video Throttle the Internet?

When you add TV online video and the still-nascent category of video communications to PC online video—and yet exclude P2P—32.2% of this year’s consumer traffic is video.

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

Unquestionably, the increase will strain bandwidth resources.

“While the Internet is not about to collapse due to the video boom, nor slow down to an unbearable crawl, changes are coming,” says David Hallerman, senior analyst at eMarketer and author of the new report, The Bandwidth Debate: Video and Net Neutrality. “But it’s likely those changes will greatly affect the growth of online video advertising.”

Looking into the future of the Internet, none of the players seems happy.

“ISPs insist that the costs associated with building out Internet capacity should not fall solely on them,” says Mr. Hallerman. “Further, the proliferation of professional video content online—mainly TV shows and full-length movies—threatens the business model of cable companies, who are also major ISPs in most of the US.”

On the other hand, companies invested in the TV business (networks, studios and cable providers) as well as major Internet players (Google, Microsoft and Yahoo!) and smaller sites all hope to carve out a share of the potential profits of video—and they are nervous, too.

“The stakes are high,” says Mr. Hallerman. “Video is set to become the preeminent online vehicle for entertainment, news and sports by early next decade—if it is not already.”

As corporations scramble for profits, consumers could be collateral damage.

“That is because in response to video’s changes, several ISPs are looking to limit their customers’ bandwidth usage through techniques such as monthly download caps—often called throttling—and differentiated service tiers.”

The problem could spill over to online video and its associated advertising. If people need to pay extra for additional bandwidth, many will have qualms about watching too much video, especially full-length TV episodes and movies that will give major support to online video advertising.

 Will the Demands of Online Video Throttle the Internet?

“If bandwidth costs are metered, many people will resent all of Internet advertising since those ads will consume some of their service,” says Mr. Hallerman. “That reaction would be particularly true for high-bandwidth video ads.” 

Via eMarketer