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Who's going to pay for the internet?

Posted on 12 Mar 2009 at 10:26

Scared of the consequences of trying to increase broadband tariffs, the ISPs seized upon the success of the BBC's iPlayer - which, according to BBC digital chief Anthony Rose, accounts for up to 10% of peak-time net traffic in the UK - to seek compensation from the broadcaster. The BBC declined.

Regulator Ofcom estimated last year that it would cost ISPs approximately £830 million to pay for the extra capacity needed for services such as iPlayer, but it can't force providers to pay. With operators such as Apple and Google scooping huge revenues based on video over the web, it's no wonder resentment is rife among the ISPs left footing the bill.

Not surprisingly, content providers have a different take. When asked to pay for delivery, media providers have repeated the same mantras to ISPs: "We drive uptake of broadband by providing quality content - it's up to you to make your networks pay."

The argument that content stimulates growth holds considerable water, according to some experts. "The TV companies are making money off the ISPs' backs, but without the content how many less [people] would sign up for high-speed broadband?" said Suranga Chandratillake, CEO of video search engine Blinkx.

Content providers also point out that they already carry a large slice of the transmission costs for the streaming from their servers. Before it was bought by Google, YouTube had bandwidth costs of $6 million per month for the upstream of its content.

At least reduced core bandwidth costs mean the BBC has appeased the ISPs by phasing out, at least temporarily, the P2P model that routed traffic almost entirely over consumer ISP connections, in favour of direct HTTP downloads.

Nevertheless, while main-pipe bandwidth might be cheaper, there's still a considerable cost to consumer ISPs trying to manage bandwidth in the last and middle miles. "We buy network capacity from New York to Manchester, and the per gigabyte cost is cheaper than what we pay from Manchester to Edinburgh," said Kurt-Elli of Lumison. "Even that is cheaper than we pay from Edinburgh to an Edinburgh suburb. It's the last mile that's in most demand, and that's the most expensive."

Searching for a new model

Despite the rows, one certainty is that bandwidth payment models will change, and the ISPs and content providers could be forced into an uncomfortable truce, whereby end users are charged for premium content services and the carrier and producer share the fee. "Virgin has done deals with the BBC for accessing iPlayer over its cable network and through set-top boxes," said Kurt-Elli. "Increasingly, commercial models will be drawn up that suit both the commercial parties. When people pay for content - then the service provider can legitimately charge and get a slice of the revenue."

It's a win-win proposal for everyone except the consumer, who could be forced to pay more for the best-quality offerings - an important consideration as the BBC looks to introduce 1.5Mbits/sec streaming, and other video services such as Project Kangaroo and Canvas come online. Rose has even suggested it will become the norm for all content providers to produce programmes in two or three different qualities to allow ISPs to price differentiate. "The future lies in tiered services," he said. "What we need to do is create the iPlayer services at different quality levels, and then let ISPs offer different bandwidth propositions to users. For example, the user who enjoys higher bandwidth connections would pay more, and those who are satisfied with lower bandwidth connections would pay less."