Streamed HD content could drive up broadband bills

A report suggests high-definition content will force ISPs to either charge extra for transmitting it, or sell it themselves, but one analyst is sceptical

Widespread downloading of high-definition (HD) movies and TV over the Internet could force providers to charge users extra, a new report has suggested.

The report, published by the IP Development Network, claims a two-hour HD movie, of around 9GB in size, could cost an Internet service provider (ISP) as much as £21.13 to transmit via IP streaming. This is more than many broadband users pay each month, and could mean the ISP forces the customer to bear the cost.

Even if the ISP has the money to invest in local loop unbundling — whereby it installs its own equipment in a BT exchange rather than buying its connection through BT Wholesale — that movie could still cost the ISP £2.10, says the report.

The report's author, Jeremy Penston, told ZDNet UK that the current evolution of content  means "it is out on the Internet and not in the control of the ISP".

"They only have one blunt instrument, and that's bandwidth charging. If I was to go to iTunes, my ISP would have to pay. I would still expect to buy that film from iTunes as consumer, but what I wouldn't expect would be my service provider to also charge me for that," Penston said on Friday.

The solution, according to Penston, is for the ISPs to control or provide their own content and "multicast" it from the local exchange — a shift that already seems to be the plan of companies such as BT and Orange.

"If they get the content right, they host that content on their own servers, they can send those files down to their exchanges — then they only pay for the backhaul cost once if they own and control that content. They can say to all the people on such-and-such an exchange that they have that file there [ready to download]," said Penston.

But some observers have suggested that the report's predictions are out of line with the likely uptake of HD-TV.

"The analysis is not applicable to the UK market today or in 2007," Jupiter Research's Ian Fogg said on Monday.

"It's kind of assuming that consumers will download large amounts of HD content across the Internet, which is unproven. HD-TV is a problem on IP, but it's not happening today and not going to happen in the immediate future in terms of large volumes of HD consumers. By the time it arrives in any mass-market sense, the costs will have changed."

Fogg said it is likely that traditional broadcast technology would continue to provide the bulk of HD content, while "the IP element [would be used] for on-demand content only".

He conceded that some ISPs are starting to experience capacity trouble now that connection speeds can go as high as 8Mbps, saying: "That's why we've seen so many ISPs either introducing data-capacity limits or traffic prioritisation in the UK market — it’s an implicit way of managing the usage costs".

However, Fogg claimed the real danger for smaller ISPs lay in pressure from companies such as Orange and Carphone Warehouse, who have recently moved into the provider space with offers of low-cost or even "free" broadband.

Jupiter's own research suggested that "about 30 percent of Europeans said nothing would motivate them to spend more with their ISP", as users have become accustomed to low-cost access, said Fogg.

"The amount that an ISP can get from broadband Internet access alone, we forecast, will fall by 54 percent between the end of 2005 and 2011 — and as the broadband market matures, we're forecasting that pressure to continue".