Analyst firm Ovum has predicted the rate of streaming subscriptions within Australia to increase by a factor of 17 between 2014 and 2019, to reach 4.707 million subscribers, according to a report into subscription video-on-demand (SVOD) services commissioned by the company rolling out the National Broadband Network (NBN).
Pay TV subscriptions, meanwhile will grow by 18.4 percent during the same period, said the Ovum report.
The continuing rise of SVOD services will put pressure on the networks and capacity in Australia, Ovum added, which could be eased by the NBN's rollout of ubiquitous, high-speed broadband.
"The recent boom in subscription video-on-demand services, driven by the launch of Netflix, Stan, and Presto in Australia, was accompanied by a sharp rise in network data traffic," the report, released at the OTT Summit in Sydney on Wednesday morning, said.
"Average monthly download usage on the NBN network was 73GB in March 2015, but was 110GB by September, a rise of 51 percent in just six months. Some capacity problems arose [as a result of] this sudden increase in demand."
According to Ovum, there are now 1.6 tablets and 2.3 TV sets per home, in addition to smartphones, which are all used to consume TV content.
The firm also said that streaming in HD only requires an average connection speed of 5Mbps, a target that NBN will be well able to meet; guaranteeing speeds of at least 25Mbps nationwide, the NBN's so-called multi-technology mix delivers 25Mbps across satellite, 50Mbps on fixed-wireless, 100Mbps on hybrid fibre-coaxial (HFC) and fibre to the node, and up to 800Mbps on other services combining copper and fibre and using G.fast technology.
While streaming services are increasing competition in the sector, Ovum said that no form of television, including free TV and pay TV, will face "dramatic abandonment". Rather, streaming will become the dominant form of TV consumption.
While Australian internet service providers (ISPs) struggled with delivering quality services after the initial launch of Netflix, Ovum identified the issue as being the cause of capacity in the backhaul, long-distance transit, and high-capacity core networks that support the last-mile networks, rather than basic access speeds in the last mile itself.
"OTT video is delivered by multiple service providers across a value chain that is only loosely coordinated. No single provider is ultimately responsible for service quality and stability. This arrangement has the undoubted advantage that it is low cost, and this makes OTT video services cheap to buy," the report explained.
"But there is a price to pay for this. Service guarantees are limited, and service quality cannot reach the same levels as pay TV and IPTV unless OTT providers convert themselves into IPTV providers, which would require major investment in new infrastructure. But investment on this scale is not going to happen, because it would undermine the prime attraction of OTT video to customers -- its low cost and growing variety."
Ovum argued that streaming video has been causing tensions, resulting in the net neutrality battle in the US; Korea Telecom blocking video services to Samsung smart TVs for a short time in 2012 in order to relieve capacity, which resulted in the regulator having to intervene; and Spanish telco Telefonica's network policies curtailing video quality and rates.
Australia's uncommon tiered data allowances have mitigated the tensions between streaming service providers and ISPs, as they provide a profit motive for ISPs to cooperate with players such as Netflix, Ovum said. The analyst also suggested that retail service providers (RSPs) and streaming services could in future co-invest in improving the underlying infrastructure in order to ensure the delivery of high-quality video.
Telecommunications providers are increasingly becoming IPTV providers as well, with Optus recently acquiring the exclusive rights to broadcast the English Premier League (EPL), taking the most-watched football league worldwide away from pay TV provider Foxtel for an unknown amount.
"Lacking a broadcast network, Optus will mostly monetise EPL games by bundling them with Optus telecommunications services," Ovum said.
"However, it has been claimed that the costs of acquisition were around double the previous contract. Even if Optus strikes a deal with a traditional broadcaster to broadcast some games, most will be carried across the broadband network, and this kind of service will increasingly tax the Australian broadband infrastructure."
Optus CEO Allen Lew, who said he is an avid viewer of the EPL, argued that customers would prefer to pay directly for sports subscriptions, rather than signing up for pay TV.
"I think you've seen us starting to move away from being very mobile focused to one that is about integrating communications and entertainment for customers, regardless of where they are," Lew told ZDNet earlier this year.
"I think that is going to disrupt the pay TV model."
Optus offered unmetered access to Netflix from its launch date in a bid to secure more customers, and last month announced that it will also be throwing a free six-month Netflix subscription into its entertainment bundles for home broadband customers.
Optus' main rival, incumbent telco Telstra, has also been making moves into the media industry by launching its video-streaming device Telstra TV to provide home broadband customers with access to streaming services Netflix, Presto, and Stan; as well as catch-up services SBS on Demand, Plus7, and 9Jumpin.
"The next wave of media ecosystem disruption is coming from telcos and media companies coming together," Joe Pollard, who was recently promoted to the role of chief marketing officer and group executive of Media at Telstra, said.
The Australian Communications and Media Authority (ACMA) on Tuesday released a snapshot report of the streaming industry in Australia, reporting that 3.2 million Australians, or 17 percent of the population, consumed streaming services during the six months to June 2015, and 2.2 million in the last seven days prior to June.
The ACMA also estimated that as of June, Netflix Australia has 2.5 million users. Globally, Netflix in April recorded a total subscriber base of 62.3 million, with 40 million located in the United States.
Netflix has yet to release any results from its operations in Australia, but Roy Morgan released statistics in May stating that 1 million Australians were using the service. Should the ACMA's numbers be accurate, Netflix gained 1.5 million customers in Australia within one month.
Government regulatory bodies are beginning to recognise the changes that streaming services have made to the broadcast industry; last week, the ACMA announced the registration of a new Commercial Television Industry Code of Practice.
The new code was written mainly in response to how IPTV has affected complaints handling, privacy, advertising, content programming, and classification.
The government has also revealed draft exposure legislation that will see GST added to all digital products and services purchased online by Australians from mid-2017.
There is still much to be done, however, with NBN chair Ziggy Switkowski arguing on Monday that the advent of SVOD has rendered cross-media ownership laws "obsolete", and the ACCC saying that streaming has gone beyond the scope of competition laws, with legal and policy framework needing to catch up to innovation.