OTT Video is a Double-Edged Sword

In some ways, growing viewership of online video by the likes of Netflix, YouTube (News - Alert), Hulu, iTunes and other video streaming applications and services represent both a threat and an opportunity for broadband access providers.

The threat obviously is the danger that consumers might shift viewing from video subscription services to over the top alternatives. Over time, that could mean fewer subscribers, and less revenue for one of the three anchor services for a triple-play services provider.

On the other hand, video represents the application with highest bandwidth requirements, so demand for bigger broadband access buckets should grow over time, and perhaps dramatically- if significant percentages of households shift a large part of their video viewing to online sources.

To the extent that service providers sell retail packages based on some form of usage, that additional demand should translate into higher revenue from sales of broadband access services.

While consumers have access to an increasing array of broadband video services, Netflix continues to grow its dominant share of usage, for example. Not only does Netflix now represent 29 percent of peak period (8:15 pm to 10:45 pm) bandwidth consumption, but it now accounts for 24.4 percent of average daily bandwidth consumption, according to BTIG.

With Netflix’s 23.4 million subscribers now each streaming well over an hour per day, Netflix has become one of the best ways to market higher speed, higher average revenue per user broadband service plans.

But that illustrates the challenge for service providers. Services such as Netflix both potentially compete with video subscription services and, at the same time, boost demand for faster broadband access services and bigger consumption allowances.

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