OTT expected to cause Internet capacity crunch

Netflix isn’t the only game in town anymore. In recent weeks, Canadian and American TV giants have made a number of announcements about new over-the-top (OTT) video services — HBO and CBS revealing new streaming products in the United States, Rogers Communications Inc. and Shaw Communications Inc. launching Shomi, and BCE Inc. announcing “Project Latte.” Whichever service consumers across North America choose, the signals will travel over much of the same Internet network, and how well that network is prepared for the increased demand is a complicated question, according to Duncan Stewart, Deloitte Canada’s director of technology, media and telecom research. “Different technologies in different parts of the network will work differently well for different content,” Stewart said in a phone interview, adding that performance will depend on factors such as the frame rate and resolution of the content, the area, the carrier and the type of compression technology involved. “How will service slow down, who needs to spend the money, where does the money need to be spent, which parts of the networks are going to need the most work?” Stewart said. “It starts getting very complex.” As OTT continues to grow, “somewhere in those networks there will be bottlenecks, and I suspect there will be pressures on ISPs, depending on where they are, to spend more money … at different parts of their network.” Stewart added that OTT consumption isn’t evenly distributed across the population, with some demographics watching more than others, and that means some neighbourhoods will see more of a “capacity crunch” than others —such as those with “a lot of anglophones, especially young, especially urban, especially well-educated, high-income and female.” One thing that seems pretty certain, at least, is that the number of people watching OTT will increase. Stewart said more people will watch OTT content in the next few years, while the amount of content people watch is also rising, according to data from the U.S. Recent data from Sandvine Inc. showed Netflix Inc. accounted for 34.2 per cent of downstream Internet traffic in North America during peak periods in the first half of 2014, while all real-time entertainment, which includes video and audio streaming, was responsible for 63.9 per cent. Stewart said that, given the growth of services that will become available, the increased amount of streamed content, and the higher quality of video that will be transmitted, the amount of bandwidth used for streaming could grow to 80 per cent by 2016 or 2018. When watching TV over-the-top, viewers are constantly pausing, stopping and starting, and changing channels, he noted, which requires “very rapid reactions from the servers.” The number of OTT hours watched in Canada is still small compared to traditional television, Stewart said, but the inefficiency of streaming compared to something like IPTV or cable means not everyone has to switch to OTT for problems to arise. Traditional TV signals distributed in a broadcast mode, either over the air or through cable or IPTV, amount to, say, 200 signals (for 200 channels) being sent out to 35 million Canadians in what is “an extremely efficient way of distributing a linear video signal,” Stewart explained. Distributing that content through OTT, where each viewer receives their own signal, means that number jumps to 35 million signals instead of 200, so it won’t take long until we “run out of room," Stewart said. “Because over-the-top is inherently an inefficient, many-to-many distribution mechanism for video, that means that the fact that a growing number of Canadians will watch a growing number of hours, even though it’s a tiny fraction of TV, it still matters,” he said. There are other contributing factors, too. The rise of higher resolution content, including ultra-high definition or 4K, will necessitate more bandwidth, The Wire Report reported late last year. Stewart noted that no Canadian broadcaster has announced they’re making 4K content available, but services like Netflix and Google Inc.'s YouTube have. “When we see 4K catch on, and nobody knows exactly when that’s going to occur, almost all of the traffic in the early days is going to be the spectrally inefficient Internet distribution,” Stewart said. Higher frame rates in video, which Internet distributors are also more likely to embrace than traditional broadcasters, contribute to the problem as well, Stewart added. With “more people watching more content at higher resolutions and higher frame rates,” we are heading for a “perfect storm,” he said. Bill St. Arnaud, an independent telecom analyst, said in a phone interview that telecom and media companies could deliver their own OTT services separately from other Internet traffic, in the same way IPTV is delivered. “So there will be a much better throughput,” he said, meaning that even subscribers on the cheapest Internet plans with the least amount of bandwidth “will still get their services flying through with no problem at all.” Cable systems like that from Rogers won’t be able to support rising OTT consumption, he said, and fibre-to-the-home (FTTH) is “about the only technology that will cope with this kind of torrent, tsunami of OTT services.” “Cable will claim that they can do a gig to a home, but again, that’s a gig shared by many, many users,” he said. “And there’s no regulation anywhere in the world to say, how many people are sharing that gig at the same time? So if you have a lot of OTT users at 7 p.m., even a gig may not be sufficient in terms of bandwidth.” He suggested that the government help to create a fibre-to-the-home network across Canada, adding that “a big infrastructure investment like FTTH would be a great tool to stimulate the economy.” “Something like the National Broadband Network in Australia is what we need, because I don’t think either the cable companies or telephone companies will make that investment,” St. Arnaud said. “They don’t see the financial requirements to do so.” Distributel Communications Inc. CEO Matt Stein said he was less worried about the technical challenges of an OTT world. “The core of the Internet will swell and it will grow and router upgrades and so on will always take care of bandwidth increases across the Internet itself,” he said in a phone interview. The cost for smaller Internet service providers like his could be a challenge, though. “Unfortunately, these kinds of services place even more pressure on the ISP. Really, it sort of asks the ISP to pay the freights for all that bandwidth,” he said. Another challenge is that with traditional copper networks, such as DSL, “the speeds aren’t keeping up,” he said. Consumers also have a responsibility to set up a home WiFi network that can relay the faster speeds, he added. “So the two pieces there are getting it to the home and then getting it around the home,” he said. Having more FTTH will help, Stein said. Fibre-to-the-node technology has hit its limits, he added, noting that a discussion over FTTH will be an important one during the CRTC’s upcoming hearing on wireline wholesale access. “In a lot of neighbourhoods, that’s not even begun yet. And I am concerned that it does need to get underway. So we need to see more investment there," he said, noting that, for example, there’s not a lot of FTTH in urban areas. For ISPs like Distributel that have to purchase wholesale access from wireline incumbents, the challenge as bandwidth consumption grows will be the rates it has to pay, Stein said. “The capacity-based billing model works very well, but the rate is so expensive that it’s an economically challenging environment, I’ll say.” He expects that challenge to increase. “The bandwidth growth, it’s certainly outpaced our projections,” he said. “That really is an industry statement. And I think that’s just going to continue.” — With reporting by Anja Karadeglija at akarad@thewirereport.ca and editing by Derek Abma at dabma@thewirereport.ca

OTT expected to cause Internet capacity crunch

Broadcast | November 6, 2014

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