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Ofcom Considers BBC Impact On Broadband Usage

Posted: 24th Jan, 2007 By: MarkJ
Ofcom has published an intriguing report into the market impact of the BBC's new Internet based on-demand (VoD etc.) services. Huddled among the interesting points is a concern that the broadband usage limits of ISP's could run into problems:

The cost of providing extra broadband capacity to deliver the BBC’s proposed services to consumers is likely to be high, though any additional capacity would also be available for use by a wide range of other services including commercial on-demand services.

Typically there are a lot of assumptions here, not least that the BBC's service would actually be watched. Personally I tend to prefer the quality of a good TV screen. However the BBC's product is not the only one in town and Ofcom's full report goes into more detail:

We estimate that, for the average broadband customer, using the proposed internet-based services would involve downloading an additional 3GB of data per month. The costs of the broadband capacity required to support the services could in aggregate be between £399 million and £831 million over the next 5 years. However, it is important to note that typical broadband connection speeds and download caps are likely to continue rising in the years ahead, and new technological solutions are likely to reduce the costs of incremental capacity over time. As such, the cost estimates set out above are likely to be at the higher end of the possible range.

Furthermore, to the extent that that the additional capacity would also be available for use by a wide range of other services, including commercial on-demand services, it would not necessarily be appropriate to attribute the associated costs to the BBC services in isolation. Some customers may nevertheless have to move to a more expensive broadband package in order to be able to use the BBC services. Whilst the costs of the broadband capacity required to deliver the services are to some extent relevant for the Ofcom MIA, they should in our view be taken account principally in the BBC Trust's PVA.

Typically ISP's that rely on balanced packages, which offer flexible usage restrictions based on an assumption that most will never download their maximum, should be cautious of the evolving online content market. Ofcom also outlined three other interesting impacts:

  • Series stacking, described earlier, could discourage investment in commercial on-demand services and is likely to have an adverse effect on related markets such as DVD rentals and sales. Ofcom believes the scale of series stacking should therefore be substantially reduced or excluded altogether;
  • In the case of catch-up TV on the internet, the ability to store programmes for up to 13 weeks could have negative effects on competition and therefore investment in consumer choice. Ofcom believes this storage window should be reduced or removed. In the event of removal, viewers would still have up to 14 days to download and view the content;
  • the ability to download free BBC audio content might have a serious adverse impact on specific markets; notably commercial classical music recordings and audio books. Ofcom believes the latter should be excluded from the proposed services and the availability of classical music recordings should either be constrained or removed;

Like it or not traditionally TV styled content is increasingly finding its way on to the humble home computer. The impact this is likely to have on the market as a whole is far from linear.
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