Christopher Herot's Weblog

Cisco Global IP Traffic Forecast

Cisco released a report this week forecasting how much Internet traffic will grow over the next five years and where that traffic will come from.  Some of the key findings and predictions:

• The Internet is not collapsing from streaming video, although traffic is expected to grow at 35% a year, mostly due on-line video and peer-to-peer file exchange, and the growth may not be evenly distributed.
• YouTube alone represented 4% of US traffic by the end of 2006.
• Pre-recorded Video content is 11% of consumer traffic worldwide, 18% in North America.
• Video communications will dwarf everything, although this probably won't happen until 2015.
• Total IP traffic will double every two years.
• Consumer traffic will surpass business traffic in 2008.
• Internet video-to-PC will grow by 10x in the next 5 years.  By 2011 reaching the equivalent of 250 million DVDs each month.

One of the more interesting conclusions of the report is that, contrary to the conventional wisdom that "content is king," that the more powerful driver is the combination of communications and content.  The social aspect of YouTube accomplished something that many pundits had dismissed: getting people to watch low-quality video on a small screen.  Traditional television may be less desirable than video that can be shared, tagged, mashed up, and discussed, with the result that the PC may continue to be an attractive alternative to the big screen TV for a lot of content.

Cisco believes that video-related Internet traffic will come in three waves:

1. Video viewed on the PC.  This was 8% of IP traffic in 2006, not including P2P file sharing.
2. Video to the TV set-top box.  With HDTV, this could be huge.  Three hours of HD a week would be 27 GB per month - a point that today would be lableled a "bandwidth hog" and kicked off the network.
3. Video Communications.  Perhaps the most controversial projection is that PC-based video calling will succeed where the videophone has not.  If this happens, by 2015  it could  be the largest consumer of bandwidth, since it is generated by  millions of individuals and, being real-time, can not be cached.

For the most part, the core of the Internet is not likely to be a major source of bottlenecks.  However, consumers are not accustomed to paying a lot for video bits.  The report contrasts the $0.0001 a consumer will pay for a megabyte of video to the $20.00 they will pay for an SMS message.  Also, the rerport states in several places that it's estimates may be conservative and that if services such as Joost catch on, bandwidth could grow a lot faster than projected, which does raise the issue of how the service providers will finance all that Cisco gear they need to purchase.

The White Paper summarizing the report is available here.

The methodology is in a paper Global IP Traffic Forecast 2006-2011.

A useful site to find similar papers from Cisco is here.

Updated 17 August 2007 to provide Cisco links.

Future of Television

This morning, the Massachusetts Innovation & Technology Exchange (MITX) presented a panel discussion as part of its Digital Marketing Series on The Future of Television.  Speaking were (left to right in the photos):
Matthew Emans, VP Product Management, Navic Networks
Brent Simon, Product Manager, On-demand Applications, Verizon FIOS
David Weinberger (moderator), Fellow, Harvard Berkman Center for Internet and Society
Adam Berrey, VP, Marketing and Strategy, Brightcove
Peter Kim, Senior Analyst, Forrester Research

Although conferences on this topic seem to have proliferated lately, there were a number of ideas that were fresh, or at least freshly presented.

Dave Weinberger started off by asking the panel if Consumer Generated Media (CGM) were going to displace most of the expensive, professionally-produced content that we conventionally think of as television.  Brent Simon offered that Verizon was happy to give users access to both on its network, but that consumers were going to continue to expect high quality video that was free of the "bumpiness" usually associated with Internet delivery.  The rest of the panel got involved in a long discussion of who would pay for all the expensively produced content in a world where people could fast-forward through commercials, with Dave several times bringing them back to the issue of whether viewers wouldn't really want to watch more stuff of a more grassroots origin.

Brent pointed out that among all the consternation about the fast-forward button, people were losing sight of the other buttons, specifically pause and rewind.  He stated that when he and his fiancee moved into their new, empty apartment they deliberately and repeatedly watched furniture commercials, even in slow motion, and as a result bought lots of stuff.  Matthew, Peter, and Adam talked about how marketers were going to need to find new ways to engage the viewer, such as by offering more interactive experiences and, of course, targeting the advertising to match the viewer's interest.

In the recent Upfronts, advertisers were unwilling to pay for PVR (e.g. TiVo) viewing, but there was a feeling this may change once Nielsen roles out its system for measuring timeshifted viewing.

Someone from NBC mentioned that every production they do has someone on the set whose job is to look for ways the Internet can be used to involve the viewer.

Another hot topic was the role of the networks.  The consensus was that their ownership of the infrastructure would become unimportant, but that they had a continuing role to play as a means of filtering and branding content and as a way of aggregating content for viewers and of aggregating viewers for advertisers.  As Adam pointed out, Brightcove had some specialized channels (such as for target shooters or diabetes patients) which could appeal to equally specialize audiences, but that other content would need to be aggregated into something larger in order to attract advertisers.

A few other tidbits:

• The big network operators, such as Verizon, expect to support 5,000 to 10,000 hours of Video-on-demand.
• Mark Cuban was quoted as saying "It's easier to watch TV, than to sit there and do nothing."  [he says in his blog that he was paraphrasing Aaron Spelling who said "TV is the path of least resistance from complete boredom."]

 

IPTV vs. Internet Television

The recent Streaming Media East in New York brought into focus the difference between two seemingly similar terms, IPTV and Internet Television.  Both refer to the use of Internet Protocol and associated technologies to deliver video to consumers.  Both imply that the sound and images are in digital form on their way from the camera to the screen.  But while the technologies are similar if not identical, the business models and thus the user experiences are very different.

IPTV, as the term was used at the recent NAB Conference, is an upgrade to the cable TV business.  It preserves the existing model of content producers, channels that aggregate content (e.g. HBO), cable headends, wiring, and set-top boxes.  The difference is that computer technology is used in the distribution process down to, and including, the set-top box, allowing a number of new services to be provided, such as video on demand and personal video recorders.  While the content could theoretically be viewed on a variety of devices, most IPTV schemes include a set of tightly controlled, overlapping digital rights management (DRM) systems, to ensure that the content is only used in an approved manner.  These systems go as far as encrypting the links among devices so, for example, only an approved screen can be connected to an approved tuner.  This has the practical effect of limiting IPTV to two comparatively closed environments: home TV sets and mobile phones.

In contrast, Internet Television, as described by Jeremy Allaire in his keynote, is the distribution of video on the public Internet.  While some of the content comes from the same sources that supply conventional TV, such as Comedy Central, there is also a long tail of more niche-oriented content, such as Shipwreck Central and the type of stuff found on YouTube.

The business models resemble cable TV in that there are producers, distributors, and consumers, but the hardware, software, and payment options are far more varied and, some would say, unproven.  To the extent that money changes hands, it is mostly for advertising, although various types of subscription and pay-per-view are also possible, and much of the material is offered as a means of promoting content in other venues.  For example, when Beth Lewand of Comedy Central was asked how they felt about clips of their material showing up on YouTube she replied that their feelings were "very mixed."  While they do want to protect their revenue opportunities they also see the promotional value of having their material widely distributed, especially if it can be branded in such a manner as to draw people back to their site and to the cable shows.

The synergy among different formats is becoming more important in a world where digital video recorders such as TiVo are widespread and the consumers have more choice about what to watch.  According to one panelist, at this year's Upfronts where the TV networks present the fall line-up to the ad agencies, the agencies were not interested in a show unless it also came with an interactive Web experience.  In an age where viewers can fast-forward through commercials, and where the young demographic most attractive to advertisers are all digital natives, the PC screen may be the place where advertising may be more effective.

Which brings us back to the issue of DRM.  While both IPTV and Internet Television provide for ways to control how content is stored and used, the IPTV world is obsessed with the idea of total control over every aspect of distribution, storage, and viewing, creating a closed universe of trusted devices, where none of the content can leak out in to the dangerous world of the PC where users can not be trusted to lean back passively on their couches but instead are likely to rip/mix/burn and otherwise personalize the content for their own use.  From what I saw at the conference, the people who produce the content seem to understand that accomodating their viewers and allowing more flexibility will be good for their business and perhaps essential for their survival.  On the other hand, the cable and telephone companies, who were conspicuous in their absence, may find that their rigid, proprietary systems may not deliver them the returns they expect.  To the extent that they can't lock customers in with DRM, they will fight back by witholding bandwidth, but that's a topic for another post as the network neutrality debate heats up.