Of the Pay when you go outto define based on market evolution, al pay per use taking into account the actual data and bandwidth consumption. from Ad hoc subsidies to support telecom companies and provider a a fee paid by the over-the-top: The debate surrounding the question of tariffs for ultra-broadband is not only being conducted in Europe. In the United States, the FCC — synonymous with our Agcom — began to wonder since the pandemic how to balance weights and measures.
Video entertainment has reshuffled the deck
Strand Consult is preparing to update the report: “Middle Mile Economics: How streaming video entertainment is undermining the broadband business model‘, but already from the previous edition a ‘borderline situation’ in terms of revenues and profits for the telecom companies emerged. “While there is no one-size-fits-all solution, there is increasing evidence that broadband policy needs to evolve. The dominant patterns of broadband access were enshrined when email was the Internet’s killer app more than 30 years ago. No one knew that video entertainment would become the primary use case, accounting for 80% of internet traffic. It’s time to adapt the guidelines to reality,” the analysts explain.
It was stated in the report an in-depth survey of 50 broadband providers in 24 states. The report points this out Mid-mile costs are growing 2-3x faster than home broadband revenuethat Big Tech traffic consumes up to 90% of network capacity, and so on Few, if any, broadband providers have been able to monetize the increased traffic of video entertainment streaming into their network.
How do I get streaming costs back?
“Although many online applications have seen an increase in traffic during the COVID-19 pandemic, the infrastructure requirements to support streaming video entertainment cost significantly more than work, education, and healthcare applications. These latter applications are societally important, but their overall traffic volume is very small compared to streaming video entertainment provided by Netflix, YouTube (Alphabet/Google), Amazon Prime, Disney+/Hulu and Microsoft Xbox,” the paper reads , which examines the challenge faced by four rural broadband providers running fiber optic networks to their homes to recoup network costs for the middle mile of streaming video entertainment.
The rural broadband providers are located in four different rural regions of the United States, each have an average of 20,000 customers and cover an area the size of Montenegro and Cyprus. The high cost of broadband access requires careful price management by providers to generate sufficient revenue in a given area from a range of advertised prices. The report also analyzes why flat and consistent pricing (for a given level of service) is a particular challenge for all broadband providers and particularly why this is a problem in expensive, underserved areas.
$50 a month per subscriber: that’s not enough
Current broadband prices are about $50 per month per subscriber, which covers the last mile of the network and operational costs, but not the capital cost of the middle mile, a separate cost that scales equipment requirements as traffic increases. Subscribers pay around $25 per month for video streaming services from Netflix, YouTube, Amazon Prime, Disney+, and Microsoft. These five video streaming service providers account for 75 percent of all network traffic on the four rural broadband networks and charge an additional $11.65 per month in capital costs currently borne by the broadband providers. Overall, the analysis shows that 77-94% of total network costs are related to entertainment video streaming. This equates to $100-$180 in non-refundable costs per subscriber per year. Given the popularity and growth of video streaming, the cost of the middle mile is expected to double in 3-4 years while the number of subscribers is expected to remain flat. The non-reimbursable costs will increase to $25.04 per subscriber for the four providers, or a total of $81,953,409.
Indefensible model
Video streaming entertainment providers do not contribute to the average network cost or the last mile and reject attempts to find cost recovery methods. Netflix and YouTube offer caching services to rural broadband providers, but these are exclusive to the platforms’ proprietary services and incur additional costs for rural broadband providers to participate. Studies show that the current flat and uniform pricing model (even with subsidies throughout the coverage area) will probably no longer be sustainable for rural broadband coverage.
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