Will Internet TV Be a Victim of Bandwidth Caps?

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Bandwidth caps might not affect many users now, but with services like Netflix streaming and Hulu Plus just gaining momentum, research firm iSuppli warns that carrier plans to set limits on the amount of bandwidth consumers use could pose a threat to the emerging Internet TV segment. William Kidd, director and principal analyst for financial services at iSuppli, writes that “caps will only become relevant if users viewed low-quality streaming media — say, a 200-kbps stream — on a wireless device for three hours, or if a standard-definition TV signal on a wired network was streamed for approximately 25 hours.”

Until now, Internet TV has primarily been held back by bandwidth available to end users. As Stacey Higginbotham at GigaOM has long argued, consumers need fat pipes to be able to watch high-quality video over the Internet. That need has only increased as Internet-connected TVs, Blu-ray players, gaming consoles, broadband set-top boxes and other devices have made it possible to watch IP video content in the living room. But to do so, HDTVs require around 5 to 8 Mbps for crisp HD-quality video to fill those flat panel TV screens.

However, the rapid adoption Netflix’s Watch Instantly streaming service shows that users are becoming increasingly comfortable with the quality and available for video delivered over today’s networks and consumer electronics devices. Netflix saw its subscriber base increase 35 percent year-over year, growing to 14 million at the end of the first quarter, compared to 10.3 million a year before. And the subscription rental firm expects that growth to continue, with forecasts that it will have about 17 million subscribers by the end of the year, up from 12.3 million at the start of 2010.

And Netflix isn’t the only provider looking to offer video services “over-the-top”; Hulu just announced its own plans for a subscription video service that will allow users to watch a variety of broadcast TV and movie programming online and through connected devices for $9.99 a month.

But now that users are getting “good enough” IP video streams delivered to their TV sets, consumption-based or capped broadband, as it is currently being tested by service providers like AT&T and Comcast, could end that momentum.

Stacey already showed how metered broadband pricing increases the cost of renting a digital download from iTunes, but the same will be true for the tax that Internet services will add through subscription streaming services.

In an email exchange with NewTeeVee, Kidd writes that he believes bandwidth caps will limit the amount of video that consumers can watch online. “Internet providers cannot improve the quality of their service to be comparable to TV, since bandwidth caps exist. Hence, Internet loses today since their quality is inferior, and cannot raise their quality because of caps,” Kidd writes.

Photo courtesy of (CC-BY-SA) Flickr user tnarik.

Related content on GigaOM Pro: Appleā€™s Path to the Living Room (subscription required)

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