Time is running out for so-called "unlimited broadband" packages, according to analysts and internet service providers.
For some time, many ISPs have been offering users what they call unlimited broadband, although it almost always comes with some kind of "fair usage" cap on downloads. PlusNet has been one of the few providers to buck this trend — preferring instead to offer packages based on fixed download caps — and is now warning that the emergence of IP television and the BBC's iPlayer will make it impossible for its rivals to continue marketing their packages as "unlimited".
"2008 will be the year of IPTV," said Neil Armstrong, PlusNet's product and marketing director, on Thursday. Speaking to ZDNet.co.uk, Armstrong said that the iPlayer service had "gone from zero percent of [UK traffic] to five percent in two months", and this explosion in high-bandwidth usage meant ISPs would have to either explicitly charge for the actual amount of data used by customers or operate at a loss.
The popular video site YouTube is also believed to provide around 10 percent of all traffic on the internet — and if it goes "high-quality", as it is expected to do soon, this figure is likely to go up.
"Where it's going to be a big problem is ISPs selling unlimited broadband with a 'fair-use' policy," said Armstrong. "[Users on such packages will] hit that figure and [their] line will slow down, and [they] are going to get a nasty surprise. This is happening right now."
Asked whether this meant those who consider themselves to be "light users" of the internet but now use services such as iPlayer will have to pay more, Armstrong agreed. "Somebody somewhere is going to have to pay, which is why we are very clear about what our products [involve]," he said. "It's not just a single-price, all-you-can-eat market any more." He said he hoped there would be no "unlimited broadband" offers being advertised in a year's time, because they are, in his view, "dishonest".
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Armstrong added that, while business customers "don't fall for advertising as easily" as consumers might, the increasing prevalence of home-working using home broadband connections meant a change in tariffing could affect some businesses. He also said that increasing consolidation in the broadband market, together with the massive increase in data traffic brought about by consumer video services, would force many small ISPs to go business-only or be swallowed up by larger rivals.
Michael Philpott, principal analyst at Ovum, agreed with PlusNet's views on "unlimited broadband". "[Such offers are likely to disappear] quite soon actually — I would say within 12 months, simply because you hear it more and more," he told ZDNet.co.uk on Friday. "At conferences where the likes of Tiscali and BT are present, you hear them say these things — 'We must move to a new tariffing scheme' — and that tells me they're working hard on this. The challenge for them is doing it in a way that keeps them competitive — there is a first-mover problem."
Philpott said business models for ISPs would have to change as a result of increasing traffic. "It is up to you as an ISP to make the business case work by designing your network around that [leased or owned] pipe," he said. "It only makes sense if you can split the pipe across as many customers as you possibly can — if end customers increase in terms of bandwidth, you can fit less customers in a pipe and you are therefore paying more per customer. If you're charging £15 [per month] fixed then eventually your costs outweigh [your income]."
Those operators who owned their own network, rather than leasing connectivity from BT Wholesale, would find themselves in the same boat, Philpott suggested. "You're buying Cisco or Juniper routers or whatever, which have a certain amount of capacity, so you are having to purchase more and more hardware to be able to keep control of your customers," he said.
"You will start to see new tariff schemes come out onto the market," said Philpott. "The market will try to not look like they're punishing people — they will try to spin it as 'You want to be a homeworker, upgrade to this package and pay extra'. If you're not willing to pay, then you unfortunately get put to the bottom of the pile. ISPs are heading towards segmenting their customers."
A spokesperson for Orange, one of the UK broadband providers that offers "unlimited broadband", told ZDNet.co.uk on Friday that "consumers are becoming increasingly sophisticated in their broadband use and multimedia services are driving increased demand and consumption".
"Orange continually reviews and refreshes its packages to meet consumer needs," the spokesperson added.
Talkback
People get paid for these opinions ?
The statements on bandwidth are simply not true and never have been true.
Technological progress and optical fiber ensure that sufficent bandwidth is available. Bandwidth growth is 40% p.a. in the USA.
A replacement router will have double (or multiples times the performance of previous generations, when replaced, depending on age) as a consequence of moores law.
Virgin Media are in a position to offer higher bandwidth using DOCSIS 3.0. BSkyB have sufficient backhaul from the exchanges to remove bandwidth caps, and BT are building their 21 century network.
(See www.dslprime.com)
A combination of Virgin and BSkyB may provide sufficient competition to force BT to reduce the cost per bit, and increase bandwidth. There is no justification for BT's current prices.
The elephant in the room is FTTH.
... and what an elephant it is, too.
The issue as I see it is not that bandwidth is un-expandable. It's that it won't be expanded in time to cope with the very sudden growth in usage that's happening right now.
a) "Unlimited" is and always was a truth-economy (I'm being kind here). Make it non-cost-effective, and it'll go away pretty sharpish.
b) Expanding bandwidth doesn't happen for free. See above.
c) I've heard so many people tell me, just in the last couple of months, that the intarwebs are being unusually slow/unreliable. Not that I've never heard this before, but it's just become more frequent recently.
Consumers are going to have to get used to the idea of choosing tiers of service. Fact is, the ISPs are talking about it and want to do it and, as for 21CN, that development is going to make segmentation a lot easier (tools for BT Wholesale's ISP clients, etc).
We effectively have fiber to the exchange (BT and BSkyB)
The limits on bandwidth, is in the aspirations of the telecom companies, as Japan has demonstrated.
The current limits to bandwidth (in the UK) are the copper local loop.
About 12-20Mb/s using ADSL2+, no-one is currently pushing this limit.
(notional 8Mb/s with bandwidth fair use cap)
And the monopoly power of BT's pricing of bandwidth.
This is the current limiting factor for ISP's dependent on BT for bandwidth. BSkyB and Virgin are not subject to this restriction, so BT can relax this restriction or risk losing market share (wholesale and retail) to these two media companies.
There is scope for bandwidth growth, players: next moves please.
Could it be that ISP’s are making this out to be a bigger problem than it actually is?
We’re a small country with an internet penetration of less than 60%, for every Youtuber there’s someone who only uses the internet to check their emails, more people surf on their mobile handsets than a few years ago. Surely things should even themselves up.
For years they’ve charged us for viewing text pages, now that there are services that enable us to use our money’s worth of bandwidth, they complain.
One can only hope that they won’t take a page from the Gas companies’ book and start ganging up (colluding) to raise prices.
Hi there,
I agree to the said things but have to top this up with the experience made just this. week. Virgin media, I am contracting with for £ 17.99 a month restricted my broadband usage as a penalty to 5GB usage a week. By using 6,5 GB in a resent week my connection was cut to 80k modem speed for one week (modem speed is 56k). I asked already for my MAC code because unlimited with Virgin means 5GB a week of 20 GB a month with normal broadband speed, in my case 8mb line. For 18 £ you get 24mb line with be unlimited. So it is time to change.
Virgin Media should think if in the 21 century on should try to educate people by penalizing user like they did it in my case.
Thanks for your time.