Internet Video Challenges for Network Operators
 
The Video Internet is booming. Worldwide Internet Video Growth and Demand is accelerating every year and creating unique opportunities and challenges for network operators across the globe.  Traffic growth continues to increase as more content companies adopt an Internet delivery strategy and as they continue to improve the quality of their videos.

The goal for the network operator is to leverage Internet Video to improve revenues and preserve or better yet, improve margins. Specifically:

  • Gain Market Share through a better video Quality of Experience (QoE)
  • Improve Margins by lowering video delivery costs
  • Increase ARPU (Average Revenue per User)

PeerApp’s UltraBand media caching software enables network operators to minimize the impact of video traffic on the network while delivering a premium end-user video experience. PeerApp eliminates transmission of repetitive HTTP and P2P objects by caching the popular content within the provider network, and improves the end-user experience by delivering content to the subscriber at the fastest possible rate. With PeerApp operators can create premium broadband packages and specialized Internet video offerings to help recoup their capital investments, improve market share, and stay ahead of the competition. PeerApp helps operators improve customer satisfaction and reduce subscriber churn by offering an outstanding video and download experience, plus enhance margins and ARPU through tiered broadband services.

Internet Video Growth and Demand

The demand for video is driven by the fact that the Internet is going through a shift from an information medium to a primary entertainment and social networking medium. In addition, we are seeing tremendous advances in consumer technology as smart phones, PCs, set tops, and televisions are being connected directly to wireless and wireline networks. The impact on Service Providers across the globe is considerable as they are required to dramatically increase their network capacity without a clear increase in the revenue stream.

The following graph is based on data Cisco Systems provided in their most recent report forecasting consumer Internet traffic: Cisco Visual Networking Index: Forecast and Methodology, 2008 - 2013. Video traffic volumes are expressed in Exabytes/Month.

According to this forecast, video and file sharing traffic represents almost 79% of all consumer traffic; and by 2013, that number should reach 85%.


 
Source: Cisco Visual Networking Index: Forecast and Methodology, 2008 - 2013

Economically satisfying all of this subscriber demand has become a key differentiator for network operators as it drives subscriber satisfaction and ultimately market share and revenues.

An entire industry has emerged to provide the infrastructure for the Video Internet – from next generation media players, to new content creators and syndicators, to innovative content delivery technology based on HTTP and P2P. New video applications and services are appearing almost daily and driving a tremendous amount of traffic. Examples include the RapidShare file-sharing service and the iPlayer from the BBC.

Mainstream content providers such as ABC.com, CNNMoney.com and Major League Baseball – and their advertisers - are flocking to the Web and raising the bar on video quality and production values. They want viewers to experience their content in the best possible light.

Content providers view video quality as strategic and have responded by improving encoding mechanisms and increasing data streaming rates. Today the average video encoding rate is well over 500Kbps. And many major broadcasters and content providers offer video streaming options of 1 Mbps or greater. While enhanced encoding methods and feed rates are important to video quality, the consumer experience is ultimately determined by the rate at which content is eventually delivered to the subscriber. A lot can happen between the content provider and the subscriber. Video typically flows from a content provider through multiple carrier networks before it makes its way to the network of the consumer's service provider. Along the way, content is likely to traverse a large number of routes, borders, and links - encountering congestion and delay that deteriorate video quality.

The end result to the network operator is higher bandwidth costs, lower operating margins, and an overall lower service quality as network resources are congested by all the video streams and downloads.

Gain Market Share

One of the primary reasons for subscriber churn is poor service quality. Basic connectivity is taken for granted, so service quality is increasingly measured by raw performance. Quality of Experience (QoE), specifically for videos and downloads, has become a critical component in determining customer satisfaction and affects the competitiveness of the service provider. Poor video quality – long video downloads or interrupted video streams - can turn consumers off and tarnish service provider brands.

The reason is simple. Internet Video and Web 2.0 applications have become ubiquitous. Consumers are accessing video content over wireline and wireless networks, using PCs, Macs, netbooks, smartphones and even conventional television sets. Billions of videos clips are streamed from YouTube, MySpace, Facebook and other popular sites; not to mention the billions more that are downloaded from popular file sharing services like RapidShare, MegaUpload, and BitTorrent. Television shows, feature-length movies, news and live events are all delivered over the Internet. According to comScore, in the US alone, 161 million Internet users viewed 25.3 billion videos in August 2009 (a staggering 70% increase in a 7 month period) - consuming an average of ten hours of content per month. Users are already demanding more choices, greater variety, and better video experiences.

Consumers expect a high quality viewing experience regardless of the access network (wireline or mobile broadband) or device (smart phone, computer, set-top, etc). Consumers also hold their service provider responsible for poor video or download performance, and actively communicate with one another via blogs and other social networking sites to grade service providers and their performance in these areas.

By embracing video streams and downloads, a network operator has a unique and strategic opportunity to create a real differentiator and a competitive advantage. By caching popular content locally - within their own network infrastructures - broadband service providers and mobile operators can mitigate the effects of Internet backhaul and offer their subscribers a superior video experience. They can lower their churn and in fact, acquire subscribers from their competition. In this manner, Internet Video becomes a strategic differentiator for the operator giving them a competitive advantage and higher market share.

Improve Margins

With the usage of Internet Video growing by over 70% annually, and video quality doubling approximately every six months, the service provider is experiencing exponential growth for traffic associated with video and large file downloads. If not dealt with proactively, video poses a significant threat to the profitability of the service provider’s business model. The increase in video traffic is already congesting many networks; a trend that is likely to continue. Network congestion then impacts subscriber service quality for video and all Internet based services. However, responding to this growth and satisfying subscriber demand for video requires massive network upgrades which increase both capital expenditures and operating costs, while subscriber ARPU remains stagnant. The net result is lower margins for data services.

In addition, capital expenditures are having a longer ROI time because the increased capacity is almost instantly consumed with demand, without necessarily increasing revenues. It is creating an economic disincentive to further investment in the network. However, the alternative is even worse; a poor service quality that ultimately leads to customer dissatisfaction, higher churn, competitive disadvantage and a tarnished brand image.

By deploying media caching for video and file sharing, an operator can actually meet consumer demand, without massive network and circuit upgrades. In this manner, the operator can improve their margins and deliver a better overall service quality to their subscribers. Media caching lowers operating costs, reduces network congestion, and delivers data faster than traversing transit links.

Improve ARPU

While the proliferation of video has spawned massive growth in Internet traffic and created enormous challenges for network operators, it has also given them an opportunity to innovate and differentiate themselves.

The network operators have long embraced the strategy of promoting their top-speed “wideband” packages at a premium price, while touting the blazing speed of Internet access that these packages offer. But what good is a 20 Mbps, 50 Mbps, or even 100 Mbps access network, if the content cannot get there that fast. Why will a subscriber pay an extra $10-$20 per month? With the rapid growth in popularity of Internet Video, service providers now have a class of application that relies on the quality and speed of the service. Consumers care about the quality of their video and the performance of their network, giving the service provider a real opportunity to differentiate, gain market share, and up sell faster broadband or wireless connections.

Usage of in-network media caching allows operators to meet the demand for large high-quality Internet videos, without incurring massive network costs, at the speeds that make use of the wideband capabilities of their network. Media caching realizes the value in building out a faster access network, and provides real value to the subscriber. The net result is that Internet Video gives the network operator a real opportunity to differentiate service plans, improve uptake of the premium broadband packages, enable tiered service offering, and ultimately improve ARPU.
Customer QoE
  "The improvement users report, in terms of network performance and reduced call center volume, far exceeds what would be expected just looking at the bandwidth we save or generate from UltraBand."

 
Steve Waddington, Exetel, Australia		  

To learn more, download the whitepaper: 
Why QoE is Important to Service Providers