The Internet: the world’s biggest video store

By 2019, according to forecasts published by U.S. computer networking giant Cisco Systems, video content will make up 80% of the world’s consumer Internet traffic, up from 64% in 2014.

This will be fuelled in part by the influx of new users. In 2019, more than half of the global population will be connected to the Internet, compared with the current 42%.

However, the primary driver of growth will be increased supply and demand for the bandwidth guzzler that is high-quality video content.

In other words, by 2019, the Internet will have become, for all intents and purposes, the world’s biggest video store.

How big? Well, to watch all of the IP video content circulating worldwide on any given month, you would have to keep your eyes glued to your screen for over 5 million years. Or put another way: in 2019, the equivalent of all the movies ever made will cross the Internet every two minutes.

Despite its global reach, membership in this particular video store is not open to everyone. To enjoy these privileges, consumers need to have an Internet connection with sufficiently high bandwidth and the appropriate devices, settings and subscriptions in place. To become a recognized service provider, producers, content distributors and Internet providers must be able to navigate choppy regulatory waters, sail through multiple and diverging currents and fend off all manner of pirates and sharks along the way.

Becoming a member of the global video store

Superior video quality requires a fast Internet connection: 1.5 Mbps or faster for standard definition and at least 3.0 Mbps for high-definition content.

These are the minimum streaming requirements to ensure high-quality image delivery in a household where a single connection often powers several online services at once. In Canada, the Canadian Radio-television and Telecommunications Commission (CRTC) has set the basic download speed at 1.5 Mbps and asserted that almost every Canadian currently has access to this level of service.

However, if an Internet connection is to accommodate the simultaneous needs of a multi-user household, the CRTC considers that the target download speed should be 5 Mbps from coast to coast and that this goal should be reached by the end of 2015.

“In the 21st century, affordable, ubiquitous networks will be as critical to social and economic prosperity as networks like transport, water and power.”

Dr. Hamadoun Touré, Secretary-General of the International Telecommunications Union

The Commission reports that, although the availability of 5 Mbps broadband service has expanded from 87% to 95% in large population centres, only 25% of Canadians living in rural areas have access to an equivalent level of service. In 2013, roughly 1.2 million Canadian households, or 9%, did not have access to broadband Internet at the stipulated speeds.

In the U.S., the Federal Communications Commission (FCC) estimates that a typical household (4 people and 7 Internet-connected devices) requires broadband speeds of 10 Mbps or higher to enable users to take online courses, download files and stream a movie all at once, for example, or to simultaneously watch two high-definition movies on two separate devices or view 4K video content.

“High-speed Internet access has become fundamental to modern life, whether we are on the job, at home, or going to school. Broadband connectivity can overcome geographic isolation and put a world of information and economic opportunity at the fingertips of citizens in even the most remote communities.” 

Tom Wheeler, Chairman, Federal Communications Commission

In January 2015, the FCC decided to increase the minimum broadband download speed from 4 Mbps to 25 Mbps. FCC Commissioner Jessica Rosenworcel has gone on the record to say that she would like to see the download threshold pushed even further to 100 Mbps: “We invented the Internet. We can do audacious things if we set big goals, and I think our new threshold, frankly, should be 100 Mbps. I think anything short of that shortchanges our children, our future, and our new digital economy.”

Our U.S. neighbours are currently engaged in a debate as to the minimum speed for streaming 4K and Ultra HD video content. Netflix is calling for a 25 Mbps download threshold, although this is contested by the National Cable & Telecommunications Association (NCTA). A large number of telecom subscribers with market-leading providers such as AT&T and Verizon are still connected to the Internet via a digital subscriber line (DSL), considered by many experts to be obsolete, with top speeds limited to 6 Mbps.

Source: CRTC, Communications Monitoring Report 2014

In Canada, the CRTC initiated a review of basic telecommunications services in April 2015, including a review of Internet service target speeds, which will conclude with public hearings in April 2016.

“The Commission’s current target speeds for broadband Internet access service are a minimum of 5 Mbps download and 1 Mbps upload, based on uses that consumers should reasonably expect to make of the Internet. Are these target speeds sufficient to meet the minimum needs of Canadians today? If not, what should the new targets be and what time frame would be reasonable to achieve these new targets?”

In this ranking of countries by download speed, the U.S. comes in 26th and Canada, 35th. Singapore is in the top spot with a speed of 135 Mbps, and Equatorial Guinea trails in last place with 1.05 Mbps.

Source: Ookla Net Index

Who’s running the store?

Thinking of the Internet as a massive repository of video content yields a whole new perspective on the manoeuvres and actions of today’s ICT giants.

In this light, it is clear that utilizing the electromagnetic spectrum to control the airwaves is a strategic imperative.

On its website, Industry Canada, the owner of the Canadian electromagnetic spectrum, states: “Wireless services require spectrum, which is the invisible infrastructure that carries our information. Spectrum has been called the oxygen of our mobile economy.”

“By summer 2015, following the 2500 MHz auction, the amount of spectrum available to provide mobile services to consumers will have grown by almost 60 percent since early 2014. This is the largest amount of spectrum ever released in such a short time in Canada, allowing Canadians and their families to benefit from the latest technologies and world-class services.”

This auction represents hundreds of millions of dollars in recurring revenue for the Canadian government, given that telecom corporations cannot buy a given frequency—they pay for a spectrum licence for a 20-year term.

“He who controls the wires or airwaves can control the Internet, for it is only by means of these connections that the Internet can exist¸ let alone operate. Internet-based firms can reach their customers by no other channel. To use a search engine and other utilities, you need Internet access, and that is not a service that firms like Amazon or Google provide (with trivial exceptions). To have such access, you need to pay an Internet Service Provider — typically your telephone or cable company. The Web firms must also pay for Internet service, a fact that, conceptually at least, puts all of them on an equal footing. In fact, this equality is the life-blood of firms that were born on an open Internet. Were the Internet not a common carrier most would need a new business model.”

Tim Wu (the father of net neutrality) in The Master Switch, published in 2010 by Vintage.

TV goes mobile

Only a few short years ago, the idea of streaming enormous quantities of high-quality video via already congested cellular networks would have boggled the mind. But industry experts confirm that four mobile service providers have carefully leveraged their spectrum acquisition efforts to be able to provide over-the-top television (OTT) services in 2015.

Source: Adobe Digital Index

Similarly, Verizon—the top mobile service provider in the U.S.—is planning to launch a mobile TV service by the end of the year.

The key to success in these initiatives resides in the providers’ ability to secure licensing rights to the most sought-after content. Verizon has done precisely this by working out deals with two DreamWorks properties, namely AwesomenessTV and DreamWorksTV, both of which are targeted at younger viewers.

How does a spike in video-driven broadband demand affect the consumer’s bottom line? Verizon recently announced the possibility of brand-sponsored viewing to pay for consumption, an idea embraced by AT&T as of early 2014. This approach will also make it possible to sidestep the FCC’s net neutrality rules.

But, more than anything, this strategy on the part of wireless service providers is an indicator of the importance of direct consumer access in conquering the market. In the words of the technology editor for the International Business Times: “That’s one reason the TV business has been so tough for prospective entrants like Apple, Sony, Google and Microsoft. All four of those companies are more-than-capable of securing content deals; the question is whether they could operate profitably once doing so, particularly if they have to pay a broadband toll to get into the living room.”

Danielle Desjardins
Danielle Desjardins offers analysis, research and writing services for media and cultural enterprises through her company, La Fabrique de sens. Before that, she was director of planning for Radio-Canada, where she was responsible for strategic, corporate and regulatory matters for more than 20 years.
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