Over the Top Video Entertainment Suffers Because of Cost Shifting by Participants

Any business ecosystem contains potential for conflict between participants, and the over the top video entertainment ecosystem is not exempt from those issues. In a loosely-coupled ecosystem, there frequently are opportunities to shift costs to other participants, or add complexity to functions provided by other participants.

At the moment, “such cost shifting has temporarily threatened, but not permanently damaged, the ability of over-the-top services to function acceptably,” according to Sandvine.

The quality of experience of an end-user for a given Internet-delivered application or content is affected by numerous choices made by many players through the value chain, including consumers.

End user devices (screen resolution, CPU performance, memory, application and operating system), the network inside consumer homes (wireless or wired, coverage, interference), the connection from their home to the access provider (RF noise, oversubscription ratios), the backbone of the access provider (oversubscription, latency), the transit providers, hosting services providers and original content providers make choices that can affect perceived end user quality.

Since a network’s capital cost is driven heavily by peak capacity, there is significant incentive for all parties to optimize and find efficiencies.

But it also means there is significant incentive to move the cost to another party, and there is ample opportunity to do so, says Sandvine.

With limited exceptions (peak and off-peak pricing, as well as using time-zones to trade-off transport distance versus server load), moving traffic in time is not an option because, with real-time applications, consumers decide when they want to be entertained.

What can be done is to minimize the total number of links between a source and a consumer, moving traffic to lower-cost links, arbitrage on pricing models or use of better video compression, Sandvine suggests.

The larger point is that disputes about how to allocate cost and revenue within the video entertainment ecosystem involve legitimate attempts by participants to maximize their own revenue and minimize their own cost.

That is why access providers so often complain that some app providers are imposing costs on access providers while reaping all the revenue themselves.