Broadband networks generally perform well until they exceed 85% network capacity. Beyond this point all traffic, regardless of source, can be negatively impacted. Broadband service providers are forced to make investments to accommodate the traffic on these networks, with no contribution to capital or operational investments from outside sources.
USTelecom identified that subscriptions to video streaming services have increased by 60% over a four-year period. The 2018 report also found that rising consumer demand for data-heavy content streams—like high-definition video—continued to grow by 20% year over year.
Three years and a global pandemic later, those numbers continue to grow. Jimmy Todd is the CEO and General Manager at Nex-Tech, a broadband and technology company. Todd joined the Fiber Broadband Association’s Fiber for Breakfast series to discuss and share insights on how video streaming impacts broadband networks.
Todd said Nex-Tech identified streaming stats within its own local network that spans across rural, central Kansas. Nex-Tech found that big streamers traffic (including Netflix, Prime Video, and Hulu) is growing at 30% annually across its rural network alone. And that streaming makes up for 75% of the network traffic.
The increased streaming traffic is no surprise as people are spending more and more time at home, but as Todd explained, the concern is that increased streaming will require higher speeds—which puts a strain on rural broadband providers who are already facing higher costs.
Nex-Tech is a fiber-based company covering roughly 10,000 square miles, Todd said. Looking at total capacity for one month, most Nex-Tech customers in 2015 were consuming up to 10 Mbps. Five years later, consumption jumped to between 50 Mbps and 1 Gigabit speeds and those relying on less than 10 Mbps had nearly vanished. When considering data usage, Todd said it was a similar story.
“Looking back to December 2016, we had about 4 petabytes of data going across the network,” Todd recalled. “Fast forward to December 2020 and that’s grown to nearly 14 petabytes.”
And when looking at peak network usage, the number from 2016 has since tripled to 77 gigabits in December 2020.
“When we were looking at projections on our network in 2016, we realized our 10Gig core network was obviously going to need to increase. We started a 3-year multi-million-dollar project in 2017 to transform the network from 10G to 100G,” Todd explained. “Here we are one year after finishing that project and we’re already anticipating that our next round of upgrades are only a few years away.”
Todd said a major driving force of the demand for network expansion is a direct result of the continuously increasing use of streaming services.
“For every investment we make to increase capacity on our networks, the streaming providers are using more and more of that capacity,” Todd said. “Considering revenues for streaming services that use our networks, we’ve determined that for every dollar earned for streaming companies, we were investing 49 cents to provide an adequate network.”
In more urban areas, you have more subscribers per mile, giving you a bigger bang for your buck when it comes to network expansion. In rural areas, you can have a little as one subscriber per square mile, Todd explained, “So the cost per customer is extremely high.”
“When you're looking at service providers, who have a finite amount of capital, they have to continue to reach customers while also staying ahead of the demand that will continue to be placed on the network,” he said.
It’s not an attack on streaming providers, Todd said. “They simply saw an area to grow their business at zero cost.”
Todd said he hopes these concerns by rural providers will be recognized on the federal level this year. Specifically, Todd pointed to HR 1650, which was introduced recently and requires an FCC study on network traffic in high-cost rural areas. Todd said he also hopes for 2020’s HR 2929 (the Rural Broadband Network Advancement Act) to be reintroduced to this Congress.