Video Streaming Causing Internet Traffic Jam, With Little Relief in Sight

SAN DIEGO -- Paul Gray, director of TV electronics research for DisplaySearch, warned the TV industry in 2008 that if something didn’t change, the TV set would end up as a commoditized monitor. Something did happen when the Internet and the TV collided, and the industry is banking on the connected TV to lead the product category well into the future. But Gray warned on at the DisplaySearch Flat-Panel Conference last week that Internet video is creating a large traffic jam on the road to the future and few solutions are in sight.

The world is dreaming of a “wonderful” future in which data and video “will flow unencumbered down this gorgeous open road to our living rooms,” Gray said. “I'd love to believe that, but the reality is this is what it’s starting to look like already,” showing an image of bumper-to-bumper traffic. He said 20 percent of evening Internet traffic in the U.S. results from Netflix streaming by about 20 million households. He cited U.K. data that the BBC’s iPlayer service feeds 145 play requests monthly on average to each of 6.3 million users. “What happens if the other 75 percent of consumers join in?” he asked, comparing traveling the Internet to driving a car: “It’s wonderful driving at 5:30 on a Sunday morning, but it’s not necessarily so fun at 6:30 on a Friday evening."

Describing his experience at home using a connected Blu-ray player, which “works great until 9:30 at night” and then “buffers and grinds to a halt until half past midnight,” Gray said Internet capacity is a “problem of success” and “we have to start thinking about what will happen.” He said Internet TV doesn’t scale the way broadcast TV does. “With broadcast, when you turn on your TV it doesn’t affect your neighbor,” Gray said. “Connected TV may not be like that.” It’s unknown who will pay for the pipeline, “dig up the street, run fiber, and build content delivery networks,” he said. Additional issues affecting the broad expansion of Internet infrastructure are net neutrality, “which could suddenly go from being an esoteric, academic subject to one that actually affects business,” conflicts of interest in who installs the infrastructure, tiered data rates and quality of service.

It’s unclear how the TV set maker’s business model will evolve in the connected era, Gray said. The connected TV will evolve into a multiscreen world in which set makers compete with mobile phones, tablets and set-top boxes. Content services will determine hardware sales, he said.

Forecasts are for strong growth for connected TV worldwide, varying with broadband penetration. Gray referred to two “speeds” divided by developed and emerging markets. Sixty percent of TVs shipped in 2014 in North America, Europe and Japan will be connected, and they will be concentrated in screen sizes 30-inch and larger, according to DisplaySearch. In emerging markets, 30-50 percent of TVs shipped in 2014 will be connected, Gray said. Worldwide, connected TVs will climb from 21 percent of the market last year to 41 percent in 2014, he said. Growth is expected to fall in Japan this year because of “hugely inflated” 2010 TV sales spurred by subsidies for low-energy TVs, he said. As the connected TV market matures, it will fragment and become more complex, eventually “dramatically diverging” into a segmented market of basic sets “with few features” to “uber smart TVs” and “something in between,” he said. The mix will vary by region.

Despite all the talk about “cord cutting,” with consumers canceling paid TV subscriptions and getting all their programming online, Gray said the percentage of paid subscribers making the switch is only about 1 percent. Cord-cutting “remains to be proven as a phenomenon, but it’s definitely a growing competitive threat if you're a paid TV operator,” he said. And connected TV is “as much an opportunity as a threat” for providers willing to “think differently,” he said.

Wilfred Martis, general manager for retail consumer electronics at Intel, said software compatibility could limit smart TV expansion. TVs that aren’t connected operate in a “monolithic” world determined by broadcast standards, he said. With a smart TV, “you have to make sure the middleware stack can co-exist with any operating system or app environment,” Martis said. If audio from one app overlaps with another’s, as in the PC world as users move between applications, “you can’t mute a screen on a smart TV,” he said. “You have to figure out how the resources don’t step on each other,” which involves “lots of work” for those developing different standards, programming data and audio streams, Martis said. “That limits how fast you can scale around the world.”