COVID-19 has dramatically stressed the importance of broadband connections in America’s homes. Once the pandemic struck, the requirement for home broadband exploded and turned into a requirement for work, school, entertainment, and other aspects of daily life. The reality is that it has helped fuel the demand for better broadband connections and that demand continues to increase with no end in sight, pandemic or not. Broadband operators have responded strongly, facing unprecedented rises in demand of 20 to 40 percent during COVID-19 quarantines and beyond.

In addition to the noticeable impact from the pandemic, the appetite for streamed on-demand video has become insatiable. Consider this: According to Cisco’s Annual Internet Report (2018-2023), video traffic will quadruple by 2022. At that point, video will account for 82% of all IP traffic, up from 75% today. By 2022, Cisco says that nearly half of all devices and connections will be video capable. Viewers are lapping up over 405,000 hours of video that flows over the internet every minute. And, that’s just Netflix and YouTube according to the 2020 report of What Happens Every Minute on the Internet. Video is basically consuming the internet.

However, as more and more people are streaming video from Netflix, Hulu, etc. there is a subsequent upsurge in network costs for internet service providers, especially those in high-cost rural areas.

How did we get here?

According to Cisco, in 2020, two-thirds of all internet traffic flowed over content delivery networks (CDNs), a network of proxy servers and their data centers run by the video providers. These networks are spread over geographical areas and dramatically reduce the distance content has to travel to a subscriber. People are demanding better, faster video and the big content companies are happy to feed them. 

In order to deliver content as fast as possible, the content companies are using technologies that will max out a customer’s connection while the content is flowing. In rural areas, where customers may only have 2.5 to 10 mg connections, they can be impacted for a large part of the day.

New technologies like augmented and virtual reality, and ever higher video resolution like 4k and later 8k, mean that these CDNs will be even more heavily used than ever in order to keep things streaming smoothly.

The large ISPs can comfortably deliver to their customers the speedy video access their subscribers demand. The problem is that users in some areas are left underserved and the smaller ISPs are trying to cover those areas.

But the soaring popularity of streaming video means that users in rural areas want their binge-watching fix too. This is putting pressure on the small ISPs, who can’t always afford to deliver such sizable amounts of traffic to their customers. “Customers used to have a 1.5 Mbps connection and use it for an hour or two during the evening,” says Jimmy Todd, CEO of Nex-Tech, a broadband service provider in Kansas. “Now they’re using it for hours at a time and sometimes all day for streaming video. It’s placing a burden on our network, requiring us to upgrade our networks constantly just to keep up with the content providers.”

Another issue is that once the capacity on the network reaches 80-85%, congestion issues begin to impact not only video quality but also education and health care services on the network. And these services are critical as we’ve realized during the pandemic. So providers have to continually stay ahead of demand and capacity or streaming video is going to affect everything else going across the network.

The Staggering Numbers

The Network Operations team at Nex-Tech looked back at data from December 2016 through December 2020 and saw that total traffic had increased from 4 Petabytes to 14 Petabytes over that time frame, and peak data usage had risen from 25 Gigabytes to 77 Gigabytes. That is over 300% growth in traffic and peak usage over those years, even though their customer base only grew 6% during the same period.

Fortunately, Nex-Tech had seen the trend early on, so in 2017 they began a three-year, multi-million dollar project to upgrade their core network from 10 Gig to 100 Gig to handle the expected additional load. Todd said that even with those upgrades now in place they expect that within three years they will again have to increase capacity in some areas of the network due to the continued rising demand from streaming video.

These network upgrades are becoming a necessity as the file sizes and the technology used by the OTT providers continues to grow. As soon as an ISP increases speeds for their subscribers, the adaptive bitrate technology OTT providers employ immediately makes use of that additional capacity to push even more data through to the end user. Consequently the provider must continually upgrade capacity without a corresponding increase in customer base or revenue.

Data analysis that Nex-Tech did with a peer group of providers found that 75% of the data going across their networks was from video streaming. This is generating tremendous revenue for the big streaming companies, yet the cost of the content delivery and required network upgrades is borne by the broadband provider.

For providers who operate in high cost rural areas, it's a balancing act they are grappling with. Subscriber density dramatically affects the cost of providing service. As the number of subscribers per mile decreases, the cost to supply service increases at an exponential rate due to ongoing maintenance and operational costs. The lower population numbers in rural areas make deploying and upgrading systems a high priced investment. If service providers cannot recover their costs, it makes it difficult to provide high-speed Internet to the many communities that desperately need it. In addition, many of these rural ISPs rely on Universal Service Fund (USF) subsidies and have their hands tied with the requirements to keep rates low and affordable while trying to earn enough revenue to support, maintain, expand and upgrade the network. 

Rural Broadband Network Advancement Act

The challenges linked with expanding network infrastructure to economically serve low density rural sectors have given rise to a bill proposed in the legislature designed to offset some costs faced by rural internet providers.

The goal of House Bill 2929, which was introduced in the last Congress, is to have the powerful content providers, like Hulu, Netflix, Apple and many others, who are delivering content over the independent provider’s high-cost network, help pay for the transmission of that content. These OTT services are receiving subscription fees from subscribers but are not contributing any usage fees to the operators whose systems they are using to deliver that content.

The latest bill, HR 1650, which was introduced on March 8, 2021, is seen as a necessary first step that will gather the data needed to get HR 2929 considered. It would require an FCC study that would quantify the impact of content delivery, especially OTT video, on rural broadband networks.

Want to learn more about this topic? Watch this conversation with Jimmy Todd from Nex-Tech on our Tech Tuesday Broadcast.