A 20-percent fall in the average cost of delivering streaming video, using a content delivery network (CDN), over the next few years will change the economics of video delivery, making Internet delivery cheaper than satellite, in many cases, argues Thomas Decieux, Nagravision head of product marketing, multi-screen solutions.

One has to make assumptions about the actual consumption, the number of users in a household, the number of streams any user would routinely use, image quality, CDN pricing and then more subjective issues to answer the question of whether a satellite TV provider would be able, at some point in the future, to make a rational business case for streaming over broadband connections rather than delivering content by satellite. But it is an interesting exercise.
 
Nagravision for example, has taken a look at costs to support a 250-channel standard-definition TV service requiring an average of 4Mbps, per channel, with 25.5 hours of viewing per user each week. Keep in mind the only issue is delivery channel. The analysis assumes all the rest of the licensing, marketing and operating functions are in place. 

Also, assume satellite transponders cost $3 million a year and a CDN cost $0.044 per GByte of transferred data. With those assumptions, a provider with about one million users might find delivery costs a wash, the analysis suggests. Below that level, a new entrant would be better off streaming. Decieux assumes further cost cuts for CDN service would continue to move the breakeven point up to perhaps two million subscribers. 

With larger customer bases, satellite delivery still will be cheaper, as multicasting or point-to-multipoint distribution simply is inherently more bandwidth efficient for delivering standard content to millions of users, compared to any unicast method. 

The largest satellite providers, such as DirecTV or Dish Network, will probably always find multicast a more-efficient choice. 

Smaller providers increasingly will find streaming a reasonable option, though. According to Nagra’s figures, CanalSat in France with five million subscribers could reach a point of cost neutrality as early as 2018, while BSkyB in the UK, Europe’s largest DTH operator with over 10 million customers, the point of cost equivalence would be reached in 2021.

Nagra’s main argument is that new service providers should seriously consider delivering over CDNs from day one and not bother with satellite at all. There are caveats. Thinly populated or rural areas might not have broadband access at speeds high enough to deliver a consistent high quality experience. Access provider usage caps also will be a factor. Also, content owners will have to be assured that piracy issues are controllable.

Edited by Brooke Neuman