Making Money From Both Sides

Canadians are in for a change when it comes to their surfing habits. Not those on the beaches of Vancouver Island, but rather those in front of computers, tablets and smartphones. The Canadian Radio-Telecommunications Commission (CRTC) has allowed ISPs to charge Internet users per usage after 25GB (you should also read James Cridlands take on related radio aspects). This follows a recent move by Norwegian ISP and telecom operator Telenor that wants media houses to pay for the data traffic they generate through web TV and similar services.

So is the Internet, as we know it, changing? Well, if we combined the Canadian and the Norwegian models outlined above, and we say that all television viewing and radio listening will take place through the Internet next year, we'll get a pretty cruel scenario for little Norway.

Let me start with some figures and background information.

• There are 4,925,000 people in Norway. Approximately 3.9 million of them are above 12 years of age.
• Every Norwegian over the age of 12 listens to radio for 101 minutes every day. 40% of this happens outside the home, much of it in cars.
• An average radio station takes up 128Kb per second. Every Norwegian above the age of 12 watches television for 183 minutes a day. 11% of this happens outside the home.
• More and more of all produced television content is in HD quality, typically taking up 5-6Mb per second. Let's say 5Mb for this scenario. Viewing outside the home typically takes up 384Kbps as the screens are smaller than at home.
• Let us say that we can reduce the figures by an on average 35% as people often tend to view and listen together, thus reducing the needed transfer capacity.   
• A pretty good negotiated price for data transfer for a broadcaster is 4.3 American cents (0.043 US dollars) or 3.2 Euro cents (0.032 Euro).

Given the above, we're looking at the following:

• Radio: Those 101 minutes every day constitutes almost 3GB per Norwegian per month.
• Television: Those 183 minutes a day constitutes 185GB per Norwegian per month. 
• In total: The total data transferred per average Norwegian above the age of 12 is 123GB (given a reduction of 35% due to people listening/watching together).
• Let's go back to the cap of traffic in Canada. They allow 25GB a month before you have to pay extra.
• Those 123GB a month adds up to 5.7 billion gigabyte a year. That equals 5.6 million terrabyte, 5500 petabyte or 5.35 exabyte  
• To transfer 5.35 exabyte per year constitues a cost to Norwegian broadcasters of 250 million USD if all this traffic were to go via the Internet.

But this is not all. Remember that the ISPs and telecom operators want to get paid from both sides - from media companies and from end users. That's certainly a win-win situation, but only for one industry, thus eroding the normal meaning of win-win.

So what kind of amounts are we looking at from the other sides, from all the end users out there? What will you have to pay?

• First of all, you'll need a broadband connection. For a proper broadband connection of at least 7Mbps, you will be looking at 52-69 USD (297-399 NOK) per month, according to the Post and Tele Authorithy that operates a price overview for all ISPs and telecom operators in Norway.
• To get radio and TV via the Internet on the go, you will also need a mobile broadband connection (typically included in many phone subscriptions). Those will set you back 42-104 USD (239-599 NOK) per month.
• To get a basic package, you will have to pay 94-173 USD a month (although some companies will offer you triple play packages that will save you money).
• But of course, if the Canadian plan is to be followed, you will have to pay 1.9 USD for every GB transferred after you have exceeded the first 25GB, every month. That means 98GB times 1.9 = 186.20 USD.
• With the 123GB, we'll be looking at the following costs (and I'll use the cheapest possibilities): 94 USD for access (including 25GB) + 186.2 USD (for the remaining data) = 280.2 USD per average Norwegian.
• 3.9 million people paying 280.2 USD each means 1,092,780,000 USD. That is almost 1.1 billion USD. And that is not per year, but per month. Per year, we are looking at 13,113,360,000 USD, or 13 billion portraits of George Washington.

But what about the win-win situation? The ISPs and telecom operators want to get paid from both sides, don't they? So, we should really add up what the broadcasters will have to pay per year (250,000,000 USD) and what the end users will have to pay per year (13,113,360,000) to get their bandwidth related revenues. Well, 13.36 billion dollars per year sounds OK. It is actually more than OK, it is 3.2 percent of Norways GNP.

But hang on, the entire scenario above would be impossible. The Internet cannot cope with those amounts of data. The Internet would go down if an estimated less than 5% of TV viewers and radio listeners were to use the Internet to get their radio and television versions of news, sports and entertainment. And then the Internet would not be able to accommodate all the others that want to check emails, use Facebook, watch Youtube videos or read articles.

Who said we won't need broadcasting also in the future?

Related article:
Why the Internet Won't Solve Everything.