Thirst for data to be extinguished by price hikes?

Habits are changing. Our thirst for data is becoming insatiable, whether its social media, movies, games or music. And with the launch of Netflix into the UK market in January, and others trying to keep-up, our data consumption is only going to increase.

So this leads to one burning question that all UK internet customers need answered: will broadband providers raise their tariffs to cope with the UK’s ever-increasing data needs?

It has already happened in the American market. Massive game console updates, music purchases, cloud applications services, and the explosion of Netflix movie downloads has resulted in providers, such as AT&T, claiming they were forced to introduce bandwidth caps. Stats provided by AT&T say that data usage has increased by 20,000% in the last five years, with usage at least doubling every year. So the caps were created to act as a deterrent for high-capacity users, but consumers claim it was just an excuse for a silent raise in prices. Either way it acts as buffer to slow down Netflix’s domination of the market.

So will this happen in the UK? Netflix launched in January 2012, Sky is launching a pay-per-view service for non-subscribers and already has Sky Go and LoveFilm and others offer similar monthly packages. The level of competiveness in the market means it has never been easier and more cost-effective to download your favourite entertainment. However, can the UK’s broadband infrastructure cope with the explosion of data consumption?

In reaction to the possible broadband price hikes, Stavros Tsolakis, CEO of Direct Save Telecom, an independent telecoms provider, has promised customers that Direct Save will not increase their prices.

Stavros explains: “In the space of ten years, the average household’s monthly data requirements has increased dramatically and with the new products coming out on the market this is set to increase even more. At Direct Save Telecom over the last few years we have seen typical data usage increase from between 1.5 to 5Gb per month for the vast majority of our customers, to more recently 3.5 to 11Gb per month. If Netflix, and others, get a fraction of the success in the UK that they enjoyed in the US, data consumption is about to go through the roof. So broadband providers might well see this as an opportunity to cash in, either by increasing prices or by reducing their data caps.

“If our customers have any worries, they can discuss their profile as an internet user with our UK based, skilled Customer Services to ensure that they are on the best possible package for their needs. We have broadband packages with 20Gb, 60Gb or 100Gb usage allowances and these should meet the demands of 99% of all home users as demand increases over the next few years.”

A recent report commissioned by Ofcom in 2011 confirms that data consumption has increased ‘seven fold in the last five years.’ Residential fixed broadband customers are using on average 17 Gigabytes of data per month. This is the equivalent to downloading more than 11 films per month, streaming 12 hours of BBC iPlayer HD video or more than 12 days of streaming audio content.

Broadband expert, Richard Patterson, a Director at Broadband Expert, believes the introduction of Netflix will put even more pressure on the UK’s broadband system which could lead to problems for consumers.

“With Netflix accounting for around 28% of bandwidth use in the US if the service is anything like as popular in the UK it will, undoubtedly, put extra pressure on an already stretched infrastructure. With the UK having a greater amount of competition between providers it is unlikely that many ISPs will raise prices, however there is a real danger that there will be an increases in ISPs throttling speeds on unlimited broadband packages (slowing the speed of the customer’s connection to reduce data usage), for those customers with the heaviest data consumption. Users of Netflix are likely to be amongst the top data consumers so would be more at risk of this. ISPs usually justify this activity under their so called ‘fair use’ policies where they look to restrict the heaviest users to benefit their wider customer base. I would urge potential Netflix users to check their unlimited broadband packages really are unlimited and are not subject to a fair use policy which will restrict their bandwidth.”