This just in: Over-the-top (OTT) traffic is growing rapidly in every operator network; mobile, cable and telco. Nearly every industry presentation leads off with the obligatory chart from Cisco’s VNI or comparable source, showing a strong growth of network traffic volume and video as the widest swath of it.

It’s also commonplace to talk about the impact of OTT traffic on the operator: rising network costs, peak-hour congestion resulting in quality impairments, and declining revenue per user.

In this context, it is easy for an operator to view the OTT content providers as a sort of a malicious parasite, selfishly thrusting bandwidth-hogging video streams to “our” subscribers, reaping all of the benefit while side-stepping the underlying costs of delivery. But in fact the OTT content provider, rather than being the coercive agent of change, is only responding to profound changes in consumer preferences – preferences that cannot be served via traditional video delivery methods, i.e. linear TV and VOD systems.

More video platforms

The TV experience of a generation ago, in which viewers chose from a narrow selection of content on a provider-determined schedule in the living room, is quickly becoming foreign to anyone under 18. We already take the Netflix streaming service for granted, but the idea of being able to choose from among tens of thousands of programs at any time would startle a time traveler from as recently as the late 1990s.

A tier 1 operator in Asia found that most of the video on its networks is being watched on mobile devices.Compare the MTV generation of the 1980s to today. Then, audiences anxiously waited for the 13-plus minute video to be played so it could be discussed in schoolyards and hallways. Today, a 30 second search provides instant access today and I discover I am the 150,629,730th person to view the video. I watch a 10 second commercial for Katy Perry’s new album before the video starts and I have instant access to links where I can “like,”  “tweet, “share” to Facebook and Twitter and subscribe to the channel.

Today’s living room offers services such as Google Chromecast, a $35 solution for streaming video from OTT providers to any HDMI screen, and Aereo, where I can DVR any broadcast channel and view it on any Internet device for just $8 per month. These services all bring an explosion of user choice, not only in the content, but when, where, and on what device to view it.

Content evolving as well

Beyond the delivery methods, the content itself is changing to meet emerging consumer preferences and become more interactive. Programs such as ABC’s “Modern Family” mix traditional TV-style video programming, online polls, interactive games and simultaneous social communities across large and small screens at the same time. You don’t have to be in the same room to interact with other fans of the show, you just have to be connected to the Internet.

These types of experiences are popular because they are what an online-bred generation of consumers increasingly comes to expect. If you are a content provider whose survival depends on delivering such an experience, you have no choice but to turn to the Internet and OTT. Only the Internet can provide the flexibility, intelligence, personalization and mobility needed to deliver this new entertainment experience.

To say that Internet video is growing is true, but it misses the broader significance of the point. The Internet is becoming the de facto content delivery network. Viewed in this context, the challenge for network operators is not so much about how to handle the ~10 percent of viewing that takes place online by early adopters today, but rather how to handle the remaining 90 percent that will soon follow.

You can’t predict how subscribers will consume the data either. A tier 1 operator in Asia used data analytics to track user patterns and device impact. It saw that over 70 percent of the YouTube content consumed on its fiber network was being viewed on a mobile device such as a tablet or smartphone. This shows that mobile operators face these same challenges.

OTT video impact

As a simple example of network impact, an HD video stream typically consumes about 4 megabits per second (Mbps). If in a single home three people are watching, which is not at all unusual, that is 12 Mbps for a single home. A small suburban town of 5,000 homes, in which just 25 percent are so engaged, consumes 15 gigabits per second – a single town. Extrapolated to a large metro area, state/province or nation, the numbers are truly staggering. By these numbers, the 316,000 households that “cut the cord” in the year ending June 2013 (Moffett Research) would account for a peak traffic load of 3.8 terabits per second (Tbps).

By June of last year, 316,000 subscribers cut the cord, which added 3.8 terabits per second of peak traffic to broadband networks.Clearly the current network architectures for delivering content – especially video content – will not be adequate if this growth continues. A subscriber’s perception of quality for this delivery will be measured on the entire experience: the quality of video delivery, the social media speed, game elements, chats and even the targeted advertising traffic.

Transparent caching

What’s a network operator to do? Fortunately, a solution exists to support this new mode of consumption and provide revenue for all the participants in the delivery value chain. Transparent caching, such as PeerApp’s UltraBand, delivers all types of content closer to the subscriber. This reduces the operator investment required to meet the demand of OTT content so that the bottlenecks from aggregating thousands of requests for the same content simply never happen.

An important requirement of a caching solution is that it needs to support today’s entire interactive delivery experience: video and web, stationery and mobile, TV, tablet and smartphone. Approaches that simply deliver a movie title over a single type of network and device type are solving yesterday’s problem.

The discussion goes beyond optimization and network management into meaningful business opportunities. Even the content providers are acknowledging that operators need a piece of the action because they are realizing that their future business model will rely on a sustained and robust access network infrastructure.

Content Service Extension underway

New opportunities for operators are starting to emerge. Last year, PeerApp, along with content delivery network (CDN) providers EdgeCast and Limelight Networks, announced an initiative called Content Service Extension, or CSE. CSE is an architectural framework allowing the integration of operator system and network resources into existing content delivery networks (CDNs) and OTT services.

The solution allows network operators to offer their caching infrastructure as a service to CDNs and OTT service providers and act as a virtual extension of the content service footprint, providing delivery control, reporting, resource management, QoS and other capabilities via a set of open interfaces.

By deploying solutions based on this architecture, network operators are able to participate in the over-the-top value chain and monetize OTT content delivery, while retaining full control over their own network and system resources. CDN service providers and OTT content providers also realize a broad spectrum of benefits, including geographical footprint extension, increased market share for existing services, differentiated service offerings and content delivery cost reduction. CSE is currently in trials on three continents.

Network operators need to adapt to, and ultimately profit from, the transition of content from traditional broadcast methods to broadband networks. The brute-force method of constantly building fatter pipes is not sustainable in the long run. Transparent caching offers an elegant and proven solution by delivering content from the subscriber edge and introduces an innovative solution for long-term monetization of OTT content.