By Daniel Hays, Director, PRTM

On-demand video is starting to out-compete broadcast, and it looks like that trend is going to keep going.  The recent federal appeals court ruling against the FCC’s net neutrality assertions will probably support the growth of on-demand video. Various forces are converging to open the floodgates for broadband service providers and content owners to deliver content on-demand.  Likewise, the National Broadband Plan, published in March, presents significant challenges for broadcasters, calling for the reallocation of more than 120 Mhz of their current 300 MHz of allotted spectrum.

The broadband camp is harnessing a host of new weapons to use in the battle against broadcast. Tablet computers and fourth-generation (4G) wireless smartphones are coming out this year. Other devices–including Apple’s (AAPL)  iPad, which operates on AT&T’s 3G network, and HTC’s EVO, which will operate on Sprint Nextel’s (S) 3G and Clearwire’s (CLWR) 4G networks–will be among the first gadgets to truly embrace high-definition, streaming, on-demand video content and games.

Broadband service providers and their network equipment suppliers are constantly strengthening their arsenals to support the on-demand revolution. Verizon (VZ) and Clearwire are developing speedy 4G wireless networks using global technology standards such as LTE and WiMAX.  Even more capable, fiber-optic-based wireline networks are rolling out in most metropolitan areas to bring lightning-fast broadband speeds to communities. Verizon’s FiOS and AT&T’s U-verse are prime examples. These networks will allow a growing base of users to shift from today’s broadcast paradigm to one of on-demand usage.

Delaying the Demise of Broadcast

The broadcast value chain is not giving up without a fight.  Broadcasters have widely opposed the reallocation of their spectrum for broadband services, because they think it would endanger their plans to roll out new applications such as mobile TV and data services. The broadcast community has also raised serious questions about the ubiquity and capability of broadband-dependent services.  Operators of public service communications and emergency alert systems that are dependent on broadcast technologies say that it may be many years before broadcast can be turned off, if ever.  Besides, many areas in the U.S. don’t get broadband.

Still, broadcasters are hedging their bets.  Major content owners, including NBC Universal, Fox Entertainment Group, and ABC, have partnered with private equity leader Providence Equity Partners to form Hulu, an on-demand content delivery web site.  Other broadcasters are starting to invest in broadband capabilities. In 2009, broadcast and print media company Schurz Communications partnered with wireless broadband service provider DigitalBridge Communications. It appears that the broadcast community does not want to be left out in the cold when broadband takes over.

Fate Decided By Users

The writing is on the wall, with dramatic shifts in content consumption already taking place in favor of broadband. Nevertheless, broadcast and broadband will coexist for many years to come.  It will take a while for the broadband ecosystem to address serious challenges, but the consolidation and decline of the broadcast industry will likely continue.

Speaking recently at a private conference on broadband media, a former top Google (GOOG) executive noted that “one-way broadcast is going to continue to suffer” and that companies in the broadband media space must do as Google does and “focus obsessively on users.”  It seems that the users have spoken, and they are demanding information when, where, and how they want it.  It’s now up to broadband and broadcast to decide how to make this a reality for all.

Dan Hays is a director in the Services, Electronics, and Software practice of
PRTM
, a global management consulting firm. He can be reached at
dhays@prtm.com
.