As broadcasters search for new ways to monetize online viewing, Sky and Ofcom are looking at ways of speeding up the networks. This is no coincidence, argues Will Strauss.

As luck would have it, my Google Reader virtually wrote this article for me this week. It's all thanks to one of those fascinating little nuances that occur when you use RSS feeds to keep up with what is going on in the world.

Basically I got two news items in my ‘inbox' juxtaposed together which seem to be completely unrelated yet are intrinsically linked.

The first was about NBC in the States using the Olympics as a "billion-dollar research lab" to get a sense of how people are using different media platforms to experience the Beijing Games.

The other was about Sky trying out new ways of speeding upbroadband access.

And both stories followed an announcement by Ed Richards, chief executive of Ofcom, about plans to encourage a UK-wide fibre optic network that would allow faster broadband speeds.

For those that cannot instantly see the connection, here is my theory:

  1. Broadcasters are still working out which online services work - and which ones they can charge for.

  2. The speed of the internet connection to the home is paramount to any future success.

Here is my argument in full

There is demand
It's clear that viewers want to watch video content online. Here, we're a bit further down the line than America.

  • The statistics back up the theory. December 2007 data from web analytic firm comScore show UK online video viewing reach at 87 per cent, equating to 108 videos a month per viewer in the UK. This is second only to Canada and eclipses the US, where users watch 77 a month on average Watching videos is now the third most popular online activity after search and retail and ahead of social networking.

And online viewing is the saviour of some types of British television programming, apparently, and is creating audiences all of its own.

  • Up to 40% of total viewing of BBC3 sleeper hit comedy The Mighty Boosh is via the iPlayer broadband TV catch up service, according to the BBC.

Making it pay
Lots of viewers don't want to pay for all/any online content - in its current form.

While people will watch free stuff - especially short clips on Youtube of cats falling into ponds - the ‘quality' of the viewing experience means that it is unlikely to generate much money.

Other than the short clips there are two main types of TV viewing on the internet:

- Download it and watch it (or burn it to a DVD). That can make money, but piracy is rife.

- And online television, which is broadcast type programmes being viewed on a different network (the internet).

Broadcasters are still working out how to monetise their online ventures beyond using the advertising model

  • The main strategy behind Kangaroo- the VOD online TV joint venture announced by BBC Worldwide, ITV and Channel 4 - is to monetise TV shows outside of the existing free-to-online window.

People will pay for improved viewing quality
Sky HD figures prove that. Around half a million people take Sky HD, paying an extra£10 a month.

The current quality of video online isn't great
Especially if you hook your connection up to your big screen TV. The internet service to the home needs to be fast enough that it can offer video that has an instant start, no buffering, no pixilation etc. To achieve this, there are several factors to consider. There is player, there is the encoding but, importantly for my argument, there is the speed and quality of the internet connection.

A faster, higher quality internet service to the home can help to generate revenue because:

a) Some people will pay for a subscription upgrade and b) It allows the provision of a quality experience much like a broadcast network - and if you have exclusive content in decent quality, people might also pay for that.

So, basically, my argument is that paid-for online content is incredibly reliant on a decent internet service.

Sky is not daft. It knows how important this is. The tests that it is undertaking are said to be "a few men in white coats making a technical study with no commercial involvement". And I have no reason to think that this isn't true.

But equally I can see that if Sky can speed-up broadband access not only can it compete with cable speeds but - because the company is also a content owner and creator - it can develop better ‘quality' online services and offer faster connections both of which it could charge for.

Is Will talking rubbish? Have your say below.