Consumer storage solutions - the next deadly threat

There's been lots of hype about enterprise storage solutions since 9/11, but few have considered the impact plummeting storage prices will have on the telco business plan - particularly from the consumer front. Today, consumers can buy 100 gigabytes of storage for under $200. In the past, the impact of improved storage solutions has been localized to the PC, back-up server, etc. But coupled with broadband access, consumer storage has the potential to drive another nail in the coffin of telco business plans.

Most carrier business plans assume content will be stored in the network and consumers will pay for access to and viewing/use of that content on demand. The underlying assumptions that consumers won't need or want to store large files locally, or won't find 'free' sources of the materials, are dead wrong. Thanks to the current and coming wave of consumer storage solutions, what was presumed to be currently stored in the network can very easily be stored locally - and therein lies the threat to providers.

Look at video. For years, the plan from cable and telco companies has been a network-based delivery solution, supported by massive network servers to stream the content to users on demand. Now, with true MPEG-4 and other high compression encoders making low-bandwidth video options possible, downloading video (and other) files to a storage device is possible even under bandwidth challenged scenarios. Users won't need 6M bit/sec to enjoy last week's reruns - just a PVR (personal video recorder, a la TIVO or ReplayTV) to download it in the background or overnight. We've seen studies showing consumers are willing to wait 24 hours to download a movie to their disk - it's a background transfer that does not impact their normal day-to-day network usage.

This fall, we're going to see home and office storage devices that can be internetworked with audio, video, computing and gaming devices. This means increasing amounts and types of content can be searched for, downloaded and immediately available on demand. TIVO, ReplayTV and other content groomers are designing their products to tape and store content from broadcast streams. So far, broadcast content hasn't been swapped wholesale on the Internet due to the barrier of getting it off the PVR box and onto the PCs. But those barriers are going away.

At this point, people usually talk about how illegal this is and how the courts won't allow this or that… Well, tell it to the recording studios that shut down Napster. Other distributed options came up in its place. Those expecting cybercitizens to opt for 'pay' content solutions over 'free,' do-it-yourself -- albeit illegal -- solutions are simply naïve. The recording industry hasn't come up with the audio answer; Hollywood certainly won't come up with the video answer any time soon.

The result is that 'convenience' becomes the main value proposition of buying content through the cableco or telco. Service providers will have to make some fundamental changes in pricing and perhaps new service delivery to maintain a profit margin as traffic grows. One option might be to use traffic shaping policies to shift lower priority traffic to off-peak delivery; or implement a volume-based pricing scheme for some sets of delivered content. Another approach could be to offer different levels of quality for different customer experiences. You might have a fast and low quality option, or a slow and high quality option, for delivering files or streaming content.

Smart service providers will have to consider the effects that consumer devices and cheap storage will bring. While that may mean changing users' expectations on pricing structures, it's better than the slow death of exploding network capacity with no corresponding increase in revenue.

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