How ISPs Can Differentiate Their Video Offerings

One question that keeps being asked is: why don't ISPs move away from the flat-rate pricing model? Good question of course, and not so easy to answer.

ISPs started this offering when always-on broadband made its appearance, most notably at a time when video wasn't part of the internet yet. It kickstarted the adoption of broadband, especially so because consumers don't have a sense of what a MB or a GB is.

Now, here are two options to do something about it.

1. Catastrophe. It was calculated that YouTube runs up a $1m bill for transit each day, whereas it only makes $0.1m in advertising. Just suppose Google (GOOG) would pull the plug, or threaten to do so and only give ISPs access who are willing to pay - reversing today's battle, because currently ISPs are trying to charge Google for 'giving it access to their pipes'.
2. Differentiation by providing HD video, VoD or BB video to the TV. I wrote about the Daily Media box several times before, including this option for differentiation. They were also covered recently by Gerry Kaufhold. Now, there is yet another box: Zillion. Again, a different business model from Daily Media's. Let's wait and see who scores the first ISP deal.