Over the weekend I was struck by the fragmentation of TV distribution. On Sunday afternoon, I found my wife with her iPad watching a rerun of Strictly Come Dancing on BBC iPlayer, my son using his iPod Touch to watch an episode of Peppa Pig via Slingbox and myself watching a pay-per-view rugby match. Aside from wondering why we don’t have stock options in Apple, I was struck by the splintering nature of TV consumption.

There can be no question that the Internet has radically altered how we consume TV. There is no longer a central access point. Laptops, smartphones and the wealth of other connected devices mean we want TV whenever and wherever we are. The impact on our global networks is profound. Recent figures in the US reveal that Netflix’s Instant streaming service now accounts for over 20% of North America’s traffic. What’s even more staggering is that only 2% of Netflix’s customers currently use its streaming service. What would happen if the other 98% suddenly signed-up?

The report goes on to highlight that the cumulative figure for Over-The-Top (OTT) video traffic jumps to 43% when including other major players, such as YouTube, Hulu and iTunes (see left). Almost half of North America’s downstream traffic is now driven by OTT video services. This has led some in the industry to suggest that it’s only a matter of time before viewers start migrating from expensive cable and satellite subscriptions to much cheaper Internet-based services. In Europe, this migration is already taking place. According to figures from the EU, over 8 million people unsubscribed from their cable service in 2009.

In the US, the migration is not yet as distinct. Figures from Yankee Group highlight that changes are taking place but understanding the reasons for this shift aren’t clear. Yes cable subscriptions are slowing and OTT video services are dramatically growing, but is there a direct correlation? Currently, viewers appear to be supplementing their cable packages with OTT video services. However, this raises a key concern for cable operators: as audiences become more accustomed to streaming content and the quality of service continues to develop, is the long-term future for cable in doubt?

Part of the answer to this question lies in the development of our networks. Streaming video content to an iPad over a cellular network can be a frustrating process and is entirely dependant upon your location. As I mentioned in a previous post, video poses a significant threat to mobile networks and a lot of development needs to occur before a high quality of service can be expected. Another part of the answer lies in the future of OTT services. In addition to video, there are also OTT services for VoIP and data sharing that are all driving bandwidth demand. Will there come a point when OTT service providers need to start contributing to the development of the network? If so, how will this impact upon their bottom line?

There are still a lot of questions to be answered, but one thing’s for sure, video’s disruption is set to continue for a long time to come.

How do you watch TV? Do you subscribe to any OTT services? Have you abandoned cable for an Internet-based solution? I’d be interested to know your thoughts on how the landscape is changing here.