Internet Capacity Demands Increasing

It looks like the "middle mile" is fast becoming a bottleneck in the Internet video revolution.  Internet networks are often described as being constructed out of three parts:

1. The tier 1 backbone (the superhighways that only connect the major cities together),
2. The "last mile" that connects end users to their Internet service providers' points of presence (PoPs), and
3. The "middle mile" that connects the ISP's PoPs to the tier 1 backbone (or to an intermediate traffic aggregation point).

It's this middle mile that is apparently feeling the most strain as online video traffic is ramping.  Here are some anecdotal examples:

• A New York Times report from a few days ago says that Internet traffic could quadruple by 2011, driven largely by Internet video distribution and peer-to-peer file sharing traffic. 
• ISPs in the UK are feeling the strain of the BBC's iPlayer service, which streams video from the prior week's BBC television shows. 
• Brough Turner reports on his Communications blog that most cell sites have only one or two T1 or E1 links.  That's only about 1.544 Mbps per T1.  That certainly won't be enough to adequately serve the coming wave of wireless data service bandwidth improvements.  As spectral efficiency improves, much more data will need to be backhauled from cell sites.  Brough suggests dark fiber should be deployed to cell sites.  That may be overkill, but heck, if it is the least expensive option, then why not?
• A Broadband Wireless Exchange Magazine article blames a lack of backhaul bandwidth for lackluster growth in the mobile TV market.
• A Cisco study from last summer found that U.S. video web sites transmit more data per month than was transmitted on the entire Internet in the year 2000. 
• An Ars Technica report from last summer cited an ABI Research study predicting a major bandwidth crunch for cable companies. 

While some predict a catastrophic collapse of the Internet under increasing demands, I do not.  Instead, we will find that the Internet is not "big enough" for certain applications to perform well quite as soon as we would like, as with the example of the relatively slow adoption rate of mobile TV applications, above. 

What does the booming Internet growth mean, then?

• Data networking equipment vendors should see inreasing demand for routers and switches.
• Owners of middle mile capacity should see the rate of price declines slowing, and in some cases middle mile capacity prices will actually increase.  This bodes well for incumbents like AT&T, Verizon, and Qwest, and for other companies that own middle mile capacity, like Level 3 Communications.
• Cable companies may have to accelerate their deployment of DOCSIS 3.0 to help meet increasing demand, and may begin to deploy passive optical networks to keep pace with telco deployments.
• Wireless companies will continue to be 2nd class citizens in the high-quality Internet video streaming game in the near term, unable to compete with landline networks due to limited wireless data capacity.  Wireless companies will also need to increase cell site backhaul capacity.
• Even in a recession, the Internet will continue its rapid growth.

Comments

[fanfare]

""Cable companies may have to accelerate their deployment of DOCSIS 3.0 to help meet increasing demand, and may begin to deploy passive optical networks to keep pace with telco deployments.""

This seems a bit contradictory. DOCSIS 3.0 is supposed to yield 100 mb/s and theoretically make fttp unnecessary. While I believe DOCSIS will present its own set of challenges in the medium term, Cable Co's seem comfortable with testing results. I know there have been articles for sale that compare the two and list strengths/weaknesses between optical PON and alternatives like DOCSIS, but to date nothing has been posted to the 'layman'. I think a discussion outlining the points of both sides would be very helpful in predicting an overall outcome for competition in this sector.