Pricing watch

As a result, bandwidth pricing could increase, he says, because carriers will need to purchase equipment to support IPTV across specific fibre routes with a shortage of capacity.

"Somebody could say, 'we've got a lot more fibre than we need' -- that's probably going to be true maybe forever -- but that doesn't mean that we don't need to have more," Holliday says. "It doesn't make any difference how much fibre you've got in total in the United States. If you need to get from A to B, the only thing that makes any difference is how much you've got from A to B. There will be routes where you'll see major additions."

Global Crossing recently increased wholesale and "selective" retail bandwidth pricing by 5 percent to 10 percent due to "supply and demand equilibrium," says Anthony Christie, director of marketing for the carrier.

Christie says this equilibrium is a confluence of several factors -- not just the growth of streaming video on the Internet. The virtualization and Web-ification of enterprise applications, industry consolidation and inexpensive broadband access -- which enables sharing of video files -- are all playing a role in the stabilization and increase of bandwidth pricing, he says.

As is the case with Level 3, Global Crossing finds that 50 percent to 60 percent of the traffic from its top 10 IP transit customers is "video driven," Christie says.

Level 3 is seeing increased demand from YouTube and other companies that are aggregating user-generated content; as well as from companies looking to offer broadcast-quality content through the Internet, such as studios distributing DVDs online, and portals offering video downloads to PCs or set-top boxes.

Jeff Tench, senior vice president of offer management for Level 3 Content Markets, also sees prices for that bandwidth -- be it transport bandwidth, IP transit or content distribution -- stabilizing due to higher demand from the end-user as well as from carriers for edge applications.

That higher demand has helped absorb the capacity glut, Tench says, prompting a round of reinvestment in the network. Level 3 has been investing in its network for the past three years at both the wavelength division multiplexing and IP layers, he says.

Level 3 has also been one of the more active carriers on the consolidation front, acquiring seven companies over the past two years.

"If you look at the price for bandwidth fives years ago on a unit basis, it was not economical to distribute movies online," Tench says. "At the current levels, people are finding new opportunities to use the Internet to shift an entire industry."