Rival broadband companies have distanced themselves from BT's campaign to charge the BBC and YouTube (GOOG) to send video over its network, while industry insiders believe the move will fail. "They know full well it's not going to change anything, but maybe they hope to add it to the agenda for Digital Britain," one source close to the situation said.
A spat has emerged in recent days between BT (BT) and the BBC. The telecoms group broke cover this week to say it could no longer afford to subsidise the cost of sending huge media files from the online video on demand service as its network was suffering. A spokesman for BT said yesterday: "We can't give these companies a free ride any more."
The two sides had been in talks for months to answer the problems faced by the internet service providers (ISP) such as BT as well as Virgin Media, TalkTalk (CPW.L) and BSkyB (NWS).
"Bandwidth costs money, and files like movies and music take up a lot of that. The situation at the moment is that the ISP picks up the tab," the BT spokesman said. The spokesman would not comment on how much supporting video content cost BT, but said it was a "significant sum".
The group feels constrained because in such a competitive market it cannot put its prices up. It also sees companies making money from content put across its channels, without paying for the costs.
Yet many of its rivals were surprised by BT's move, and rather than back it – as they too look for ways to bring in higher revenues from their networks – many came out against it.
It is understood that no others have requested direct payments from the BBC in recent talks. One said: "We are not going to be shaking a tin at the content providers." Another added: "BT has gone out on a limb."
Some industry insiders believe the move was "tit for tat" after the BBC News website published a report accusing BT of "throttling" iPlayer use – basically cutting the speed of its network – at peak times. The story is thought to have come from an iPlayer staff member, and BT was furious.
Another rival added that it made the move "with one eye on Digital Britain". Lord Carter's report, which will outline the Government's vision of Britain's online future, is due next week, and BT might have moved to "get the issue on the agenda," the rival added.
The BBC put out its official line this week: "Despite its popularity, the BBC iPlayer is just one of the many services on the open internet and only makes up a small percentage of total internet traffic in the UK." The iPlayer is about 7 per cent of internet usage in the UK at its peak. YouTube uses 30 per cent.
The BBC would not be drawn into an open brawl with BT, but behind closed doors the corporation is understood to be unhappy with the group's tactics.
The rest of the ISPs have remained publicly silent, although this is not the first time the issue has been raised. Tiscali (TIS.MI) has complained in the past of the pressure video files put on its network. Another rival said that while it did not want to support the move, "there is definitely a conversation to be had down the line about content producers contributing to distribution costs".
Some ISPs suggested a service of "express lane delivery" where providers pay to prioritise certain traffic as the networks become more congested. Another suggested a tiered charge for consumers. "If you want to spend all your time online looking at video content, then using these services will be more expensive."
Currently providers such as the BBC pay content delivery networks (CDN) such as Akamai and Limelight Networks a fee to put its videos on the net. The ISPs then take that file and send it to consumers. There were suggestions that BT could monetise by building its own CDN business, or "monetise the relationships with existing CDNs". Other suggestions were to charge customers more, and one wag said they could "throttle more traffic".
Adam Daum, an analyst at the research group Gartner, said: "If content providers and ISPs could co-operate it would be better for everyone. The problem is there are obligations on both sides."
BT and the BBC are continuing to talk, but the relations are believed to have suffered. The move is also complicated by BT partnering with the BBC, as well as ITV, for the online video-on-demand service Project Canvas. Mr Daum said Canvas could provide a blueprint. "ISPs who participate in Canvas will have to guarantee quality of service, basically invest in their networks, but then content providers will have to pay them to carry their programmes."
There will be no regulatory intervention in the market, however. Ofcom said: "There is no immediate reason why the regulator needs to intervene." It added: "We have no remit or powers to resolve commercial disputes between the BBC and the ISPs but will be monitoring the situation closely."