User demand for the Internet could outpace network capacity by 2010, according to a study released today by Nemertes Research. The study found that corporate and consumer Internet usage could surpass the Internet access infrastructure, specifically in North America, but also worldwide, within the next three to five years.

“It is a dynamic that has been evolving over time,” said Mike Jude, senior analyst with Nemertes. “The timing of the study we conducted is fortuitous because when we look at the demand line for Internet-based services, we see a real inflection point approaching in the next couple of years or so. You can look historically and see that this is something that is inevitable. It is a continuing dynamic.”

As Internet capabilities continue to expand and users strive to be constantly connected, usage of the Internet via the mobile phone, set-top boxes and gaming devices has exponentially increased thus limiting bandwidth capacity. This is due in large part to voice and bandwidth-intensive applications, including streaming and interactive video, peer-to-peer file transfer and music downloads and file sharing. According to ComScore, nearly 75% of U.S. Internet users watched an average of 158 minutes of online video in one month alone and viewed more than 8.3 billion video streams.

“In the past, the use of the Internet was casual for things like email and Web browsing,” Jude said. “Clearly the demand line wasn’t increasing all that much. But now what we are seeing is a whole raft of applications that are bandwidth intensive – the Youtubes, Facebook-kind of applications, new services, content delivery over the Internet – all these things are starting to be developed, be deployed, be conceptualized. So what we see is a radical increase in bandwidth-intensive applications going forward.”

The anticipated Internet overload would lead to brownouts, stalling applications and download times and reverting users back to speeds similar to dial-up modems, Jude said. The report, designed to measure how user demand would evolve if Internet capacity was not limited, concluded that the impact of this inadequate infrastructure would be primarily to slow down the pace of innovation. The next Google or YouTube-like killer application, while in high demand, may not come about because of insufficient infrastructure preventing applications and companies from emerging.

To prevent this anticipated decline in service, the study found that a $137 billion global infrastructure investment for broadband access would be needed, with between $42 billion and $55 billion required in the United States alone. This figure is already 60% to 70% above the $72 billion service providers are already planning to invest, the study said.

Jude added that there are two ways to approach the issue: One, find a solution to considerably increase capacity for access or two, find some way to decrease demand. “I don’t think that any of us collectively are interested in ways to throttle down demand,” he said. “I think that is the point of our study. The Internet itself is sort of self-throttling…Because it is based on IP technology, it doesn’t really fail, but it gets slow. The slower it gets, the less incentive people have to consume some of these technologies online...If we do nothing to address the issues of Internet supply and demand, it will take care of itself, but the solution will be that it will just throttle people’s desire to use it.”