The BBC’s iPlayer service will cost UK broadband providers between £399 million (Eur 605m) and £839m in the next five years, according to UK media watchdog, Ofcom.

The regulator said that BT and other ISPs using the British incumbent’s wholesale-broadband products are likely to be the hardest hit.

Ofcom calculates that each user of the public-service broadcaster’s planned peer-to-peer (P2P) video-download service could cost up to an extra £2 a month to support. Cable and unbundling operators, however, could reduce these costs by using their network equipment to either deprioritise or drop P2P traffic, says Ofcom.

Many observers have warned, however, that such measures could lead to a consumer backlash. Rregardless of technological advances and likely declines in capacity prices, ISPs’ costs will remain “significant” over the next five years, says Ofcom, forcing the companies to raise their prices or lower their profit margins.

Ofcom’s conclusions are presented in a market impact assessment (MIA) of the BBC’s on-demand proposals. The regulator has passed the MIA to the BBC Trust oversight body which is expected to publish an interim decision for consultation shortly as part of its public value test (PVT) of the proposals.

Ofcom’s calculations offer a valuable benchmark for ISPs across the world, which are bracing themselves for the impact of an array of P2P-based services from broadcasters, film studios and other media firms.

The regulator estimates that the iPlayer service could account for around 1.4 billion viewing hours by 2011, representing a BBC share of the internet VOD market of about 26 per cent. Based on the £26,000 price of a BT Central backhaul link and traffic patterns, each incremental hour could require capacity costing around 24p to 50p.

But although capacity costs are a “reasonable indicator”, says Ofcom, “the real question is what the actual resource cost associated with the new build will be.”