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The starting point for me, at this stage of the digital revolution, is where will the tipping point come? At what stage does the distribution of television by the internet become a reality and significantly starts to erode the hold of terrestrial, cable and satellite broadcasters?

In Britain, the broadband speeds are below the OECD average. There are 11 OECD countries with higher average speeds than in the UK, and leading the global pack is Japan, because 40 per cent of the Japanese network is fiber, versus almost none of the British network. Internet distribution in the digital age has not become a reality simply because our broadband connections are too slow. In this country they are about 4Mbit/s on average if you are lucky; in the countryside probably not that much. It's really too slow for video downloads or streaming because of bottlenecks which slows download speeds.

It would seem to me that at 50Mbit/s the whole thing tips. At this point it would be as easy to view television over broadband as any other means of distribution, and at the same high definition quality. These speeds of 50Mbit/s are not with us yet, largely because most broadband in this country is still delivered over copper wire, which has been with us since the Edwardians first gave us the telephone. So it's not exactly equipped for a digital revolution. OFCOM thinks these speeds are less than a decade away, but hardware manufacturers such as Sony, Sharp and Panasonic are already selling TVs with internet connections built in, in anticipation of the tipping point, and that point is much closer in Japan and in other countries than it is in the UK.

When that tipping point is reached, it seems to me that a number of revolutionary things will happen that will cause problems for the established players. When it's reached, the middle men, such as Sky, Freeview and traditional networks, risk being cut out the by the consumer who has already shaken off the shackles of the schedulers compared with ten years ago because of the spread of multichannel television. Viewers will really find no constriction at all on what they want to watch. They will access what they want and watch it when they want. They can download on to digital storage in their own home, and this is already happening with Sky+ and the various varieties of TiVo in the Western world. It will become the default position when broadband reaches the tipping point.

The implications are profound, and I've seen it in a small way with a little company that I'm chairman of called World Media Rights. We make historic programs for the History Channel on both sides of the Atlantic. We are a B2B company. We make programs for other channels. When the tipping point comes, what is to stop us from becoming a B2C company, cutting out the middleman?

Already you can see in our little business an inkling of that already happening. We are on several sites for downloading, including Amazon, and we noticed, for some reason that didn't strike us to begin with, that the downloads were taking place much more often in Southern California than anywhere else. Then it dawned on us: Southern California has more fiber cable. Verizon has been rolling out a fiber program called FTTP (Fiber to the Premises) there for three years, giving speeds of about 30Mbit/s. It's not quite the tipping point, but it's a lot better than elsewhere. At 30 and above you are approaching the point where broadband becomes the default way of receiving television, and then a lot of questions and a lot of opportunities open up.

For example, there's likely to be a race to buy up content rights. At World Media Rights we get contacted on average once a week by broadband providers wanting to buy our content. Broadcasters who produce their own content will still survive, although perhaps with different business models, but those who don't or have limited content, such as Sky, may struggle in this new age.

The idea that downloading from websites will become the new way of watching television is becoming increasingly established in the US. Comcast, one of the big cable companies, had video-on-demand sales of 3 billion in 2007, up from 2 billion in 2006. You can see the growth. Americans watched 10 billion VoDs in February 2008 alone. Netflix is now selling a set-top box for $99.00 that streams unlimited number of videos to you for $8.99 a month. When these become ubiquitous, appointment viewing, which the networks have always relied on, will probably disappear for most programs, except sport. Which means the traditional networks will continue to decline. In the US last year, the four main networks lost another six million primetime viewers compared with the year before. The only thing that matters now is the speed of their decline and how long they will last.

The end of the 30-second spot

The new business model will probably include things that we have not thought of before, such as viewers paying a premium for speed. If you want really fast downloads, really high quality HD, you will be asked to pay a premium for this. This will become a new revenues stream for the companies that provide the broadband and the content, and the old model of spot advertising will go the way of the steam engine.

It seems amazing to me that the advertising industry and the old broadcasters haven't yet realized this. And when it does go the way of the steam engine, it will further encourage the decline of the traditional commercial networks, whose business model depend on the spot advertising. A majority of advertisers in the US believe that TV advertising is less effective than it once was and therefore they using it less. When the penetration of DVRs, Sky+s, TIVOs and so reaches 50 per cent, the TV ad market will have reached its tipping point too. It was Tim Rogers the CEO of TIVO who said recently, 'We went to the TV industry, told them the game was over, in terms of people watching commercials. We told them there was one thing we know about our users: they fast-forward through ads. You need to look at another way of raising revenue.'

As a user of Sky+ myself, I know that to be true. Tim Rogers went on to say that they'd developed a systems of gold stars on the TiVo central menu where people can see something at the bottom – a new car, a new movie that's coming out, something that that catches their eye and gets them to come in. And so people go onto that video: instead of a 30-second commercial, it can be a three minute commercial; it can be a trailer for a movie which last for three minutes: it can give more information about the movie and, in the process, you can arrange to download the movie or buy tickets. There'll be new ways of advertising, new business models will need to be developed.

Broadcasters who have thought about this are already taking steps to get into shape for this new age. Fox and the NBC networks are at each other's throats for primetime ratings, but they've combined to provide a broadband service for their TV programs to give the users of the service as broad a range as possible. In this category, Kangeroo, with the BBC, ITV and Channel 4, is perhaps the biggest collaboration between broadcasters. It's interesting that Hulu, knowing spot advertising is on the way out, has now cut the number of ads offered per program by 75 per cent They know that spot commercials are not the way forward .

In the manner of those in London who thought when the automobile was invented that you should have a man walking in front with a red flag so it couldn't go faster than 4mph (which happened to be the average speed of a horse in London at the time) so that the car didn't compete with the horse, ABC tried to do a digital version of that. They produced a VoD service with the fast-forward function disabled, so you couldn't go through the commercials at speed. The consequence was that nobody watched it and the service flopped.

Broadcasters trying to get to grips with what the new business models know there are new viewing habits, well documented by what happened with this US teen series GossipGirl, which is made by the same people who made The OC, and indeed replaced The OC on the network in a primetime slot. GossipGirl received 2.5 million viewers, which was only half of what The OC had pulled in. Yet they had hundreds of thousands of downloads from iTunes, and substantially more downloads from the network's own website.

Now the fact that that was the way so many people chose to watch Gossip Girl reflects the young demographics of the audience, and you have to get used to it because this is a generation that is used doing things this way. It's as natural for them to watch a program this way as it is for the older generation to watch it with a zapper in their hand as they flick through the channels.

The impact of this was that Nielson, the ratings agency, had no way to measure viewers. The traditional advertising model of determining the number of people who watch the program had gone by the board. This will happen in the UK too. Barb will now need to make a similar confession. Those who want to rely on the advertising model will need to find new ways of measuring how many people are watching. Because Nielson couldn't tell them how many people were watching GossipGirl they had trouble holding the advertising rate and, despite extensive product placement, which was built into the show to take account of the new way of working, they still struggled to make the show a commercial reality. In April, they took a leaf out of ABC's book and removed the episode from the website in an effort to force viewers to watch it on TV with the ads, and the consequence was that fewer people watched it.

New public policy will come in this age of digital downloads and high speed broadband, which has huge ramifications for ISPs such as AT&T. They want to make money out of it, and to reserve the right to provide high speed for some, and slower speeds for others. So they could do a deal with News Corp, for example, so they can carry all their traffic at the highest possible speed and perhaps do a different deal with Google, where their would travel at a slower speed.

I understand Virgin is already considering a partnership with the BBC in this country. If that happens, you can see Sky retaliating with its Anytime on-demand service, with fast lane for On-demand, and slowing down with the iPlayer. In some ways, the market will work this out, and in other ways it will require some regulation. But I think that all broadcasters, broadband providers and production companies should be careful with these kind of restrictions. I think the iPhone is the apposite of this; the iPhone is doing badly because Apple has tried to restrict it to fewer networks, and this sort of high-speed HD programming seems to operate best in an open market.

As the broadband industry takes off, and high-speed becomes ubiquitous, at least in towns and cities, it will change the face of the commercial networks like ITV, NBC and CBS. As ITV is discovering, and NBC and CBS have found out, it is increasing hard to stand alone with so many providers and so many platforms. In the future, these networks will find a more convivial home under the umbrella of a Yahoo or a Microsoft or a Google. Their programs will sit alongside all the other broadband offerings. The networks will become part of a wider network, rather than remaining a traditional standalone network.

It is probably the end of the BBC licence model too. I'm always hesitant to predict the end, as the licence fee has shown remarkable resilience, even though the environment changed radically after the launch of Sky, but I suspect that the next round will be the last, because when the TV screen becomes indistinguishable from the computer screen, levying a licence fee becomes problematic. There will some who call for a tax on computer screens, but it seems to me that in the 21st century, that would seem like the medieval tax on windows. It would be regarded as unpopular and perverse. It doesn't mean the end of public service broadcasting, because that will always have a role to play. But I thing the traditional licence fee model will go the same way as the networks that rely on spot advertising.

Broadcasters and program makers, whether private companies or public broadcasters, will have to rely on a mixture of other revenue streams, such as content rights, because when broadband becomes ubiquitous, the content becomes important, not the means of viewing. Sponsorship will become a lot more important, subscriptions will become a lot more important, as will the new forms of advertising, such as the boss of TiVo is suggesting. All of this is designed to monetize content across all platforms, including mobile phones and Blackberries. And content will be commissioned on the basis of its multiplatform potential.

So these are major changes for the broadcasters. It means that the convergence that has been talked about will actually occur. I will read my newspaper on the computer screen and I'll then watch BBC news whenever I want, not just when the schedule says; and social networks will let me see what others are saying about the news. Schedules will be a thing of the past. It doesn't matter when you decide to schedule something: I will chose when I decide to watch it at my convenience. I may not even bother to download it because it's always going to be there ready for me to watch. But I will look online, and maybe even in the old dead tree press if it comes into the house, to see what new programs are going to be on offer that week and to see what broadband fare is being offered for my delectation.

And it will know what I tend to watch and push me towards things that I like. Brand names, such as the BBC will still matter, not necessarily as networks, but as makers of contents that are hallmarks of quality and trust. I think we can honestly say that this will be the third revolution in TV; the first being the invention, the second being the creation of multi-networks, and the third will be the arrival of digital networks.

The Future of Television

Andrew Neil