iSuppli Corp, a leading market research firm, has said that AT&T’s (News - Alert) recent decision to implement broadband caps and charge extra fees for heavy data usage on wireless devices can act as a barrier to emerging competition from Internet TV.

Last month, AT&T discontinued its old phone plan which allowed subscribers unlimited Internet access. AT&T is seeking to limit the intensive data usage of smart phones such as Apple Inc.’s iPhone (News - Alert), as well as the new Apple iPad tablet. iSuppli maintains that the caps will make it difficult for any high-quality streaming application hoping to become a true TV substitute to get off the ground without the support of wireless operators.

“By implementing caps now that don’t impinge on the way subscribers use the Internet today, cable and telco operators are able to create for themselves an advantageous situation,” William Kidd, director and principal analyst for financial services at iSuppli, said. “Under these circumstances, emerging media competitors must work more directly with the network owners before getting their services off the ground—as opposed to around them, as they may have previously hoped.”

Meanwhile, new broadband subscribers worldwide are projected to rise in 2010 by 63.5 million, up 8.4 percent compared to total net additional subscribers of 58.5 million in 2009, affirming the ongoing strength of the broadband access market.

“Most of the emerging streaming Internet models are mistaken in postulating that they could displace, over time, traditional television and movie delivery mechanisms without paying for related network costs,” Kidd said. “However, such a theory is directly at odds with the ambitions of cable and satellite-TV operators, which increasingly are unwilling to provide heavy data access through their networks for free—especially if a way can be found to monetize ongoing data traffic into viable revenue streams.”

Although broadband caps help properly price an access service for the small percentage of subscribers that take up a disproportionate share of network traffic—usually through their heavy use of data—streaming media presents unknown risks. Such risks, Kidd believes, will compel broadband providers to increasingly implement caps in order to mitigate any long-term gambles that providers might have to take to make streaming media available to home and mobile environments.

Kidd said that for the vast majority of data subscribers on a broadband network, caps will only become relevant if users viewed low-quality streaming media—say, a 200-kbps stream—on a wireless device for three hours, or if a standard-definition TV signal on a wired network was streamed for approximately 25 hours. By the same token, streaming a high-definition TV signal could put a user in cap trouble in just 7 hours on the wired network of Comcast (News - Alert) Corp., the largest U.S. cable operator and Internet service provider for the home.

In addition, for consumers to consider the Internet as a true substitute for their big-screen TV, content would need to be comparable in both technical quality and entertainment value. And to achieve the same level of value, such content necessarily would be extremely bandwidth intensive.

In another report, iSuppli has predicted that the cell phone usage for navigation and Location Based Services and the use of Global Positioning Technology or GPS is expected to increase significantly in the coming years.