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While I don't agree with the tactic, it is actually a very clever way of reducing bandwidth usage by Telstra. Most youtube videos stream fine at 1Mb/s. I'd guess that a lot of youtube clips are closed before they are over and any buffered data is "wasted".

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But Google does a lot of trafic shaping as well: If you Wget a video, you see the first bytes stream in really quickly, after which the speed goes down. No need for your ISP to do this as well. I assume Google tweaks it so your buffer doesn't get empty, but also not too full: if you decide the close the video, the buffer is wasted (which, on Youtube's scale, is a LOT of data).

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