My bad, apparently skimming text is a skill I need to master still.
Simply said: most operating systems negotiate about the speed with which their network card can communicate to the next point, for most people that is the router/switch provided by their ISP. That device in turn negotiates the speed with which it can communicate with the servers from the ISP. And this goes on and on until the destination is reached. Often referred to as bandwidth.
Determination of the communication speed is a vital part to provide the best possible service with any streaming content being sent to the browser. There are many factors that have a negative effect on the communication speed and if I were Youtube there would be rules in place that would deliver the highest quality uninterrupted video stream possible to the browser, while keeping the load and bandwidth consumption on the Youtube servers as low as possible. Bandwidth cost serious money and Google is a business so the service needs to make money.
Scaling down the resolution from the original content to the resolution of the stream that is actually sent to your browser is easy and can be done fast. This is already quite fast on my old Core2Duo processor and Google has lots of way better hardware deployed just for this purpose.
Flash is used to show video's in a browser and does the same speed determination at the time of installation. Quite likely it is even more conservative in selecting the default resolution at this time. If you have problems with the Flash settings, they are easily enough adjusted in the Flash player itself. But if you feel too limited in the options there, let me tell you about an add-on for FireFox that doesn't care about these settings or the limitations that Google imposes on the video stream that is sent to the browser.
With plugin '
Youtube Center' you gain a lot of control back that Youtube and Flash have taken away from you with each new version.
Default resolution can be set permanently high, the 'Dash playback' functionality can be disabled (so the video keeps downloading till the end while it is paused) and lots more.
Also handy, the settings made with add-on can be stored in a file for backup purposes or to be applied when you install this add-on on a different FireFox instance, or Chrome, or Internet Explorer or Opera for that matter.
Once you figured out the settings that work best for your situation, you will enjoy Youtube a lot more. The add-on did that for me at least.
