This work is concerned with system identification of plants using quantized output observations. We focus on relationships between identification space and time complexities. This problem is of importance for system identification in which data-flow rates are limited due to computer networking, communications, wireless channels, etc. Asymptotic efficiency of empirical measure based algorithms yields a tight lower bound on identification accuracy. This bound is employed to derive a separation principle of space and time complexities and to study sensor threshold selection. Insights gained from these understandings provide a feasible approach for optimal utility of communication bandwidth resources in enhancing identification accuracy. (C) 2008 Elsevier Ltd. All rights reserved.