AT&T has announced a brief delay to the launch of its MediaFLO mobile TV until early next year, a move which has split most pundits over whether this is good or bad for mobile TV generally.
One side suggests that it means that MediaFLO is not yet ready for prime time, and that not enough people are taking the service at Verizon (which has not yet given out numbers) while the other side says that it is in fact the entire concept of mobile TV that is in the slow lane and AT&T is pushing back costs until consumer demand is more proven.
We would take neither view. We remain convinced that AT&T is going to use the spectrum that it acquired from HiWire to launch mobile TV services, probably using the HiWire trial technology, the global DVB-H standard. This delay of perhaps three to four months gives an internal team at AT&T the kind of time it needs to plan such as DVB-H network and to make key business estimates on how long it will take to bring in revenues, and decide whether it needs to wait for DVB-H or if it should go ahead and launch MediaFLO first to stay in step with fierce rival Verizon, and then launch DVB-H later.
At present there is no official explanation for why Verizon only has 8 TV channels on MediaFLO. A case can be made that another 12 TV channels are possible for the 6 MHz of spectrum that Qualcomm’s MediaFLO holds, along with further clip cast channels and audio channels, and that it is holding back some capacity for other cellular operators. From the first time Qualcomm talked about the technology it has claimed that in one 6 MHz channel it can get 20 Quarter VGA signals at 30 frames a second, plus 80 channels of clip casts, and 10 channels of enhanced AAC audio, plus EPG and other data services.
But increasingly there are those in the mobile TV community that are describing this as ‘a theoretical maximum’ and point out that Qualcomm has yet to run a trial at any more than 11 TV channels. Given that there have been DVB-H trials around the world at 17 channels in 8 MHz of spectrum, then the spectrum which AT&T has purchased can deliver at least 24 TV channels, and most analysts expect it to be closer to 30 channels and rising.
If that turns out to be even close to being true, then there is not much spare capacity within MediaFLO’s 6MHz for AT&T to offer a decent rival service to Verizon, with differentiated content. It may have no option but to go it alone with its own spectrum. It might cost another $500 million to build out the network, but the nice thing about a DVB-H network is that it can be built more or less concurrently over the entire US and AT&T could pick off the top markets in around 15 to 18 months from a standing start, especially given how mature DVB-H is now, but of course if our assessment is right this is not a standing start. Partners in the HiWire trial such as satellite partner SES Americom, Italy’s RRD which helped integrate the 3 Italia DVB-H network and transmitter maker DMT, will have already done a lot of planning on how to rapidly build out a network.
The jury is still out on whether or not AT&T will EVER launch MediaFLO handsets, but our view is that it probably will. AT&T has an exclusive on the Apple iPhone, but still cut a deal with Napster for an online music service that will go to its more advanced handsets. AT&T may well introduce MediaFLO if it can come up with a package of channels equivalent to Verizon’s VCAST TV, but then launch the DVB-H service alongside it, and let the MediaFLO service wither on the vine. That way it has all options covered.
It might even do it with the same handset. We understand that LG Electronics is supplying handsets to the HiWire trial and currently uses a Microtune DVB-H tuner, we’re not sure who does the decoder. If it was to work with its erstwhile partner Qualcomm and use its DVB-H/MediaFLO chip, then the same device could be offered to the market with a different software footprint.
But one of the things that has also hit the news last week is the possibility that AT&T may purchase satellite DTH TV player EchoStar, trying to squeeze the transaction into the current US presidential administration.
In which case we have to ask what implications there are for AT&T buying both the 700 MHz spectrum that it might use for mobile TV, and buying EchoStar at the same time?
Does this give it access to a bigger basket of content? Could it use the special skills of the other half of EchoStar, the part that will engage in satellite services and technology, which will not be part of the sale, to either deliver signals to mobile TV transmitters, or to deliver regional advertising to different parts of the network? Could it even opt to use a form of mobile TV, such as Alcatel’s DVB-SH, which is delivered from satellite, which might give it a flying start? After all EchoStar landed the contract to offer satellite capacity for the Chinese mobile TV system which needs to be in place by mid-2008. And Alcatel is the lead network equipment provider in AT&T’s project Lightspeed, and it might find it easier to integrate its IPTV channels into a mobile TV brand working with that same supplier.
It is not inconceivable that a satellite DVB-H hybrid, using DVB-H for cities and DVB-SH for rural communities, could be built. But doing things that way are likely to mean going to market with untried systems, or waiting three years to carefully try out the different combinations. Something like that may happen, but most likely the simple expedience of dropping content which has the DISH brand perhaps, complete with local advertising, to DVB-H transmitters, would amount of a saving on any other way of getting content to transmitters and synchronizing it.
Using the same content, branded either as U-Verse Mobile or Dish Mobile would just lead to some economies of scale, and bigger advertising potential, sooner.
In the meantime AT&T reported record revenue and profits for its third quarter which is only natural as it was reporting with both the original AT&T as well as BellSouth including all of what was once Cingular, for the first time, making a $30 billion quarter, up 3.2% on the equivalent revenues from last year.
AT&T added two million mobile phone subscribers with over 1 million of them iPhones, 40% of whom were new AT&T subscribers taking it to 65.7 million subscribers with wireless revenues up 14.4% and ARPU up to $51.
AT&T U-verse reached 126,000 pay-TV subscribers, up from 51,000 three months earlier and total pay-TV subscribers including U-verse, Homezone and those from deals it has with DirecTV and EchoStar were up 215,000 in the third quarter to 2.1 million and the AT&T U-verse TV install rate is approaching the 10,000 per week that it set itself, up from 5,500 three months ago.
AT&T broadband numbers increased by 499,000 in the quarter to reach 13.8 million, while it reported net declines in its traditional retail consumer phone service.
By comparison Verizon’s added 202,000 FiOS TV customers this quarter gone, taking it up to 707,000. Its IPTV customers combined with Direct TV sales take it to 1.5 million total TV customers. It also 202,000 FiOS broadband and another 56,000 DSL customers taking it up to 8 million broadband customers, compared to AT&T’s 13.8 million.