While my son was at university he had a 100 Mbps internet link and a PC with a 500 GB hard drive, and thought nothing of downloading (mostly legally) entire video series to watch in his leisure time, which seemed to be after the bar had closed and after he had come home and caught up his work between midnight and 4.00 am.
If he had been using a conventional TV network, broadcast or cable, there would have been nothing on at that time, and when he fell asleep in the middle of his favorite program (sleeping past the early start for his lectures), he would have lost the program forever unless he had a DVR.
To him the internet is the biggest VoD server on the planet, and his PC was a DVR. He had virtually unlimited narrowcast bandwidth and virtually unlimited storage, so broadcasting was of little use to him except for live events (which for him mostly happened when he couldn’t watch anyway).
People that will consume video content for the next 30 years have all had this training, and have developed a perennial boredom, a complete disregard for rules and convention, and little to no awareness or care of what the previous generation thought was ‘good TV.’ Whether we like it or not, their morality has been built by the Simpsons and Family Guy and their tastes are anything except that which their parents liked.
They also care nothing for the $20 billion spectrum auctions that will be father to the digital Tsunami we discussed last week as the US (and the rest of the world) take advantage of the spectrum that was wastefully allocated to analog TV is re-allocated, probably equally wastefully, and they care even less for the painful build out costs and promotional war that characterizes the search for next generation video services and customers.
Think about it. Did you ever care that ABC (or the BBC or whomever) spent nearly as much on a transmitter network as it cost to build the Panama Canal? No, but as a regular reader of Faultline you might care that AT&T has spent 10 times that to build out its network in readiness for U-Verse.
Future generations will also not give a fig that 10 times that amount of money again ($65 billion) will have been spent buying and building out 62 MHz of 700 MHz spectrum and the 90 MHz of the AWS spectrum in the US, to create a bonanza in bandwidth for mobile devices, not to mention the actions of Sprint in the 2.5 GHz market. And as we keep pointing out, this is just the US, where around 10% of mobile customers are, so expect another multiple of 10, to something approaching $650 billion to be spent by the telecommunications industry around the globe, taking this digital dividend spectrum, paying for it, and utilizing it. Future generations will get to be around 30 or 35 before they even give it a second thought.
What they will care about is that they have universal and speedy access to the internet. They will consult the internet while watching the TV, doing their homework, and use it to communicate with friends visually, verbally and vocally at any time of the night or day. They will also assume that they have a god-given right to 100 GB of storage (or some such outlandish number) to store music, video, love-letters (love-emails) and photos of themselves ‘ and pay nothing for the privilege, paying instead by accepting a world that has gone in for ‘marketing madness,’ and where every device which consumes power (from the internet connected fridge, to the TV, DVD player, DVR, handset and even the gasoline (petrol) pump ‘ if we still have gas by then) shows multiple, moving, mind numbing advertising. Of course they will also, like every generation, accept that the advertising is just there to be avoided, little realizing that this effect is all factored in, and big brands will still be getting their message across in a manner something akin to brainwashing. If anyone can remember the early scenes from Bladerunner, it looks as if that’s our future.
In the same way that people who can really text (use SMS) are all under 18, and behave as if they invented it (which they kind-of did because the cellos just made it available, they never expected it to become an institution), the next generation will use VoIP, IM and Skype video conferencing or tools that have not yet been invented, but which better suit them and characterize the gap between their generation and the texters. These will all be bandwidth hungry.
The leap to using the internet was big, and it has taken us about 15 years to populate it in a semi-sensible way. It is getting increasingly hard for any modern person to survive a day without it. Try it. ‘If you’re naughty they’ll be no IP for a week’ might replace the TV ban. Get someone with a Blackberry to manage for a day with no PC, no handset and no IP access at all. It’s almost as bad as TV without a DVR. Switch off your TiVo for a week and see if you can bear to watch any television. Progress in reverse is tough. But for these kids, it’s not just tough, it’s impossible.
They have been brought up in a multitasking universe and if they are not doing three things at once become tetchy and on edge. They won’t be able to do it.
I once wrote a novel (in about 1980) about something that had access to the internet directly into a human brain, or at least access to some universal global network, which amounts to the same thing. In once scene the main character is placed into a locked room and cannot remember the combination to the door without access to the internet, because that’s where he stored it and he felt like that was in his brain. It may be a bit fanciful to imagine storing numbers, personal data and even the smell of a summer morning, on the internet to review at a moment’s notice, but you get my point, this is the direction we are headed in as a race.
Having the internet invented and built was one big thing for mankind, but having access to it at a whim, night and day is as big a change to the way individuals behave, think and operate, as language had when it was first invented or rather when reading became universal. We will have a society that can permanently reference itself, look things up on a wiki, poll our friends, check our calendar, remember when our children were young, and watch our loved one at work ‘ constant reference points that will need constant bandwidth use.
Now while lot’s of you with conscience and a sense of history might bemoan the effect that all might have on the human psyche, what about the effect that it will have on mobile wireless bandwidth use?
We don’t know how much bandwidth any final sci-fi vision of the future will require, but we need to start thinking not only of our carbon footprint, but our data footprint, or better still our constant bandwidth footprint.
What are we using now? 1 GB per month, go mobile and perhaps that’s 3 GB, add more video services to the stack and that’s perhaps 15 GB, take all your visual entertainment down such a route and perhaps it goes up to around 400 GB a month. Make it all in HD and we are looking at 2 TB a month per person reaching out to us throughout almost every part of every day, except (perhaps) when we are sleeping.
This is all overkill, but again I hope you get my point, the growth of the internet has not stopped when everybody gets broadband. It doesn’t even stop when everyone gets 100 Mbps (as my son had at university). Perhaps it begins to slow down when everyone has access to 100 Mbps 24 x 7, anywhere, anywhen, but probably not.
But, and it’s a big but, how much are they going to be prepared to pay for all of this? And in what kind of steps are we going to get there.
Going back to the Panama canal. It cost around $600 million at the time, it now costs around $54 to send a 20 foot container through its length. If your ship has 200 containers on it that’s $10,000 or so, about one millionth of its cost each time it is used. The average charge is around $54,000. It is used under 15,000 times a year, which means that it probably took 80 years to repay its building costs, which it passed around 1995, as long as operating costs are ignored.
This we fear is the fate of many of the networks that people will build with the US switchover spectrum. Let’s not take the Panama canal analogy too far, but as mobile bandwidth requirements rise, no-one will give a damn what the networks cost to build, and the first network to get built will probably do well, the next will have to fight hard for customers. The third or fourth network will only make any headway if it is the cheapest network and so on.
Of course the RIGHT way to go about this visionary and monumental task is to share the cost of building ONE US network. But given the mentality of the cable operators, the RBOCs, and local incumbents, the national rivals like Sprint, and the foreign investors (T-Mobile) an the new technologies (Mobile Satellite Services) and the White Spacers (unlicensed spectrum), in the US we can be fairly sure that this will NOT happen. In fact as the economics role out, we can be fairly sure that some of the spectrum will be given back to the FCC or hoarded until it is taken back or re-sold, with lengthened commitment times for build out.
In Europe, there will be mass 4G RAN sharing, and one base station may support four chunks of spectrum, and any shortfall from one operator will be dynamically sold to another, to service their client at the time. A bit like airlines that have overbooked passengers, who shunt them off to another airline that doesn’t have enough passengers. It will be Europe, where they mostly make a charade out of capitalistic competition, and prefer Co-opetition, that finds the most efficient way to market, re-market, and rebundle cellular broadband capacity, and as a result the spectrum will be used here earlier, partly due to the guarantee that 100% of the population will sign up because of high mobile penetration rates. The more advanced Asia Pacific countries will follow and the US will only begin build out proper with the right presidential regime ensuring that telecommunications operators have proper competition. So that might put it a decade or so behind.
The initial charging is the most important step. The early cellular operators worked out finally that mobility is the premium here. Over time they have come up with a complex formula in cellular networks to charge for this. Their billing problems, as a result, are legendary. If people pay for their device they actually pay more or less the same, or even more for cell time. So the poor pay more, but do it under their own control with pre-payment. The rich pay less, but promise to use it more, and for this devices are thrown in for free. But mobile phone calls used to be around 5 times the price of fixed calls, and that continued until quite recently. This type of pricing will get mobile broadband networks off to a slow start, but will yield high premiums per customer. Later data churn will become critical, the rate of customer acquisition will also be a key indicator. Prices will come down, and clever bundling operations will come in.
Data rates will be bundled with services, and service operators will partner operators on services that will guarantee some, but not heavy data usage, and this will slowly give rise to more and more bandwidth usage. Bandwidth hogs will be overcharged, bandwidth roaming will turn the whole thing into a global club of mutually supporting cellular players. And then when the pricing can be made just right, and the networks are just picking up momentum, machine to machine communication will start to take up swathes of network bandwidth ‘ talking to your DVR at home, to your security set up, updating to your ebook reader, your mp3 player, your portable video receiver over the network, checking that the contents of your fridge are not going off, or that you have a real time read out of your home power consumption etc’ Devices will use the network to ‘discover’ other devices and make sensible decisions for themselves about what their owners would like them to be doing.
All of this is a bit like the development of wi-fi. Wi-fi showed great promise, then everyone that built out a network went bust through lack of revenues. Then the models were re-worked, with far lower expectations, but all the while people got more and more used to wi-fi ‘just being their’ a sort of anticipated ubiquity. Today the handful of wi-fi networks per country are usually owned or affiliated by telcos, and are only making money by such moves as reducing churn among broadband network owners that also own wi-fi. Little money is changing hands and yet it is a successful business model.
Today people will pay for satellite TV, but they would not pay for satellite time. Adventures in Western Europe shows that people prefer to pay for Freeview or Freesat services with the promise that they will watch adverts. The same is likely to be true for these networks. ‘Bring me the adverts to subsidize my IP, and don’t worry eventually I’ll find a way around them’ will be the message, or customers might even find that adverts become more useful if they are addressable (I only see ads about things I like).
In this world that is perhaps only a little more than ten years away, we will see a gradual, but pervasive change to how content is made, and to its exploitation formulas. It will be vital that film and TV series producers, and music labels find a way to exploit the new economy. There are two ways to go here. The broadcasters (ABC, Fox, NBC etc’) may feel they must continue to dominate, although broadcasting itself will be dying. Instead they will have to try to dominate the internet, and that will include the route to mobile internet devices. Of course broadband wireless operators will be saying, no you can’t come on my network unless I get a piece of the action,’ but in the face of the move to open mobile networks that is going to be a tough position to maintain. But if they want content rights for broadcasting, DVDs, the internet and everything else, then these broadcasters will increasingly see their content budgets going up and up and up as content owners are aware the content is worth more on all these networks.
At the same time among the networks, flat rate IP is what will sell, and that means that services will find their own way onto the mobile internet and cellcos will not be able to keep them out. The only way around this is for the mobile broadband networks to partner these services with positive promotions in return for a piece of the action.
The other route for content will be to divorce exploitation of the internet from broadcasting contracts. Content will get less from broadcasting and have to get the rest from partnerships with mobile broadband services and other internet destinations such as social network portals. Most major content creation companies are in the dark ages. They don’t experiment with business models until they are forced to. They would prefer that the major broadcasters take their business lock stock and barrel onto the internet and mobile internet, and kept exploitation control of content so that they, the content producers, don’t have to.
However new content creators will come into being all over the internet, some going the User Generated Content route in the style of YouTube, others taking a more traditional role of making content for internet exploitation first, and broadcasters second. This is a slow burn, but will eventually lead to some new content majors emerging which will challenge the traditional route to market and undermine broadcasters still further.
The poor ISP, even if it happens to be the major ISPs like the cable operators, will be just one way of getting IP, and where they cannot come up with their own mobile broadband, these will become marginalized and ex-growth. Any cable operator without a mobile strategy will get killed in the long run, which is why the ClearWire initiative is so vital in the US, and why the deal cut this week between Sprint and Cox is similarly vital, right now for churn reduction, later for survival, and will lead to cable operators which have mobile devices and quad play.
The digital switchover will be a Tsunami and everyone will get wet. Mobility is the only way to swim, not sink, and the early development of mobile broadband will first be through EV-DO and HSPA, then through WiMAX and LTE. Failure to be on one of these bandwagons will mean that businesses drown. Advertising is the only way to underpin the high costs, and the first companies to build networks will have a huge head start in market and mind share as the entertainment industries fragment further than ever before.