The mobile TV landscape, if somewhat devastated in the US and Europe, will be irrevocably changed by the touch screen ‘ and that particular innovation has been rampaging through handset design now for more than 18 months. A touch screen makes for a lower number of button controls, which makes for bigger screens, which makes for a better TV performance on a handset. So in a way the iPhone has completely changed the market for mobile TV.
These days every time a mobile TV technology comes to market, all that anyone wants to talk about is the Apple iPhone, despite the fact that Apple has expressed no interest in broadcast mobile TV at all.
But like everything in cellular of late, the iPhone and iPhone copies, will immediately dominate mobile TV as it comes to market in the US with the freeing up of analog TV spectrum and its re-use, among them Qualcomm’s MediaFLO and also ATSC M/H local mobile TV broadcasting.
The way this has been phrased this week by MediaFLO president Bill Stone, speaking to Telephony, is that MediaFLO will begin selling directly to consumers ‘ and Stone highlighted two new routes to market, through in-car devices and through an attachment to existing handsets and other portable wi-fi devices.
What immediately springs to mind is the PacketVideo Telly device which has been demonstrated all over the world, using a variety of broadcast standards, to collect TV and re-broadcast it to wi-fi connected devices. Now we are not saying that we have special knowledge of Qualcomm’s intentions ‘ it may have its own similar device planned, or it may cut a deal with PacketVideo or others ‘ but wherever we have seen mobile broadcast TV shown with this type of device ‘ both at the Mobile World Congress in February by PacketVideo and in Japan by Softbank ‘ both devices were shown working with the Apple iPhone.
For PacketVideo to finally announce a MediaFLO device it will have to get a chip and a license to the technology from somewhere, likely to be Qualcomm, and the two have worked together in the past on putting video into handsets, with PacketVideo licensing its software stack to Qualcomm when handsets first began to show video. So in a way it doesn’t matter if there is one device from Qualcomm and another from PacketVideo and 20 from other players, they will all feature demonstrations on an iPhone and this story is all about route to market.
No operator of broadcast mobile TV services has managed to launch (never mind succeed) without working alongside a cellular operator as its route to market. That doesn’t mean that it’s not possible, it just means that over the past 4 years no-one has thought that it is possible.
But if it can be done it is all about finding alternative routes to market and here Qualcomm’s MediaFLO is talking about two distinct routes to market which have both been shown to work, and which may not work any worse in a down economy. The Apple store (and other stores) is a perfect place to sell iPhone accessories, and today the iPhone can also be bought at Best Buy and Wal-Mart, as well as AT&T stores. MediaFLO can immediately create desire on the shelves of these retails stores ‘ some of them or all of them ‘ by showing off its service working with handsets that people already own. The other route to market would be that taken by Sirius, through car manufacturers and dealers.
In any network, the biggest cost is that of the devices which attach to it at the edge. In an IPTV network (or any other pay TV network for that matter) the set tops and DVRs is where the function is put in, and the network itself, even building out thousands of miles of fiber underground, costs less in the end than the free provision of viewing devices. Luckily in Pay TV markets the TV itself is a purely retail purchase.
It’s the same for fixed telephony and for cellular, but in cellular the purchase of devices is frequently sponsored (subsidized) by a cellular operator. Where it is, that operator has $billions of equipment out in the field at any point in time, and the last thing it wants to do is create a brand new service which requires that each customer who buys into that service also needs a new handset. It is that kind of consideration which makes companies like AT&T and Vodafone appear sometimes to be technology laggards ‘ resisting moves which might trigger wide scale device replacement.
It’s not that MediaFLO (or ATSC) handsets are particularly more expensive than any other handset (maybe $10 to the bill of materials), but everyone who wants one under the current business model, has to be given a new handset (MediaFLO requires a special chip added) and if that was widely taken up, you can understand that both Verizon Wireless and AT&T Mobility would want to control the speed of service introduction and have it happen more slowly, unless of course they were each guaranteed to make more profit from all customers which took up the service.
There are ways of making that happen ‘ either the service itself must cost a reasonable amount, with a big chunk of that going to the operator, but even then that operator would not want an overall increase in the rate at which it was replacing handsets, because that would eat the profit it makes. The other way is if those handsets only come in bundles which include bigger and more expensive data plans and longer contract periods.
But it is even better for the operators if the devices which make it possible to receive broadcast TV services a) do not require an entirely new handset, just a cheap additional device, so do not increase churn rate among customers, and b) are sold as a purely retail item, not subsidized in any way.
Back when AT&T and Verizon signed up for MediaFLO, each of them treated the service as a way of threatening the other, of not letting their rival get ahead in any crucial way. They were both happy to sign up but not put any appreciable effort behind the service ‘ it was as if to say ‘you’ve got MediaFLO, I’ve got MediaFLO, so we’ll have to fight over something else.’ One of those something else’s was the iPhone, now suddenly pivotal in any top end device decision.
There are only a small number of device types which will work even with a device like the PacketVideo Telly, which outputs wi-fi ‘ typically dual mode handsets ‘ such as the iPhone, the Nokia E71, LG Incite, the Blackberry Curve and the Samsung EPIX for AT&T and other Palm
devices, assorted Blackberries, the Samsung Saga and Omnia and HTC Touch and Touch Diamond for Verizon ‘ and of course virtually every laptop, netbook or smartbook in the world and every portable gaming device.
But owners of top end Smartphones collectively make up something less than 25% of all cellular customers in the US ‘ so while this bunch can keep their phones and buy a TV dongle, there is an incentive for others who see someone using the service and want it, to buy a new phone and upgrade to a better package ‘ just to get a phone that will play TV.
While this is being touted purely as a MediaFLO move, what’s good for the Goose is good for the Gander, so why would an independent supplier of handset TV dongles such as PacketVideo not supply a similar device which also gives access to ATSC M/H broadcast TV at the same time. It might even put both chips into a single $50 device and let the customers decide what they watch. Better still, it might put the two decoders on the same chip, which is something that Qualcomm could and should do.
At present MediaFLO packages are around $13 to $15 a month from Verizon or AT&T Mobility and give you 8 to 10 channels. ATSC M/H appears to be coming to market for free, with new interactive advertising as one revenue earner, and the idea that cellular operators could offer the same programming as a catch up TV service, streamed after their broadcast, for a fee similar to existing streamed video services. Independents might offer both on the same device or on different devices and let the market decide, but we think this is unlikely ‘ this appears to be a battle of ATSC M/H versus MediaFLO, where you are on one side or the other ‘ unless you have the luxury of being one of the biggest cellular operators in the country.
Somehow we do not see MediaFLO wishing to develop a billing relationship with each consumer that takes its broadcast TV service ‘ either it will have a cellular operator collect money for each subscriber or it will build the price of the TV programming into the device price ‘ we’ve said it before but ‘Comes with TV’ would echo the business model that Nokia has (mostly unsuccessfully so far) tried to bring to market in Europe, where the device retail price includes a year’s free TV and retailers would kick back to MediaFLO.
At the end of a year MediaFLO would have to have a mechanism for recharging ‘ perhaps a voucher sale, where a unique number was keyed into the device to ‘re-charge’ it for a year and make its encryption key continue to work. In Korea where 65% of broadcast TV devices are not handsets, there are similar deals, but they are for the device lifetime and perhaps that might work in the US too.
However we see MediaFLO as part of Qualcomm, and Qualcomm’s reason for existence is to please operators ‘ so somehow we would expect there to be a hidden part to this public statement ‘ and that somehow for every dongle that was sold, software would have to install on a phone, and for that to happen it would mean having the blessing of the cellular operator which had subsidized the phone, which means that AT&T and Verizon are STILL likely to be in the financial equation, even where MediaFLO sells directly to the consumer.
And we mustn’t forget cars. MediaFLO also wants to challenge both Sirius Satellite Radio, which offers a car seatback video service, and AT&T’s the new Cruisecast service, direct to seat backs which it has launched with partner RaySat Broadcasting. There are other players here, the Alcatel driven ICO, which has a launched service and EchoStar, which has one planned.
Qualcomm must have realized that it had to compete with AT&T at some level, because it knew about the Cruisecast launch of AT&T back in January, when at CES it deliberately showed devices from Audiovox which demonstrated in-car MediaFLO. At the time it was seen as a stab at other overseas markets, but now it is clear that it knew it needed to compete with a satellite distributed TV signal from Cruisecast. Considering how far a MediaFLO signal will go from a decent sized transmitter (about 40 kilometers at best) it would appear far easier to offer car seat back TV from a satellite than from terrestrials transmitters.
The reason this is attractive to MediaFLO is perhaps due to the state of the US car industry is in and how this makes in-car devices a great route to market. If no-one buys any cars in the US for a while, dealers can use MediaFLO devices to attract people back to the showrooms, but also where people are looking at new cars, nothing will be spared to differentiate them, and dealers will look at anything, even a moribund TV service, if it will sell their cars. Again a long term subscription is likely to be out of the question, but perhaps a device built into the car with a free one or two year subscription, might make the difference between brand X and any other car.
But we come down to the big problem with MediaFLO and that is that it has virtually no content. It is able to show TV channels which content providers have already designated as content ‘for mobile’ ‘ ESPN Mobile, not ESPN; CBS Mobile not CBS; Fox Mobile not Fox; NBC 2Go not NBC. The rival ATSC M/H will be selling those full channels and not the mobile equivalent ‘ plus many more, plus some made up local channels of their own.
MobiTV now has 7 million people taking its streamed TV service, and is now picking them up at the rate of 1 million every 6 months. The great bulk of these are in the US, and the great bulk of those are taking very similar content to those mobile channels which MediaFLO offers. Once MediaFLO had a huge quality advantage over the video that was streamed, but now its only real advantage is that when people stream TV channels, the cellular networks are using vital bandwidth that could be used for speaking and for internet access. From the customer point of view the only difference is that the streamed versions usually take ages to start playing or change channel.
So MediaFLO has to revitalize its content and go to market through new routes, but it will STILL need a contribution in marketing effort, from the big cellular carriers or it is dead ‘ just fattening frogs for snakes, piquing the appetite of the US consumer for mobile TV content, just in time for ATSC M/H to come along and take the lion’s share of the market.
MediaFLO probably has a three month start broadcasting in all of the 100 plus national markets it will have built out by the analog cut off date ‘ and then slowly but surely ATSC M/H will emerge and eat into its customer base, and may well come through the same channels ‘ cellular operators, car dealers and retailers. By second quarter 2010 it will likely reach a similar number of markets as MediaFLO. By which time consumers will have to decide if they want existing broadcast channels for free, or their mobile counterparts for a subscription ‘ and we know which we’d choose.
As a footnote, today MediaFLO in the US said that following the DTV transition on June 12, it will expand into 39 new markets, adding 60 million potential customers to its universe, taking its total to 100 major markets and 200 million potential consumers US wide by the end of 2009.