Mobile TV group: carriers should build own network

Carriers looking to cash in on mobile TV services should pony up and build their own dedicated multimedia network, according to a new report from a consortium of industry players. Then they should somehow convince subscribers to pay $20 a month for the stuff.
The new white paper, published by the Mobile DTV Alliance, claims that U.S. operators could join forces and invest as much as $2 billion to build a network dedicated to wireless video broadcasts. The carriers would recoup the cost, the group claims, if 25 percent of the nation’s 200 million subscribers pay an average of $20 monthly to access the service, generating $12 billion in annual revenue.
“Even if we assume that 50 percent of that revenue will go directly to content
owners, and the entire investment in infrastructure is to be amortized over one year,” wrote author Yoram Solomon, “there is plenty of profit to share.”
The group downplayed the economic viability of unicast-delivering on-demand video to a single handset at a time-claiming that the heavy data traffic would limit offerings to short-form, low-resolution clips that could overload carrier networks. Instead, the Mobile DTV Alliance-which includes Intel Corp., Motorola Inc., Nokia Corp. and Texas Instruments Inc.-suggested operators deliver high-quality video on the dedicated network and charge consumers for all-you-can-eat access. And instead of using networks such as Qualcomm Inc.’s MediaFLO or Aloha Partners’ Hiwire, they should consider building their own.
But while the alliance’s math may be flawless, analysts and others question the viability of a $20 monthly price point for on-the-go video. A report last year from Telephia indicated that subscribers of MobiTV and Verizon Wireless’ Vcast offerings spend nearly $40 more per month overall than non-TV wireless users, but such users still account for a tiny fraction of the overall mobile market.
U.S. operators offer a variety of mobile TV services at anywhere from $10 a month to $25 a month, generally, but many of the higher-end services are sold as part of a broader wireless data package. One Nokia study from late 2005 found that half the participants in a trial of wireless TV services thought that a monthly charge of 10 euros-about $13-was a reasonable price.
But carriers looking to sell video to 25 percent of their subscribers are going to find $20 a month a very tough sell, particularly in a market where the average monthly bill for basic cable is about $50, according to Rory Altman of Altman Vilandrie & Co., a Boston-based media and technology consulting group.
“To me, $20 a month seems exceptionally high; I think it’s stratospheric,” Altman said. “If you want to have 2 percent, 4 percent, or maybe 10 percent, I think you might be able to pull in a price point like that.”
The steep price point may seem even more daunting as place-shifting technologies expand beyond early adopters to mainstream U.S. consumers. Carriers looking to differentiate their offering-and drive content revenues in addition to simple data charges-will need to make their video services easier to use and of higher quality than broadcasts delivered through Sling Media, for instance, or Orb Networks.
Given the tried-and-true relationship between television and advertising, though, it’s likely that many mobile TV services will be subsidized with marketing dollars. Carriers seem to be warming to the idea.
“I think advertisements are going to be a big part of it,” Altman predicted. “That might be something that bridges the gap between the eight or 10 bucks I’m probably more comfortable thinking about paying vs. the $20 somebody might want” for a monthly subscription.