Mobile video surprise

Editor’s Note: Welcome to our weekly Reality Check column. We’ve gathered a group of visionaries and veterans in the mobile industry to give their insights into the marketplace.
The rollout and consumer uptake of mobile video has been slower than expected for wireless carriers. But watch out, assembling just over the horizon is a new mobile video technology that promises to shake up this already unsettled business. Broadcasters are preparing to use their new digital spectrum to invade the mobile video turf that wireless carriers have been trying to cultivate.
Both Verizon and AT&T are utilizing Qualcomm’s MediaFLO network to deliver mobile video. In the rest of the world the DVB-H standard seems to be gaining a foothold. Regardless of the technology used, the model is tried and true: buy the spectrum and build the infrastructure. That was until new broadcast technology changed the model.
On February 17, 2009, analog television broadcasts will cease to exist in the United States. Without attaching to cable or a converter, consumers with analog TV sets will see only “snow.” The spectrum that was formerly used for analog broadcasting has been reallocated (some was part of the recent 700 MHz auction).
Congress gave the nation’s broadcasters new spectrum so they could convert their transmissions to enjoy the benefits of digital technology. The political rationale was to enable high-definition television over-the-air. At the time of Congress’ decision (1997) some of us thought broadcasters should pay for their spectrum just like wireless carriers had to pay for theirs. Congress decided otherwise, however.
Technology’s advance has now presented the local broadcasters with more of an opportunity than anyone envisioned in 1997. It is now possible (for an incremental mobile video investment of around $100,000) for a broadcaster’s digital spectrum to support a high-definition channel, and a couple of standard definition channels, and several mobile channels. It could be a game-changer for wireless carriers seeking to develop a new mobile video revenue stream.
Field trials of the broadcasters’ mobile video technology are expected to begin in the third quarter of this year. Full service is expected to launch a year later.
The most obvious impact of the local broadcasters providing mobile video will be the entry of a powerful new competitor to wireless companies who thought they “owned” mobility. While mobile video hasn’t exactly been a barn-burner of consumer acceptance, the promise is clear: Consumers love mobility and consumers love television – the marriage has to be a winner. Now, however, the wireless carriers’ fledgling subscription-based mobile video business will be up against free (ad-supported) mobile video from the local broadcaster.
Just what content the broadcasters might distribute is an interesting question. The most valuable broadcast programming is local news, weather and sports. The broadcasters already own the rights to that local product since they created it. This means the TV station can sell additional ads on the mobile version of the local news for almost zero incremental cost. The local station also (at least arguably) already owns the local rights to the network and syndicated programs they broadcast. Wireless carriers (or providers like MediaFLO) don’t have access to the local news and have to pay for their programming.
The new competition also holds the potential to have an impact on the mobile handset market. We have already seen tensions over handset-based services that bypass the carrier. Imagine how the dynamic could change when a handset OEM includes a broadcast video radio; the handset that is essential for voice service also becomes a bypass of the carrier’s mobile video service in favor of the competitive service from the local broadcasters.
The brave new world of mobile video is about to become much more complicated. Having been a part of the cable industry’s challenge to the dominance of broadcast television over a quarter century ago, these developments are like an echo. The new technology is entering the turf another entity thought they controlled. This time, however, it is the broadcasters who are the aggressor. The lesson from that earlier experience, however, could be beneficial to both parties today: figure out how to make it work together. Broadcasters have inherent advantages, as does the wireless industry. Now is the time to figure out how to have a win-win rather than spending years battling.
Tom Wheeler is Managing Director of Core Capital Partners, a venture capital firm specializing in early stage companies, including next generation wireless services. For almost a dozen years prior to joining Core Capital he was the president of the Cellular Telecommunications & Internet Association (CTIA).
Comments or questions? You may contact Tom at twheeler@core-capital.com. You may contact RCR Wireless News at rcrwebhelp@crain.com.