With the success of smart phones, tablet PCs and game players, video continues to be the dominant form of mobile data traffic on wireless networks. Cisco Systems predicts that mobile video will increase at a compound annual growth rate of 131% between 2009 and 2014. Yet we constantly hear and read user complaints about poor video quality, stalling/ freezing. Can mobile video traffic continue to climb while users are so dissatisfied with reception?
The conundrum is that mobile video transported on 3G mobile networks cannot deliver the quality users desire, while the stand alone. broadcast mobile video networks are commercial failures with the new, standards based networks pushed off into the future. How long can this continue without mobile video traffic falling off a cliff?
Meanwhile, broadcast mobile video networks have yet to be profitable. Qualcomm's FloTV (AKA MediaFLO) has been a huge disappointment and the company is considering shutting it down, according to the Wall Street Journal. Mobile-TV Push Gets Fuzzy Reception.
And, the mobile DTV network that we thought would be up and running by now is nowhere near launch. The WSJ reports, "A group of U.S. local broadcasters, in fact, is just beginning to gear up an effort to deliver a broadcast service called Mobile DTV to U.S. markets, using transmission capacity freed up by a transition from analog to digital technology."
Let's look at the market dynamics for mobile video:
1. Poor video quality and bad reception due to cellular network congestion leads to customer dissatisfaction
In its 2010 Mobile Minute Metrics report, Bytemobile states that mobile networks experience the most congestion at 10 p.m. when mobile video consumption peaks, causing users to have the most stalling. In other words, it's not there when they want it most.
"The mobile data industry is experiencing tremendous growth, with video as the key driver," said Joel Brand, VP of product management at Bytemobile. "While operators are enjoying revenue growth from data subscriptions, they are also experiencing rapid escalation of traffic, which is outpacing available network capacity and adversely affecting quality of service." In addition to a deteriorating user experience as data traffic continues to increase, operators will have to implement stringent billing policies as way to curtail data usage, Brand said.
For more information see: Mobile Networks Falter Under Video Demand.
The analogy of more memory and faster processors for improved performance also applies to mobile data traffic. Apps developers and users have had no problem consuming more memory and increased processing power of speedier microprocessors. We predict that as aggregate and individual mobile bandwidth increases, it will be consumed just as rapidly presenting the same congestion problem users now face with mobile video. Chris Koopmans, VP of Product Development for ByteMobile, states, "Many operators say 'the next speed will solve your problem'… the point we're trying to make here is however fast you make your network, users will consume it. No matter how fast it is, you will always end up with congestion." And, we totally agree with that comment!
2. Qualcomm's FLO TV has been a commercial failure
Qualcomm built FLO TV as a broadcast network, featuring scheduled channels of programming that mobile users can tune to. It does not use the cellular networks for mobile video, unlike MobiTV. Qualcomm's FLO TV powers mobile-TV services marketed by AT&T Inc. and Verizon Wireless (a joint venture of Verizon Communications Inc. and Vodafone Group PLC). After six years designing and building this network, Qualcomm has conceded that growth has been disappointing and may shut it down. Qualcomm CEO Paul Jacobs, told the WSJ that Qualcomm was "considering a number of alternatives" for FLO TV. He wasn't more specific and a company spokeswoman declined to elaborate. But, he said Qualcomm is in early-stage discussions with unnamed companies about FLO TV and the radio frequencies it controls.
The spectrum Qualcomm owns for mobile broadcasting is a distinguishing element of FLO TV. Most users of smartphones use conventional cellular networks to call up video programming, such as downloads from services like Apple Inc.'s iTunes store and streamed videos from sites such as Google Inc.'s YouTube.
The Journal reports that there are fundamental handicaps in the U.S. for mobile video. "Unlike markets like Japan and South Korea, where mobile TV has a sizable following, many Americans are driving when they aren't at home or at work—and less able to watch TV on the go than users in countries where public transportation is more widely used."
"Here it is a little difficult," said Mark Beccue, an analyst at market-research firm ABI Research. The market-research firm estimates that 12.8 million people will subscribe to mobile TV in North America in 2010, which he expects to grow to 25.9 million in 2012 in response to factors such as a proliferation of devices with bigger screens for watching videos. By comparison, the firm's worldwide estimate calls for 178.4 million subscribers this year and 384.5 million in 2012.
So with such slow growth and no profits, will Qualcomm redeploy the spectrum they own from FLO TV to something else? We think so. Qualcomm has "very valuable spectrum, and now the question is are we using it well with the FLO TV service," Jacobs said at the Wall Street Journal's D Conference last month.
Qualcomm isn't the first to pursue, and drop a similar broadcast approach, according to the WSJ. Crown Castle International Corp., which had been planning a service similar to FLO TV called Modeo, in 2007 changed strategies and announced plans to sell its wireless spectrum. Later the same year, Aloha Partners LP, whose subsidiary HiWire had tested a mobile broadcast service, instead announced a deal to sell its spectrum to AT&T for $2.8 billion.
3. Mobile DTV standard based networks still in a holding pattern
We really thought that this standard would solve the congestion problem by providing a separate band for broadcast mobile video. Here is what we wrote last Fall: Will the new mobile DTV standard enable Mobile Video to succeed in 2010?
Why hasn't it been deployed yet? The WSJ reports: "The backers of Mobile DTV, dubbed the Open Mobile Video Coalition, is pressing ahead with plans for services that also require special chips for receiving broadcast signals, typically built into media players or included with a device called a dongle for outfitting a laptop computer to use the service."
Anne Schelle, the Open Mobile Video Coalition's Executive Director, told the Journal that its research shows that Americans are willing to pay for the right mix of locally generated programming and other content. "I don't think [Qualcomm's experience] means that consumers aren't interested in this," she said. "Consumers are highly interested."
But why is it taking so long for market liftoff? The mobile DTV standard is almost one year old. In my independent research, I have not found a single investor or developer for the mobile DTV standard- not even Motorola, which talked about the need for a separate mobile video broadcast channel at a conference I attended last Fall.
Significant questions about the business model for mobile DTV still need to be answered. These include whether the technology should broadly launch as a free, ad-supported service or as a subscription offering, and whether stations have the right to simulcast their normal network programming through mobile DTV. And, while wireless carrier Sprint is participating in the Washington trial, which was organized by the Open Mobile Video Coalition (OMVC), no formal deal with a carrier to implement mobile DTV technology in handsets or other devices has been reached. If these questions aren’t addressed soon, the commercial launch of mobile DTV could be delayed well into 2011 or beyond. Will it be DOA? Only time will tell.
4. Most users prefer to watch video on their TV, rather than a mobile gadget!
Chris O"Brien, one of the most incisive tech reporters I've ever read had another great article in the Aug 1, 2010 San Jose Mercury that documented users strong preference for watching video on a TV (and not a mobile gadget). "Almost 99 percent of all video is still watched by people using their televisions. While our viewing options have multiplied, our viewing preference hasn't much changed: sitting on a couch in front of a TV. In fact, we're spending more time watching more video on TV than ever before. In Silicon Valley, home of YouTube and a host of online video startups, this seems astonishing, where we believe with near-religious fervor that the future is coming faster than ever and changing everything. It's not. Rather, this is a good lesson in how consumers' most deeply ingrained habits can slow down the pace of change. And it's a reminder of how living here can sometimes warp our sense of technology's true impact."
O'Brien: BitTorrent and the reason things are changing slower than you think
We find this article quite reassuring and on the money. As a result, we predict that in the near future, most folks will watch Internet video on their new TV's and not on mobile gadgets and gizmos.
We think something has to give and very soon. For mobile video to be successful, it will take the initiation and success of live and on demand videos delivered via mobile DTV networks in conjunction with more 3G network capacity (i.e. aggregate bandwidth for users) to have a better experience watching You Tube, Hulu and other Internet Video sites on their mobile gadgets. If this does not happen, we think that the wireless telecom industry will be in big trouble.