The Real Threat To Carrier's Wireless Video Plans

Recently, I've seen increasing heat in the discussion of how mobile video will eventually be delivered to a mass market of wireless phones. The current discussion seems to be centered on the debate between two approaches: Broadcast of content or Unicast of content.

In the Broadcast model, content at a pre-defined schedule is sent out over shared airwaves, and any subscribing cellphone can watch the video much like TV was 10 years ago. Broadcast in the US cases seems to be achieved by deploying a new network across the country so as not to encumber the cellular network's capacity.

The second approach, Unicast, is a way of using the 3G or better data networks to carry a streaming video to each individual subscriber. This more closely resembles the Internet video of recent years, and allows individuals to watch whatever they choose at their own schedule, but unfortunately this fills limited data network capacity with each incremental subscriber.

Vendors on the broadcast side (Qualcomm, Modio, Hiwire) are arguing that Unicast distribution over 3G doesn't scale, and if mobile video is successful, unicast video streams will clog the 3G pipes. MediaFlo is on this side, and has got Verizon and Cingular on board.

But Sprint disagrees, saying that their experience with unicast mobile video indicates that their 3G network has the capacity to meet mobile video demand. That could be interpreted as a negative comment on the demand for video, or a positive statement on their network capacity.

But even though the unicast vs. broadcast debate is an important one, it's not the real battleground for mobile video. It's even old news. I wrote about precisely this Mobile vs. Unicast paradox in 2004: neither approach held all the right cards then, nor now (the linked 2004 story explains why). Meanwhile, under the radar the real threat to the carrier's mobile video aspirations seems to get overlooked at all the conferences and boardroom strategy meetings: OTA vs. Sideloaded. Not sure why, but I think it's a mix of wishful thinking, yes men, and Kool-aid drinkers.

Here's what carriers should really worry about: OTA (Over The Air) vs. Sideloaded. That is, the carrier model vs. the iTunes or PVR sideload model. It's like this: if I have content in my PC or PVR, which I've already paid for and chosen as desirable, why would I re-buy content over an expensive 700Kbps wireless network when I could use a free, 480Mbps network (a USB cable) to transfer it from my PC into my phone? Phones with flash memory are well-suited for this, and increasingly available. In fact, I seem to recall a rumor that Apple might even try something in this space...

The real threat to carrier business models is that consumers will learn to move video to their phones without ever passing the telco tollbooth. And Apple is about to educate the masses as to that possibility. Whether consumers buy an iPhone or not isn't the point - the point is consumers will gravitate towards the cheap, simple solutions that are known to them.

Carriers need to have strategies that take this into account, or their strategies will be doomed. For example, a carrier that invests heavily in a DVB-H solution and subsidizes handsets may find they are losing subs to a carrier like Cingular that offers an iPhone with iTunes Music Store access to cheaper content through sync. Carriers would be better advised to use their handset control advantage in the same way Apple uses iPod control - to route customers to their web-store.

Yes, that's right; try to control a piece of the inevitable sync market instead of the mythical OTA market.

The OTA solution may still be worthwhile, but only for live content, timely content, and impulse content purchases. So far, the music case has shown that to be a small share of the market. Video will be different, but that's the reality-infused business model that should be considered before OTA investment is approved.

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