In praise of cheap wide pipes

This weekend I’m in Marina Del Rey (near LAX) at the annual conference of researchers who study the mobile communications industry.

The conference has a very international flair. One session I attended was about the (under) adoption of mobile TV in Korea and the UK. Another was a multi-country study on attitudes towards mobile data adoption.

Given the concerns of the industry for revenue growth, it’s not surprising that mobile data is a big topic here. Why aren’t more users using mobile data? What are the killer applications? What kind of content will create demand and make money? What is the relative mix of short content (e.g. 30 second clips) vs. long content (entire TV shows or movies)?

And what will be the pipes? Will they be the 3G cellular pipes? Or will they be one of the alternatives, such as personal Wi-Fi, business Wi-Fi, Wi-Fi hotspots, municipal Wi-Fi or WiMAX?

Both for transport and for content, there were many concerns about business models because winning business models for wireless data are few and far between. The one exception is that Japan’s DoCoMo (reportedly) collects a 9% charge for billing/invoicing all m-commerce transactions.

Given the location, it was appropriate that the first plenary session focused on video entertainment. The panelists for the session entitled “Mobilizing Digital Hollywood” were:

• Derek Broes, Senior VP Digital Entertainment, Paramount Pictures (ex-Microsoft)
• Chris Brunner, VP Mobile Content and Services, Univision, Online — selling TV content
• Neil McGinness, IMG — mainly selling sports content through deals with various sports leagues
• Mark Young, Disney, VP Business Development and Strategy
• Bill Sanders, Sony Pictures Television International, VP Mobile Networks Programming and Digital Product Development (formerly with HBO)

SMS is highly profitable with limited bandwidth, but a key issue for rich multimedia content is the characteristic of the pipe. Among the key issues:

• The bandwidth for individual users. 3G is now offering a megabit/second, as does Wi-Fi, but fiber to the home is offering tens of mbps.
• The efficiency of the bandwidth. In an earlier session, Dave Tilson’s paper on mobile TV noted that in one of the UK trials, cellular networks could only support 6 mobile TV users per cell. Sony’s Sanders said that carriers see mobile data like a health club membership: “They want you to pay your monthly fee but not show up too often”
• Pricing. For single professionals and students, switching from a home-based broadband to a PCMCIA-based broadband (each at $30-$40/month) is realistic. But otherwise, Elizabeth Fife reported that for the US respondents of the Worldwide Mobile Data Service Study, the most popular answer was that users were willing to pay about $5-20/month for mobile data service.

So a lot of the interest is in moving traffic off the cellular network to other sources, such as municipal Wi-Fi or commercial WiMax service. Seamless switching between cellular and Wi-Fi/WiMax is a key concern of most firms in the mobile industry — except of course for the carriers.

Still, both 802.11/802.16 alternatives have problems. The hopes and claims of municipal Wi-Fi systems have not been proven, and most (if not all) are failing to hit their financial and adoption goals.

WiMax has been sponsored by Intel as a direct attempt to bypass Qualcomm and cellular carriers. However, the business models have not yet been proven. I wonder about the capacity — if each antenna only supports 60 concurrent connections, how many antennas do you need to build to cover a city? If you are building cells (with backhaul), how are the economics different than cell phones?

One way to increase capacity is to go Back to the Future: instead of unicast, go to a broadcast (“multicast”) model (i.e., the 1950s TV model). Usually this means moving the traffic off the network to new spectrum: terrestrial VHF or UHF (like MediaFLO) or direct satellite broadcast (as in Korea’s S-DMB). For something like live broadcast of the World Cup, it’s hard to imagine another solution that will offer the economic or spectral efficiency. One of the Hollywood panelists (didn’t see who) specifically praised MediaFLO and its economic efficiency as potentially changing the whole mobile content industry.

There is one other example of mobile video — in its infancy — being like TV of 60 years ago. Particularly in the US, cable TV, direct broadcast satellite and the Internet have fueled a fragmentation of media industry, ending the dominance of the “big three” TV networks that reigned for the first two decades of US television. But as I listened to the presentations today, it was clear that there will be limited capacity for mobile video — just as there were no more than 12 VHF channels in the US (typically 3-6 per metropolitan region) in the 1960s, and only 2-4 TV channels in Japan and most of Europe through the 1980s.

I asked about this in another session. Sanjay Pothen is COO of Metroworldwide, a company responsible for product placement that is trying to do product placement and sponsored content for mobile phones through its Pliq subsidiary.

So, I asked Pothen, is mobile TV going to be like cable and the Internet — a fragmented, niche-oriented market? Or is the limited bandwidth going to mean that mobile only succeeds in mass markets. His reply: “We’re betting on the masses. I’m spending no time on niches.”

In the US, MediaFLO is the mass media pipe for the two largest carriers (Verizon and Cingular) that have 53% of the market. Sprint (not quite 24%) is planning on using WiMax (based on the Korean WiBro) for its next generation broadband. It may be that Sprint has to target unicast niche markets, while the big carriers deliver the mass market content more cheaply.

Photo credit: Picture of Derek Broes, Bill Sanders and Marc Young © by Marc Davis of Yahoo, via Flickr.

Technorati Tags: broadband,LA GMR, MediaFLO, mobile phones, video, Wi-Fi, WiMax