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Wednesday, January 18, 2006

Mobile TV trial results

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Below is an excellent analysis of the results of the recent Mobile TV trials in the UK with O2 and Virgin, by Marek Pawlowski who writes the excellent PMN Mobile User Experience newsletter (www.pmn.co.uk). (Lots of other good stuff on his site, by the way.)

Considering the business model, Marek asks how much additional core communications business (SMS, calls) the mobile TV usage stimulated, and suspects very little. He says near the end of his piece "...mobile TV will never be a significant profit generator for network operators as a standalone service...but it will be sold as an integrated package of home entertainment by the major media companies [my italics]."

At IMS Insider, we couldn't couldn't agree more. But the opportunity that IMS brings is for Operators themselves to create the 'integrated package of home entertainment' - to offer home entertainment service propositions that combine the power of mobile TV (for what it's best at - clips and promotions) with core telco communications services and new models of advertising to support cheaper content.

If you couple this with Federated Identity (see my previous posting), then you put mobile operators at the centre of this new world, not the media companies.Subscribers to the IMS Insider monthly report will have seen how this works in detail via the future IMS-based Movie rental service scenario we've been developing. For those who'd like to access this subscribe at www.ims-insider.com or email me at Editor@ims-insider.com for more information.

The bigger picture with mobile TV

There has been extensive press coverage over the last few days of two mobile broadcast trials in the UK. Virgin and BT Movio reported the results of their DAB-based test while O2 and Arqiva shared the findings of their DVB-H trial. The two studies varied considerably in their conclusions, highlighting differences in the approaches adopted by both groups. They also fell short of revealing other key metrics, such as the effect of mobile TV handsets on other revenue generating services such as voice and SMS.

Key findings
- Users are willing to pay GBP 8 per month for access to mobile TV services [Virgin]
- Mobile TV was the first multi-channel TV experience for 31 percent of users [O2]
- There is greater demand for radio than TV services on mobile handsets [Virgin]
- 36 percent of viewing was done in the home, compared to 23 percent at work/college [02]
- Average viewing times varied considerably between the two trials, with O2 users viewing for more than 3 hours per week while Virgin trialists tuned in for just over an hour per week.

These results raise a number of questions. Firstly, how much of an impact does handset form factor have on the time spent viewing mobile TV services? The O2 trial used Nokia's 'widescreen' 7710 handset, while Virgin deployed a standard 'monobloc' Windows Mobile smartphone. O2 users reported viewing times three times longer than those of the Virgin trialists. I believe the enhanced screen quality, superior usability and more natural viewing angle of the 7710 played a significant role in this.O2 also offered more channels (16 in total), including most of the UK's standard terrestial stations, thereby providing users with access to familiar content and a compelling 'demo' to show to their friends and family.However, viewing times are not necessarily the most relevant metric.

The economic case for mobile TV remains unproven and it doesn't matter how long users are willing to watch for if they aren't willing to pay a correspondingly higher price for the service and the handset.It would be interesting to know, for instance, how many users continued to carry their standard mobile handset for making calls and sending texts during the trial. I would suspect this would be quite a high percentage among O2 trialists, who would be unlikely to switch to a device as large and cumbersome as the 7710 if they had an ongoing requirement for high voice usage for either business or personal reasons. The Virgin trial, which used a device with a form factor more similar to the handsets on which most users will expect to receive their mobile TV service is probably a better indicator of potential uptake.

Another unanswered question is raised by O2's finding that most viewing occured in the home. PMN have long held the view that the mobile environment is fundamentally incompatible with traditional TV consumption. It is unsurprising, therefore, that the highest number of viewing minutes were recorded in the home, where the immersive experience of viewing television on a small screen device is more practical.What effect, then, will the rising popularity of home media sharing have on the popularity of viewing TV on a mobile phone.

Will users still choose to view TV on their mobile handsets when they have a house unwired with a Wi-Fi network for sharing TV, music collections and video libraries on any laptop, PC or TV screen? As O2 found, the mobile TV experience was the first time nearly a third of users had watched multi-channel TV. Their higher viewing figures could be as much a factor of novelty as genuine enthusiasm for TV in the mobile form factor.Returning to the economic practicalities, there are several issues to be addressed regarding standards, network build-out costs and handset availability.

Virgin and BT used existing DAB infrastructure for their trial. The spectrum is available today, much of the infrastructure is already in place and it also comes with the added benefit of providing access to the UK's mature market for DAB radio.O2, on the other hand, used the DVB-H technology more widely supported within EU countries, but mired in spectrum availability issues and requiring the deployment of new infrastructure. Indeed, O2 has already started talking to other operators about the possibility of sharing the costs of network construction and is lobbying the government to address the spectrum issues.

DVB-H benefits from the support of Nokia, the world's leading handset manufacturer, which is already making aggressive moves to solve the economic case on the terminal side. The Finnish manufacturer has the scale and financial resources to invest in developing DVB-H handsets at a loss if it guarantees a leadership role and profitability in the future.DAB lacks an individual champion with the strength of Nokia, but the market for chipsets and terminals is already well developed because of the widespread popularity of digital radio in the UK and several other territories around the world.

Companies like RadioScape, which pioneered the use of DAB to deliver multimedia content to mobile devices, are working on software-based radio technology which could eventually lead to the development of an integrated DAB and W-CDMA chipset for mobile devices.

From a cost perspective, it is tempting to see streaming TV - as supported by Vodafone, Three and Orange - as a less expensive alternative. It is supported by existing technology, the economies of scale are already in place for handsets and it can be delivered today using previously allocated spectrum. However, the costs are still there, they are just more evenly dispersed throughout the deployment cycle: the reality is that most UK network operators will require significant capacity upgrades and most likely the introduction of the HSDPA upgrade to their 3G networks if streaming TV becomes a mass market service.

The broadcast model, although it may have higher upfront costs for network infrastructure and handset investment, should prove cheaper in the long-term.O2 and Virgin have both taken positive steps in conducting these trials. They have gathered valuable operational experience and 'prepped' the industry for the commercial introduction of these services later in 2006.

I believe, however, that mobile TV will never be a significant profit generator for network operators as a standalone service. The fundamentals of viewing video content in the mobile environment limit the usefulness of this application and therefore limit the amount users will be willing to pay. Mobile TV will become mainstream - by 2010 it will be a standard feature on most mid-range handsets in the UK - but it will be sold as an integrated package of home entertainment by the major media companies.

Small wonder, then, that Richard Branson has been willing to accept a lower payment for his share in Virgin Mobile to ensure the merger with cable company NTL proceeds. As the largest single shareholder in the combined group, he will be uniquely positioned to drive the media convergence which will be essential to the success of mobile TV." [For more excellent analysis from Marek, go to www.pmn.co.uk]

The Editor -
editor@ims-insider.com www.ims-insider.com

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