You may recall in the last issue that we considered the technical complexity of wireless digital media devices. To refresh your memory, a conceptual design of a next-gen device is presented in the diagram here. Note, however, that its convergence of various technologies is accompanied by an even more tortured intertwining of business elements. We’ll discuss the latter this time, particularly as they apply to the coveted “personal media device” of the (very near) future.
First, put aside all notions of traditional broadcasting, where broadcasters transmit free services over their assigned channels, and consumers simply purchase any manufacturer’s appropriate receiver and tune in. In the grave new world of wireless, service is via paid subscriptions, offered in a crazy quilt of plans with various tiers, roaming agreements and interface options. The user’s terminal device is the complex instrument shown in the figure, but designed and configured as the service provider wishes, and typically available only from the service provider or its dutiful agents.
The L word
In this internecine maze, it’s all about leverage and behavior modification, with the primary goal being to keep the consumer sending as large as possible a payment every month to the wireless service provider. So service providers try to leverage the consumer’s desire for media and connectivity by providing an appealing service package under their own branding, and at the lowest possible price.
To do this, the providers attract customers with deals on monthly service and subsidized device pricing, then lock them in with long-term service contracts and constrained access to features and services on the devices. (Customers’ desire to keep their same cellular phone number used to be another element of such leverage, but it was eliminated by wireless number-portability regulation in 2003.)
(click thumbnail)The “personal media device” can potentially connect to many services, primarily via wireless technologies.Even where to buy the device can be constrained and leveraged, as evidenced by the recent debut of Apple’s iPhone, which is only available through Apple’s and Cingular/AT&T’s stores. (Apple’s initial negotiations with Verizon as the exclusive iPhone wireless network broke down over this point, as Verizon wanted general retail availability of the device, but Apple insisted that it be sold only through Apple and the wireless carrier’s own outlets.)
So a popular device’s appeal can be used to get people into particular stores that have exclusive access to the product, and while they are there, perhaps they’ll buy other items, and/or come back for more later.
As the diagram shows, these new devices can serve as consumer access platforms for numerous wireless services, both one-way and two-way, but because network operators control the devices’ design, only the services that operators want to include will be offered. This implies that the only services supported may be those with which the network operator has some beneficial business arrangement. So the likelihood of these devices including future free-to-air digital broadcast services (such as portable IBOC radio, or the envisioned Mobile/Handheld ATSC DTV service) is slim if the network operators aren’t in on the deal somehow.
Where the pioneers went wrong
Even services that understand these business realities may not be successful, as the two early “Mobile TV” failures (Modeo and Movio) mentioned in the previous column exemplify. These were broadcast-delivered, mobile multimedia services developed for and/or by wireless telcos, but neither could properly arrange all the requisite pieces of the puzzle.
Movio was developed by British Telecom, and used DAB-IP (datacasting over the Eureka 147 DAB format) at VHF frequencies to deliver several premium TV and radio services to handheld devices in the U.K. The consumer device also served as a standard DAB radio receiver, in perhaps the one market where that service is successfully deployed.
Despite the service’s use of a standardized delivery format, BT was only able to engage one manufacturer to produce the converged device (the Lobster from the Taiwanese firm HTC), and had only attracted one wireless carrier (Virgin Mobile) to offer the service. (Another player engaged in the service’s food chain was DAB national-frequency licensee Digital One, a transmission service owned and operated by a group of commercial U.K. broadcasters, from whom BT had leased 100 kb/s of national DAB service.)
Less than a year after its festive October 2006 launch, and with reportedly fewer than 10,000 customers, BT announced it will shutter the service in January 2008.
Meanwhile, in the U.S., Crown Castle had developed the similarly named and positioned Modeo service, also using a standards-based approach (in this case, DVB-H), for transmission in L-band spectrum for which it had obtained a national license in a 2003 FCC auction of repurposed former weather balloon telemetry spectrum (1670-1675 MHz).
Earlier this year, Crown Castle received a rules waiver from the Commission allowing it to use higher power than originally licensed for the service, thereby reducing its potential network costs (i.e., fewer transmission sites required). It built a trial network in New York City, and launched beta service there in January 2007 with live TV content from Fox News and Discovery Networks, plus audio service from Music Choice.
Nevertheless, it failed to attract a single U.S. wireless telco operator to engage its services, and Crown Castle ultimately chose to terminate the project in July 2007. Most observers blame the failure primarily on Modeo’s use of L-band spectrum, whereas competing services in the U.S. use the more advantageous 700 MHz band. (Verizon and Cingular/AT&T had already chosen Modeo’s competitor MediaFLO, developed by Qualcomm, which will use the former UHF-TV channel 55 with a proprietary delivery format. Meanwhile a firm called Aloha Partners is offering its Hiwire service, which plans similar services on former UHF channels 54 and 59.)
Pay to play?
So even though radio broadcasting — analog or digital — is already inherently wireless and robustly available for mobile reception, some impressive business negotiations would have to be brokered for broadcast radio to appear among the suite of services offered by the personal media device of tomorrow.
Consider that today some wireless phones sold in the U.S. actually include FM receivers, but they are disabled by the software that the service provider installs on the device. Reversal of such proactive blocking of radio reception capability on the platforms that the wireless operators control would require a pretty sweet deal, and it’s unclear what broadcasters might be willing or able to offer in order to achieve it.
Another factor involves the recent decision by the FCC to auction some of the other reclaimed 700 MHz spectrum it will auction next year with a requirement that it be “open,” meaning that the spectrum licensee could not control the devices that its customers connect with. This would make at least one slice of the U.S. wireless environment more like the rest of the world, and allow the deployment of innovative devices with designs not solely driven by wireless network operators’ motivations. In other words, maybe we’ll eventually see U.S. cell phones with radios in the open 700 MHz space.
Whatever happens, it’s becoming clear that the pathways to tomorrow’s listeners will traverse much new ground.