Lowenstein: Dynamic connectivity - A new framework for managing the data 'tsunami'
Earlier this week, Time Warner announced that it would make live simulcasts of its CNN and HLN channels available on the Web to people who subscribe to participating TV distributors, including Comcast, Dish Network, and Verizon. This means they could watch CNN live on the company's Web site or other portable devices, such as an iPad. Great news on the progress march to "TV Everywhere".
Question: Do the wireless operators want their subscribers to watch CNN live over their cellular networks?
Likely Answer: Nope.
What Should Be the Answer: Under certain circumstances.
One of the most strategic questions the wireless industry will be facing over the next few years is whether, how, and at what price subscribers should be able to view or download media-rich content on mobile networks (outside of Wi-Fi). Three developments on the content front are going to force operators to confront this question sooner, rather than later:
- The "TV Everywhere" initiative, whether it's the CNN example above, HBO Go, or the upcoming watchespn.com.
- A burgeoning number of web sites and apps with bandwidth-hungry content or streaming video. Example: latest version of Vanity Fair for the iPad, a 600 MB download, which would chew a good portion of the typical 2GB iPad data plan.
- Forthcoming "cloud" services, which will require a near constant-connectivity model.
These developments spur two fundamental questions:
1. Will wireless 3G and 4G networks offer a good quality experience for these services?
2. Do cellular network economics support these services, at reasonable cost to consumers?
The answer to question #1, above is that the experience would be highly dependent on one's connectivity scenario, which as we all know varies tremendously by market, proximity to cell site, mobility, weather, and a zillion other factors. My bottom line: the quality will be OK-to-good with a really good HSPA+ signal, stationary WiMax, or LTE.
The answer to question #2, is, not likely, under the current capacity and pricing framework. Verizon's current LTE pricing, for example, is highly discouraging of any usage model that approaches that of residential broadband or substantial consumption of video.
But there's another answer here, which is that it's time to start thinking differently. My concept is called dynamic connectivity. Let me explain. Let's say you and I are sitting in South Station in downtown Boston, with an hour to wait before our train to New York. We have the same smartphone/cellular-connected tablet and operator relationship and we're on the same data pricing plan. We will have a similar data experience when we connect--which is the best that our operator can offer at that given time, given the usual factors. Where things diverge is what you and I might want to do with our devices over the next hour or so. You might want to check e-mail, update social network status, play a game, and check out a couple of apps to help you decide where to go to dinner when arriving in New York. I might be more interested in watching CNN live, or perhaps downloading a movie to view on the train trip. Clearly, I'm asking a lot more of the network over the next hour than you are, and our operator also has to consider all the other users in the cell sector during this busy commuting hour.
In today's typical network planning structure, I'd consume a pretty healthy chunk of my 5 GB allotment if I wanted to do the above. This would also quickly become a money-losing proposition for the operator, unless I blew over my plan allotment and incurred hefty overage charges. I also wouldn't be able to predict the quality or consistency of the connection--note the enormous delta between "maximum throughput" and "typical throughput" that has become the norm in how mobile data is marketed. Sort of a lose-lose proposition, if you think about it.
But maybe there's an alternate way of thinking about things. Why not a temporary "data boost" option, available for a modest premium, say $5.00 for the hour. That $5 would guarantee a higher throughput rate, and my consumption for that hour would not count against my plan allotment. Now before the net neut crowd goes haywire on me, how is this any different than, say, private toll roads that are popping up all over? You pay a premium price for a less crowded road so can get to your destination sooner. Closer to home, it's become commonplace to charge extra for the "HD" version of a pay-per-view movie on cable or iTunes download.
There are numerous scenarios for how this could play out in wireless:
- Premium pricing for certain types of content, where the added network cost is bundled into the price, with the operator taking a portion of the premium
- Advertiser-supported mobile content. "This mobile viewing experience is brought to you by XX".
- Time-of-day adjustments. Pay a lower "data premium" for media-rich downloads at off-peak hours.
- A bronze-silver-gold pricing structure, similar to what some fixed broadband subscribers offer.
This could all work the other way, too. If the user wanting access to rich content is in a place with high capacity demand or poor signal quality, the operator could intercede with an appropriate message or recommend they use Wi-Fi.
And to ensure the operator isn't "robbing Peter to pay Paul", a certain "average" speed would have to be promised.
The overall principal here is that wireless operators could more dynamically allocate network resources to those who need it at a given time. Uses might be prepared to pay a premium for it. The "best 4G you can get" is great, but not always needed by all users at all times.
The technology to implement dynamic connectivity is getting there. It will require greater flexibility in pricing models, cooperation with key players in the content ecosystem, the right marketing message, and most importantly, a new way of thinking.
Mark Lowenstein, a leading industry analyst, consultant, and commentator, is Managing Director of Mobile Ecosystem. Click here to subscribe to his free Lens on Wireless monthly newsletter, or follow him on Twitter at @marklowenstein.