Verizon Wireless (NYSE: VZ) and AT&T Mobility (NYSE:T) are expected to launch their first versions of LTE Broadcast technology this year, likely on a limited basis. But there is a concern that the technology could favor the customers who are accessing content via LTE Broadcast by giving them a higher quality of service, while saddling everyone else with optimized, compressed and lower-quality video content. The fear is that this would violate the FCC's new net neutrality principles and give too much power to the carriers--which are the ones that will decide when, where and how much to use LTE Broadcast.
While there is a legitimate concern that LTE Broadcast content will be given a higher quality of service than regular, over-the-top video content, I don't think the situation will violate net neutrality. In fact, based on conversations I have had this week with experts at vendors that specialize in LTE Broadcast (and, admittedly, are proponents of the technology), carriers' use of it is likely to benefit customers, even those who are not taking advantage of it.
Moreover, the use of LTE Broadcast is likely going to be allowed under the FCC's net neutrality rules as a technology-driven network management practice.
A quick refresher on LTE Broadcast (sometimes referred to as LTE Multicast): the technology is based upon evolved Multimedia Broadcast Multicast Service (eMBMS), and it enables the same content to be sent to a large number of subscribers at the same time, resulting in a more efficient use of network resources. The alternative, which involves each user requesting the same content and the content being unicast to each user, requires a lot of bandwidth and network resources.
The eMBMS standard, as specified by 3GPP, technically allows carriers to reserve up to 60 percent of a channel for LTE Broadcast content. That seems like a lot. However, in practice carriers will only use about 10 to 20 percent of the given spectrum resources on a cell for LTE Broadcast, according to experts I spoke with at Alcatel-Lucent (NYSE: ALU), Ericsson (NASDAQ: ERIC) and Qualcomm (NASDAQ:QCOM).
So why won't LTE Broadcast violate net neutrality? For one, it will depend entirely on how much capacity is in a given cell site. Let's say that a carrier takes up 20 percent of the available bandwidth on a site with LTE Broadcast. That still leaves 80 percent of the capacity for unicast users. Further, because LTE Broadcast is a more efficient use of spectrum, employing it gives a carrier a "net positive capacity increase as long as you have more than two people wanting to watch the same thing," according to Joakim Sorelius, head of services and infrastructure within Ericsson's LTE business. The net result is that using LTE Broadcast actually frees up more spectrum for other traffic, he said.
Secondly, Sorelius noted that carriers have an incentive not to degrade the quality of service for non-LTE Broadcast customers. "If operators provide poor service, people will not use as much data as if they had a good service," he said. "Regardless of where it comes from, it seems to me it is in the interest of operators to provide as good a service as they can, regardless of whether they are using unicast or broadcast."
Ed Tiongson, Qualcomm's director of product management for LTE Broadcast, said that unicast users on a cell site that is sending out LTE Broadcast content won't see the quality of their content degraded. "You will be impacted by the same factors as if multicast were not there," he said.
Tiongson admitted that carriers can set a high quality of service for LTE Broadcast but that eMBMS is less about delivering higher quality content and more about efficiently delivering content to numerous people on a cell site or in a given geographic area who all want to watch the same thing--for example, streaming a local concert or highlights from an NFL game. Moreover, he said, there are ways to make unicast content better through optimization.
A third and important reason why I don't think LTE Broadcast violates net neutrality is because it's designed to be used in congested parts of the network, where it would make transmissions more efficient rather than less efficient. "There is a broadcast set up because there's a lot of people who want to watch content in their given area," Tiongson said. "If that happens you could argue that the network is already loaded." In other words, LTE Broadcast is the technology equivalent of a carrier calling in the cavalry when the network is likely to be congested already.
Bill Goers, director of product marketing in Alcatel-Lucent's wireless division, noted that the first uses of LTE Broadcast are going to be for major events that the carriers are promoting. They will push content down to LTE Broadcast-capable smartphones and tablets and ask customers if they want to access the content via the technology. In the future, the specs for LTE Broadcast call for phones to be dynamically capable of notifying carriers of when they want to access content that could then be sent via LTE Broadcast to numerous users. However, that's likely not going to happen this year since it requires special middleware on phones, Gores said.
Anyway, I didn't see much of a business model last October for LTE Broadcast technology, and still don't see much of one now. Is it conceivable that Netflix (NASDAQ: NFLX) could get into the pay-per-view business and strike a deal with Verizon to stream a boxing match via LTE Broadcast? Sure, it's possible. But I don't see that happening every month, let alone every day.
Moreover, under net neutrality, carriers seem to be able to conduct network management via technologies like LTE Broadcast if the management is primarily aimed at "achieving a legitimate network management purpose, taking into account the particular network architecture and technology of the broadband Internet access service." The practice needs to be related to a "technical network management justification" and not business practices. Since LTE Broadcast is about more efficiently using spectrum, it would seem to be allowed.
There is a fear that LTE Broadcast could give content owners and carriers and incentive to deliver higher-quality content compared to everything else. But I think it's a largely unfounded fear right now. As Ericsson's Sorelius noted, carriers have an incentive not to antagonize their customers by degrading their service.--Phil