There's been a great deal of chatter about LTE Broadcast technology in recent weeks. The technology will not be commercially launched in the U.S. until next year, and I think that for many years it will only be a niche application, used sparingly by carriers and without a clear business model.
LTE Broadcast (sometimes referred to as LTE Multicast) could have a bright future in delivering video and other files and data more efficiently, but it will likely be a few years before it becomes a viable, large-scale option for even its most ardent carrier proponents, such as Verizon Wireless (NYSE: VZ), which plans to launch the technology in 2015.
The business model remains a major question mark. There are some clear uses for LTE Broadcast, including streaming live content (especially sports) to a multitude of users, and using the technology to send out files or application updates to a larger subscriber base. Yet it's unclear how carriers or content providers will be able to make money off of the new transmission techniques when consumers are increasingly viewing video content when and where they want to.
At a recent investor conference, Verizon Communications CFO Fran Shammo said that the carrier is talking to content owners about the possibility of delivering their content via LTE Broadcast. 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.
According to a transcript of his remarks provided by Verizon, Shammo noted that Nielsen will "have the capability in the fourth quarter of this year to be able to tell the content providers who is watching their content on what mobile device and how many minutes they are watching it." That could definitely give content owners greater visibility into who is watching what content when, and how they can potentially monetize the content through advertising. However, it's unclear how that translates into a viable business model for the operator, something Shammo also acknowledged.
"So how does the ecosystem develop? Is it a pay-per-view model? Is it an advertising model?," Shammo asked.
Patrick Lopez, an independent consultant and strategist at Core Analysis, and former executive at mobile video optimization vendor Vantrix, is pessimistic on the near-term potential for LTE Broadcast.
When it comes to distributing video, Lopez said fundamental idea behind LTE Broadcast runs counter to how most people are consuming video. Consumers are increasingly viewing video when they want to, not when broadcasters schedule it. With LTE Broadcast, consumers would have to watch only a single piece of content when carriers streamed it via LTE Broadcast. Consumer behavior "does not validate" the model that in the future a carrier could switch multiple users from unicast to LTE Broadcast streams. "It's more of a solution looking for a problem," he said, adding that LTE Broadcast advertising could only be tailored by location, not individual user's preferences or contexts.
All of that presents several issues for those companies pushing LTE Broadcast. If advertising is the business model, but the ads can't be tailored to individual users (since all users are receiving the same broadcast stream), how lucrative will the return on those ads actually be?
And if consumers continue to want to watch movies and TV shows on demand, will there be enough demand from consumers to watch LTE Broadcast content to justify the investment from content providers and advertisers in the first place?
The technology is there and it can work, but it's not clear that will be enough to drive a large number of eyeballs to screens for LTE Broadcast content. It may happen for big football games, but what else?
Several mobile video experts have weighed in on the business model question. MobiTV currently provides white-labeled mobile TV services to all four of the Tier 1 U.S. carriers (think Sprint TV), as well as U.S. Cellular (NYSE:USM). Rick Herman, chief strategy officer at MobiTV, said it's unclear what the LTE Broadcast business model will be. "We've been around long enough to see some of this ebb and flow on delivery techniques," Herman said. "For us, I really think any time you have new technology or new technology investment the business models don't tend to lead."
Herman said one potential business model is to drop dynamic video ads into live streams of content that are being distributed via LTE Broadcast. Yet he said it will all be dependent on how large the subscriber base is that can access LTE Broadcast technology.
Lopez acknowledged that LTE Broadcast could be used to deliver a large software OS update like Apple's (NASDAQ: AAPL) iOS 8 but noted that carriers would be dedicating resources to that update—and only that update—for an extended period of time. A better example, he said, is five to 10 years from now when more M2M sensors have LTE. At that point, carriers could deliver firmware updates to those devices, whether they were inside consumers' homes or out in gas fields.
Another hurdle for LTE Broadcast is that it will simply take a while for this to become a mainstream technology from a consumer adoption perspective. Without a large subscriber base capable of accessing content via LTE broadcast, commercial momentum is likely going to stall. Simply put, devices need new chipsets to take advantage of LTE Broadcast, and Shammo said that because of device upgrade cycles it will be "a year or two before you have a meaningful number of subscribers" with devices that can support the technology to then spur content providers to really buy into the ecosystem.
Since Verizon has been a leading proponent of LTE Broadcast (there are 16 operators either testing or deploying it), it's safe to assume that for most carriers it will be at least be a year or two before LTE Broadcast takes off in any meaningful way. In the meantime, Qualcomm (NASDAQ:QCOM) recently unveiled a software toolkit that enables developers take advantage of LTE Broadcast in a bid to accelerate the deployment of related apps. Again, the technology is there, but the business model is lacking.
LTE Broadcast has potential, but I think it will be at least a few years before it takes off commercially. Even then, it's not clear how it will be monetized. For now LTE Broadcast is more about hype than reality.--Phil