The Pragmatic Innovator

The Customer is Always King (Well, until They Use Too Much Data)

We have predicted the current capacity crunch for some time and over the past months we have seen almost every wireless operator around the world begin to cap their users on a monthly basis. This all to contain the damage of streaming video.

But the fact that wireline operators are now capping their consumers and willing to jeopardize something as important as customer satisfaction demonstrates exactly how dire the situation has become. AT&T in the US and Rogers in Canada have now announced caps on DSL and Cable.

Consider, for example, that Netflix is cutting the quality of streaming video in Canada and that Verizon is planning to “throttle” its most-active users when its network is stressed. They are trying to find a solution to a very complicated problem, which is commendable, but is it really wise to further diminish an already poor quality of experience for the customer? For sure the data cap will help as a band aid to their network capacity crunch but operators and media distributors alike must find new technologies that work for both sides.

So how can operators mitigate the impact capacity crunch without sacrificing the consumer experience?  Unfortunately there isn’t a silver bullet.  There is not a solution or tool on the market today that can single-handedly solve the capacity crunch.  But there is some good news – there are a number of video delivery optimization solutions on the market today that can help ease the burden that mobile video places on the network.

Operators just need to be more realistic when they are evaluating them.  For example, solutions that rely on bit-rate throttling or transcoding are akin to putting a bandaid on a shotgun wound.  Sure, they reduce the amount of data flowing over the network, but it’s a relatively insignificant reduction that also often results in a poor end user experience.

Why not instead consider employing a strategy such as content pre-positioning, which provides consumers with a far superior playback experience on their device and maximizes the efficiency of the operators’ networks by leveraging underutilized capacity and flattening the peak loads. And it also enables innovative revenue growth applications that work outside of the cap.

It’s a win-win solution, in our opinion.  The customers get great quality playback on an unlimited basis, operators get to save their networks and don’t need to invest billions so that media companies can monetize it and media companies continue to grow in the digital content distribution market.

What do you think?

Part 1: Data Caps: Good for the Consumer or Good for the Operator?

AT&T and Verizon are doing it. And it is only a matter of time before all wireless operators are imposing some type of usage-based mobile data pricing, or data caps. The iPhone, surge of Android devices and now tablets are demanding an unprecedented amount of wireless bandwidth largely due to video-based apps. And bandwidth is something that operators have a limited amount of.

So data caps are here to stay (even with 4G, we believe) because operators simply cannot keep up with the growing demand of video, which uses a tremendous amount of capacity. Read more about how much capacity streaming video requires.

It has been argued that data caps are good for the operator (less network congestion so they can add more subscribers without building new base stations as quickly) and good for some subscribers as well (especially light users).

But how do you know how much data you use?

We did the math on AT&T’s pricing plan and we determined on average subscribers pay about 5¢ per MB. This is fairly meaningless unless you know how much data you can get per MB.

Streaming Video Clips

Costs for streaming YouTube videos to a smartphone based on watching 15 minutes of video each day, which is what the average person spends on YouTube. YouTube uses approximately 2MB/min to stream a video to a smartphone

Streaming Full Length Movies

Costs for downloading the movie Avatar to various devices using AT&T’s Data Connect Plan. Figures are calculated based on information taken from AT&T’s website.

No doubt subscribers will now have to think twice before viewing that 2 minute YouTube video, not to mention longer-form content that is proving popular on these devices. I’d argue that this is not good for content owners or over-the-top type of video service providers.

We believe operators are faced with two primary options:
1) Forget about allowing subscribers to stream video over 3G

2) Find alternative ways for subscribers to get their video fix

If you’ve read this blog before, you know that Opanga has developed solutions based on a concept called content pre-positioning. Operators can pre-position content into end devices by using surplus capacity found in their networks throughout a 24-hour period.

We believe that pre-positioning technology can complement subscriber data usage limits and pricing plans. Content pre-positioning can enable operators to offer new innovative revenue growth applications that are “outside the cap.”

Stay tuned for some business use cases that will benefit operators and media companies.

Are you surprised at how much a movie would cost on your smartphone? Would you pay it?