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 3: The Content Pre-Positioning Opportunity

We’ve talked quite a bit about how streaming video places enormous strain on wireless networks, degrades network performance and creates a massive capital burden for operators.   This strain also affects the end-consumer as it results in a very poor and inconsistent playback experience.  Many operators are imposing data caps (check out this video from o2 talking about why they chose this route), but data caps alone will not ease the strain on networks.

The simple fact is that video is crippling our networks and the industry must explore new video distribution methodologies, as well as new consumer models that achieve superior service level characteristics.   We believe that new video distribution models must accomplish the following to be successful:

• Reduce operator CAPEX and OPEX. Operators have fronted the cost to build out the current network and the costs to maintain them.  Continuing to invest billions of dollars in network build out to facilitate other third party company revenue growth is simply not a long term viable business model   (see how much bandwidth Netflix is using without paying for the capacity)
• Creation of new revenue generating services. A more viable approach would be to create new services that generate revenue in a linear relationship with capacity consumption and provide wonderful video quality to consumers – something they will pay for.
• Improve quality of video for consumer. Operators must provide a substantially improved video playback experience.  The optimal playback experience should:
  • Never freeze and/or rebuffer;
  • Should leverage the high quality video components in today’s smartphone and tablet devices
  • Should utilize the ultra low cost of memory in wireless;
  • And allow consumers to enjoy their content without broadband connectivity.

It’s actually a rather basic proposition: operators simply need to provide a quality of experience that is worth paying for.  Innovative subscription-based applications allow consumers to subscribe to the content that they want, when they want it.  And that content is always available in flawless quality every single time. Everywhere. If operators can provide this type of high-quality service and experience, we think consumers would be willing to pay for it.  What do you think?

Part 2: Providing High-Quality Video Outside of the Mobile Data Caps

In my opinion, the end-user mobile video experience today leaves a lot to be desired. On any given day, I will visit an app for a leading cable news site on my iPhone.  Half of the time I wind up watching a video of decent quality, and half of the time, I get a video that freezes and buffers until I get frustrated and exit the app.  At best, the experience is mediocre.

Personally, I think this is unacceptable, and it looks like the majority of mobile video users today agree.  In fact, we expect that over time, consumers will migrate to those applications that provide better experience for their “video snacking” time and even premium video.

It is essential, therefore, for content owners to provide consumers with a better experience just to stay competitive.  One way to improve QoE and gain a strong competitive advantage is to enable apps with content pre-positioning technology.  Apps that utilize this exciting new technology eliminate consumer frustration by pre-positioning content into the end device memory using surplus capacity.  This allows content to be played back instantly, truly at any time (on an airplane, etc.) and with ultimate consistent quality.

We believe that pre-positioning technology, which is utilized by Opanga’s NetRover solution, can complement subscriber data usage limits and pricing plans that are becoming the norm today (see previous post).  For example, content pre-positioning can enable operators to offer new innovative revenue growth applications that are “outside of the cap,” and, when done properly, can maximize the efficiency of the operators’ networks by leveraging underutilized capacity.  This is in addition to providing consumers with a far superior playback experience on their device.  Consider, for example, the following possible use cases:

• Premium content distribution such as catch-up TV, Seasons Pass TV and “mobile DVR” functionality.
• New release VOD movie content delivered to smartphones that coincide with DVD and Blu-Ray release windows.
• Up-to-date news applications, where subscribers can open an app and watch all of the latest local or national news videos – without a broadband connection
• Personal file sharing, where subscribers can share sharing pictures and media with other devices or family members

What other use cases can you imagine with business use cases?  What is your favorite video-based app?

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?

New White Paper Discusses Urgent Need for Innovative Video Distribution Solutions

Posted by Dave Gibbons

Earlier today, we announced the availability of a new white paper titled “Streaming Video and Wireless: A Fundamental Mismatch?”  In the paper, the team explores the fundamental mismatch between the amount of spectrum available and the demand that streaming video places on that spectrum.

We’re very excited about this paper for a number of reasons; in addition to providing a compelling analysis of the traditional video delivery solutions, we also introduce content pre-positioning as a compelling new component to complement these traditional solutions.

The full white paper can be downloaded, free of charge, here. Please check it out and let us know if you agree or disagree with our assertion that streaming video and wireless are a fundamental mismatch.  As always, you can post a comment here on this blog, or, if you are attending CTIA Enterprise & Applications next week, you can drop by our stand (#755) and let us know what you think.