The North American communications market is evolving rapidly as a new, cloud-based dynamic is taking hold: services are increasingly simply applications delivered via an IP-based connection, whether wired or wireless. So, eventually, future residential bundles are unlikely to be quad plays (i.e., voice, video, Internet access and wireless), but rather a dual-play of landline and wireless broadband, over the top of which all else is delivered.
The implications for mobile video are staggering, as operators continue to evolve their networks and approach third party applications in new ways, to capture new revenue streams, monetize traffic and stay viable. Packaging a managed but over-the-top (OTT)-modeled service like a standalone LTE-based TV option—much like what DirecTV has been rumbling about over the past year—as an add-on application to existing broadband packages, would seem a no-brainer. But are the infrastructure and enablement pieces in place to support that?
Transitioning to an OTT World
A new survey from Stratecast | Frost & Sullivan (News - Alert), shows that consumers find broadband connections sufficient for voice telephone and subscription television, in addition to a preference for bundled services. Services, therefore, may one day look more like applications, easily downloadable via an app store—a massive sea change from the days when communications services were hard-wired to network assets and remained the rarified purview of carriers.
"The implications of these results portend a transformation in consumer perceptions," said Stratecast | Frost & Sullivan consumer communication services program manager Mike Jude. "Our findings made it very clear that consumption of the services that ride access channels - voice and video - is in decline. It begs the question: does this mean the two access services, broadband and wireless, are increasing in importance to consumers? The simple answer is yes."
Residential consumers already rate Internet service the highest in importance, followed by wireless, subscription video and then voice. Statistics related to the services consumed concurred with these rankings, with 97.3 percent of respondents subscribing to an Internet service, and 78.9 percent subscribing to landline telephone service. Finally, among other results, the survey found that Internet usage now exceeds conventional television viewing for more consumers with a data connection.
And, traditional subscription television service is working its way into a slow-to-negative growth dynamic. In fact, conventional cable subscriptions show a marked decline, down 12 percent in the third quarter 2013 from Q3 2007.
In stark contrast, broadband Internet access is a growing market. With year-over-year growth at 3.7 percent from 2012 to 2013, the survey showed satellite-delivered broadband as well as fiber and cable continue to have considerable increases, while DSL is declining.
And, wireless continues its inexorable penetration among consumers. Subscribership, especially in the prepaid space, is increasing, although at a slower pace than in the past.
"The slowdown in wireless is due to subscriber saturation, and also because subscriptions can cover more than one device," said Jude. "The bigger picture is the fact that consumers are increasingly harnessing mobile devices as a medium for the delivery of data-based applications. Services are now applications, mostly written in software, and instantiated over IP-based connections. The old quad play is now the new dual play of landline and wireless broadband."
And indeed, with smartphone penetration growing (more than two-thirds of mobile subscribers in the U.S. owned smartphones in the fourth quarter of 2013, according to Nielsen); consumer usage of phones is rapidly shifting toward increased screen time with entertainment and social media. In fact, time spent using smartphones now exceeds Web usage on computers in the U.S., U.K. and Italy, according to research unveiled by Nielsen at Mobile World Congress. Americans spent 34 hours using smartphone apps and on the mobile Web in December 2013, up six hours from December 2012. Britons spent a whopping 41 hours using their smartphones during December 2013. And Italians used their smartphones about twice as long (37 hours) as they spent on the Web via their PCs (18 hours) in December.
Apps make up the lion’s share of time spent using smartphones, led by the growth in time spent using apps for entertainment and media. Video and entertainment is an important part of that (15 percent of Americans’ time with apps), while the rest is spent playing games (18 percent) or using social media (29 percent)—followed by traditional uses like calls and messaging. In Japan, nearly half of time spent on smartphones is split between entertainment, games and social media. the UK, more than one in four minutes spent (28 percent) using smartphones is spent using social networking apps—this has significance for mobile video, considering that social media is an important conduit for video clips.
Managed Mobile Video Dawns
Mobile World Congress this year was a showcase for continued LTE build-outs and managed services from operators that would make the most of the consumption trends. For instance Ericsson (News - Alert) president and CEO Hans Vestberg, speaking at a media and analyst briefing at the event, noted that mobile video traffic will grow more than 75 percent this year as a result of the continued ascendance of broadband and applications as a communications delivery mechanism.
“We use our smartphones to work, live, and entertain ourselves in more powerful ways every day. That demands networks that provide superior performance, and our leadership across generations of technology – from fixed, to wireless, to LTE, and, in the future, 5G – contributes to our ability to deliver that to our customers he said, highlighting the need to get to a world where mobile data throughput averages at least 1Mbps, for “continuous app coverage to support our new ways of living and doing business.”
Tellingly, Vestberg noted that 43 percent of Ericsson’s revenues now come from services, as opposed to hardware—and it’s the services piece that will contribute to the infrastructure giant’s growth going forward.
At the show, Ericsson showed off its, “Future TV Anywhere” service – an end-to-end integrated platform for pay TV service providers, designed to combine traditional pay-TV content and quality with mobile and cloud-based delivery suitable for OTT-model consumption.
The gear maker said that the platform will be offered in a software-as-a-service model, based entirely on standard Web and cloud technologies in order to foment a common video delivery model across the device and network ecosystem to better meet consumer thirst for multiscreen services, it said.
Vestberg believes that by 2020 there will be at least 50 billion connected devices, 15 billion of which will offer video to users, making for a potentially hellish fragmentation scenario where different kinds of content from different providers will only work optimally on specific devices. But using standard Web protocols for content handling can give operators the ability to better innovate and drive efficiency, just as we’ve seen in the Web economy at large.
The announcement came hot on the heels of Ericsson agreeing to buy OTT and multiscreen specialist Azuki Systems. “Our latest acquisition in TV media was Azuki, which is a DRM company – seeing that you have watermarks on the content from the beginning to end in next-generation TV. So we definitely see this as an important area for us to support our customers,” said Vestberg.
Separately, Ericsson has announced that Vodafone (News - Alert) Germany is the first European carrier to conduct live tests with its LTE Broadcast platform, along with technologies partners Qualcomm and Samsung.
Meanwhile, Vodafone Germany unveiled its trial of a LTE broadcast service under live conditions, along with Ericsson, Samsung (News - Alert) and Qualcomm. or the test run, the stadium of German Bundesliga team Borussia Mönchengladbach will be equipped with the new streaming technology. An unlimited number of viewers will then be able to watch several TV channels through LTE broadcast on their smartphones and tablets, via a dedicated app. Sky Deutschland will contribute its Bundesliga coverage to the trial.
“There is growing demand for high quality video content on mobile devices and LTE Broadcast gives our customers a brand new mobile media experience,” said Eric Kuisch, CTO Vodafone Germany. “This technology enables multiple broadcast sessions to be viewed simultaneously, so our customers will be able to watch Sky’s Premiere League Summary or exclusive video content from the stadium they’re in.”
SingTel meanwhile said that it is rolling out 300Mbps mobile broadband service with LTE-Advanced later this year, double the speed currently offered. LTE-Advanced enables the aggregation of multiple mobile spectrum bands, delivering higher data speeds, greater spectral efficiency and an increase in system capacity.
The Asian operator is also planning a trial of LTE Broadcast technology in the second half of the year.
Getting the Network and Management in Place
As can be seen with SingTel’s announcement in particular, the underpinnings for better, managed, OTT mobile video are falling into place. For one, ABI Research said that worldwide LTE-related subscriptions reached 229.7 million in 2013, and is expected to continually grow at a CAGR of 43.6 percent between 2013-2019, to exceed two billion.
Greater penetration of LTE, capable of supporting high quality broadcast experiences, will significantly alter the landscape for mobile television and video by offering a landline-comparable viewing experience to consumers, the firm said.
For now, among the LTE subscription growth, Asia-Pacific contributes the most with a 49 percent market share. The second greatest contributor is North America with an 18 percent share.
"The large population base in Asia combined with rapid LTE network deployment and cost-competitive smartphones has accelerated the remarkable subscriber adoption," said Marina Lu, research associate at ABI Research.
Further, all the major mobile operators are also showing their commitments to carrier aggregation capable LTE-Advanced technology, which can better handle the anticipated explosion in mobile data and video traffic with greater bandwidth. ABI Research forecasts that LTE-Advanced subscribers will grow to 750 million in 2019, accounting for 37.3 percent of overall LTE subscribers. North America will be the most aggressive LTE-Advanced market, followed by Asia-Pacific and Western Europe.
"Remarkably, the South Korean operators, SK Telecom (News - Alert) and LG U+, commercially launched LTE-Advanced networks in June 2013 and by the end of 2013, SK Telecom gained more than one million LTE-Advanced subscribers, which equates to 10 percent of all its LTE subscribers," said Jake Saunders, ABI vice president and practice director.
Quality Challenges Remain
There is of course a caveat to all of this: The network is only one part of the equation. According to an analysis from Allot Communications on video detail records (VDRs) from hundreds of millions of unmanaged mobile video transactions, actual bandwidth allocation by the network has no correlation to the video stream requirements. Insufficient allocated bandwidth for the video session will result in video stalls, but the video delivery container directly affects the mobile viewing experience.
Interestingly, the Allot study also found that laptops with dongles experience more video stalls than smartphones; however laptop users will continue to watch the video for longer durations, regardless of stalls. And, videos watched for longer durations are likely to have more stalls.
The takeaway? Mobile operators must find a way to either deliver managed OTT content or partner with OTT content providers to limit subscriber dissatisfaction and churn, loss of revenue and to avoid having to expand their networks in order to carry non-revenue traffic.
Opera Software similarly at MWC released a comprehensive study of five major smartphone markets – the United States, Brazil, Russia, India and Indonesia – that found that mobile video stalling and buffering is leading to measurable consumer dissatisfaction and stalling rates that range between 40 percent and 73 percent of all videos played.
Video session stalling rates across 2G, 3G and LTE networks ranged from 40.8 percent of all videos played in the United States to 73.3 percent of videos played in India, a negative viewing experience which helped lead to 49.6 percent or more of consumers in each market saying that they experienced low quality, lagging or buffering when they watched videos often, or all the time. Moreover, significant stalling, defined as 10 percent or more of a video's playback time being spent stalling (rendering it nearly unplayable), ranged from 20.1 percent (US) to 41 percent (India).
Opera found that while LTE networks in certain countries had better results than existing 3G and 2G networks – such as in the United States, where 18 percent of videos on LTE networks experienced stalling – the data reveals an overall need for video optimization that can pinpoint individual users who are having a poor user experience, and then mitigate potentially troublesome sessions by surgically optimizing their video in milliseconds, providing video playback free of frustrating stalls.
"This combination of quantitative network data and consumer feedback tells us that the global smartphone boom is putting strain on many mobile networks, leading to videos stalling and unhappy users on too many sessions," said Nitin Bhandari, senior vice president of products for operator solutions, Opera Software. "The surge in video streaming and in customer enthusiasm for video on mobile devices shows no signs of abating. This truly puts the burden on mobile operators and their partners to implement flexible, surgical solutions to help address the current dissatisfaction with video stalling."
Edited by Stefania Viscusi