BY LEVI SHAPIRO The conversion from TV broadcast to TV broadband is getting closer with the advent of WiMax — the next generation of mobile broadband — which is coming to the U.S. this fall. Increasingly, electromagnetic frequencies are being used not to transmit TV signals, but broadband services such as Wi-Fi and WiMax. By merging wireless cellular technology with a landline’s high-speed broadband technology, the television industry is now able to offer TV service any time, anywhere, with any video device, whether it be a TV set, a computer or a phone. WiMax is often called “Wi-Fi on steroids.” While Wi-Fi is a short-range system that uses unlicensed spectrum. WiMax is long-range, covers many kilometers, and uses licensed spectrum from the FCC, the U.S. telecommunications authority. That can make your laptop, your phone or any other device with an Internet connection work in your car while traveling at 60 mp/h (96.56 km/h). In spite of the deluge of press releases from wireless carriers over the last few years, the present third-generation (3G) network is still like “sipping through a straw,” said Tim Sweeney, director of Mobile WiMax at Intel, referring to the fact that 3G systems are still too slow when it comes to transporting data. “Consumers should not have to distinguish between mobile Internet and [traditional] Internet.” Intel, together with Motorola, literally drove that point home this year at the Consumer Electronics Show in Las Vegas. The press was regaled with YouTube clips in a car, delivered via WiMax, while driving at 45mp/h (72.42 km/h). “More powerful microprocessors and high-speed WiMax wireless networks will bring a new era of the full Internet on mobile devices,” he said. U.S. telephone giant Sprint Nextel plans to allocate 200 Megahertz of wireless spectrum toward a nationwide WiMax joint venture with Clearwire (a Washington state-based provider of high-speed wireless Internet) that values the entity at $15 billion. Sprint has 51 percent ownership, Clearwire has 27 percent, and Intel, Comcast, Time Warner Cable, Bright House Networks and Google hold the rest. Brian Roberts, CEO of Comcast, cited his experience watching a broadbanddelivered video clip at 50 mp/h (80.47 km/h) in Portland as a reason for choosing to invest. The initial launch will be in Baltimore in September, followed by Chicago and Washington, D.C. According to Barry Davis, executive director of Product Planning at Clearwire, “Next year the service will cover a population of 60 million to 80 million people, then 120 million to 140 million in 2010.” According to John Butler, CFO of Clearwire, the company estimates it will have 30.7 million subscribers by 2017, with coverage of 220 million people. Of course, previous joint ventures among media titans have not exactly been successful. “The difference this time,” promised Davis, “is that our partners own their own customers. Nobody cares more about a Comcast customer than Comcast.” Similarly, Mike Roudi, head of Wireless at Time Warner Cable, told CNET, a technology network, “With Clearwire, we will control the customer relationship including the service and phones. We will handle pricing, marketing, customer care, and billing.” The only major rollout to date has been in Korea, where consumer adoption has been slower than expected. Back in 2006, Korea Telecom and SKTelecom launched their own version, called WiBro, using Intel’s WiMax standard. Because of technical hurdles, rights issues, limited marketing, limited dual band devices and costly subscriptions, as of first quarter 2008, Korea Telecom achieved only 145,000 WiBro subscribers. Consumers have shown far more interest in free services like multi-user gaming and highspeed Internet than a-la-carte video services. According to HJ Ahn, CEO of Synergy Holdings in Seoul and formerly head of IPTV for Korea Telecom, “It’s not enough to just be a pipeline on top of the network. You need truly unique content that is reasonably priced. The regulatory environment does not permit extensive advertising.” Dave Poltrack, evp and chief Research officer of CBS Corporation, espoused an advertising-supported model for CBS’s broadband video content, including WiMax. “Ad-supported works,” he said. “CBS can reach a larger audience and get a better return by using advertising.” Clearwire and its wholesale partners have not yet publicly announced pricing for the WiMax service. However, video is potentially an important component of that offering. In addition to video, entertainment might also include localized, personalized, and locationbased content. Other services will include residential voice and residential broadband, mobile voice and mobile broadband. However, entertainment is potentially the most lucrative of these services. U.S. households spend nearly five times the amount for entertainment than they do for broadband and telco. Moreover, the cable companies are deeply immersed in a no-holds barred war with the telcos to capture quad-play (video, broadband, mobile, voice) customers. In markets where telcos offer IPTV, there has been significantly greater consumer take-up than cable companies’ VoIP voice offerings. Communications services available on WiMax already available include Gmail, Google Calendar and Google Talk applications. As a “preferred vendor,” YouTube may ultimately come preloaded on relevant devices. Google invested because it desperately needs a mobile Internet running on an open operating system and requiring lots of searches. Google has championed an opensource, mobile operating system called Android. Telcos like Verizon and AT&T use their own proprietary operating systems and have been reluctant to adopt handsets that run on Android. WiMax would finally provide Android with a large addressable universe of mobile broadband users. Google engineer Dan Morill wrote on the Android Internals discussion board, “Android has two goals: first, to be an excellent mobile platform on its merits, and second, to be open and open source.” Google’s $500 million investment ensures the Android operating system software, which still lacks a U.S. wireless carrier partner, will be available to those 30 million WiMax subscribers. What is less clear is how content owners will monetize in this new environment. Rick Robinson, vp, Business Development and Planning for Sprint’s WiMax offering, XOHM, does not pretend to know which services will resonate with WiMax subscribers. “We can set the stage but the best thing is to make it easy for consumers and then follow,” he said. “In an untethered environment, we may see a fundamental shift in the form of video content, for both creating and consuming content.” Video on non-traditional platforms without an ad-supported model has failed to reach mass audiences. For example, the U.S. Sirius Satellite Radio presently offers only three in-vehicle video channels but charges a subscription fee of $20. Similarly, mobile television in the U.S. has reached a plateau of five percent penetration (according to Nielsen Mobile), in part because of the expensive subscription. Art Spivy, director of Content and Community at Sprint XOHM advocated “an environment like the Web, an ad-supported model to watch any show when you want. Advertising could be more relevant and valuable by knowing the viewer’s current location, which is built into the XOHM network.” Barry Davis at Clearwire has also encouraged studios, networks and content owners to consider revenue models based on advertising. One example is the television series Smallville from Warner Bros., which ran threeminute episodes on Sprint’s mobile network that were ad-supported and generated high user engagement. Davis recommended that content owners “consider all the ways you can touch end users with this big pipe. The Web brought the advent of the short episode in an ad-based model. There will be new ways to build a business around WiMax.” Beginning with WiMax this year and followed with a competing technology called LTE, which Verizon will testlaunch next year, content owners now have another broadband service to add to their distribution platforms. V I D E O • A G E OC T O B E R 2 0 0 8 30 W i Ma x R e a c h e s t h e U . S . Broadcast TV to Broadband TV: The Trend Continues Clearwire’s Barry Davis Tim Sweeney, director of Mobile WiMax at Intel
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