Last time, I wrote about some recent announcements (and rumors) about “the end of free” – i.e. media companies that are starting to charge for access to their content on the internet. While this is interesting for folks who are heavy users of nytimes.com or people who like to watch a lot of video on Hulu, I think the real change in business models is about to become much more apparent in the mobile world.
In the last few months, we have seen plenty of items in the news explaining how mobile users (and especially iPhone users) have been overwhelming wireless networks with content (especially video content). Carriers have responded by trying to figure out ways to penalize the heaviest users. Essentially, the iPhone has made it simple for users to communicate with video, and the resulting traffic has consumed the available wireless bandwidth. AT&T’s John Stankey recently announced that his company is increasing its investment in wireless infrastructure by $2B this year in an attempt to combat this problem.
But where is this money supposed to come from?
Competitive pressures have caused wireless carriers in the US to offer unlimited, “all you can eat” plans for voice and data. The conundrum is obvious – pricing models are encouraging consumers to increase their usage of wireless service, but this behavior is exactly what is overwhelming wireless networks.
I believe that the “end of free” will become most apparent through mobile video. I believe that carriers like Verizon Wireless and AT&T will have to charge more to those users who are heavy users of network resources. But they will have to position these charges as a premium service – some way of encouraging heavy users to pay more in exchange for a better experience in some way.
In my opinion, improved video quality is the key to unlocking this revenue potential in the wireless world. Most of today's mobile video “kind of sucks” (to quote a friend of mine). Poor quality has a myriad of causes, including bandwidth-constrained networks, mediocre video coding technologies, and content that is not very mobile-friendly.
However, a big part of the problem is that carriers do not have a way to measure the quality of the mobile viewer’s experience. Companies like Dialogic and others are working to provide these video quality measurement tools. Once these tools are available, I think wireless carriers have plenty of opportunity to increase their revenues.
I am predicting a new revenue model to emerge in the mobile space – wireless carriers will offer premium service, but rather than basing the premium on increased usage, carriers will guarantee a higher level of quality. Some consumers will be eager to pay for higher quality. And both consumers and carriers will need access to video quality measurements to keep each other honest.
Instead of “penalizing” consumers for using their networks, wireless carriers can use video quality as a way of encouraging users to view more video – and to pay more for the opportunity. Remember – you heard it here first!