After an endless preparation phase and numerous unkept launch dates, German mobile TV is now rumored to be terminated before it even really started. Allegedly, the companies involved are looking for a face-saving exit strategy. This is hardly surprising, because the commercial players’ business optimism was neither matched by an appropriate regulatory environment, nor a clear notion as to what kind of content should be distributed. The finishing blow to the project might now have been dealt, rather surprisingly, by the consumer electronics (CE) industry.
One of the major obstacles was that German regulators came up with a complicated, multiple-stage licensing procedure. Basically, both the Federal Network Agency and the State Media Authorities wanted to keep the three main parts of the value chain strictly separate: Content, customer relations, and distribution. This was supposed to enhance competition and pluralism at the same time.
Without any public interference, most likely the four mobile telephony operators in Germany (T-Mobile, Vodafone, E-Plus, and O2) would have snatched mobile television as well. These companies already own comprehensive transmission infrastructures, have existing customer relationships with practically everybody living in Germany, and control most of the end devices, i.e., the mobile phones.
This is because mobile providers sell high-tech phones at artificially low costs to their clients. Upon signature of a mobile subscription contract, anybody can immediately get a new phone very cheaply. As a consequence, mobile telephony companies are in a position to quickly push innovative and up-to-date phones into the market.
Of course, there is a catch. Mobile providers “brand” whatever devices they sell. This means they modify the phones in such a way that customers are forced to use only their respective network operator’s services, rather than selecting the best and/or cheapest service available on the market. A well-known example is Apple’s iPhone, which is in Germany exclusive to T-Mobile (as it is to AT&T in the US).
Consumers would have to invest extra effort and money to liberate themselves from such limitations, and most just do not care.
So the natural course of things would have been that mobile telephony organisations strongly promoted TV-enabled phones with TV subscription plans, while at the same time buying content from television stations, production companies, and other purveyors. Marketing and billing would have been very easy, given the existing customer relationships.
Yet, the authorities ruled differently. Broadcast transmission services for mobile TV in the EU-endorsed DVB-H standard were allocated to the company that also operates terrestrial television transmitters, Media & Broadcast. This organisation does not have any stake in German mobile phone networks and is strictly business-to-business (B2B). It formerly belonged to incumbent telco giant Deutsche Telekom, but was recently acquired by French TDF.
Then, another company was licensed to aggregate and broadcast mobile TV content: A consortium named Mobile 3.0, owned by two major German publishing houses, Holtzbrinck and Burda, and South-African media conglomerate Naspers. Despite some small stakes, neither of them has a significant influence on the conventional television sector of Germany. Mobile 3.0 follows a B2B-only strategy as well. The organisation plans to deliver content wholesale to distribution partners such as mobile telephony providers, which, in turn, are supposed to sell subscriptions to end customers.
However good the intentions of the authorities were, they could just as well have prohibited mobile television right away. This three-tiered system (four-tiered if you count in the original content providers) is just too complicated and too artificial; particularly because an organisation such as Mobile 3.0 exists solely for regulatory reasons, not because it has a sound business case.
The second major problem is content. Mobile 3.0 has concluded agreements with the major public and commercial TV stations, not least because the company was pressured to do so by the media regulation bodies. Public television will be free, while commercial channels will be encrypted and require a special subscription. But that is merely regular TV. As yet, nobody has been able to show convincing content tailor-made for mobile, i.e., for very small screens and for situations on the move, such as while commuting with public transport. There are some experiments happening, but none has managed to make an impact so far.
And then came the final blow: Manufacturer LG introduced the first phone capable of receiving DVB-T rather than DVB-H. DVB-T is regular digital terrestrial television, which in Germany is free and available almost everywhere, carrying 25-30 of the most attractive public and commercial channels. So why should a customer in his right mind pay for a DVB-H subscription when he can have basically the same content without charge via DVB-T?
This has also larger implications, because it is one of the rare occasions in which major CE manufacturers have untied themselves from serving the entertainment industry and/or the network providers and rather acted in the interest of the consumers. Most of the time, CE companies willingly oblige when they are asked to provide devices which are customised (read: restricted) to the requirements of, e.g., the major Hollywood studios or a dominant network operator.
The sad example of mobile TV via DVB-H in Germany combines two quite typical issues with digitalisation.
Firstly, if you do not act very quickly, technological progress might render your business case obsolete. Originally, DVB-H was invented because it saved coveted spectrum resources and used less battery power in the end devices. Ten or even five years ago, those were major advantages. But now, service-neutral airwaves have created new opportunities. Battery capacity is increasing. Devices become less power-consuming. DVB-H it does not matter that much any more.
Secondly, if you obstruct the market leaders – even for very good reasons – and let a diversity of market participants negotiate and try out standards and business models, the market might never develop at all, unless there is a uniquely strong and focused consumer demand.
Could it be, therefore, that competition and pluralism in some cases are better served if regulators let big business pave the way while imposing strict rules for access to technologies and networks, such as in the quite successful European telco liberalisation process? This might work faster and more efficiently than first chopping up the market and then letting it go in a rather indifferent laisser-faire approach.
Please see also The Ad Contrarian‘s August 2010 post, saying: “If you’re all excited about mobile viewing, don’t read this. Mobile viewing currently accounts for 2/10ths of 1% of all video viewing. In other words, it essentially doesn’t exist.”