Wireless Video is Testing Data Limits

26 Mar, 2012 By: Chris Tribbey

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Mobile data throttling could prove concern for Netflix, UltraViolet

More and more content is heading into the wireless world and filling up the available spectrum.

Netflix already is available on any number of mobile devices, and on March 21 the company announced to its streaming customers that its iPad application would soon be able to support high-def video. The Digital Entertainment Content Ecosystem (DECE), the cross-industry consortium behind UltraViolet, counts a half-dozen mobile hardware and technology companies among its members, to help fulfill its goal of buy once, play anywhere for digital content.

But both Netflix and UltraViolet, and other content companies that are increasingly looking to offer content on the go, are facing a problem: throttling. Mobile companies must deal with increasing data usage by customers and have resorted to slowing down their biggest data users after they reach a certain threshold.

“Customers are using more data than ever before,” said David Christopher, chief marketing officer for AT&T Mobility and Consumer Markets, when the company announced its new data plans of $30 for 3GB and $50 for 5GB.

AT&T estimates that wireless data volume doubles annually, and wireless data traffic has grown 20,000% in the past five years. With 3GB of data getting AT&T subscribers only 140 minutes of streaming video, that spells trouble for consumers watching mobile video and for content companies looking to the mobile space. Indeed, in a recent Wall Street Journal profile, users lamented streaming only two hours of video on the new iPad under AT&T’s 3GB plan before hitting a data wall.

“Streaming video consumes the most data of all possible activities and is often the reason customers are among the top 5% of heaviest users,” AT&T says on its website.

T-Mobile already has canceled its unlimited data offering for subscribers and cuts off users after they pass 2GB of usage. Verizon also stopped offering unlimited data plans and begins throttling after 2GB. Sprint is the lone, major wireless carrier still offering unlimited data plans.

Mark Teitell, GM and executive director of DECE and UltraViolet, said he understands streaming and downloads have advantages for users, and UltraViolet is meant to do both. But he expressed concern over costs mobile UltraViolet users may face.

“When consumers have to rely on streaming on their mobile devices, they may face performance issues related to stream quality, along with incurring additional costs associated with bandwidth caps and usage charges,” he said. “UltraViolet’s open system lets consumers download locally-stored files (downloaded while not on 3G/4G networks and/or copied directly from other devices) and play their UltraViolet entertainment on up to 12 Ultra- Violet compatible apps or devices in order to ease the complications that may arise from streaming.”

A Netflix spokesman declined to comment further than saying, “data caps are not in consumers’ best interest.”

Walter Piecyk, mobile industry analyst with BTIG Research, said the problem is a lack of mobile broadband spectrum for operators, which are trying to handle an ever-increasing amount of mobile data usage in America. For wireless, spectrum refers to the amount of capacity over certain frequencies that carriers have licensed from the federal government, and mobile operators are pushing for more. The 2010 federal National Broadband Plan calls for “an additional 500 MHz of spectrum available for mobile broadband within the next 10 years.”

“The problem of throttling is a result of the government’s inability to source additional spectrum to the operators,” he said. “Without spectrum, the operators that most Americans use for their wireless service will not only throttle speeds but also increase prices on whatever data the consumer can squeeze through the throttled space.

“This could have a material negative impact on the affordability of great new data applications like DirecTV’s new iPad App, which allows streaming of content outside of the home.”

The Federal Communications Commission March 21 took steps to open more spectrum for wireless carriers, including one that would have Dish Network switch some satellite spectrum over to mobile broadband. Separately, Verizon is currently trying to buy wireless spectrum from four cable companies, to the tune of nearly $4 billion.

Still, when it comes to use of video content on mobile devices, the problem may be overstated, according to Validas, a consumer-based group that analyzes mobile data and consumption. The company keeps track of Sprint-Nextel, Verizon, AT&T and T-Mobile.

A recent study by the group examined 15,000 smartphone lines in 2011 and found that from January to December average data consumption rose 34.7% for all users, or from 448.8MB to 604.8MB. But median users’ data consumption shot up 136.1% in the same period to 387.4MB from 164.1MB.

For AT&T, Validas found that only 5% of customers use more than 2GB of data per month, and only 2.7% of those used at least 3GB.

“The fact remains it’s a slim portion of users who are in the red zone,” said Dylan Breslin- Barnhart, VP of communications for Validas.com.

But a new study by PricewaterhouseCoopers shows that data consumption is likely to go nowhere but up. Smartphone sales were 48% of all wireless phone sales in 2011, up from 30% in 2010, and accounted for 51% of upgrades, up 36% from 2010.

In the 2011 survey of a dozen American wireless carriers, 82% said that at least 90% of their subscriber base was covered by 3G technology, up from 67% in 2010, and seven operators said they were getting ready to deploy 4G technology, allowing for faster data transfer.

“There is significant pressure on carriers to migrate to the most efficient networks while needing to address the issue of spectrum scarcity,” said Dan Hays, U.S. advisory wireless leader for PricewaterhouseCoopers. “We are beginning to see carriers shut off legacy networks and force customers to migrate to new technologies. The challenge ahead will be to balance slowing subscriber growth and pricing pressure with investment in much-needed network improvements to enable the broader move to smartphones.”

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