The coming year is going to be the one when top US operators AT&T and T-Mobile US launch new streaming services as a way to attract and engage consumers, and compete with OTT giants including Netflix, Hulu and Amazon – as well as with each other.
T-Mobile said it is building a new TV experience for the 5G era using its Layer3 TV resources, while AT&T plans to use its new WarnerMedia assets for a streaming service with content from HBO and CNN for starters.
But this begs many questions, such as how important it is for content to be exclusive, and how these operators will compare with growing and strong competition: let’s not forget 2019 is also the year Disney will be launching its own streaming service which will include original programming around popular franchises including Star Wars.
So, do these operators stand a chance?
Kester Mann, director – consumer and connectivity at CCS Insight, believes AT&T’s video streaming service will be greatly supported by its huge investment in content, which culminated in the mega $85 billion acquisition of Time Warner. T-Mobile will be boosted by growing recognition for its brand following strong improvements in network and customer care, which will drive additional spend, customer engagement and loyalty.
Chad Sakaguchi, executive account director at software company Teoco, echoed these sentiments. “Customer care is a key to success. T-Mobile already has a well-publicised strategy in place around ‘uncarrier’ type customer service, and tells a compelling story around their customer care being a key differentiator of its overall service offering.”
However, he added that the operator “will need to ensure this is carried through to the streaming service”.
Jonathan Plant, senior marketing manager at software vendor Openet, is also positive about the operator’s strategy. He stated the foundation Layer3 TV has built “can easily be merged into the T-Mobile brand without having to start its own TV offering from scratch.” What’s more, “Layer3 operated its signal in a similar fashion as to how Netflix sends video, so this goes hand in hand with the rollout of 5G”.
Meanwhile AT&T’s strength lies in the content it has acquired. As Forbes noted, “the company is likely to keep a lot of its content exclusive to create a compelling streaming offering”, even though this has the downside of giving up the revenue it could garner from licensing to third-parties. It’s also bought Otter Media to build up its media portfolio.
This exclusivity will be key for AT&T. On the other hand, Mann said it is more likely T-Mobile will assume the role of content aggregator, establishing partnerships with other providers. “Such an approach could accelerate time to market and would avoid distraction from the mammoth task of integrating operations with Sprint, should its merger be approved by regulators.”
“It is hard to see them signing off big cheques in pursuit of exclusive content to challenge heavyweight rivals directly,” he stated, adding that “the jury is out as to whether content ownership and production is a viable long-term strategy”.
He gave the examples of BT and SFR in Europe, which have placed big bets on acquiring rights to sports programming “but are yet to see significant extra spend among their customers”.
Also, it might be the case that several operators become aggregators and this erodes the value of such an approach as everyone joins the party. An example of this: there are already a number of providers that have a partnership with Netflix.
The technical side
In order to make streaming services a success, especially with the advent of 5G, there are some things both operators will have to keep in mind.
“A seamless transition between devices is essential and 5G should allow full 4K definition regardless of where and when you are consuming content. As sports is one of the few forms of TV content that has to be watched live, a 5G network needs to be able to handle the likes of the Super Bowl and the high volumes of people consuming this 4K streamed content at the same time without any latency or lag issues,” said Plant.
Sakaguchi added the video encoding and technical aspects that typically put consumers off when it comes to internet-based streaming mobile video services are usually related to poor video quality and video/audio synchronisation issues, and these must be avoided.
What’s more, in September 2018 OpenSignal CEO Brendan Gill said managing the data load associated with streaming video is “a real and current challenge for mobile operators on a really large scale”.
“When there’s a peak or spike in demand, primarily driven by video, that’s going to lead to congestion on the network, which ultimately translates to the buffering people experience in their video streams,” he added.
T-Mobile has an advantage here. Sakaguchi said: “Layer3 TV already has one of the most advanced video codecs, high efficiency video coding, to reduce its streaming bandwidth requirement for 4K video down from 10Mb/s down to 4Mb/s. This will be one of the keys to broadly scale a truly wireless-first video service.”
It is worth mentioning what Forbes noted about AT&T: that its control over content and distribution could work in its favour, with the weakening of net neutrality rules and relatively lower oversight by regulator the Federal Communications Commission (FCC).
“The company currently limits streaming video to standard definition on its basic unlimited wireless plans. It’s possible that AT&T could allow full HD or 4K resolution on its own video service while limiting resolution for rival video services, giving it a competitive advantage,” the news outlet wrote.
There are some instances these operators can look to and learn from, such as Telefonica, which GSMA Intelligence senior analyst Nuno Afonso mentions in this blog. In 2018 the operator announced the launch of original content to be broadcast over 13 countries in Latin America, alongside content sourced from third parties.
“Content quality and choice are obviously a key differentiator. Telefonica, however, also sees user experience as a key factor to differentiate its proposition: the operator expects its network and content access platform to play a strong role in that regard. How this all plays out is still a question,” noted Afonso.
CCS Insight’s Mann praised Veon and said it “remains the most extreme example yet of repositioning by a telecoms provider. It should be commended for adopting a radical new business model at a time when the role and relevance of a network operator is increasingly being called into question”.
However, he explained online messaging is a notoriously difficult market to break into, adding that Veon may have underestimated the long-term investment required to ensure its platform gained the scale needed to make profit.
Meanwhile Verizon’s content strategy included go90, which The Verge noted suffered from “anaemic viewership rates across the board” and the fact that “none of its original video programming ever really caught on”, with former Verizon CEO Lowell McAdam admitting the app “did get a little bit overhyped”.
If T-Mobile and AT&T are able to leverage their respective advantages and learn from Verizon’s failure with go90, it is entirely possible they are able to pull this off. Other operators are likely to follow in their footsteps, thereby revolutionising the traditional operator business model.
The editorial views expressed in this article are solely those of the author and will not necessarily reflect the views of the GSMA, its Members or Associate Members.Subscribe to our daily newsletter Back