Professional Documents
Culture Documents
Abstract
In the United States the content and media industries are strong. The mobile market is
characterised by different 2G and 3G-technologies and by many mobile operators, four
of which operate on a national level. The calling plans typically have special add-ons for
messaging (e.g., SMS), data traffic and content. Practically all mobile phones are
branded by the operator. Reuse of 2G and 3G phones on other networks is not easy,
and will generally only work for basic voice services.
The mobile operators emphasize their content offerings, especially their video content,
in their marketing. Technical solutions and conditions for use ensure that the content is
available only on the operators’ designated terminals, indicating heavy emphasis on a
walled garden approach. A closer look at the information about the video content
available reveals, however, that only a small fraction of the content is exclusively
available on only one operator’s network. Many of the channels provided are delivered
by a mobile video content aggregator. In summary, the operators have chosen a
business model similar to the model of cable TV.
There are different pricing arrangements for mobile content. We have no data about
use and revenues, but it is our impression that the industry is experimenting with new
ways to distribute content.
Branded terminals, service conditions and calling plans all result in higher switching
costs for the customers. Most likely, the service conditions also result in lower volume
of mobile content. For the mobile operators, this may be a very high price to pay for
increased switching costs.
Keywords
Mobile content, walled garden, exclusivity, switching costs, United States
Preface
This research note is based on data collected during a common study tour to
the United States in March and April 2006. We were visitors at the Annenberg
Center for Communication at the University of Southern California in Los
Angeles and we are very grateful for the hospitality shown to us at Annenberg.
The material presented in this note is mainly aimed at describing the situation
in the US market. It is a first insight into how US mobile operators approach the
emerging mobile content market. As this note shows, there are many
uncertainties in these market developments. We hope that this note may
provide some fruitful perspectives for further research as well as discussions on
how to approach mobile content markets.
Contents
1 Introduction.......................................................... 1
5 Conclusions......................................................... 21
References .................................................................. 22
1 Introduction
This research note aims at describing the main mobile operators in the United
States with special emphasis on their offerings of content services.
Expectations are high that the mobile content markets will increase rapidly and
that mobile content services will be a killer application for 3rd generation mobile
telephony (3G). At the same time, both mobile operators and content providers
are searching for viable business models for mobile content services.
Among the key issues in mobile markets is how content services should be
provided in order to generate income. In the Norwegian market, CPA has been
established as a model for service provision that enables the customer to use
and pay for content services across platforms (3). In other markets, operators
are developing quite different models.
We have investigated how US mobile operators have approached mobile
content services. The US mobile market is highly competitive. It has several
mobile operators, and competition between different technologies for mobile
service provision. Further, the content industry in the US is highly developed
and delivers content all over the world. The business models that emerge in the
US may therefore turn out to be of relevance for other markets.
These characteristics of the US market make it very interesting to study how
mobile operators approach content. We have focussed on basic characteristics
in how US mobile operators provide content:
• What content is provided – and how?
• How and for what do customers pay?
• Is content provided openly and to all customers regardless of mobile
operator, or are there measures of exclusivity and walled gardens?
We have investigated the content services provided by the mobile operators
looking at text based information services, and audio and video services. In
one, more focussed investigation we have focussed particularly on video
services, as these are the most advanced services and in the provision of these
services we would expect the mobile operators’ strategies to be the most
explicit.
As a research note, this document mainly serves to document concrete findings
and to provide a first insight into the US market. The note is mainly based on
material available from the web and from the sales outlets of the mobile
operators as of April 2006.1 There are many mobile operators in the US, most
of which are regional (1). For practical reasons the study focuses on the
operators with a national footprint. We have not recorded user experiences and
we do not have economical data that could inform us about the success or
failure of mobile content services.
1
The links are generally in footnotes. These were valid at the time of writing (April-July 2006), but
we cannot guarantee their validity in the future.
2
See http://en.wikipedia.org/wiki/List_of_United_States_mobile_phone_companies
3
The fall of AT&T wireless; http://seattlepi.nwsource.com/business/191742_attw21.html
4
Numbers are in thousands as of year-end 2004. Source (1).
5
As obtainable in April 2006.
6
Estimates of annual growth in 2005. Based on recent unofficial figures (column to the left).
7
In addition, all operators must provide AMPS until 2008.
8
http://www.cingular.com
9
http://www.cingular.com/about/company_overview
10
http://www.verizonwireless.com
11
http://aboutus.vzw.com/aboutusoverview.html
12
http://www.verizonwireless.com/b2c/aboutUs/wirelessNetwork.jsp
13
http://www.sprint.com
14
Sprint and Nextel:
http://www.sprint.com/investors/annualreports/pdf/2005/Sprint05arAllPages.pdf
15
http://www.t-mobile.com
16
http://www.t-
mobile.com/Cms/Files/Published/0000BDF20016F5DD010312E2BDE4AE9B/0000BDF20016F5DF010
980E317DFA319/file/2005_Q4.pdf
Verizon Communications was formed when Bell Atlantic bought GTE (the largest
independent, non regional Bell operator) in 2000. Verizon Communications had
previously bought NYNEX (regional Bell for New England and New York).
In 2006, Verizon wireless operated a CDMA network with 3G (1xRTT and EV-DO
technologies). Verizon Wireless also operated an AMPS network.
Besides mobile telephony, Verizon Communications provided local and long
distance telephony, Internet access over ADSL, Voice over IP, video over optical
fibre (the FiOS service) and also Internet over fibre (FTTP, fibre to the
premises, called FiOS Internet).
2.2.4 T-Mobile
T-Mobile in the US emerged as the result of Deutsche Telekom’s acquisition of
VoiceStream Wireless and Powertel. In 2006 T-Mobile operated a GSM network
with GPRS and EDGE, but without any 3G.
T-Mobile HotSpot was the country’s largest provider of WiFi hot spots with 7682
sites all over US, e.g. in Starbucks, selected stores, some hotels, airports and
airline clubs.
T-Mobile has announced that it will introduce UMA (Unlicensed Mobile Access) in
2006. UMA allows for “GSM over WiFi”, thus filling coverage gaps and possibly
(authors’ speculation) allowing for lower traffic charges.
17
Sprint brochure 2006 Sprint Choices, Service Plans and Rates, (NV5001-1400 49555604),
Cingular Brochure 2006 Cingular Nation GSM Plans Allover Network (NCP BR T 0206 0232 E
78802), Cingular Brochure 2006 Cingular Nation GSM Plans Allover Network (NCP BR T 0206 0232
E 78802),
http://www.verizonwireless.com/b2c/store/controller?item=planFirst&action=viewPlanDetail&sortO
ption=priceSort&catId=323&cm_re=Home%20Page-_-Personal%20Box-_-Individual%20Plans
and airtime, but the rates accessible online were often not transparent on
how this would work.
It is important to note that the subscriber usually not only paid minutes for
calling or sending messages, but also for receiving calls, messages and other
forms of data. The caller and the recipient of a call, the sender and the receiver
of a message were both charged. They seemed to be equally charged. As stated
by Verizon about charging text messages:
“TXT Messaging is a two-way text messaging service. Send and receive
text messages of up to 160 characters right on your two-way messaging-
capable phone. $0.10 for messages received and $0.10 for messages
sent.”18
T-mobile described that:
“You are charged for all calls processed through your phone, including
airtime for toll-free calls and for voicemail receipt and retrieval. Your
phone can process more than one call at a time, Certain calls or features
involve multiple calls, and you will be charged separately for each; these
include forwarded calls (in to your phone and out to a forwarded number),
call waiting, and hold, conference calls and unanswered incoming calls
forwarded to voicemail. ... Except with respect to callers and recipients on
rate plans that include unlimited mobile-to-mobile calls, the caller and
recipient each will be charged (...) on a mobile-to-mobile call. .... You will
be charged for all data sent by or to you through the network, whether
received or not.”19
Similarly, Cingular stated that:
“Use of Services will be charged as specified in your plan. Text, Instant,
and Multimedia messages are charged when sent or received, whether
read or unread, solicited or unsolicited. Cingular does not guarantee
delivery of messages.”20
Sprint offered free incoming plans. These were more expensive to subscribe to
than the regular plans. The cost of extra additional minutes was quadrupled in
these plans.
3.2 Services
The services these companies provided were quite similar. They all provided
voice telephony, voice mail, caller ID and other basic services related to voice
telephony. They offered text and picture messages, data services, e-mail,21
Internet access for computers22 – and content services, which are in focus here.
18
http://www.verizonwireless.com/b2c/store/featurePopup?item=planFirst&featureType=incl&featur
eId=1847
19
Brochure: T-mobile 2006: Rates, Services & Coverage (T1031.4.LOS.4x9)
20
https://www.cingular.com/media/terms/#section1
21
E-mail is typically billed by the volume of data sent and received.
22
Internet access for computers is a service all operators provide. We have not investigated this
service particularly other than noting that efforts are made to separate this service from mobile web
and content services. This is discussed in the illustration in the last part of chapter 3.
Compared to the Norwegian setting, these would be the content services that
had been around for a long time, firstly by SMS, later also available through
WAP. These services included:
• Ring tones and caller tones (tunes the caller can listen to while waiting for
an answer, also called answer tones and ringback tones).
• Graphics, styles and background pictures for the phones.
• Games to download.
3.2.3 T-Mobile
T-Mobile provided basic content services like caller tones, ring tones,
background pictures and games. These were downloadable from what they
called T-zones, which the customer could access via their mobile phone or on
the web. T-zones were free to browse, but the customer was charged for all
data sent by or to the customer, whether received or not.24 T-Mobile’s services
were for T-Mobile customers only and would be charged to the customers’
phone bills. We did not investigate T-Mobile’s services more closely since they
did not provide more advanced services.
3.2.4 Cingular
Cingular provided both basic and more advanced services. They described the
following services: Text Messaging, Instant Messaging, Multimedia Messaging,
MEdia Net, Ring tones, Info Alerts, Graphics, Games and Mobile Email.
23
Not to be confused with the popular notion of Web 2.0 referring to new advanced uses of WWW
like flickr, del.icio.us, etc.
24
Brochure: T-mobile 2006: Rates, Services & Coverage (T1031.4.LOS.4x9)
Downloads
Streaming
Cingular provided streaming of voice and video when offering channels from
MobiTV28 and MobiRadio.
Subscribers could access MobiTV with over 25 channels of TV for $9.99 a
month.29 The brochure stated that “Media Net service required and usage is
charged, based on your plan. Cingular recommends an unlimited Media Net
plan.”30 MobiTV is not a wireless company but a provider of services to several
network operators.31 MobiRadio are radio channels provided by the same
company.
Information services
Media net provided News, weather, sports, movies and more on a text-based
service.32 The portal looked like a WAP service but was not referred to WAP. It
was further clearly distinguished from computer-based Internet access:
MEdia Net is not equivalent to landline Internet. Only select sites
accessible through a mobile connection are available. You are restricted
from using a home page other than the Cingular home page. MEdia Net is
billed by total volume data sent and received (in kilobytes). .... Cingular
provides connectivity for access to MEdia Net. Information is provided by
unaffiliated content providers and is subject to change at any time without
notice.
25
Cingular Brochure 2006 Cingular Nation GSM Plans Allover Network (NCP BR T 0206 0232 E
78802)
26
https://www.cingular.com/media/terms/#section1
27
Cingular Brochure 2006 Cingular Nation GSM Plans Allover Network (NCP BR T 0206 0232 E
78802)
28
http://www.mobitv.com/
29
Cingular Brochure 2006 Mobitv/mobiradio (DAT TO T 0106 0445 E)
30
Cingular Brochure 2006 Mobitv/mobiradio (DAT TO T 0106 0445 E)
31
http://www.mobitv.com/
32
Cingular Brochure 2005) Cingular Media Net: With Media Net (DAT TO T 1105 0413 E)
3.2.5 Verizon
Verizon provided basic downloadable content services over its “Get it Now”
platform, and more advanced services over its V CAST platforms:
Downloads
- and streaming
Information services
Verizon’s information service very much resembled a WAP portal, but was
referred to as Mobile Web 2.0SM. The service provided access to text based
services of CNN, Fox Sports etc. To use the service, the customers had to
activate it through a process in which they accepted the terms of subscription:
Subject to Customer Agreement, Calling Plan, Get It Now Agreements.
Get It Now capable phone required. All airtime used applies towards your
33
http://getitnow.vzwshop.com/index.aspx?id=vcast_music_how2phone
34
http://getitnow.vzwshop.com/index.aspx?id=vcast
35
http://getitnow.vzwshop.com/index.aspx?id=vcast_music_how2start
36
http://getitnow.vzwshop.com/index.aspx?id=video_browse
37
http://getitnow.vzwshop.com/index.aspx?id=video_how
Calling Plan's monthly airtime allowance, and usage above allowances will
be charged at the rate set forth in your Calling Plan.38
Charges for premium content services are in addition to any network
usage costs (whether charged by airtime minutes billed individually or
subtracted from a minute allowance, or by kilobytes billed individually or
subtracted from a kilobyte allowance).39
38
http://getitnow.vzwshop.com/index.aspx?id=news_web_learn
39
http://getitnow.vzwshop.com/popups/footerTermsWeb.aspx
Downloads
The Sprint Power Vision Service (Sprint PSP) was promoted as an exclusive
service only from Sprint and included both downloads and streaming of audio,
video and game services.40
The Sprint Music Store offered wireless download of digital tracks – “hundreds
of thousands of full-length songs from virtually every genre”. The songs could
be downloaded directly from the phone – and even to the PC.
Streaming
Sprint also offered the streaming of music through Sirius Hits 1 (a satellite
radio station) and by letting the customers “choose from their many individual
premium commercial-free stations.” Apparently, this was a kind of real-time
radio streaming. The provision of satellite radio content over the mobile
network also raised a discussion of censorship.41
The customer could also get exclusive video clips, performances and interviews,
watch Sprint TV or clips from other TV providers.
MobiTV claimed that they delivered services to Sprint. We could not find any
explicit mentioning of this on the Sprint website. However, the provision of
video content did fit well with an assumption that MobiTV was the main
provider of video content to Sprint (see chapter 4).
Information services
3.2.7 MobiTV
Above, the four main mobile operators have been briefly described. Three of
these (Cingular, Verizon and Sprint) provided mobile audiovisual content
(video). As will be described in the next chapter, the video content they
40
Sprint brochure 2006 Introducing Power Vision only from Sprint (AU5000-1301
SPEVDOBRO_11/05
41
See http://www.orbitcast.com/archives/sirius-/-sprint-debuts.html and
http://getsiriusinfo.blogspot.com/2005/09/sprint-pcs-phone-now-with-sirius.html
provided was basically mobile services from the main television providers, such
as Fox, ESPN, CNN, Cartoon Network etc.
How the deals were made between the television providers and the mobile
service providers was not transparent in our data material and should be
investigated further. However, there was a third kind of actor involved which
could be called a mobile content aggregator.
Cingular stated (as described above) that they received their video services
from MobiTV, and MobiTV confirmed this on their website and stated that they
also delivered services to Sprint. MobiTV was also available on some regional
networks in the US, and on Networks like Orange and 3 in the UK, Bell in
Canada as well as on other networks and in other countries.
MobiTV had two services; the MobiTV Service that included a long list of both
live and made-for-mobile television channels, and MobiRadio Service, delivering
more than 40 commercial-free digital music channels.
MobiTV was founded in 1999 and is a privately held company, headquartered in
California. MobiTV calls itself a global leader in television and digital radio
services for mobile devices. On March 14, 2006 it was announced that the
company had been chosen by OnHollywood as one of the Top 100 Private
Company Award winners.
42
A Norwegian example of this would be the exclusive deal between Canal Digital and TV2 in the
Norwegian satellite market.
massive advertising for mobile services, including content services, all the
advertising was done by the mobile operators. We found no advertisements
from content service providers.43
Another illustration of the closed environments for mobile content was how
Sprint explicitly separated Internet access for computers-services from the
mobile content services. In fact, phones could not be used for these services
unless the customer has subscribed to a specific plan for this:
“Except with phone-as-modem plans, you may not use a phone (including
a Bluetooth phone), provisioned with a plan that includes unlimited
Vision/Power Vision, as a modem in connection with a computer, PDA, or
similar device.”44
Similarly, Cingular stated that:
“MEdia Net packages are not available on PDAs, RIM devices, or Laptop
Modem Cards. MEdia Net packages are not intended for tethering.”45
One may of course speculate about the motivation for these conditions, but the
effect is clear. There is a technical barrier between mobile content accessible on
the phones and content available from the Internet. Where the barrier is
incomplete; there are conditions that prohibit mixing the two worlds. Thus, if it
is technically possible at all to transfer content from these services to a PC or to
any other device with an ordinary Internet connection, such use is prohibited.
Moreover, the mobile phones cannot be used to access ordinary free content on
the Internet.
43
This is in stark contrast to Norway, where the service providers actively develop and promote
their services, with high visibility in terms of advertising.
44
Sprint brochure 2006 Sprint Choices, Service Plans and Rates, (NV5001-1400 49555604)
45
RIM (Research in Motion) is the provider of the highly successful BlackBerry wireless e-mail
solution.
46
See http://wireless.fcc.gov/services/index.htm?job=operations_2&id=broadband_pcs and
http://www.wirelessadvisor.com/analog-cellular.cfm
phones: “Our services will only work with our phones.”47 The other operators
did not explicitly refuse other phones, but underlined that services might not
work with phones not purchased through the operator. The terms and
conditions from T-Mobile and Verizon read:
T-Mobile: Use of Phone with Other Providers/Phone Purchases. Wireless
devices and networks do not all use the same technologies. Your Phone
may not be compatible with the network and services provided by another
wireless service provider and, therefore, may not work with that
provider's wireless service. You may buy a Phone from us, or from
someone else, but it must be GSM/GPRS equipment that is compatible
and approved for use with our network and Services and we do not
guarantee that all T-Mobile features will be available with such equipment.
A T-Mobile Phone may be programmed to accept only a T-Mobile SIM
card.48
Verizon: Your wireless phone is any device you use to receive our wireless
voice or data service. It must comply with Federal Communications
Commission regulations and be compatible with our network and your
calling plan. Whether you buy your wireless phone from us or someone
else is entirely your choice. At times we may change your wireless
phone's software, applications or programming remotely and without
notice. This could affect data you've stored on, the way you've
programmed, or the way you use, your wireless phone. Your wireless
phone may also contain software that prevents it from being used with
any other company's wireless service, even if it's no longer used to
receive our service.49
Thus, the terminals were basically sold as integral parts of the mobile
operators’ chain stores and the effective terminal control makes switching costs
very high. It also enabled the operators to preinstall features and applications
etc. According to a salesperson at a T-mobile store, neutral phones were
supposed to exist, but these were impossible to find. Furthermore, as
underlined in the quotes from the terms and conditions above, such phones
would not work with some of the services provided, probably because of
preinstalled software. The issue with phones that are locked to a specific
operator is, of course, controversial.50
47
Sprint brochure 2006 Sprint Choices, Service Plans and Rates, (NV5001-1400 49555604)
48
http://www.t-
mobile.com/Templates/Popup.aspx?PAsset=Ftr_Ftr_TermsAndConditions&print=true
49
http://www.verizonwireless.com/b2c/globalText?textName=CUSTOMER_AGREEMENT&jspName=f
ooter/customerAgreement.jsp
50
See http://www.consumersunion.org/campaigns/handset%20locking%20letter%20FCC%20-
%20mar%2011%2004.pdf
and that it wanted to be different from its competitors, not basing its services
on MobiTV.
The data we have collected do not clearly support either of our hypotheses.
There is a mixed picture: Most content seemed to be non-exclusive, and there
was considerable overlap of content. Still, there were examples of video content
provided with exclusivity arrangements.
We should also add to this that the existence of MobiTV was new to us. MobiTV
apparently works as a kind of mobile video content aggregator. Its overall
business, results and business models and its competitors deserve further
study.
51
http://www.cingular.com/media/terms/#section1
52
http://www.hbo.com/mobile/index.html
53
In the analogue cable market, a set top box is usually not necessary for the basic package of
channels, but for additional services and channels, the subscriber would need such a box. For digital
services, a set top box is required.
As we can see, the market structure of the cable TV market was quite similar to
what seems to be the basic structure of the mobile content market in the US.
To what degree it is a wise move to base the mobile content market on the
cable TV model is contested and will be commented in the conclusion. We shall
in the following discuss what may explain the choice of the cable TV-model for
the US mobile market.
It is more uncertain whether there are any ambitions to generate revenue from
content. There are examples of per clip-pricing (audio or video clips) or channel
subscriptions, but we do not know the contractual arrangements between the
operators and the content providers or aggregators. Hence, we do not know
whether the operators get any extra revenue from video content.
Finally, modernity may be a motivation. Even though the volumes appear to be
low, the capability to provide video content is new and the business models are
still uncertain. The operators give much emphasis to their video content in their
marketing. To us, this indicates that there is great uncertainty and a strong fear
from being left behind in case there is a large market for mobile video content.
Hence, modernity appears to be an important motivation. Whether this factor
has any strong impact will be clear when we see the development of subscriber
numbers among the four operators: T-Mobile does not have any of these
services so far, and probably will not get any in 2006. A change in the growth
pattern (see table 1) to the disadvantage of T-Mobile may indicate that this is
important.
Seen from the perspective of the providers of mobile video content, i.e. TV
channels and aggregators, there is clearly interest in increased revenue or
increased visibility from mobile video, as long as these services do not
cannibalise existing business. This may make a business based on walled
gardens and specific terminals relatively safe, as there is practically no risk that
the content will find its way to competing media platforms.
It is more unclear, however, whether the mobile video content providers have
any real interest in exclusive deals with one mobile operator, unless they get
sufficient compensation for not providing the content to anybody else. Our data
appear to support this, as there is considerable overlap between the offerings
and only few examples of truly exclusive content.
We choose to interpret this as an expression of uncertainty, if not confusion.
The content providers feel that they need to try this new channel, but they do
not have any clear strategies or business models for this so far. This is similar
to the early presence of media on the World Wide Web, as observed in studies
in the mid 1990s (2, 4, 5).
5 Conclusions
Our main findings are that:
1. Phones are exclusive and provided by mobile operators.
2. Content packaging is exclusive. The portals/environments for content
services are exclusively provided to the operators’ customers.
3. The content on these content service portals is mainly non-exclusive.
Although there are some instances of exclusivity, most content services
seem to be provided without exclusivity arrangements. The content appears
to be available to whatever operator will negotiate a deal with the content
provider.
4. The content is surrounded by walled gardens. The customer cannot access
content not provided by their mobile operator, and the content is not
available on other platforms than the operator’s branded terminals.
In launching mobile content services, the mobile operators have adopted a
business model that is very similar to the well-known business model of cable
TV. Whether this is a suitable business model for mobile content, and for whom,
is an open question.
There are different actors on the arena with respect to mobile content:
consumers, network operators, TV channels or other media corporations,
telephone manufacturers, and mobile content aggregators. Other relevant
actors could be independent programme producers and regulators, although we
have not observed these in this study.
In mobile telephony, voice and messaging will give larger revenues for many
years, if not for ever. While succeeding in generating switching costs, the
mobile operators risk giving users as strong reasons to go to another operator
as reasons to stay. With all likelihood the walled garden approach will reduce
the total volume of consumption compared to a situation where all attractive
content is available. In a regime of this kind there is little, if any, room for user-
generated content. In the long run this reduces traffic with detrimental effect
for content providers and for mobile operators. For the operators, this may be a
very high price to pay for increased switching costs, potentially moving
consumption away from mobile phones to other kinds of portable devices.
The results presented in this note are uncertain. More thorough analysis of the
same data, and data about use of these services, the contractual arrangements
between content providers and operators, and analysis of the actual content of
these services may reveal other patterns and strengthen or weaken our
conclusions.
References
1 Annual Report and Analysis of Competitive Market Conditions with Respect
to Commercial Mobile Services, tenth report. FCC 05-173, Federal
Communications Commission, Washington DC, September 2005.
http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-05-173A1.pdf
MarketWatch
MAXX Sports
Meteo Media
MLB.COM Mobile
Mobi Trailers
MSNBC
MTV, MTV2, mtvu
Music Choice Music Choice
Nano TV
NASCAR.COM to go
NBC Mobile NBC Mobile NBC NBC Mobile
NFL Network
Nickelodeon
RDI
Sesame Street
Shift
ShortsTV
ShortsTV Corto
Sirius Hits
Smash Hits
Sports Illustrated
Sprint TV
The History Channel
The Mic
The OC
The Shopping Channel
The Weather Channel The Weather Channel The Weather Channel The Weather Channel
The Weather network
TLC
Toon World Toon World
Treehouse
Univision
V CAST Ent News
V CAST Music Videos
V CAST Showcase
V CAST Sports
VH1
V40
YTV