[opendtv] Re: Auction Hi-lights

At 12:12 PM -0400 3/24/08, Manfredi, Albert E wrote:

I'd expect these winners, i.e. mostly AT&T and Verizon, to build out
something that is similar in cost, possibly more costly, than their
cellular networks. And for which they will extract monthly fees at least
as high as that as well. (Probabaly higher, since this was the biggest
auction ever.)
I strongly suspect that the first thing these companies will do is move much of their traditional voice traffic into the 700 MHz spectrum. These operators have two major problems today: 

Capacity and reach.
Adding spectrum helps with the capacity crunch, but the propagation characteristics of the 700 MHz spectrum allow for much better service, especially inside buildings. I would expect to see more voice in the 700MHz bands, freeing up the higher frequencies now used for voice for the rapidly growing 3G data services.
There was an interesting Forbes story I read this morning about Best Buy moving into the mobile handset sector in a major way. 

http://www.forbes.com/2008/03/25/best-buy-mobile-tech-wire-cx_ew_0325best.html?partner=alerts
The bottom line is that the cellular services are spending small fortune in support of their current business model, where they have stores everywhere to sell devices and services. All of the major carries have announced flat rate plans (about $99 per month) for voice and limited data. Since a big chunk of the 700MHz spectrum comes with the new rule of open device attachment, Best Buy is betting that they can take a large chunk of the retail market as the carriers close these expensive storefronts and let consumers pay the full cost of the devices in return for the ability to connect them to any network.
At the same time, however, Google is pushing full speed ahead on opening up the white spaces for mobile data services. It is quite likely that future products like handsets that support Android, and Blackberries and iPhones will have the ability to use or to bypass the telco services. 



So, assuming you're talking about FOTA broadcast, how does that revenue
compare with ad-supported TV? I don't know, but to me that's the
question to answer.

Or, if you're talking about ad-supplemented subscription TV, then maybe
the monthly fees can be a little lower.
The old models don't apply here. The mobile market is not moving toward subscription service - it is moving away from these services. Mobile consumers are going to look for services, not channels. Services that provide exactly what they need, that take advantage of 24/7 connectivity to push the service to the mobile handset for on demand usage. The notion of tuning into a broadcast while riding the bus or train during a commute is as archaic as channel surfing is becoming in the family room. On the other hand, the commuter may be watching/listening to/reading something that they really want that is already in cache, and perhaps searching for additional related content or news.
The reason that "broadcast spectrum" is becoming relatively cheap is that the push business model is growing relatively obsolete. Advertisers are looking for prospects, not audiences. The ability to reach real prospects who are pulling in the services they want has much higher value that pushing TV programs to demographic groups. THIS DOES NOT PRECLUDE using broadcast techniques to deliver the bits to the new "groups" that "subscribe" to a specific service. For example, a radio or TV station might be well advised to create a local traffic service that could be pushed to commuters... 


I don't know about you, but to me these outrageous auction revenues are
scary. As scary as the way house prices went up the last few years.
Hrdly something to cheer about. The money might be going in the Treasury
in the short term, but somehow AT&T and Verizon are planning on making
back many times that amount.


Indirect taxation.
This is just a reflection of opportunity costs relative to the actions of an entrenched industry that has been trying to change the slope of the end of the product life cycle curve, by preventing the best economic use of this spectrum. 

Regards
Craig



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