New Business Models in Wireless, Video, and the Cloud?

Well, it looks like there’s some substance in the rumor that Apple is going to get into the mobile broadband business.  At least two independent reports are now saying the company is negotiating with several wireless operators to become what’s called an MVNO, or mobile virtual network operator.  MVNOs don’t own spectrum or facilities but lease capacity from others.  I commented on this possibility early this year when it surfaced that Apple had a patent for a carrier-agile phone, one that could allow them to roam between, say, AT&T and Verizon.

The benefit to Apple here is pretty clear; they would get a deep discount from a wireless operator for bulk capacity and then earn the retail profit spread on each customer, who would now buy their wireless service from Apple.  There are already MVNO relationships worldwide, so everyone knows that the model can work, but the profit margins for these players are thin.  Apple’s retail power and pizzazz combine to give them a better-than-average shot at making this work, but I don’t think it’s a slam dunk yet.  The question is whether they can play the carriers against each other to get favorable rates and good coverage.

Another factor in the MVNO picture might be AT&T’s “Watson” APIs, which are scheduled to be available to developers in just a few months.  Watson would allow cloud-based or device-based speech recognition to be integrated with apps for virtually any device, and Apple might well see this as a sign that the network operators intend to deploy their own cloud-based or device-based service features, which would collide with Apple’s ecosystemic profit plans.

I don’t think this is a done deal at this point; I do think Apple and Google are both checking out the business model for an MVNO launch, and we may see at least one of these giants move.  The obvious timing would be for the fall/holiday period, and if there’s something on tap for that period we should hear more by mid-summer.

There’s also more indication that the TV Everywhere model is expanding and becoming the de facto streaming strategy.  Networks (NBCU) and advertisers are both looking more to symbiotic ad deals that exploit streaming as an extension of linear TV, and it turns out that both are very comfortable with that notion and highly uncomfortable with the alternatives.  The interesting thing is that the TV Everywhere acceptance by advertisers is an indication that the networks themselves are unlikely to try to bypass linear broadcast and cable players in favor of direct streaming to customers; the ad revenue won’t cover the cost of the shows and the linear players would likely stop carrying the channels.

Yesterday I pointed out that there was a rumor Hulu was being put under pressure here.  Today the story is that Sony is dropping its plans for a streaming service because of the price-cap policies of Comcast (and presumably other players).  Comcast, so the story goes, will be taking its TV Everywhere platform (X1) to a major city shortly.  While there’s also a rumor that CBS is again at least looking at Hulu distribution of shows, it’s not clear whether that consideration is conditional on the link to linear subscription.  So TV Everywhere is going to win in content, and that’s good news for operators because it links streaming success with linear TV delivery, something the appliance players don’t do.  Might that be another reason for some appliance guys to be thinking of MVNO relationships?  Could be.

In yet another development, this time in the cloud, Microsoft has announced that it’s going to drop its “Live” service brand.  It’s not going to discontinue a web-based service presence, but I think what it intends is to package its offerings as cloud components, for deeper and more explicit integration with desktop products.  Microsoft has less to gain from being a web provider than by being a cloud provider, and it has less to gain by promoting independent browser access to its apps and information than by integrating that with Windows 8 so it can help differentiate its tablets.

If you look at all of this in synchrony, you see a transformation of a lot of big player’s business models.  I think it’s clear that mobile video slaved to TV Everywhere favors the carriers rather than the appliance players or independent portal players.  I think it’s clear that handset subsidies are passing and the appliance guys want to figure out what will keep them in the hands of wireless users in the future.  I think that Microsoft and Apple and Google all realize that cloud services to devices are going to be the big differentiators, but so do the carriers.   Might we finally see the telcos get off the dime on services?  Not unless they get some help conceptualizing their infrastructure for the new model.  So far, that’s not happening, but I may get more data in our spring survey, which we’ll publish in Netwatcher in July.


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