Barron’s ran an interesting interview with ATT heir-apparent John Stankey, now CEO of WarnerMedia, and it offers some views on how streaming and 5G might transform the telco space. I think these same factors will influence the direction of cable companies, and of course will then pull through influence on the vendor space. We have to take all public comments like this with a grain of salt, of course, and I intend to provide at least some of that!
The first statement Stankey makes sounds a lot like one Cisco has been making, or at least suggesting. Business, he thinks, will lead the business case development for 5G. This is a return, says Stankey, to the norm in technology, with a new development first appearing in the business service space and then transferring to the consumer space. There’s some sense in this view, but less sense in what he’s suggesting will drive those business models.
Stankey says that things like distributed manufacturing, with 5G mass-distributed sensors, will be the applications that create the early business case, and I have two problems with that view. First, factory floors are well within the network range of current technologies like WiFi and even ZigBee, and thus it’s hard for me to see how 5G is really necessary to connect them. Especially if you assume you have to pay for those devices to be networked, which is my second point. If some new technology like 5G were to be needed, I think it would likely be an unlicensed form with a more local scope. WiFi 6 would serve here, likely as well as unlicensed 5G.
The thing Stankey isn’t saying, and that could actually create a business case for 5G in the enterprise, is that worker productivity gains have driven all past enterprise IT spending waves, and will surely drive the next one. It is very possible to link mobile empowerment with 5G services to worker productivity improvement—see all my blogs on the topic, including the service-centric “information fields” model.
Perhaps AT&T is quiet on the real opportunity to build compelling business cases because they’re too complicated to explain to the press, or perhaps because they’re dependent on ecosystem-building activities that are more likely to promote cloud software players like Red Hat or VMware than to promote service providers. A simple “they’ll pay monthly to connect factory sensors via 5G” is a better slant for a financial publication.
The important point here, I think, is that AT&T is admitting that consumers are not going to pay more for 5G per se; they might pay more if 5G were linked to something that was compelling at the application/service level. Thus, we need to pin early incremental 5G revenue on businesses, who have at least a theoretical path toward 5G business cases. The current push to get 5G out there doesn’t account for any path to those business cases at all, so if real incremental 5G revenue is needed, then we need to get on the job and create something above the network.
Stankey reinforces the fact that consumers need a real-world value-add connection to new capabilities through 5G, not just more capacity. He says that consumers won’t care about the wavelength of 5G, or whether “I can give you 110 megabytes and they can give you 105”. He makes the point that “you’re not going to be able forever to sell connectivity based on speed.” Thus, AT&T’s Warner Media activity, perhaps especially HBO Max.
For the consumer space, AT&T seems to believe that the HBO Max platform will be the unifying mechanism to deliver whatever it is that consumers will pay for, and that it’s revenue from this platform that will realize the incremental revenue of 5G. There’s truth to that, and some fairly aggressive hopeful thinking.
The truth part is clear; nobody is really interested in paying simply to push bits to a mobile device a little faster. In most cases, any incremental speed advantage of 5G could be seen only in the speed of a download; streaming video doesn’t require higher speeds and if you postulated 8k video delivery to smartphones, you’d have to wonder if any could display it or if people could see the difference on a small screen.
The hopeful part is that 5G will have any role in making the platform successful. I think AT&T realizes that the HBO Max story can be told just as well for the mobile user of 4G as for 5G. Thus, they either have to believe that there’s no real link between 5G and HBO Max other than that AT&T has to deal with them at the same time, or that millimeter-wave 5G fixed wireless is the link.
The point Stankey makes that HBO Max “is a high-value, low-priced service that we believe most U.S. households will want. It starts with a subscription video service, the HBO brand. But we can add ad-supported services, as well” is telling here. It says that AT&T thinks that an Amazon/Netflix model of subscription streaming of video is the current need, more so than live TV, because all of the latter is going to have to be ad-sponsored. This, IMHO, says that Warner Media may exploit its library of content more, at least initially, and then focus on using its production facilities to create original video content, as Amazon and Netflix have done.
AT&T also believes, according to Stankey, that “cable TV” meaning live streaming I presume, would eventually thin out to be nothing more than true “live” stuff. The rest would migrate to a subscription model, with a series being put up for streaming all at once and streamed when needed.
All of this says to me that AT&T accepts the view that linear TV is going away, which links arms nicely with the fact that all of this is linked to being able to deliver a lot more bandwidth to the home at a lower price/cost than before. That’s where millimeter-wave 5G/FTTN hybrids come in. They’d give AT&T two things they don’t have now.
Thing number one is a lower-pass-cost way of delivering broadband speeds of 50 Mbps or higher to areas with higher population density (suburban, primarily). Copper loop doesn’t have the combination of capacity and low operations cost, and FTTH has too high a pass cost for lower-density geographies. AT&T’s HBO Max strategy has to work for TV, and work well, and 5G/FTTN could make that happen. In more rural areas, 5G in its cellular form could provide better home broadband speeds at a lower cost, too. The combination could be killer.
Thing number two is the potential to enter the home broadband market out of their home region. If AT&T could leverage its content offerings to the TV in other areas, their plan for streaming would be all the more viable. Verizon, AT&T’s big rival, has lower demand density and so can more easily deploy deep fiber and higher-speed broadband. Why not take advantage of 5G to go into Verizon’s territory, particularly when their chief cable rival, Comcast, shares much of Verizon’s geography?
The fact is that AT&T’s content strategy could well depend on their exploiting 5G/FTTN and cellular 5G for home broadband. People still want to “watch TV”, meaning video content of any sort, on their TV if they’re at home. Mobile-only strategies are at risk to strategies linked to home broadband, so AT&T needs to be the one to create the linkage, which means they really have to jump on 5G/FTTN.
They also need to jump on things like advertising in a streaming world, and integrating that with the notion of a contextualized, personalized, service platform that lives above the network and below service features, providing uniform support for advertising and other services that require knowledge of the real world. Fortunately for AT&T, they’re leading the operators in their awareness of the need to evolve the notion of what the network provides. That gives them at least a shot of getting to the place they need to be.