Infrastructure costs could be justified if subscribers are willing to shell out $20 for basic service.
U.S. consumers are willing to pay enough for watching TV on mobile phones to justify what it would cost carriers to build a new broadcast network to guarantee quality service, an industry group said Thursday.
The winning formula for mobile TV in the United States is high-quality video and service and flat rates of about $20 a month for unlimited viewing, the Mobile DTV Alliance said in its latest white paper. To meet those standards, the alliance advocates building a separate broadcast network, which would cost a carrier between $500 million and $2 billion.
But the cost would be justified, according to Yoram Solomon, white paper author and president of the alliance. If a quarter of the subscribers of U.S. operators are willing to pay $20 a month for the service, carriers would take in a total of $12 billion annually. At that rate, even if half of the revenue went directly to content owners, and the entire investment in infrastructure was amortized over one year, "there is still plenty of profit to share."
The alliance believes carriers could draw 25% of subscribers into mobile TV based on commercial trials in Italy, Finland, and the United Kingdom. In those countries, 50% of wireless subscribers were willing to pay for mobile TV, once they were holding phones in their hands with live, high-quality broadcast services available.
While it doesn't represent the definitive word, the alliance white paper offers a hint of the direction carriers could go in offering TV programming. For example, the trade group suggests that carriers offer tiered programming, similar to how people pay for cable TV. Tier one, for example, could be $15 a month for basic national channels, such as ABC, CBS, CNN, Fox, and NBC. For $5 more a month, subscribers could get financial and entertainment channels, such as CNBC and MTV, respectively. For another $5, subscribers could also receive sports channels, such as ESPN.
Advertisement could also generate revenue for carriers, but the ads would need to be short, Solomon suggests. Additional money could be made by offering an Internet link to find more information, order goods, or any other complementary services associated with a TV program. Clicking the link would send subscribers from the broadcast network to the cellular network, where they would be charged by the minute.
Other additional revenue options include video downloads for specialty shows and a shopping channel.
The Mobile DTV Alliance also advocates the use of open standards in the creation of broadcast networks to reduce the risks associated with buying products from multiple vendors. Groups that could join the alliance in testing technology to ensure compliance to standards include the Bluetooth Special Interest Group, the Wi-Fi Alliance, the USB Implementers Forum, and the 1394 Trade Association.
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