Spectrum Freed! No Injuries Reported!

Michael Hedges February 28, 2005

Europe’s first digital dividend arrives as Berlin-Brandenburg hands over TV channel 39 to mobile phones, PDAs, digital radio and more.

MABB (Media Authority Berlin-Brandenburg) Director Dr. Hans Hege, who escaped serious injury when attacked by angry DAB supporters, announced the hand-over of the old analogue TV channel as “the first exchange giving us a chance to be in front of new offers.”  The freed spectrum, said the MAAB press release, was immediately eaten by “two high performance DVB-H transmitters.” MABB made the announcement February 24.

Exchanging inefficient analogue media for digital everything results in a “digital dividend,” packing more into less space, until now just theoretical. European television is converting to digital transmission, some places faster than others. Berlin-Brandenburg fully converted in 2003.

With freed spectrum available to all (who have money) the next battle is over standards. The MABB drew hostile fire from WorldDAB last November when it stopped licensing DAB (Digital Audio Broadcasting), preferring to look at newer standards, like DVB-H. Mobile phone companies, both hand-set manufacturers and content providers, are divided on DVB-H or DMB, Digital Multimedia Broadcasting. DMB offers more frames per second than DVB-H and drains batteries less. Nokia favors DVB-H, while Eriksson and most Asian manufacturers back DMB.

But mobile phones aren’t mobile phones any more. In the parlance of the technologically astute they are now “terminals.” The rest of us can call them “smartphones.” And they are smart. Imagine sitting in a football stadium and watching an instant replay of game action on your personal hand-held screen.

All mobile phone providers are betting on video as the killer application for the new generation of handsets. Broadcasters, too, are betting on revenue from mobile phone services. French broadcaster NRJ Groupe announced plans to become the first French mobile virtual network operator (MVNO) buying 3G minutes from SFR, the second largest mobile phone operator. Television operator M6 quickly followed suit with a similar deal with Orange. Both NRJ and M6 target teenagers, the obvious market for music videos on mobile phones.

NRJ Groupe Chairman
Jean-Paul Baudecroux

“Mobile phones will become the digital portable music player of tomorrow on which you can do everything,” NRJ Chairman Jean-Paul Baudecroux told Reuters, in a less than vague shot at iPods, when announcing the SFR. He added that he expects a 3G boom in France of the same proportion as the high-speed internet boom.

The base-line of conventional wisdom on new media technologies remains very simple. Consumers are charting the course. When the MABB cut off DAB the regulator made the point, defying the politically correct, that consumers and not policies would determine the future. UK consumers are voting for DAB, for a variety of reasons, but the consumer response elsewhere has been tepid. The mobile phone manufacturers and operators are trying to stay one step ahead of the consumer and content providers – the broadcasters – are following that lead.

Baudecroux, no stranger to defying conventional wisdom, believes consumers will opt for a single device. Most handset makers and mobile network providers want to believe the same. Market research seems to show just the opposite, something learned when PC makers said their device would become the one device in the living room. Consumers still tend to prefer dedicated devices for dedicated services.

“Smartphones will not replace dedicated devices such as cell phones, media devices, cameras or game devices, “ revealed Jupiter Research last week (February 23) in a study of the US consumer market. “Our research indicates that consumers will carry up to three devices,“ said Jupiter Research VP and Research Director Michael Gartenberg in a press release announcing the results. The company predicts a “compound annual growth rate of 28% through 2009” for smartphones. That would give 3G/smartphones a 7% market share.

Finnish public broadcaster YLE announced last week an end to their DAB transmissions. YLE cited the “reluctance” of manufacturers to bring low-cost receivers on to the market and little interest from cost-conscious commercial broadcasters. Nokia was been field-testing DVB-H services in Finland since 2003 and is ready to roll-out a finished product. Nokia has the market strength to launch a 3G product at any price they choose and content providers will be more than willing to join in.