By Jennigay Coetzer – Business Day, 29 July 2010

Broadcast, IT and telecommunication are all moving to the same IP (Internet Protocol) based network delivery platform. This will pave the way for new services such as interactive TV whereby it will be possible for friends to chat on social networks such as Facebook or Twitter and discuss programmes on the same screen, while they are watching them.

“This is a merging of social media and TV,” says Ian James, programme director for ICT and telecommunications at Gordon Institute of Business Science. He says the converging of broadcasting and the internet will also allow targeted advertising.

For example, with interactive TV, when watching a programme viewers will be able to click on an outfit worn by one of the stars and a window will pop up with information about where it can be purchased. Another example of the bringing together of different mediums is that it is already possible to make free Skype phone calls over the internet from a mobile phone, says James..

The delivery of mobile TV is another area in which operators are dabbling, but it is difficult to envisage how revenues can be generated from this. In the traditional broadcasting world, subscribers pay a TV licence fee and revenues are generated through advertising.

But mobile operators are in the habit of charging per megabyte of data throughput, and are not geared up to handle advertising. “So there is a clash of business models,” says James.
An alternative is for mobile operators to charge a monthly subscription, but then they would have no control over how much content users are downloading, and the bandwidth-hoggers would clog up the networks.

This cannot happen with traditional TV, because it is broadcast on a one-to-many basis.
The operators are the weak link in the converged communication chain, because they are are focusing on being connectivity utilities instead of becoming content providers, says James.

He says people will pay more for content than bandwidth if it is of value to them.
The incumbent Japanese operator NTT Docomo proved this 10 years ago when it launched its iMode portal to deliver mobile content to its customers, and sold phone handsets to them that were capable of accessing the service.

“The cost of the content was added to customers’ phone bills and 91% of the revenues went to the content providers,” says James. Cellphone manufacturers have recently woken up to the potential of content delivery, an example being Apple, which was the first to set up an online application store.

The company encourages developers to develop mobile applications, checks the quality before making them available in its online App Store, and pays 70% of the revenues to the developers, says James. “Some developers think this should be higher, but payments to the credit card companies reduce Apple’s share to about 14%.”

James says it would be possible to deliver pay TV over mobile phones, but with the current mobile content delivery models this would not be viable for the operators because most of the money users pay goes to the content providers. Another challenge is that users are used to getting a lot of free internet content and services from the likes of Google and participating in free video conferencing using Skype.

The internet business model is to get millions of people to access the content or service and then find ways of generating income, for example by advertising to specific market segments. “Technology tools are available to mine this type of information, but telecommunications operators are not seeing this,” says James.

Leave a Reply