Kate Bulkley, Media Analyst.

Why go 3G...

By Kate Bulkley

The Guardian

Monday September 22, 2003

3 bets on MTV content. By Kate Bulkley

MTV News

Tomorrow morning on buses and trains, plenty of people will be talking and texting on their mobile phones, a few will be checking email or getting the stock prices. But the occasional one will be watching the entire live performance of Radiohead's hit Just (You do it to Yourself). That mobile user will be enjoying the first day of a two-year, 2m deal between the 3 mobile network and MTV.


MTV video is the latest attempt by 3 to attract 1 million users by year's end, from 155,000 at the end of August. MTV content is priced per download, from 50p for two-minute video news to 2.50 for live performances. MTV has created four video "channels" updated three times a week for 3 phones - a news service; a latest hits channel; a "live" performance archive; and a wrap-up of MTV's week.

Already 3 users can download Premiership and Champions League football clips plus Monty Python sketches, ITN news, star interviews, film clips, and video wallpaper. Football is said to be the big draw. But with a brand as big as MTV linked music could rival it.

"MTV is a leading brand and a partner at the level and quality of content that we think is important," says Ed Brewster, spokesman for 3.

It wouldn't give numbers, but 3 says the usage is "growing". Observers say 3's new customers are a result of lower cost voice pricing and handsets, not of video features. "Video has been seen as one of the new applications that will pull more revenues from subscribers, but it doesn't look like subscribers have been too interested," says Stephanie Pittet, a mobile analyst at Gartner Group.

Despite this, Pittet believes offering the latest single from Kings of Leon will attract an audience, but she is less sure how long the novelty factor will last. "How often and how much will you pay?" she asks.

The problem for 3 is that Orange, Vodafone and others' 2.5G networks can do all the things 3 can, except send high-quality video clips or streamed video calling content. And Vodafone is likely to launch 3G services next year, so video phones won't be exclusive to 3. Backed by Hutchison Whampoa, 3 seems committed to a long game.

"In five years' time you will say 'can you believe you didn't used to be able to make a video call,'" says 3's Brewster. "This technology is built to deliver high quality video which is what distinguishes us from GPRS (2.5G) phones."

We haven't done deals with 2.5G operators yet because the clips they can run are very short with ropey picture quality," says Dave Sibley, vice president and general manager of MTV Europe marketing partnerships. "But I would anticipate more deals as the operators change their networks." MTV will roll out the service in other 3 markets in Europe in the next few months, watching usage closely. "We have had to go back and negotiate rights from the record labels for mobile and we are all waiting to see how big a market this turns out to be," says Sibley.

3 is banking on football and better quality video to lure subscribers to 3G. But will it be able to succeed when Vodafone is offering most of the same video services for existing 2.5G mobile phones, asks Dominic Timms

Ten years ago it was the still the stuff of fantasy. James Bond might have been able to get a video message on a device hidden inside his hairbrush, but for most of us in the 1990s the closest we got to mobile video was a flickering picture on one of those portable 1in screen TVs. Fast-forward to the 21st century and it's a different matter. After spending a cool 22.5bn on third generation mobile licences, operators like 3 have begun unrolling devices and services offering users anything from comedy and animations clips to football highlights and porn, all direct to their mobiles. But as 3 struggles with coverage, battery and handset problems on its way towards its optimistic year-end target of 1m users (it has just 150,000) a raft of new mobile video services on existing phones is springing up. Using 2.5G rather than third generation technology to deliver everything from football to porn, these new services beg the question: "Do we really need 3G?"

Last week Vodafone revealed the fruits of its year-long negotiations with the Uefa Champions League, a three-season package of video clips, match data and ringtones for users of its Live mobile network. Based on a revenue share model - neither side is talking figures except to deride reports of 7m to 9m as "risible" - the deal kicked off with last Tuesday's thrashing of Panathinaikos by Manchester United, if you live in Holland, Spain or Greece, that is. Promising roll-out in the UK soon, Graeme Ferguson, head of business development and content for Vodafone Global, said the service's combination of video, text, pictures and ringtones will be a hit with the company's 2 million global Live subscribers. "Our message is that you don't have to wait for 3G, you can do a hell of a lot on 2G."

Ferguson says Vodafone Live subscribers can watch the video clips as long as they have a video-enabled phone such as the Sharp GX20. How much Champions League action you get, however, has yet to be set. Vodafone says it will vary from country to country although anything longer than 30 seconds looks unlikely. In some areas users will download the clips, much as they do on 3's Champions League and Premier League service, in other areas it will be streamed. It is Vodafone's second video-over-mobile deal in as many weeks. Just days before the Uefa one was announced this month the company also announced that it was teaming up with BBC Wordwide to offer clips of 1970s comedy Fawlty Towers to Vodafone Live users.

Aiming for a much bigger market however is Oplayo, the Finnish technology outfit and developer of a technology that enables video to be streamed to lower cost handsets. "Essentially any colour screen phone bought since the start of the year that can run Java should be able to support the Oplayo product," says the company's UK chief Philip Bourchier O'Ferrall. Independent figures and those from mobile giant Nokia predict there will be 11m of those handsets in Europe by this Christmas and 55m globally by the end of 2005, rising to 210m by 2008.

Looking at those sorts of numbers it's not surprising that Microsoft is getting in on the act. Earlier this month the computer giant signed a deal with Oplayo to bring its latest all-singing, all-dancing media-playing software Windows Media Series 9 to low cost mobile phones. While the deal should be good news for Microsoft's mobile ambitions - O'Ferrall predicts the pact will give Microsoft access to around 10 times the current market share of rival Real Technology - Oplayo already has around 30 commercial customers using the software to deliver mobile video without the need for 3G. They range from the predictable adult content outfits such as Playboy and Private Media through to news providers like Reuters. "Our customers are fully head on against the 3 service. We 've got far more content and far more handsets," O'Ferrall claims.

Not surprisingly 3 says its service is streets ahead of rival 2.5G offerings, pointing out that third generation networks and handsets have been built specifically to transmit large amounts of high speed data, including bandwidth-hungry video, to mobiles. "It's designed to deliver what we are delivering - unique mobile video content; whereas 2.5G is really just a bolt-on to an existing technology," says 3 spokesman Ed Brewster.

Aside from 3G's clear advantage in one key area of the video stakes - you can't make a video mobile call on a 2.5G network, while 3 has just introduced international video mobile calls at 1.50 a minute - Brewster says video over 3G is a much better consumer experience. "We are delivering most content at between 84 to 128Kb a second compared to 2.5G at around 46Kb. The clips from our Champions League games are 2 to 2.5 minutes long not 30 seconds and the frame rate is between 15 to 20 frames a second while with 2.5G the rates are under 10 frames per second and the sound isn't as good. They're just putting much smaller files across and if the network is busy the speed drops dramatically," he says.

Vodafone, which is expected to launch its own 3G service in the first or second quarter of next year, admits there are speed and quality limitations with 2.5G but says they are a "long way" from becoming an issue. Ferguson admits 3G's higher frame rates give a "richer" video experience where "you can see more action-based video without it breaking," but says Vodafone will gain market share by delivering content to "mass market handsets rather than fully loaded phones."

In contrast O'Ferrall suggests that for most mobile users, used to paying anything up to 2 to download a single image, video quality isn't an issue as long as it's watchable. "Most people haven't seen mobile video on a small device before so if you say to them for the same price as downloading an image of their favourite model or popstar you get a 30-second video clip then that's going to represent value."

He cites the example of mobile video operator Flix and the Daily Star, both of which were sending video to high-end Symbian phones typically costing around 300 prior to transmitting to Java phones which can be bought for as little as 100. "When they were running with Symbian-only handsets they were putting out between 400 to 600 video streams a day. After introducing video to Java phones they are now up to between 3,000 to 5,000 streams a day charged out at 1.50 a go. Consumers are obviously coming back for more."

While the current version of Java is "watchable", he says, the next version due out in time for the Christmas market will offer video at a quality that is "better" than a dial-up internet connection. "You have to take what Joe Public is happy to watch. If it's the right content they'll watch it. Content churn is the key particularly in certain types of content where people just want to consume more and more." While Vodafone is putting its faith in football, O'Ferrall suggests the biggest selling mobile video content is porn with other top sellers including Jackass-style comedy clips. "People want to be entertained. Right now it's comedy and adult content that's doing it. People don't seem to care about football or goals."

If he's right then it's bad news for Vodafone and 3 which are both counting on the sport to deliver subscribers. Vodafone says football is one of the few forms of content that will increase market share, while 3 maintains that football is one of its bestselling downloads alongside news, comedy clips and movie trailers. It won't, however, say how many clips its customers are downloading. Come the end of the Uefa Champions League, if Vodafone releases its own football clip downloads figures, 3 might well be forced to as well. This would then provide the industry with a better indication of whether fans are content with "watchable" video clips sent over their current networks, or whether they simply can't manage without 22.5bn of 3G technology and the James Bond-style face to face video calls that go with it.


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