MetroPCS Gives Video the 4G Treatment
MetroPCS Inc. (NYSE: PCS) has live mobile television on tap for later this year, but it's already serving up on-demand video and giving its own video offerings some preferential treatment on its new Long Term Evolution (LTE) network. (See MetroPCS Kicks Off Mobile DTV in the US.)
All of the wireless operators are approaching mobile video differently. Some, like Cricket Communications Inc. , are in the exploration phase and don't yet have a strategy for managing or monetizing mobile video on their networks. Others, like Verizon Wireless , are focused on optimizing video on their networks, but are still steering clear of technologies that prioritize video. (See Verizon Helps Put $8M Into Skyfire, Verizon Tweaks Mobile Video for Data Caps and Verizon Updates Mobile TV for LTE.) MetroPCS is taking a unique approach. Not only is it making money on mobile video, but it's also wading into net neutrality waters by only capping third-party, over-the-top (OTT) services like YouTube Inc. .
The regional carrier first launched its video-on-demand (VoD) service, MetroStudio, in September of 2010 when it began deploying LTE. Customers are permitted to watch videos over LTE or Wi-Fi, but not on MetroPCS's 1x CDMA network. (See MetroPCS Beats Verizon to LTE in Sin City.)
That's because good quality video requires faster speeds than CDMA can provide, according to Ed Chao, SVP of engineering for MetroPCS. He says video has proven to be the killer app for LTE. (See Mobile Video's Time Is Now.)
"When people get the speeds, the thing they do is video," he adds. And, so far, the majority of MetroPCS's customers have been opting to use LTE for video instead of Wi-Fi. However, Wi-Fi usage has picked up as more free hot spots have come available, according to MetroPCS Product Manager Stephen Jemente. (See LTE Speeds Up, But Doesn't Improve Mobile Video.)
RealNetworks Inc. (Nasdaq: RNWK) manages MetroStudio, compressing each video to the format best suited for the handset, speed and connection. Jemente says it uses Real's technology to adapt the stream to the most appropriate resolution and audio quality, taking into account the handset's limitations. And this sort of optimization isn't always based on raw network speed.
"We did quite a bit of testing to get a balance between quality and load on the network," Chao adds. "On small screens, do you really need a megabyte per second? No. We've tuned the video encoding such that we have a good quality performance mix."
Making money on mobile video
Another unique aspect about MetroPCS's mobile video service is that it's actually making money on it. The carrier offers three monthly rate plans for data: $40 for legacy Brew-based handsets; $50 for 1GB of data; and $60 for unlimited data, plus either MetroStudio with VoD or Rhapsody Networks 's streaming music service (or $70 for both). (See MetroPCS Continues 4G Price War.)
On the $50 tiered plan, once a user reaches 1GB, they are cut off from OTT services like YouTube on LTE, but can still watch videos over Wi-Fi only.
MetroPCS launched this rate plan in 2010, before net neutrality concerns reached a fervor. Jemente says MetroPCS's policy is net neutral and completely transparent in the 17-page terms of service. Very few users ever hit the cap anyway, he adds.
So far, the mix of unlimited and capped video use on LTE hasn't made a dent on MetroPCS's 4G network like some of its larger competitors. Chao says LTE has "tremendous capacity," but the carrier will continue to evolve the network, as well as encourage more Wi-Fi use. And he says the company will have to be prepared to deal with consumer backlash if its LTE network ever hits a wall.
"We're happy with the choice we made with the technology," Chao says of the LTE network. "We made the decision five years ago knowing the trends [in mobile video] were going to be there when we got to this point. As we move forward, we'll continue to scale the business accordingly."
— Sarah Reedy, Senior Reporter, Light Reading Mobile