Video services

T-Mobile Promises 'A Lot of Firsts' for New OTT TV Service

T-Mobile continues to weave a tale about how it intends to disrupt the pay-TV market with a new, national OTT offering, set to launch later this year, without revealing much about how it actually intends to achieve this noble goal.

The vagueness surrounding T-Mobile US Inc. 's plans, centered on its $318 million acquisition of Denver-based Layer3 TV in January, continued Wednesday on the company's Q2 earnings call, though execs reiterated that part of the plan is to provide a better linkage between the consumer's mobile device and the TV. (See T-Mobile buys Layer3 TV, plans OTT launch.)

"You're going to see a lot of firsts in that product, because customers have a lot of needs," said Mike Sievert, T-Mobile's president and COO. "They're sick and tired of these outdated systems that the legacy cable companies have been bringing them, with their outdated program guides and the technology island that your TV represents, as opposed to your highly connected social media-fueled life that you live in your mobile phones."

Though T-Mobile continues to hammer on cable's outdated video technology, providing a slick interface isn't much of a game-changer anymore. They're table stakes now. MSOs such as Charter Communications Inc. , Comcast Corp. (Nasdaq: CMCSA, CMCSK) (and Comcast's X1 syndication partners), as well as smaller operators that are working with companies such as TiVo Inc. (Nasdaq: TIVO), Evolution Digital LLC and MobiTV Inc. have been rolling out more intuitive cloud-based guides that work on set-tops as well as mobile devices. (See New Video Options Emerge for Indie Cable Ops .)

Traditional pay-TV service providers certainly present a soft target for T-Mobile to attack, but T-Mobile's new service will also have to contend with a market that's already littered with over-the-top TV service rivals (Sling TV, fuboTV, PlayStation Vue, DirecTV Now, Philo and Hulu) that not only have a big head-start but already employ fancy user interfaces, network DVR services and other advanced services. (See Skinny TV Services Pack on Some Pounds.)

Nevertheless, Sievert believes that there's still a lot of opportunity in attacking the video market, noting that T-Mobile has been expanding on a testbed while it develops the product that will ultimately come to market.

Before the acquisition, Layer3 TV was focused on an in-home, managed IPTV offering featuring a big channel line-up, some 4K fare, and some integrations of OTT content in a handful of markets. According to T-Mobile Securities and Exchange Commission (SEC) filings, Layer3 TV had about 5,000 customers when the deal was closed -- not a huge surprise given that the company had yet to get very aggressive with its customer acquisition marketing.

Though it's been mum on the details, T-Mobile clearly has some ideas in mind as it looks to have Layer3 TV ride its coming 5G network. But how it can truly differentiate and move the needle when it unleashes its national OTT TV service remains the big question.

It will likely have to get creative with mobile, broadband and video bundles along with special offers and perks that, for example, will enable consumers to stream video without having to fret about caps and cumbersome data-usage policies. (See T-Mobile: 5G Lets Us Take Broadband Across America.)

But for many consumers that have cut the cord or have steered clear of pay-TV altogether, the cost has been a big issue. T-Mobile could also try to resonate with aggressively low-cost services and various skinny channel line-ups, but even it will likely be hard-pressed to make the numbers add up because it has much less control on the costs of programming the service. It's entirely possible that T-Mobile will offer a pay-TV service at break-even or perhaps at a loss as it looks to prime the pump for its OTT TV offering in the early going.

A public interest statement (PDF) tied to its proposed merger with Sprint Corp. (NYSE: S) illustrates the business challenge faced by T-Mobile in the pay-TV arena. In it, T-Mobile estimates that that Layer3 TV's content acquisition costs are as much as 30% higher than larger pay-TV providers pay for the same programming. T-Mobile argued that adding Sprint to the mix will give it more scale and, therefore, more leverage at the negotiation table.

— Jeff Baumgartner, Senior Editor, Light Reading

Clifton K Morris 8/10/2018 | 3:57:11 PM
Couple of challenges The problem with this service is that it remains internet-based, and fills a delivery need that the distribution industry provides.  The service itself should be regulated and taxed in a way that's similar to a national provider because it's bundled from a single provider.  <br><br>

The reason for regulation is technical in nature.  First, I have serious doubts that a Cable TV replacement over wireless is scalable.  An hour's worth of video will transfer up to 11.25Gigs per-hour. <br><br>

Remember- this *is* T-Mobile, who as a mobile telephone provider, had to change its non-contract rateplan (breaking the Net Neutrality laws) and limit users to 480p streaming; and the CEO called customers who used a terybyte per month "data theiefs".  One Terabyte is the equivalent of as little as 90 hours of video content.  Spread over a month, that's three hours of 4K content per day for one device. <br><br>

So if you have a cell tower that covers 25 square miles, and in that area, there are two apartment complexes, and a development with 200 people watching the nightly news, about 1/2 of the people will experience studdering and buffering.  <br><br>

So T-Mobile's "first" thing would be to deliver a OTT service that can deliver 4K content at first, (so it can be advertised) but then, as capacity constraints grow, and rateplans needs to be changed, the TV will need to have the capability to throttle and only show 480p content.<br><br>

Sometimes there are products that are brought to market that make you scratch your head and wonder "why are they there" and this is one of them.  Going Nationwide as a broadband cable provider with 1/3 the spectrum of HFC networks is pretty stupid.  If Jeff Finklestein and CableLabs are able to expand spectrum on HFC networks to 2GHz, T-Mobile would have 1/6th the airwave spectrum.<br><br>

However, I have to remember that John Legere's compensation is tied to customer acquisisions and growth. <br><br>

Also, his contract with Deutsche Telekom is less than five years in length.  He'll whip that horse as hard as he can until the bonus money or the other term of his employment is satisfied and a Golden Parachute clause is enacted when T-Mobile merges with Sprint.  (See: Puget Sound Business Journal Article "T-Mobile gives CEO John Legere a big raise ahead of expected merger talks" published on March 29, 2017)
Jeff Baumgartner 8/9/2018 | 9:33:18 AM
Reveal on Aug. 15? This teaser posted by T-Mobile's John Legere hints that the company will detail its new OTT TV offering at the Un-Carrier Next event on  8/15. Nothing too specific, but the clip shows Legere rolling a crate labelled "Decomissioned" with signs referencing some policies that consumers don't like -- contracts, data limits, superfluous taxes and fees, etc. 





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