Television produced the most efficient and powerful content distribution and consumption platform of the 20th century. In the new millennium, the potential of Internet and innovation, coupled with the rapid technological advancement of mobility, is already disrupting television's dominance as a media platform. More specifically, with the introduction of the smartphone and high-speed 4G networks, the notion of mobile TV has become a reality.
Despite a rather lackluster start for mobile video in the previous decade, the underlying business opportunities are arguably stronger than ever—especially with the growth of LTE-enabled networks and devices. Operators are acquiring content as part of a strategic initiative to offset the incursion of over-the-top content providers. However, the ability to efficiently transmit this content to their high-value mobile customers has become nothing less than a barrier to transforming their business and offering more revenue-generating services to their customers.
We believe LTE Broadcast (also referred to as eMBMS) provides both a technology and platform that will help.
Delivery of video content is one high-value opportunity for which LTE Broadcast is well-suited given its highly efficient characteristics. The total addressable market for video has increased beyond just entertainment to include delivery of e-magazines and newspapers, enterprise video content to corporate employees including the sales force, and specialized content to emergency first-responders. Content is being pushed out to personal devices beyond the TV, including tablets phones, automobiles, and public transportation. LTE Broadcast allows operators to deliver high-quality service to dense segments of their subscriber base, thus creating the best possible opportunity for monetizing the investment.
Video constitutes most of the traffic that flows over networks today. We believe there's demand for specialized video and related content services that can be delivered over LTE Broadcast. For instance, in IDC's most recent Smartphone Survey, 54% of smartphone owners were streaming video content for consumption over their mobile devices. Furthermore, in the U.S., 27% of respondents said that they purchased movies on their smartphones, which was slightly ahead of worldwide respondents at 23%.
For operators, the growth of mobile video traffic from over-the-top providers has created an increasing financial burden as they must continuously invest in their networks to handle the massive influx of mobile traffic. During its 2014 Q2 earnings call, Vodafone noted in Europe that video traffic grew by almost 90%. This trend is replicated in a report by 4G Americas, in which it expects mobile video traffic to increase by 70% by 2018. Given the fact that most of this traffic is generated by over-the-top providers in which little if any revenue is collected from the content originators, mobile operators will need to look to other revenue streams to help balance the need for greater infrastructure investment to handle the large increase in mobile video traffic. IDC believes that advertising could help provide additional revenue needed for infrastructure investment. With its ability to target select geographical locations, IDC believes that LTE Broadcast can help advertisers target specific demographics in order to generate increased brand awareness.
Another area where LTE Broadcast can help is with software upgrades. The pervasive use of smartphones has created many challenges for operators. Prior to the smartphone era, software upgrades followed a predictable and highly managed process. This was primarily due to the static, singular use case of the feature phone, as well as reliance on proprietary operating systems. The smartphone introduced a shifting and unpredictable relationship between operating system vendors, OEMs, mobile operators, and application developers. The software upgrade process is never complete, but rather responds to a variety of issues, including fixing software bugs, updating versions to introduced new features, and patching security holes.
This upgrade process can be especially difficult and costly on mobile operators, who must make operational decisions regarding when and if to push a particular software release, balanced by the effect on their network resources. For example, a recent iOS update was approximately 1.47 gigabytes in size, requiring careful network management when pushing out the update to iPhone users.
While updating customers to the latest versions of operating systems and applications are important, several operators have stated that maintenance upgrades to close holes and patch critical application functions are the primary focus. In pushing critical updates, some operators utilize their LTE network, which, according to them, can increase successful downloads and installations from 70% to upwards of 95%. The addition of LTE Broadcast can help the process of completing critical software upgrades more efficiently.
LTE Broadcast holds the promise of a strong link connecting the current 4G /LTE networks and the 5G networks of the future. The advanced technical capabilities of LTE Broadcast have been thoroughly tested and documented. However, to take advantage of the capabilities of LTE Broadcast, carriers need to continue expanding the density and reach of their LTE networks while encouraging their partners, especially device OEMs, to expand LTE Broadcast capabilities to their entire portfolio.
The market is experiencing new and disruptive forces, requiring mobile operators and their partners to respond with products that can differentiate while creating new revenue streams. The IDC White Paper, "LTE Broadcast," sponsored by Qualcomm, provides answers to important questions on how to capitalize on the LTE Broadcast opportunity. We invite you to learn more by downloading the paper here.