Consumers have been down this road before. A heated battle to provide the communications standard for your cell phone is breaking out between U.S.-based Qualcomm (QCOM) and Finland's Nokia (NOK). Only this time, instead of a war over voice signals, the fight is over mobile TV signals for cell phones. And billions of dollars' worth of business hangs in the balance.
Live TV on mobile phones is a nascent market, but one that is expected to grow swiftly, reaching up to $8 billion by 2011. The intense jockeying for position looks a lot like the battle between GSM, the mobile phone standard backed by European governments and later adopted by much of the rest of the world, and a standard Qualcomm promoted called CDMA, short for code division multiple access. GSM has become the standard in Europe and in much of the world, while CDMA is used mostly in the U.S. and a few other places, such as South Korea.
The decision by European governments in the 1980s to push GSM catapulted Europe ahead of the U.S. and helped Nokia to become the world's biggest handset maker and Sweden's Ericsson (ERIC) to become the dominant telecom equipment maker. Now Europe hopes to repeat that success by once again encouraging governments, rather than the market, to decide on a single technical standard for mobile broadcast TV services.
EU Makes a Bold Move
On July 17 the European Commission jumped into the fray. That's when Commissioner Viviane Reding said she is recommending—and could later mandate—that all 27 European countries adopt a standard strongly associated with Nokia called Digital Video Broadcasting for Handhelds (DVB-H), rather than mobile broadcasting TV standards being tested in Europe by Qualcomm or one being promoted in Europe by South Korea, the first market in the world to launch mobile TV.
"We can either take the lead globally, as we did for mobile telephony based on the GSM standard developed by the European industry, or allow other regions to take the lion's share of the promising mobile TV market, " Reding said in a statement.
Reding's tough talk has put many industry players on alert—from broadcasters to chip makers—who argue governments should let the market decide, and that there is room for more than one standard. Many argue that a more free-wheeling approach would serve consumers better, allowing them to choose among a wider array of products and video delivery devices, including pocket TVs and in-car devices.
For Now, Lots of Contenders
For now, those set against setting a standard are getting their way. There are at least six different contenders competing in the European market and still others emerging globally. Japan has developed its own standard, and China appears to be going its own way. But none of the mobile TV standards is compatible and all require significant infrastructure investment.
So, say industry observers, the EU is hoping its stance will reduce fragmentation and spur economies of scale, just as it did with GSM. Given the €40 million of EU research money invested in DVB-H's development and heavy lobbying by European companies, Reding's decision comes as little surprise, says technology consultancy CCS Consulting.
Qualcomm is clearly in the other camp. "We don't have to decide on a single standard, " says Qualcomm Europe President Andrew Gilbert. Qualcomm makes chips based on its own technology called MediaFlo, but is also hedging its bets by producing chips based on the DVB-H standard. "The industry has to live in a multi-standard world, which is a good thing, because the more choices you have the better it is for consumers, " he says.
Many Trials Launched
Even without standards, though, Nokia has taken an early lead in the global race. The DVB-H standard promoted by the EU has gained support from some 200 companies, including U.S. giants Intel (INTC), Motorola (MOT), and Texas Instruments (TXN), and is the only standard being supported by all major handset manufacturers, says Mark Selby, Nokia's vice-president of sales and multimedia.
More mobile TV trials using DVB-H have taken place in Europe than on any other standard, say analysts, and Italy's 3 Italia has the biggest commercial service in Europe. DVB-H commercial services or trials have also been launched in India, Vietnam, Malaysia, the Philippines, Indonesia, and Singapore, says Nokia's Selby. And in the U.S., Hiwire, which uses DVB-H technology, is testing a mobile TV service with T-Mobile USA (see BusinessWeek.com, 7/26/07, "The Mobile TV Wars").
Qualcomm's MediaFLO mobile TV technology appears to have the lead in the U.S., but it has had only one trial in Europe, with BSkyB (BSY.L) in Britain. In Asia, the standard has had trials in Taiwan and Hong Kong.
No Vacancy Frequencies in Korea
Meanwhile South Korea, which uses a different technology called Digital Multimedia Broadcasting (DMB), is pushing that standard in Europe. It began the world's first broadcast to cell phones and other mobile devices within its own borders in 2005 with both satellite-based and land-based services. At the end of June this year the services had some 7 million users.
Qualcomm's MediaFLO and DVB-H will be shut out of Korea at least for the next several years as no vacant frequency is available. But the South Koreans are still hoping they will not be shut out of Europe. "We do not think this decision to support DVB-H will be easily implemented in the European market because all of the countries have different regulations and different spectrum, " says S.H. Kim, Seoul director of a promotion team for information technologies under the umbrella of Korea's Ministry of Information and Communications. He points to successful commercial DMB service in Germany and trials in the Netherlands, Britain, Italy, and Norway.
One factor working in favor of those promoting multiple standards is lack of available spectrum for DVB-H services in key European markets. In Britain, spectrum needed for DVB-H will not be available until 2012 and it would likely take another one or two years before services could be rolled out. The Chinese will be ready to offer mobile TV services at the Olympics in 2008, but there is a chance the British won't be able to do the same four years later due to the spectrum issue, says Richard Halton, BBC Television's controller of strategy.
The Big Question: How Much Demand?
The EU, for instance, could allocate some of the spectrum to WiMAX , further complicating the picture for DVB-H. "One can easily argue that to get to scale, DVB-H is not the way to go, " says Halton.
Beyond technical issues, the big question is whether consumers will, in the end, be willing to pay for the privilege of watching TV on tiny cell phone screens. Broadcasters are counting on mobile to offer a host of interactive services that they hope will generate lots of revenue. But despite all the excitement, its still early days. Says Ken Blakeslee, a British investor and industry adviser on innovations in mobility, "It's not a slam dunk."
With Moon Ihlwan in Seoul, South Korea