Rise of social media means that successful converged services must appeal to early adopters

Today saw the launch of the sixth Olswang Convergence Survey: ‘Does it add up’. I may now be able to see rather more of the authors, John Enser and Matt Phillips, as its preparation has consumed their every waking hour over the last few months.

They carried out the first Convergence Survey back in 2005. Not so long ago, but back then only 30% of the UK had broadband, and only 12% of people would consider watching TV on their computer. 65% of the respondents in 2005 would buy a DVD at least once a week and less than 10% used their mobile phones for email or internet browsing. How things have changed.

Matt and John describe convergence as: ‘the technological developments which result in an end-user having much greater choice and control over his or her consumption of content in the home and/or on the move, such that he or she decides what to watch, when to watch it, and on what devices, rather than this being determined by technological constraints…for us, convergence is…increasingly about how well-informed consumers will use the functionality and content which is available to them across the full range of devices, platforms and services they own or receive’.

The reports trace a history of technology enabled product innovation being able to meet (or not) user demand for convergence. However the proliferation of cross-platform distribution has also shaken up established industry value chains  – think of the impact of internet distribution on the music industry and the shift in value capture from recorded music to live performance. One of the main themes addressed in this year’s survey is whether when the merry-go-round stops if (to mix my metaphors rather horribly) there is enough cake to go around?

Another issue (which I’ll revisit in future posts) is the increasing load being placed on telecoms network by broadcast video content, the challenge for telcos to avoid becoming ‘dumb pipes’ and the net neutrality debate.

However (rather topically for this recent convert to blogging and twitter), the survey found that with increasing product diversity and choice hat consumers are increasingly turning to social media to find out ‘what is hot, and what is not’. Successful services will be those that have a simple user-friendly proposition and appeal to early adopters and social media influencers.

Do more tablets mean more ‘lean-back’ consumer browsing?

Sadly I’ve not been in Las Vegas at CES, but remained at my desk in London reading the various updates.  As the dust starts to settle it seems that tablets are the story of this year’s show.  Not having had the opportunity to personally play with any shiny new toys, I am not in a position to advise readers on whether they should stick with their iPads (works for me) or rush out to buy a Motorola Xoom, Blackberry Playbook, Dell Streak or any one of a large number of new tablets.  Nor am I able to comment on the merits of the various operating systems – Apple, Android, Blackberry or Windows.

However, stepping back from the technology I wondered if this sudden upsurge in tablet offerings, as well as been driven by suppliers wanting a slice of the new category created by the iPad, also heralds a shift in consumer behaviour?  If so, what does that mean for the wider industry?

Shifting markets, one perceived barrier to the take up of streamed IPTV has been the difference between consumer ‘lean-back’ and ‘lean-forward’ behaviour.  Crudely summarised, ‘lean-back’ behaviour is sitting back on the sofa and passively viewing TV, whereas ‘lean-forward’ behaviour is using a PC in an interactive way for social media, web-browsing, email, etc.  The barrier of consumers not (in large numbers) wanting to consume TV as ‘lean-forward’ content, has been one driver behind the creation of ‘over-the-top’ IPTV platforms which deliver streamed video content to TV screens – iPlayer, YouView, Hulu and NetFlicks

The rise of the tablet could be part of a behavioural shift whereby activities which would previously have been ‘lean-forward’, sitting at a PC activities, and instead undertaken in ‘lean-back’ mode.  On a personal level, I have found, post-iPad, that I now spend much  more time connected on my sofa, rather than at my home desk.  If this is right, and the trend is more general, then this could be bad news for desktop PC / laptop PC hardware and software vendors, but good news for TV and console manufacturers as the focus of consumers’ connected world shifts from the home desk to the sofa.

Is BT’s wholesale content connect the end of the world?

There has been a lot of discussion this week of BT’s wholesale content connect product, so I thought it would be helpful to unpack the story and explore exactly what BT’s product is (and is not), and what the views are of those objecting.

BT’s View

Let’s start with BT’s side of the story. BT has a dedicated microsite, explaining the product as they see it. 

Their ‘How’ animation explains that the product consists of local caches for video content, with delivery to the caches via links which guarantee end to end quality of service – this new infrastructure bypasses the internet, which doesn’t prioritise video packets.  Although not stated by BT these caches and associated delivery network clearly have required BT to incur both incremental capital and operational costs.

BT explains their rationale in their ‘Why’ animation as the increasing growth of ‘over the top’ video, particularly to TV screens (as opposed to PC screens).

In terms of benefits, BT explain these for different groups as follows:

  • for users a guaranteed broadcast quality viewing experience with no buffering;
  • for content owners a better user experience, customer interactions and new advertising revenue; and
  • for ISPs more cost-effective delivery of video and the opportunity to provide new digital media services.

What BT don’t explain in their published materials (although it is implicitly alluded to in the description of benefits for content owners and ISPs above) is the commercial model.  For content owners in particular, it is unclear why they would want to either pay directly, or indirectly, for use of BT’s product.  A key issue to watch is whether use of this wholesale product can be used to either increase ISP end-user revenues or content owner advertising / subscription revenues, and if either is true how the cake gets shared between the content owners, ISPs and BT. 

Open Rights Group comments

By contrast (although not surprisingly given relative resources and also as a reaction) the Open Rights Group comments are quite brief, so worth quoting in full:

“We are talking about ISPs competing with the Internet for content delivery. Whether films, music or gaming services, the idea is that ISPs will deliver content better and more reliably than the Internet. That says a lot about the state of investment in our Internet.

The result could be a fundamental shift away from buying services from the Internet to bundled services from ISPs: which would reduce competition and take investment away from Internet companies. That would be bad for everyone.”

Whilst they clearly don’t like BT’s proposal, it is not clear exactly what they are positively advocating.  Is it that BT shouldn’t offer this product at all, which wouldn’t help to enable over the top video viewing, or that BT shouldn’t charge for this service / enable ISPs to cut content deals with content owners?  The former seems like a bad consumer outcome and the latter a decision that would be in direct conflict with BT’s directors’ duty to act in the interests of their shareholders (i.e. only invest capital where a return is likely).

Their objection to ISPs bundling content with access is also worth unpicking.  I can see how this might be objectionable where there is no choice of access provider (which I understand to be driving the net neutrality debate in the US), but where there is effective retail competition between ISPs, underpinned by effective wholesale regulation of BT (as is the case in the UK), it seems to me that bundling and resultant multi-dimensional product competition is a good outcome in terms of driving product innovation and delivering consumer choice.

End to net neutrality?

The first point to make is that BT’s product is not about ‘internet’ traffic management or prioritisation at all – it is a separate content delivery network sitting alongside the internet.  Both ISPs and content owners are able to use the internet for content delivery.

If BT’s product is assessed against Ofcom’s current view of applicable net neutrality rules, provided that BT doesn’t degrade or block video traffic passing over the internet, then from the information available it wouldn’t appear to breach current rules.

Another related development is the proposed traffic light system for the BBC iPlayer, which will enable users to see how ISPs are managing video traffic – this type of user transparency could be turned against the ISPs by the content owners. 

However, this debate will clearly run and run, so I will no doubt return to the issue in future posts.  (With thanks to @mattjphillips for his input – mistakes are all my own).