Netflix gave investors plenty to celebrate last week, but for mobile operators the soaring popularity of on-demand video is a double-edged sword. Over-the-top video motivates subscribers to buy more data and upgrade their devices, but it can also bring the network to its knees.
Late last year Netflix ranked Internet service providers based on their Netflix streaming speeds. With roughly 15% of Netflix subscribers already streaming video to their smartphones, wireless carriers could be next.
Carriers are learning that LTE is not enough and are making additional investments in video optimization solutions to enhance network performance. Verizon has made three video-related acquisitions in the last three months: upLynk, which focuses on uploading and encoding live video events, EdgeCast, a content delivery solution that specializes in media and e-commerce, and Intel Media, which makes hardware and software for cloud-based video delivery.
“Verizon’s acquisition of Edgecast was very much evidence that carriers are focusing on optimization of content delivery, while their Intel Media acquisition is more about creating Verizon’s own version of a ‘NetFlix like’ streaming service to differentiate their commodity broadband capabilities – especially now that the company has won its net neutrality case,” said Sue Rudd, director of service provider analysis at Strategy Analytics.
The net neutrality victory for large service providers means that they can prioritize delivery of their own content on their networks, or charge OTT providers like Netflix for faster download speeds. If the FCC does not rewrite its rules, video content delivery could become a significant opportunity for carriers. But success will depend on network performance, especially video optimization.
“Video will increasingly decide network quality from consumers’ perspective, and is already driving investment decisions for network operators,” said Rajeev Chand, head of research at Rutberg and Company. “Best video optimization = best consumer user experience = lowest churn,” he summarized.
Video that buffers or freezes is clearly something carriers want to avoid. But consistently delivering a quality experience gets harder and harder as users demand more and more. “The faster the speeds that mobile operators provide, the more consumers swallow it up and demand more,” said Dr. Michael Flanagan of JDSU, who has authored studies on data consumption for the last four years. This year JDSU found that 4G network users demand 10 times as much data as 3G network users.
“Vodafone recently rolled out LTE in Germany and very quickly they announced that having moved only a small fraction of their subscribers the network was quickly filling up and it was 85% taken up by mobile video,” said Jeff Glueck, CEO of Skyfire. Skyfire, owned by Opera Software, provides cloud-based video optimization solutions for carriers and says that on average its solution can save 64% of the bandwidth at peak load on a session.
“As you roll out LTE the obvious question is: ‘Is LTE going to solve the data problem?'” said Glueck. “What we’re seeing is that data on mobile networks should go from about 1 exabyte to over 11 exabytes through 2017, so you’re seeing this 11-fold increase, and LTE represents about a 3 to at best 5x increase in speed and capacity. So you have this enormous mismatch between the growth of data and the ability of LTE to deliver. … So early LTE implementers have come out and said that already they’re looking at optimization solutions.”
Operators have several choices when it comes to video optimization solutions. Key providers include Flash Networks/Mobixell, ByteMobile (owned by Citrix), Skyfire, Allot Communications, and Openwave Mobility. Flash Networks is moving from #3 in the market to #1 with its acquisition of #2 player Mobixell, set to close at the end of January.
“We’ll be the largest vendor by number of installs, number of customers, revenue, number of employees, number of patents, you name them we’ve got them,” said Flash Networks CEO Liam Galin. Galin said Flash/Mobixell also leads in the market for mobile Internet optimization solutions, and that video optimization needs to be understood in this context.
“Video is only part of mobile Internet optimization,” he said. “Before you get to the clip on YouTube, you get the YouTube page and if that page doesn’t load fast enough you don’t even get to the video to be optimized. People will drop out of the session because of insufficient quality of experience. So we need to optimize everything.”
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