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US WATCH
The great 4K challenge: Bandwidth bottlenecks
Larry Gerbrandt sees major opportunities and a potential stumbling block for the next generation of TV viewing.
may be the year when the 500-channel universe meets its nemesis: 4K TV. The first consumer UltraHD (the CEA’s official moniker for 4K TV) sets are now appearing in high-end US home electronics retail outlets and over the next two years, a host of technical issues (such as getting commercial grade video compressors into the market) and affordable big screen units into the big box retail outlets will have sorted themselves out. The biggest challenge - and ultimately the biggest opportunity - may be in finding a way around the bandwidth choke point. The current HDTV era was ushered in by US terrestrial television broadcasters, forced by law to convert from analogue to digital transmission and allocated 19.2 megabits per second (Mbps) of bandwidth in the UHF spectrum. While broadcasters have seen their viewing shares plummet over the last decade as a result of the explosion in viewing choices and technology, they still consistently deliver the largest audiences in prime time and are the venue of choice for national advertisers willing to pay a premium for audience ‘reach’. This will be the first of many bandwidth bottlenecks faced by those who want to deliver UltraHD content. The government has already auctioned off much of the terrestrial spectrum for other applications. While 19.2 Mbps is enough to transmit a 1080i HD channel (or even a couple 720p channels), UltraHD has 4x the resolution of HD and unless there are major breakthroughs in compression (and a corresponding wholesale upgrade of equipment along the entire broadcast to consumer
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chain) the US broadcasters may run the risk of becoming a legacy transmission platform. Satellite providers (DISH and DirecTV) may face some of the same bandwidth constraints. There are a finite number of orbital slots and both are already
though that is not an option for the two satellite distributors. UltraHD may be just the technology gods’ gift to the new generation of video platforms: the OTT providers, led by Netflix, Amazon, Google and Apple. The reality is that the
struggling to deliver more linear channels in HD than the wired cable and telco video providers. They gained early market traction by being first to market with digital standard TV feeds and did the same with HD, but the UltraHD challenge may be their nemesis. One solution: merging the two companies and their bandwidth, since the two largely carry the same channels. Wired cable operators may have a little more wiggle room in their systems to figure out how to deliver more channels with technologies such as switched digital video but it will require a massive amount of rebuild capital at a time when video delivery has become commoditised and the cost of programming (with the latest being steep new retransmission consent license fees from broadcasters) putting pressure on margins. All the incumbents share a common set-top box challenge, however: UltraHD will gobble up DVR capacity and if widely adopted by consumers, will mean massively expensive upgrades in hard drive capacity. The most likely workaround would be the network DVR,
migration to UltraHD is likely to be piecemeal, on a programme by programme, movie by movie and channel by channel basis. Netflix and its brethren could relatively easily add UltraHD to their programme offerings. ESPN, after a disappointing experience with a 3D sports channel, has already announced it has no plans to jump into the UltraHD fray. In the same way the satellite distributors were able to use expanded HD video offerings to compete with wired cable (many of whom at the time were struggling to fund massive digital plant upgrades), the OTT purveyors will likely be first to market with UltraHD. While OTT providers can solve at least part of the band-
width challenge by making UltraHD storage cloud-based, delivery of this higher resolution content to tens of millions of US households is going to put increasing pressure on broadband bandwidth. A report by Sandvine estimated Netflix alone represented a third of all Internet traffic in prime time. The player to watch, not surprisingly, is Google. It owns YouTube and has been quietly expanding its market tests of high capacity broadband delivery in the Kansas City area. The latest rumour is that Google may bid for the NFL Sunday Ticket rights now controlled by DirecTV. Just as Rupert Murdoch used the NFL rights to establish the Fox network in the US and football rights to sell satellite subscriptions in the UK and Asia, Google could use NFL Sunday Ticket (which essentially includes rights to all NFL football games played on Sunday anywhere in the US) to launch a breakthrough OTT offering. Sports broadcasts, especially the NFL, were effectively used to drive HD set adoption in the US a decade ago and there is no reason to believe it wouldn’t work again with UltraHD. Google is also one of the few companies that could write the $1 billion check to the NFL without making a major dent in its profit margin and could justify it to investors as the logical next step in its video strategy, along with UltraHD movie delivery and adsupported YouTube channels also in UltraHD. And (if) when Apple unveils its long-rumoured TV offering, it will almost certainly be an UltraHD play. expert witness services and is a managing director of Janas Consulting, which provides management consulting, valuation and investment banking services.
Larry Gerbrandt
[email protected] has been a media analyst for more than 25 years with companies such as Kagan and Nielsen. He is a principal at Media Valuation Partners, which provides strategic consulting, research, valuation and
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