Move over, 3G: mobile TV is coming

The buzz surrounding mobile TV is spurring cross-industry partnerships and attracting significant amounts of venture capital. But can 3G networks stand the pace?

Content providers and mobile phone operators alike believe the technology has huge audience potential. “The TV count worldwide is 1.1 billion, for cellular handsets it is two billion and counting,” says Alan Varghese, principal analyst for semiconductors for market research firm, ABI Research.

Nor is mobile TV confined to handsets. Mobile PCs, PDAs, personal media players and cars are all target platforms. Little wonder, then, that VCs are investing in start-ups making chips for such mobile TV devices.

One Israeli chip start-up, Siano Mobile Silicon, is currently raising between US$15 million to $25 million in a second funding round, only 11 months after it closed an $11.5 million initial round, in which Jerusalem Venture Partners was the lead investor. Meanwhile, Newport Media has just secured $25 million for its second round, bringing total investment in the Californian start-up to $36 million. And last August start-up DiBcom raised €24.5 million in a fourth investment round, while a year ago UK start-up Frontier Silicon raised U.S. $28 million.

“This is a normal, healthy level of funding of people that have a high expectation for the market,” says Ian Lobley, senior partner at venture firm 3i, a most recent investor in French firm DiBcom along with four others, including Intel Capital.

TV services to mobile handsets have started. In France, operators Orange and SFR are delivering 50 channels using the third-generation (3G) mobile cellular standard.

New networks needed

3G networks are fine for getting to market and building a brand, says Alastair Brydon, CEO of wireless consultancy Sound Partners. But they deliver services to individual users using a point-to-point approach. TV services can be delivered with 3G while usage is low but once user numbers grow they will quickly gobble up network capacity. “Point-to-point is not a long term prospect,” says Brydon. “A [complementary] broadcast network is needed.”

And here begins the challenge. Cellular operators must choose which of several mobile TV broadcast technologies to adopt. The main three broadcast options include Digital Video Broadcast-Handheld (DVB-H); a variant of the existing digital audio broadcasting (DAB) standard, digital multimedia broadcasting terrestrial (DMB-T); and the proprietary MediaFLO technology from US cellular vendor Qualcomm.

In the Far East, where broadcast-based mobile TV services have begun, yet other standards are deployed, including a satellite version of DMB (DMB-S) in South Korea, and the ISDB-T standard in Japan.

In Europe, mobile operators are still trialling the technologies. By far the most prominent is the DVB-H standard, and mobile operator 3 Italy has announced a commercial service using the standard this summer. Finland is expected to follow soon after. And according to Siano’s CEO, Alon Ironi, at least three cellular operators in Europe will trail DMB-T.

Mobile TV chip companies must first choose which standard to back, given the time it takes to develop silicon. They have chosen two approaches: to back one standard they believe will win or developed a chip that supports several.

Multiple standards

Of the start-ups, Siano and Newport have silicon supporting several standards, Frontier Silicon has both single DMB-T and multi-standard devices while DiBcom backs the DVB-H standard. “DVB-H has the lowest power consumption, is supported exclusively by handset makers Nokia and Motorola, and the cost of rolling out a network is a third that of DMB,” says Yannick Levy, DiBcom’s CEO.

Having a multi-standard device reduces the risk of betting on the wrong one. It also promises greater device volumes, reducing unit chip cost. The disadvantage, however, is such chips are inevitably more complex and costly. “In the short-term there may be single standard silicon but chip vendors are going down the multi-standard route,” says Neil Mawston, senior analyst, wireless device strategies at market research firm, Strategy Analytics.

Strategy Analytics has no doubt that mobile TV will become a mass market. What it questions is when. “Our view is that it will take longer than vendors and operators seem to think,” says Philip Taylor, Strategy Analytics’ director, wireless Internet applications. There are a several factors to be resolved, including availability of radio spectrum and handsets (see box). “Any one of these could slow down availability and demand,” says Taylor.

The market research firm forecasts worldwide sales of TV-enabled mobile phones to grow from $5 billion in 2006 to $30 billion by 2010. It expects 8 million TV phones, the majority in the Far East, to be sold this year, growing to 120 million by 2010. It also expects DVB-H to gain the largest market share globally and be dominant in Europe. ABI Research also forecasts strong global mobile TV handset sales, exceeding 162 million by 2010.

Meanwhile, mobile TV chipmakers are now providing silicon to handset makers launching products for the European and North American markets from this summer. “We have just announced a big order,” says DiBcom’s Levy, delivering its DVB-H chip to a handset manufacturer supplying 3 Italia. “We expect to see main launches in Europe from 2008 due to spectrum issues [UHF radio spectrum becoming available],” says Taylor.

The chip start-ups inevitably face fierce competition from established silicon players, equally aware of the market’s promise. These include top 10 global players Philips Semiconductors and Texas Instruments.

How will the start-ups fare? “I expect one or two to do particularly well,” says ABI’s Varghese. They may be face competition from the chip giants, he says but unlike them, the start-ups are focussed on one thing.