Jim Cramer Talks Mobile Video with AT&T, Sprint, Verizon at CTIA
"The most powerful weapon in Bahrain when protesters faced police," said Dan Hesse, chief executive of Sprint, "was a cell phone video camera. For those who don't have access to a computer, the growth of media and commerce capabilities on mobile devices is key.
"Mobile devices have become the eyes, ears, and voice," Hesse continued, speaking before a capacity crowd in his role as CTIA chairman for 2011. "The mobile device enables economic mobile commerce in areas where it may not be safe to carry cash, it provides a way to capture video of key events, and it drives the advance of 'people power' in uncertain times."
Hesse was joined on stage later by Jim Cramer, host of CNBC's Mad Money, as Cramer moderated a question and answer session with AT&T, Sprint, and Verizon executives.
Ralph de la Vega represented AT&T, and is the company's president of mobile and consumer markets, while chief executive of Verizon Wireless, Dan Mead, represented the largest current wireless service provider in the United States.
Cramer started off with a question similar to Hesse's earlier statement.
"Did the industry bring down Egypt's government?" Cramer asked.
"The power of the people has never been better with the technologies we've brought to bear from the wireless industry," said de la Vega.
"I think we played a role," added Hesse. "Where governments have controlled public gatherings in the past, lowering the possibility of public outcry, these days they don't need to get together to push forward with societal change. Egypt is an example: the key organizers met on Facebook, Twitter, and other online social media locations."
Cramer then asked: Why are we so far behind other countries in terms of mobile technologies?
"That's a myth," said Verizon's Mead. "If you look at 4G, we're ahead of the rest of the world. Being the leader means we have a responsibility on us to provide a quality experience, but we can do so since we have the most robust network in the world."
"The US leads in 3G as well as 4G," said Hesse, "and I have to give credit to AT&T and Apple for jump-starting our lead in 3G. We've seen 75 percent of growth in smartphone growth is in the U.S., enough so that ,within three years, we've now become the undisputed leader again."
Cramer then asked about texting and the "next big thing" beyond text-based mobile data.
With the growth of video on the mobile device," said de la Vega, "we see this as the next big wave. To meet that wave, both innovation fostering and spectrum re-allocation are equally important for growth."
The mention of video sent Cramer into one of his trademark frenzies, starting a number of questions around Netflix streaming.
"Why am I subsidizing data hogs," asked Cramer, mentioning the cost of his Verizon phone bill, "and those people who watch Netflix on mobile broadband?"
When we look at the value proposition," said Verizon's Mead, "we see that unlimited data plans have fostered growth. We'll continue to foster that, but the whole industry is looking at whether there should be metered billing."
Hesse from Sprint disagreed that metered billing was necessary.
"The important thing for us is to differentiate with customers," said Hesse. "Home Internet is not metered, but we do have to look at tonnage and usage to understand how to use our network more efficiently. I found, when I ran AT&T wireless years ago, that customers will pay a premium for simplicity, so we may see different rate plans for different parts of the market."
AT&T's de la Vega added that data growth has been astronomical for the carrier who was, up until recently, the sole U.S. provider of Apple's iPhone.
"Our data growth was 8,000 percent over the past four years, and it'll grow 10 times in the next few years," said de la Vega. "That's why we're buying T-Mobile: to combine the networks to better utilize spectrum within cities."
This comment brought about audience reaction, as the news of the potential AT&T acquisition of T-Mobile USA has been the talk of the show. Cramer then turned to Hesse, whose company has filed a formal complaint against the proposed merger, asking whether Hesse saw the data growth argument as justification for the merger.
"My opinion doesn't matter, but I think it's the FCC and DoJ whose opinion matters," said Hesse to significant audience laughter. "That's my answer. I am concerned that we will see 79 percent of the market in the hands of just two companies-AT&T and Verizon."
Somewhat contradicting the need for additional spectrum, a claim made by opponents of the AT&T/T-Mobile deal, Verizon Wireless's Mead responded to Cramer's question about Verizon potentially acquiring Sprint.
"We're certainly very interested in what's going on with the AT&T/T-Mobile proposal," Mead said to the delight of the audience, "but we've built a great breadth of spectrum using many acquisitions, so we feel we're in a good position with spectrum inventory."
Cramer then came back around to the question of capacity by asking about his experience watching video on a mobile device.
"When I'm watching March Madness or MLB.com when I'm on the go," Cramer said, "my screen sometimes freezes. Who's at fault? Why do things freeze?"
None of the executives would offer an answer, but AT&T's de la Vega noted a variety of factors are at play in mobile broadband video playback.
"It's a combination of trying to predict demand, for events like the CTIA event, where the need constantly changes," said de la Vega.
Finally, Cramer asked about cord cutting.
Why does this generation need cable if they have 4G?" asked Cramer. "Is it a generational thing?"
"My sons like to watch things on their own device, streaming," said Hesse, "versus the screen that I look at on the wall, the television. So, yes, it's partly generational. We also think we'll have flexible and expandable screens in the near future that can expand from a phone size to a tablet size to view video content."
"I think the cable companies will have to move into wireless and other transmission technologies," Hesse continued, "to provide content that is often only available online. We can see 4G cable station delivery via WiMax providers such as Clearwire, which we own a majority stake in."
Hesse's point about WiMax left the question unspoken about whether the move to re-allocate spectrum from over-the-air broadcasters to the wireless industry might also shift the balance of power for multicasting video-an area that broadcasters have been exploring with their additional spectrum.
Cramer than launched into a "Lightning Round" of questions about a variety of video and social media companies.
"What about Facebook?" he asked. "Friend or foe?"
"Friend," de la Vega answered quickly.
"What about Netflix?"
"Friend," said Hesse, "as is anyone who entices consumers to use data on a mobile device. We need to watch the video business model, however, and we need to resolve that in the market."
Verizon's Mead agreed.
"We look at the relationship, and we know that Verizon doesn't need to provide content," said Mead. "Yet with FiOS and wireless services, now we can negotiate with one voice to them."
"What about Microsoft?"
"Friend," said Hesse. "If the Microsoft-Nokia hookup is successful, we'll see a shift from the two dominant operating systems-Apple and Android and, to a lesser extent, RIM-to another alternative."
"Friend," said Mead, "and important as part of the long-term relationship over Android."
Clips of the roundtable interview can be viewed on http://daily.ctia.org/wireless2011/
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