How can T-Mobile afford to offer its Binge On streaming video service at no extra cost to its Simple Choice customers who pay for more than 3GB of LTE data a month?
Won't it be crummy video? Won't it cause congestion on T-Mobile's networks and lead to frustrations for customers?
T-Mobile officials offered a few technical details after Tuesday's announcement to shed light on how it will make video streaming from 24 content providers possible starting Sunday.
What about the quality?
T-Mobile called its streaming service "optimized," although some analysts have preferred to call it "compressed" video that delivers 480p quality to smartphones and tablets. That's far lower resolution than the widely available HD 1080p quality. Some analysts referred to T-Mobile's proprietary technology as a form of "adaptive bitrate optimization coding technology." This is software that can automatically adapt the amount of data sent to appear on a smartphone from larger devices.
CEO John Legere said the quality will be "DVD or better," and said users won't need HD quality on a smartphone or tablet, although they might prefer HD on a larger screen in a living room.
"We've optimized the video stream not to use useless amounts of data," he said at Tuesday's launch event. The problem that T-Mobile tried to solve was to "find a way to stream to give an incredible experience but one that doesn't waste [data]." Binge On uses one-third the data of a normal video stream when it's carried over LTE.
T-Mobile released a side-by-side online comparison (38MB download) of how its optimized Binge On video on a smartphone looks next to HD video on a smartphone. Some differences in video quality are noticeable in the comparison, although Legere argued the differences are acceptable.
"Don't get hung up on its being 480p. It's DVD quality or better and not discernable on a device in hand," Legere said. "If you want to mirror it to a big screen, just turn [Binge On] off [and use paid LTE streaming]. It's not perfect, but try it. It optimizes for what a device needs now."
The secret video streaming software that T-Mobile uses is proprietary, and the company wouldn't disclose development partners.
Officials said that T-Mobile contacted streaming video content partners, including HBO, Hulu and Netflix, and asked them to work with T-Mobile software that would provide video streaming only for smartphone or tablet-size screens. Content providers have traditionally sent video that can be presented on a large screen, which carries the extra, wasted data.
CTO Neville Ray said 480p provides "outstanding quality," and promised that T-Mobile will further optimize the video stream that's being delivered in a multi-year program.
In an interview, Grant Castle, T-Mobile's vice president of engineering services, said T-Mobile configured its data packet core network to be able to identify video streams. "We found that how video was being delivered, whether for desktops or mobile, the providers don't differentiate," he said. "We identify the video and signal back to send a mobile optimized version to this consumer. We don't really touch it."
In addition, T-Mobile also created a toggle switch, so if a customer wants a higher quality version to mirror to a larger display, the customer can turn off Binge On.
T-Mobile uses existing technologies to provide Binge On, but is not transcoding the video as some other carriers do, Castle said. "We're helping the video adapt [to mobile] correctly," he explained. "It's not that tricky to do, but the trick was to identify the signatures of all the video providers."
Castle said that when he was first asked to find a way to offer free video to customers it seemed impossible. "The first day, I thought, no way. Later we saw a lot of video providers were offering a fat desktop version. But why? we asked them. They said, 'We thought you'd like that and thought we'd be doing you a favor.' We think that's a waste and said let's send the right amount of data."
In his normal fashion, Legere blasted competitors like Verizon Wireless, AT&T and Sprint for wanting to send more video data than is really needed for smartphones, so that customers would break through their data limits and then incur expensive overage charges. "We started the un-carrier movement to fix a stupid, broken, arrogant industry," Legere said. "Customers are living in fear or in shock of their bill."
What about network congestion?
Some analysts worried that T-Mobile's network could grow congested with too much Binge On usage. At some theoretical point, even with a T-Mobile LTE network serving 302 million Americans, congestion is possible, they said.
If T-Mobile's customer usage soars with Binge On, "the benefits in terms of customer adds and lower churn could be offset if the network does not live up to expectations," said Wells Fargo market analyst Jennifer Fritzsche.
T-Mobile's Castle was confident that the network would run smoothly. "I'm working every day to not get congested. By moving our spectrum to LTE and with coming bid auctions, we'll stay well ahead of capacity. Neville Ray couldn't allow that to happen. We do have the nation's fastest network, and we're more than happy to add more customers."
T-Mobile is willing to work with any streaming video provider that meets its technical standards, company officials said, and T-Mobile won't charge the providers for the service.
So far, Google's YouTube service and Facebook video are not among the streaming services supported by Binge On. Some experts estimate that those two sources make up well over half of all the streaming video available on the Internet. Castle said there is a "small class of videos with a different identity from others. If it's Google or Facebook, we're happy to work with them."
While analysts said HTTPS encryption on YouTube might be the reason it is not yet on Binge On, Castle said, "it's less about encryption and more about the delivery mechanism they use, which is UDP (User Datagram Protocol)."
Binge On for business users
Binge On isn't only for consumers and can also be applied to T-Mobile business customer plans.
Mike Katz, senior vice president of marketing, said in an interview that T-Mobile has seen "huge success" in adding business customers, mostly smaller companies. "They've been leaving Sprint and AT&T in droves."
Streaming video is applicable to some work-related activities, but is also a service that typical workers want to have available on a smartphone at lunch or other free time, he added.
In addition to announcing Binge On, T-Mobile doubled the data available for the same price for both consumer and business customers. Four business lines with 6GB each will cost $120 per month for a limited time. T-Mobile also dropped the price for 11 or more lines by a dollar, from $16 to $15 per line.