DVB-H and government overreach

Germany is facing difficulties finding a workable business model for the mandatory DVB-H mobile video broadcasting standard. Perhaps the problem is that governments are trying to impose technology standards ahead of time -- a strategy that, from an economics standpoint, is questionable.
Written by John Carroll, Contributor

I wrote a few months ago of the problems likely to be experienced by the European Commission as it tries to head the market off at the pass by mandating use of DVB-H protocols for video broadcasting over mobile networks before any viable companies who use the technology have gotten off the ground. As noted then, the market process is critical to working out the meeting point between profitability, customer needs and technology requirements. Quoting myself:

The lesson, in other words, is that picking the wrong winner can be extremely costly in the long term. Governments aren’t usually that good at picking winners, not because they are stupid, but because it is all but impossible to gather sufficient information to represent all the interests of buyers and sellers in a market.

My fears seem born out in the possible collapse of a joint venture designed to find a viable business model for the provision of DVB-H technology in Germany. The very notion of a government-sponsored joint venture in search of a business model really puts the horse before the cart. More commonly, companies find working business models in the process of trying to offer a new service, and that model gets popularized naturally, as success is its own best advertisement.

This statement on Betanews, however, gave me a chuckle:

For his part, Pres. Langheinrich appears not yet willing to take that extra step -- to mandate a business model for DVB-H in Germany, and to force telcos and service providers there to comply with it.

While they are at it, why don't they raid German universities and pull a few students out of engineering classes, "mandating" that they work for these companies who must offer DVB-H services under a "mandated" business model. If a business model isn't workable, then it is hard to attract top talent to unprofitable companies. Seems the logical next step, doesn't it?

Think back to the early days of word processing. The market for word processing software didn't begin on the basis of a shared, common office document format. For that matter, such a shared format would have been all but impossible to construct, as nobody really knew what kinds of things were required in office document formats until people started to try to build and use them. The trial and error process used by companies as they hunt for products that satisfy customer needs teases those details out, creating a viable business model as a free byproduct of the process.

Leaving companies to the task of hunting for a workable strategy likely means that the market will be fractured along technology lines. Not only is this outcome easier when building brand new software to support such services, but companies tend to prefer to avoid competition in early days by basing their network on technology specific to themselves (Facebook isn't compatible with MySpace, as an example). On the other hand, they are more likely to build workable business models with that approach, and the knowledge gleaned will tune the technologies on offer and enhance standards that aim to aggregate knowledge in hindsight.

There is value in a technology that serves all of Europe. That advantage will sell itself. Government does not need to force the issue ahead of time.

It is good that the EC is trying to centralize the licensing process for broadcasting across Europe. Acquiring licenses in all European countries is an expensive and slow process, and centralizing it will lower barriers to entry while enhancing competition. The EC, however, should back down from trying to impose technology standards.

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