A little over two years ago (January 2005), I wrote about Qualcomm’s plans for a service called MediaFLO that delivers video programming to handheld devices. Since then, two competing service providers have emerged, Modeo and Hiwire. I was skeptical then that a real market would develop for this kind of service. To have that market divided up between three competitors makes the prospects even worse.
Qualcomm has the rights to use TV channel 55 (716-722 MHz) throughout the country, subject to one important constraint. TV channels in that range are still being used by some TV broadcasters, and that will continue until the end of the digital transition in 2009. A MediaFLO deployment will cause interference to channel 55 TV reception, even if the separation distances are quite large, and possibly channel 54 and 56 as well. So Qualcomm has been going around the country, negotiating with broadcasters for consent to accept the interference. For example, a MediaFLO deployment in Philadelphia will cause some interference to viewers of channel 55 stations in Hagerstown, Md., and Norfolk/Richmond, Va. There are also some instances where MediaFLO could cause adjacent channel interference to viewers of channels 54 and 56. But most of those viewers are within range of other TV stations carrying the same programming. So the FCC has been approving these agreements.
Another company, Aloha Partners, has the rights to use TV channels 54 and 59 (710-716 and 740-746 MHz) covering 60 percent of the U.S., including all of the top 10 markets and 84 percent of the population in the top 40 markets. Aloha won some of these frequencies in FCC auctions in 2001 and 2003, and then acquired companies that won the auctions for other cities. Last year, Aloha established a subsidiary, Hiwire, to roll out a video service. Aloha is owned by Charles Townsend, former president of Colony Communications in Providence, R.I., and the investors are reported to include former cable industry execs Amos Hostetter, Bob Hughes and John Saeman.
Hiwire has the same problem as MediaFLO; namely, existing TV broadcast stations. It has twice as much spectrum, 12 MHz instead of 6 MHz, which means around twice as many potential interference situations to negotiate and resolve, at least until 2009.
A third company, Crown Castle International, a company that owns cellular radio transmission towers, has the rights to use 1670-1675 MHz. This was acquired in FCC auction 46 in 2003. This is spectrum that was originally allocated for federal government use. As such, the incumbent users that must be protected against interference are quite different from the 700 MHz TV broadcasters. There are important NOAA weather satellite earth stations, but only at three locations (Wallops Island, Va.; Greenbelt, Md.; and Fairbanks, Alaska). On adjacent frequencies, the National Weather Service operates radiosondes, and radio astronomy observatories analyze emissions from hydroxyl molecules in deep space. So the FCC has adopted coordination and notification requirements for Crown Castle to prevent interference. Crown Castle has established a subsidiary, Modeo, to deploy its video service.
Both Modeo and Hiwire plan to use the technology known as DVB-H, a standard developed in Europe and being deployed worldwide. MediaFLO will use a proprietary technology developed by Qualcomm. The receiver technologies will be embedded in the next generation of cellphones. This, of course, echoes the cellphone technology situation, with Qualcomm’s CDMA used by Verizon and Sprint in the U.S., and the European GSM system used almost everywhere else. Can I use my Verizon CDMA phone in Europe? No. Can I use my Cingular GSM phone in Europe? Yes. Will I be able to use my MediaFLO phone in Europe? I don’t think so.
Hiwire has two technical advantages over MediaFLO and Modeo. It has more spectrum. And the spectrum is in two separate blocks. This separation is consistent with the traditional technical approach to two-way radio use known as frequency division duplexing. Hiwire would be wasting that advantage with a one-way broadcast service. When Hiwire finally realizes it can’t make a go of the video business, it will figure out a productive two-way use for the spectrum.
It appears that all three services will operate as wholesalers, dependent on cellular phone companies for the retail distribution. MediaFLO seems to be out in front, having wrapped up agreements with both Verizon and Cingular/AT&T. That doesn’t leave much for Modeo and Hiwire.
But maybe that’s just as well. XM and Sirius, while not exactly wholesalers, are dependent on exclusive deals with auto manufacturers to have their radios factory-installed in new cars. They more or less split the new car market. And now they have decided that two robust competitors is one too many.
We’ll see how long it takes for MediaFLO, Modeo and Hiwire to realize that three services delivering video programming to handheld devices is two too many. Maybe even three too many.