Qualcomm Inc (QCOM)

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Qualcomm places bets on mobile TV


http://www.signonsandiego.com/news/business/20050805-9999-1b5mediaflo.html


Telecom firm gambles $800 million on cell-phone viewers
By Kathryn Balint
UNION-TRIBUNE STAFF WRITER
August 5, 2005



SANDY HUFFAKER
Qualcomm engineer Deviprasad Konea prepared to test TV signals on a makeshift cell phone set up inside a company van.

You'd never know it wasn't cable TV. Cable News Network airs without so much as a glitch on a tiny cell-phone screen perched inside a van driving around Sorrento Valley.

Call it TV on the go.

It's what Qualcomm sees as the next frontier for cell phones. The San Diego wireless technology giant is betting $800 million that people will want to watch television on their cell-phone screens.

"We believe the market is big enough for this," said Rob Chandhok, vice president of engineering and market development for Qualcomm. "We believe the demand will be quite high. We're talking about doing it at a quality that is so good that people who say, 'I'd never watch TV on my phone,' say 'I'd watch this.' "

Qualcomm envisions sports fans tuning in to get the latest scores, children being entertained during car trips, commuters on public transportation and people standing in line killing time. The company said news programs would be especially helpful during catastrophes.

Still, some analysts covering the wireless industry question whether there's much of a market for television on cell phones.

"Will people want to do it, and, even more importantly, how much will they be willing to pay?" asked Jane Zweig, chief executive of the Shosteck Group, a research firm focusing on the wireless industry.

Of course, video is already available on cell phones in the United States. The major U.S. wireless companies offer video from TV channels such as CNN, MSNBC, C-SPAN, Fox Sports and ESPN that can be downloaded onto cell phones.

But Qualcomm's new venture, called MediaFLO, would work more like traditional broadcast television. The FLO in MediaFLO stands for "forward link only," meaning that the signal transmits only one way.

The system would send up to 15 live TV channels from a few large central towers in each city to multiple cell phones. As many as 85 more recorded channels, including audio, could be transmitted as well.



SANDY HUFFAKER
Rob Chandhok showed how Qualcomm tests its technology for broadcasting TV over cell phones in a van traveling around Sorrento Valley the other day.
It would bypass existing cellular networks.

One benefit, according to Qualcomm: MediaFLO could potentially save wireless companies – and, ultimately, consumers – money on video services for cell phones.

That's because the system would broadcast TV programs to tens of thousands of cell phones at once instead of sending them individually to each subscriber, as cell-phone video is sent now.

And by using a separate system to deliver TV to cell phones, that would free up the cellular network for more voice calls.

Qualcomm started thinking about the concept three years ago.

One of its main goals was to reduce the expense of transmitting video to cell phones. Qualcomm's executives are well aware that there's a limit to what people will pay for television on cell phones.

Throughout the industry, there have been efforts to tweak existing digital video standards to deliver TV on cell phones. Qualcomm shunned those ideas and instead set out to develop an entirely new standard.

While Qualcomm is perhaps best known for its wireless technology known as code-division multiple access, used on cellular networks worldwide, it turned to another technology for delivering television to cell phones. That technology, called orthogonal frequency division multiplexing, was deemed by Qualcomm engineers to be more suitable for the task.

One way Qualcomm's technology saves money is in the number of transmitters it requires. Instead of the hundreds of transmitters needed in each city for a cellular network, MediaFLO can work on just two or three.

The transmitters send a 50,000-watt signal, the equivalent of a small TV station and thousands of times more powerful than a cellular transmitter. Qualcomm plans to install the transmitters on existing towers nationwide.

Qualcomm took a gamble even before it had all of the details of its system worked out. It paid $38 million for airwaves auctioned by the federal government in 2003, obtaining Channel 55 in the 700-megahertz band throughout 80 percent of the country. The auction was part of the Federal Communication Commission's move to sell off UHF frequencies in anticipation of television broadcasters moving to digital TV.

The company acquired rights to the band in the rest of the country in a private transaction. Qualcomm declined to disclose the details of that transaction.

These days, Qualcomm is busy honing MediaFLO in anticipation of a rollout next year.

In almost a daily routine, technicians and engineers, including Neal Hicks and Deviprasad Konea, ride around San Diego in van emblazoned with the "FLOMobile" on its side.

Inside, a contraption – made of a tiny screen, circuit boards and wires – simulates cell-phone technology. CNN, ESPN or a number of other TV networks that have allowed Qualcomm to use their programming for testing purposes play on the two-inch screen. The signal is transmitted from antennas atop Black Mountain, San Miguel Mountain and one of Qualcomm's buildings.

The shows, as well as the van's location, are recorded. Back at Qualcomm, the recordings are fed into a computer that analyzes them for the signal strength and other things.

"What we're doing is seeing whether what we predicted would happen is what actually happens in the field," said Chandhok, as he rode in the van on one of the short testing trips.

So far, so good. MediaFLO is capable of transmitting TV shows with four times the resolution of typical video on cell phones in the United States, Qualcomm said.

"I think that from a technology perspective, this stuff is very well thought out," said Michael King of San Diego, a principal analyst with Gartner Inc., a market research firm.

If all works as planned, Qualcomm's MediaFLO division will build a nationwide network, obtain the rights to the TV programming and sell the service to U.S. wireless providers.

The wireless companies, in turn, would charge subscribers for the service. Qualcomm is thinking the companies might charge $15 to $20 a month, but emphasizes that the price would be up to the individual provider.

Qualcomm says it eventually plans to spin off its MediaFLO division.

But, like the company's other endeavors, such as selling carriers on its CDMA technology, putting TV on cell phones poses challenges.

For starters, even though the company successfully bid to use Channel 55 nationwide, that was contingent on TV stations that still use those airwaves moving to digital transmission.

While Channel 55 is free for Qualcomm to use in most of the country, TV stations are still using it in 18 cities, according to FCC documents.

Qualcomm hopes to speed up the conversion to digital in those cities so it can use the channel sooner rather than later.

WACX-TV in Orlando, Fla., and KWDK-TV in Tacoma, Wash., have agreed to switch to digital in confidential deals with Qualcomm.

And, Qualcomm said, WLNY-TV in Riverhead, N.Y., may be next. It has told the FCC it intends to move to digital earlier than required by the government.

Another challenge for Qualcomm is power consumption.

"If you watch TV for an hour and have to go home to charge your phone before making a call, it makes no sense," Qualcomm's Chandhok said.

He said the company has succeeded in making its video system "very power efficient."

Another hurdle will be persuading wireless carriers to choose MediaFLO over several competing technologies.

One of those technologies, digital video broadcast-handheld (DVB-H), is backed by longtime Qualcomm rival Nokia. Vodafone Group and mm02 are testing the technology in Europe. Cellular tower operator Crown Castle is testing DVB-H in the United States.

"There's going to be competition to MediaFLO, and that's one of the big risks," said Albert Lin, an analyst with American Technology Research. "The U.S. risks once again getting into another big technology battle. DVB-H is almost certainly going to be one of the standards fighting MediaFLO."

Another challenge for Qualcomm is persuading TV networks to allow their programming to be used. Qualcomm is looking at offering short snippets rather than half-hour or hour shows.

"I think they're hoping they don't have to do anything really, that a Disney will look at it and say, 'This is a good conduit,' " Lin said. "I think they're really hoping that they won't have to go out and buy content."

Perhaps the biggest hurdle will be getting people to pay to watch TV on their cell phones. In addition to paying a subscription fee, cell-phone users would have to upgrade to phones with faster processors, more memory, better screens and a special chip made by Qualcomm so the phone can receive the MediaFLO signal.

"I'm not 100 percent convinced that people are going to consume mass quantities of (television) content on their cell phones," said King, the Gartner analyst. "I'm somewhat optimistic that people will consume small amounts of content."

But Qualcomm's Chandhok pointed to the thriving market for video games on cell phones and said he thinks the market for TV on cell phones is even bigger.

"If you think about it, what's the population of users that watch TV?" he said. "Imagine how many more people would be interested in TV-like entertainment on their devices."



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Kathryn Balint: [phone]; [e-mail]