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AT&T buys FLO TV spectrum, but service to be shut down

In what cannot be considered a good omen for broadcasters’ nascent mobile television services, AT&T said it will purchase spectrum licenses from Qualcomm FLO TV in the lower 700MHz range for $1.9 billion.

The FLO TV business will be shut down in March 2011. It was the first major experiment in mobile television service in the United States and was supported by the mobile phone carriers — something the broadcasters still don’t have after years of trying.

The spectrum will be used to enhance AT&T’s 4G network, where it will help deliver “substantial capacity gains.” AT&T said it will deploy the spectrum to serve as “supplemental downlink, using carrier aggregation technology,” which will “address increased consumer demand for rich mobile media content.”

The Qualcomm spectrum covers over 300 million people in the United States, including 70 million in five of the top 15 major metropolitan areas: New York, Boston, Philadelphia, Los Angeles and San Francisco, which are all covered by 12MHz of lower 700MHz D and E block spectrum. Six megahertz of lower 700MHz D block spectrum then covers 230 million across the rest of the country.

Qualcomm said it will integrate the carrier aggregation technology into its chipset roadmap, and AT&T will begin deploying this spectrum once compatible handsets and network equipment are developed.

“This is very high-quality spectrum. It’s especially concentrated in the urban areas,” said Craig Moffet, an analyst with Sanford C. Bernstein & Co. “It provides a very strong signal inside buildings and it’s extremely good at penetrating walls and windows.”

Moffet said the spectrum will help AT&T with the network congestion problems such as those experienced by Apple iPhone users in major urban areas.

The transaction is subject to regulatory approvals and other customary closing conditions.

For months, Qualcomm has been warning that FLO TV was in financial trouble. Paul Jacobs, the company’s chairman and CEO, said problems included low adoption, high marketing costs, expensive customer service, product development and customer acquisition.

Qualcomm had already launched a restructuring plan “under which we expect to exit the current FLO TV service business,” the company said earlier. That plan will incur restructuring charges of $125 million to $175 million in fiscal 2011.

Qualcomm, which said the television eyeballs weren’t there to sustain a mobile TV service, had explored operating the FLO TV network as a new wholesale software delivery service or joint venture with a third party. In the end, the effort failed, and the project continued to bleed money.

U.S. television broadcasters, still trying to get their nascent mobile DTV effort off the ground, never had the backing of mobile phone carriers, which had partnered with FLO TV. The broadcasters have been silent about the sale of the FLO TV spectrum.