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Mobile DTV lessons

It's time to make some room on that dusty shelf collecting antique tech gadgets. Among the items on the shelf are an eight-track stereo player, your battery-operated portable NTSC TV receiver and that old vinyl record turntable. Now you can add your FLO TV receiver to that junk pile.

Having announced in October the decision to pull the plug on its FLO TV service, Qualcomm will actually discontinue delivery of content to FLO TV receivers in the spring. In the announcement, the company was very careful to indicate that it was the direct-to-consumer service that was being affected and that its white label service “was not affected at this time.” White label service is what is currently provided to Verizon and AT&T, who market the content as a subscription-based mobile television add-on service to special mobile phone models that include a 700MHz MediaFLO receiver. MediaFLO is the name Qualcomm uses for the technology delivery vehicle while FLO-TV is the name used for the actual service.

Given the data rate and bandwidth requirements for streaming video, the concept of a network-efficient hybrid — a handset with both a cellular transceiver for voice and data, and a 700MHz MediaFLO receiver for video — seemed an ideal concept. In practice, however, the cellular providers' high monthly subscription fees for the TV service and lack of any real marketing push has led to minimal consumer penetration.

To implement its concept for a portable TV subscription service, Qualcomm originally invested $683 million for the acquisition of spectrum space from the circa 2005 FCC series of auctions for 700MHz range frequencies. Once the auctions were complete, delays and inconsistencies in spectrum availability on a market-by-market basis precluded Qualcomm from quickly rolling out a nationwide service — one of the first nails in the coffin of FLO TV's nascent service.

Other nails in the form of an economic downturn and a flawed business model quickly followed. In making the announcement, Qualcomm CEO Paul Jacobs expressed disappointment in the failure of the FLO TV service business but in a classic example of turning lemons into lemonade; he went on to say that the good news was that based on current valuations, the company's original investment in spectrum is now worth some $2 billion. While that might be good news for shareholders, it is probably not the kind of statement that would inspire signing up for the remaining MediaFLO service that is being delivered by the cellular phone companies. Perhaps it was those spectrum dollar signs that prompted the lukewarm commitment regarding the white label service not being “afffected at this time.”

Why'd FLO TV bite the dust?

There are a variety of factors that contributed to the failure of FLO TV. During last summer's ATSC M/H tests in the Washington, D.C., market, the Open Mobile Video Coalition (OMVC) reported that local news was far and away the most frequently viewed content by consumers participating in the test. FLO TV's business model precluded the offering of local content — a lesson that should have been learned from the early experiences of Dish Network and DIRECTV and the negative impact on subscriber growth that they suffered until coming up with a way to deliver local channels. But perhaps the overarching reason for the lack of success, particularly in today's economy, was consumer fatigue with facing yet one more monthly subscription fee, one more hand reaching into a pocket that increasingly contains more lint than cash.

Market research firm SNL Kagan reported in August that subscription TV service providers actually lost subscribers in the previous quarter — the first quarterly decline ever reported. In its October quarterly earnings report, Comcast reported the continuing loss of subscribers, with 275,000 disconnecting in the previous quarter alone. Subscribers are finding that with a combination of Internet-provided services and over-the-air signals, they can dramatically reduce viewing entertainment monthly costs.

As the TV broadcast community begins to ramp up for mobile/handheld-delivered TV services, the highly positive results reported by the OMVC regarding the Washington tests are very welcome. With the exit of FLO TV, certainly opportune as well, comes the demise of a competing service. But there are key lessons to be learned regarding that demise, and they should not be overlooked. They are prescient and critically important as broadcasters are formulating business models today for their new mobile service. To paraphrase George Santayana: heed the past or be condemned to repeat it.

Anthony R. Gargano is a consultant and former industry executive.

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