Qualcomm seeks markets with bold TV network move
Acts to take role over WiMAX
Qualcomm has always been a company of extreme audacity. Having taken on the prevailing GSM mobile phone world to establish its own de facto standard with CDMA. As a result it has created a business around its vast store of intellectual property that, if its new results are anything to go by, has far more life left in it than many would have predicted.
Now it is leaping ahead of most wireless contenders into the nascent market for the triple play.
The chipmaker's dependence on CDMA means the eventual move to all-IP networks, and the likely rise of OFDM and WiMAX, are major threats, and explain its implacable hostility to IEEE 802.11 and 802.16. Therefore it needs a game plan that will enable it to shift to new revenue streams without sacrificing its core expertise and partnerships.
The boldest part of this plan to be revealed so far is Qualcomm's creation of a national US broadcasting network for use by carriers and other partners, which will boost uptake of CDMA and W-CDMA cellphones and, potentially, other devices that Qualcomm will devise over the coming few years either on its own or with partners.
Qualcomm plans to invest $800m over four to five years in a new subsidiary that will create a network to help carriers bring television to smartphones. While other chipmakers such as Intel mull whether to invest in spectrum in order to further their wireless strategies, Qualcomm has gone ahead and done it, buying up licenses to broadcast in the former analog television bands in the US. This mirrors its aggressiveness in buying up, through an affiliate, 450MHz spectrum in Europe and other areas to bolster the chances of CDMA in those bands.
Go with the FLO
Qualcomm will initially target 30 US cities for its MediaFLO USA network, after its content distribution system of the same name, announced in March. Interestingly, Qualcomm also announced last month a video multicasting system for MediaFLO, simply called FLO (Forward Link Only), which uses OFDM as an alternative to the usual CDMA base.
This shows the chipmaker, despite all its powerful reasons to lock its gates against any non-CDMA technology, recognizing that, for some applications, OFDM may be superior, particularly for delivering more channels of content at lower cost.
MediaFlo is based on OFDM outbound high speed technology and provides a one-way, high speed system to deliver audio and video. Multiple channels within Channel 55 will be made available to both CDMA and W-CDMA carriers as well as MVNOs and content resellers.
Companies like Disney might well be interested in delivery technology of this type to replace its expensive and, so far, unsuccessful Moviebeam concept, which used spare TV broadcasting lines to transmit film files to Disney set tops.
TV broadcasters or content providers could license the network to expand their viewing base to mobile users, particularly those, like sports channel ESPN, that own content as well as distribution. Within its 6MHz spectrum, MediaFlo will be able to deliver 50-100 national or local content channels. The MediaFLO system will handle everything from content distribution through program guides and billing to the 700MHz channels.
In our guess Qualcomm just wants this spectrum to make it easier to buy Qualcomm products, and in the end may float the service off to investors. But in the meantime the company will act as an aggregator of television content for carriers, striking deals with TV stations and other parties. The network will start operating in 2006 and the first carrier to support it is Sprint, already a firm believer in mobile TV as a future revenue driver in the US.
Paul Jacobs, head of the unit that houses MediaFLO, said the FLO OFDM-based technology uses high broadcast towers and high wattage to cover a city with an average of 2-3 transmitters, using the former analog TV spectrum in 700MHz, which should be vacated by 2007-8 as the broadcasters shift into digital TV.
Qualcomm has bought the nationwide license for one of the UHF-TV channels becoming available, Channel 55, but other parties, notably the WiMAX community, have their eyes firmly on other channels.
For the quarter ended September 26, Qualcomm reported net profits of $393m. Sales were $1.1bn, up 28 per cent year-on-year.
Copyright © 2004, Faultline
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