Qualcomm announced plans for a subsidiary to deploy and operate a nationwide "mediacast" network, delivering many channels of high-quality video and audio programming to third-generation mobile phones at mass market prices. MediaFLO(tm) USA Inc., a subsidiary of Qualcomm, intends to provide interactive multimedia services to consumers in cooperation with U.S. cellular operators. MediaFLO USA has been structured as a subsidiary because Qualcomm intends ultimately to spin off its ownership of the business to its shareholders.
"Qualcomm strongly believes that the broad delivery of wireless multimedia services is the logical next step in the evolution of the wireless industry," said Dr. Paul E. Jacobs, executive vice president and president of Qualcomm Wireless and Internet Group. "Building on our deep relationships with wireless operators, handset manufacturers and content providers, we can accelerate the adoption of multimedia on wireless devices by making it truly cost effective using our FLO technology and prime nationwide 700 MHz spectrum."
Qualcomm intends to offer the network as a shared resource for U.S. CDMA2000 and WCDMA (UMTS) cellular operators, enabling them to deliver mobile interactive multimedia to their wireless subscribers without the cost of network deployment and operation. Subscribers will enjoy access to a broad range of high-quality content from the entertainment industry's leading media companies. MediaFLO USA will aggregate and distribute the content that is available to all MediaFLO partners and will provide seamless integration of this content with unique content that individual operators provide to maintain their competitive differentiation. The system will give TV stations and networks, cable TV and satellite operators and networks, and other content providers a major new distribution channel that complements their current offerings, enabling them to reach their audiences when they are away from home and on the go. U.S. consumers will gain access to compelling media services whenever and wherever they want them.
"Qualcomm's MediaFLO solution brings the cable and digital TV realms into the mobile value chain," said Jane Zweig, CEO of The Shosteck Group, an international telecommunications consultancy based in Wheaton, Maryland. "New partnerships and new revenue streams will be enabled as the content and mobile worlds become more tightly bound together. These opportunities exist for both vendors and operators alike."
The nationwide mediacasting network will deliver multimedia content to wireless mobile devices in the 700 MHz spectrum for which Qualcomm holds licenses that will enable the network to serve the whole country. It will be based on Qualcomm's FLO (Forward Link Only) technology and will use the MediaFLO media distribution system for content aggregation, delivery and viewing. The network will support 50-100 national and local content channels, including up to 15 live streaming channels and numerous clip-cast and audio channels. This content will be delivered in an easy-to-use and familiar format at quality levels that dramatically surpass current mobile multimedia offerings through the use of QVGA video at up to 30 frames per second and high-quality stereo audio.
FLO technology in the 700 MHz spectrum (UHF channel 55) offers distinct efficiency and cost advantages in delivering content to a very large mobile subscriber base. Deploying high-power transmitters on tall towers provides superior coverage with 30 to 50 times fewer towers than cellular and higher frequency-based systems. Qualcomm acquired the majority of this spectrum in the June 2003 Federal Communications Commission (FCC) Auction No. 49, using a portion of the Company's Auction Discount Voucher, and the remainder in October 2004 via a transaction with the original licensee.
Partnering cellular operators will be able to offer new interactive and differentiated services in conjunction with their CDMA2000 1X, 1xEV-DO and WCDMA cellular networks without the cost of further deployment or need for new spectrum. FLO technology is specifically designed to minimize the power consumption and size of mobile phones, and to integrate into the baseband chip.
Quallcomm's MediaFLO USA Inc. cash requirements for its business plan are expected to be approximately $800 million in investments over the next 4 to 5 years, some of which may be funded by third parties. Qualcomm expects to begin commercial operation of the new network in 2006.