Qualcomm To Shut Down FLO TV Consumer Service: Report


Qualcomm reportedly plans to shut down its FLO TV consumer service, casting uncertainty over the future of live mobile TV services from AT&T and Verizon Wireless that are also powered by the Qualcomm subsidiary.

FLO TV's direct-to-consumer service will wind down operations by the end of 2010, and Qualcomm is in discussions with the wireless carriers about the future of the wholesale services side, according to a report by PaidContent, citing anonymous sources.

Qualcomm and FLO TV representatives did not respond to requests for comment. AT&T and Verizon Wireless reps declined to comment.

After initially landing distribution deals with AT&T and Verizon Wireless in 2007, FLO TV (formerly called MediaFLO) launched a direct-to-consumer strategy in November 2009 with a service priced at about $15 per month for more than a dozen cable networks. Part of the push included an attempt to install FLO TV in cars through aftermarket auto parts dealer Audiovox.

At an industry conference this summer, Qualcomm CEO Paul Jacobs acknowledged that FLO TV's subscriber numbers have been disappointing.

"There are people who love it, but the numbers are not nearly what we expected," Jacobs said in June at The Wall Street Journal's "All Things Digital" conference. Qualcomm, he added, is looking to extend FLO TV into a "more general system for delivering data to mobile devices that isn't limited to video."

In its 10-Q for the quarter ended June 27, Qualcomm disclosed that it was evaluating the FLO TV business model including the potential sale of the unit to or joint venture with a third party "and/or alternative use of the spectrum licenses, technology and network assets, if we do not achieve adequate consumer acceptance of our FLO TV service offerings in the United States or based on other factors."

Qualcomm has not disclosed how many FLO TV subscribers it has signed up. Revenues attributable to FLO TV for the first nine months of fiscal 2010 were $9 million, compared with $22 million in the same period for fiscal 2009, a decrease Qualcomm blamed on an increase in customer-related incentives that were recorded as reductions in revenues and lower service-related revenues, according to the 10-Q.

FLO TV's loss before taxes for the first nine months of fiscal 2010 was $283 million -- partially offset by a $62 million gain on the sale of its Australia spectrum license and a $15 million decrease in net investment losses (unrelated to FLO TV) -- compared with $266 million for the first nine months of fiscal 2009.

Qualcomm has spent more than $800 million building out FLO TV and acquiring spectrum for broadcasting over a dedicated 6-MHz spectrum slice in the 700-MHz band.

In March 2008, the company acquired five E-block licenses in the Federal Communications Commission's 700-MHz spectrum auction for $554.6 million covering the Boston, Los Angeles, New York City, Philadelphia and San Francisco regions -- which doubled the potential capacity of the FLO service along East and West Coast corridors.