TV and Broadband Are In Air for AT&T

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AT&T is positioned to offer nationwide broadcast TV or high-speed Internet services to mobile devices over its own network infrastructure, having snapped up wireless spectrum— covering 196 million people in 281 United States markets — from Aloha Partners for about $2.5 billion in cash.

The U.S.'s biggest wireless carrier will use Aloha's two licensed 6-Megahertz channels in the 700-MHz band for either broadcast video or two-way communications, such as voice, data and on-demand video, AT&T media-relations representative Michael Coe said. The company has not determined which services it expects to offer in the spectrum, he added.

MOBILE-TV UNIT INCLUDED

As part of the deal, AT&T will acquire Aloha's Hiwire subsidiary, which is conducting a mobile TV trial in Las Vegas through the end of 2007 with 24 live channels through a partnership with T-Mobile USA.

But some analysts were doubtful that AT&T will deliver a mobile-TV service in the Aloha spectrum.

Parks Associates director of research John Barrett said the carrier is more likely to develop broadband Internet service in the 12-Mhz spectrum chunk. “It would surprise me if they thought $2.5 billion is something they could recoup with mobile TV,” he said. “Mobile TV is something that interests people. But it's not something everyone wants.”

What's more, AT&T announced a deal with Qualcomm's MediaFlo USA subsidiary earlier this year. At the time, the telco said it planned to roll out a live mobile TV service in the fourth quarter of 2007. AT&T's Coe said the acquisition of the Aloha spectrum has “no bearing on our position” with MediaFlo.

“I'm thinking less and less that [AT&T's use of the Aloha spectrum] will be on the video line because they have an agreement with MediaFlo,” Frost & Sullivan senior consultant James Brehm said, adding, “But you never know what AT&T is thinking.”

MediaFlo USA operates a network in a separate block of the 700-MHz band. The Qualcomm unit also has a deal with Verizon Wireless, which has rolled out its eight-channel V Cast Mobile TV service in more than 30 markets.

More broadly, Brehm said, AT&T appears to have jumped at the opportunity to get a foothold in the coveted 700-MHz spectrum — before the Federal Communications Commission auctions off 62 MHz of spectrum blocks in the 700-MHz band in January 2008. That spectrum is becoming available with the Feb. 17, 2009, mandate that TV broadcasters cease analog transmission.

“It's a foothold” for AT&T, Brehm said. “It means they won't have to fight so hard in the FCC auction. I think what this really does is set a floor price for that upcoming auction.” Aloha has said that its spectrum will be clear of any broadcast interference by February 2009 because of the digital-TV cutover.

Coe declined to comment on whether AT&T plans to participate in January's 700-MHz auction.

BIG WIN FOR ALOHA

In any case, the deal represents a coup for Aloha Partners, which had reportedly raised $100 million from investors. Backers of the Providence, R.I.-based venture include CEO Charles Townsend, who previously headed Colony Communications and several wireless providers, and former Continental Cablevision chairman Amos Hostetter.

Aloha Partners purchased the spectrum during FCC auctions in 2001 and 2003 and through subsequent acquisitions of spectrum owners. Overall, its holdings cover 281 markets, including the top 10 U.S. markets and 72 of the top 100.

AT&T said it anticipates closing the Aloha deal after receiving necessary government approvals in six to nine months.

“AT&T has always looked at how much wire they have in the ground,” Brehm said. “Now it's, 'How much air do we have?' ”

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