All the coverage surrounding Qualcomm’s £8.3 million ($16.4 million) successful bid for a 40 MHz chunk of UK spectrum (1452 MHz to 1492 MHz) has the casual observer baffled. No-one seems to understand why the company would not only spend $16 million buying the spectrum, when no other major company was even prepared to bid, but exactly what it can do with it. Qualcomm watchers will not only be aware that the company has waged an obsessive war against DVB-H, pushing its own MediaFLO system, a similar but updated design, but will also be aware that Qualcomm has historically proven entirely new forms of communication by buying spectrum, creating the technology that will use it best, and then using that as a demonstration platform to go and conquer the world with the new technology.
That is the entire basis of how CDMA came to market, which established the company’s gigantic intellectual property business in cellular.
In the context of the $ billions that Qualcomm hopes to make $16 million is a tiny amount of money, especially if for that Qualcomm can defend MediaFLO and give it a basis in Europe ‘ if that’s all that it has to spend ‘ but of course it now has to decide whether or not to build a MediaFLO network and decide on the size and scope of such a build out. Qualcomm is reported to be spending $800 million on MediaFLO in the US, and last quarter spent some $76 million in the US, building out more and more markets for a service that is supposed to be taken to market by both AT&T and Verizon, the top two cellular operators there.
The big problem with that service is none of Qualcomm’s fault. It is not well marketed by Verizon (AT&T has only just launched) and the content offering that it has been allowed by the major US content owners, leaves a lot to be desired with Fox and Disney’s ESPN and other properties all allowing only their pre-digested made for mobile content profiles on the system. MediaFLO in the US would take off tomorrow if it was a free to air service with better content, but it is a paid service with short form content ‘ as we say it’s not the technology’s fault. AT&T has been able to convince Sony to launch a film channel on MediaFLO, which may makes some difference for its own offering.
What Qualcomm did in the US was take the pain away from the cellular operators of getting involved in Mobile TV and building out a network, negotiating for content and sourcing the devices. It has conducted two trials in the UK of MediaFLO technology working with News Corp’s BSkyB and there are obvious strategies that it might adopt to cement that partnership.
For instance it might build out a major city like London, or even several cities with MediaFLO transmitters and then use them to deliver a huge chunk of BSkyB programming in mobile TV. Cellular operators frustrated that there is no 700 MHz spectrum, thought to be ideal for DVB-H, available in the UK, might join in as a route to market ‘ especially Vodafone and O2. The other large UK operators, Orange and T-Mobile, have merged their TDD spectrum and entered a commercial mobile TV trial using TDtv from Nextwave.
The important thing would be to offer full programming from Sky, not made for mobile snippets, which although fine for cellular streaming snacking, are known not to take off in high enough numbers for full mobile TV.
Sky might pay for much of this in reduced TV churn, and choose only to charge non Sky subscribers. The prospect off picking up more device business from Vodafone and others, might lead Qualcomm to keep device costs down, in partnership with its usual Korean allies ‘ Samsung and LG Electronics, who both have MediaFLO handsets.
BSkyB has worked with all the major consumer electronics manufacturers in providing set tops, and has its subsidiary NDS to solve any insurmountable technology issues such as DRM protection.
The bouquet could be enormous. The 40 MHz spectrum slice is supposed to be split into one high power 12 MHz segment and multiple 1.7 MHz slices in slightly lower power, with two of these segments uses as a guard band between them. But since this spectrum has not gone to multiple players, MediaFLO could now apply for a waiver to allow high power transmission across the board, perhaps shifting those guard bands to the outer edges of the spectrum. That would have the effect of there being over 36 MHz of usable spectrum, which it can carve up any way it likes to fit current transmitter design ‘ say into three 12 MHz chunks. Each of these might allow MediaFLO to deliver 40 TV channels, and many of the existing Sky TV bouquet could eventually be accommodated.
In the US a small city, relying on just a couple of 5 kW 700 MHz transmitters plus 10 to 20 smaller gap fillers, could reach around 1,600 square kilometers. The equipment might cost $1 million and the cost of civil permissions and truck roll might double this. In L-Band the price can immediately double, because the spectrum has less reach. However fitting this out in low power transmitters, although making the problem more complex, might actually reduce the cost. Instead of one big powerful transmitter and gap fillers which repeat the signal, a satellite system (that’s what Sky does best) could be set up to feed lots of synchronized transmitters at the rooftop level. The roof rights for this particular type of transmitter cost far less, but there are some penalties in continued Opex.
One of the areas of supremacy that Qualcomm boasts of over DVB-H for MediaFLO is that it has a 4 dB advantage, which means that for a given power level, at an adequate signal to noise ratio, it can get by with transmitters being further apart. The DVB project disputes this, but the benefit is delivered due to the turbo codes used in the outer forward error correction, which are more modern than those used in DVB-H. If we accept it for a minute then there is every chance that a strong in-building MediaFLO signal might be achieved with only $3 or $4 million of cost for each town even in L-Band. So while it might cost $400 million to $500 million to completely cover the UK with an L-Band MediaFLO network, to reach perhaps 50% of the population might be achievable for a fraction of that, concentrated as they are in the a handful of cities.
If anyone knows how to do this in the UK, Arqiva and National Grid Wireless, who ran the two MediaFLO trials and who run most of the broadcast transmission networks in the UK, should. There are no actual power limits attached to the license, only a provision for putting no more than 150 transmitters in any 50 kilometer by 50 kilometer area, which we think MediaFLO could get by with.
A statement from Qualcomm said that the spectrum would allow it to experiment with a number of innovative wireless technologies and given that UK regulator Ofcom has made this spectrum tradable, and technology agnostic, Qualcom can try out lots of things with the parts of spectrum that it isn’t using at any point in time. It could use MediaFLO as a basis for music services ‘ or run a US technology like HD radio or a European technology like DAB (the spectrum being in 1.7 MHz slices is because this is the size of a DAB multiplex and this spectrum is coordinated across Europe as DAB spectrum).
One of the other bidders was known to want to offer satellite radio services and funnily enough this is roughly the same spectrum that Dish in the US is using from a satellite for a trial with Alcatel Lucent DVB-SH mobile TV technology.
The reason this may work well for Sky is that it has virtually saturated he UK with almost 9 million households out of 24 million, taking its paid satellite TV service. Its quarterly additions have shrunk and shrunk and it has now had to embark on bundling with broadband and VoIP services to continue to deliver growth. The next step might be to take on an MVNO and it has a close relationship with Vodafone and could offer a device of its own, on an MVNO sitting on the Vodafone network, complete with a Sky TV subscription on the handset.
Such a move would give it a huge value add, and a full quadruple play, and like Qualcomm, we should never be surprised at the audacity of a News Corp owned company, especially in a territory where it is threatened by breakthroughs like Freesat (the new free satellite TV service in the UK which threatens to have 200 TV channels by Christmas).
There are many other scenarios possible, and even a major breakthrough in the UK for MediaFLO would not necessarily see it flourish elsewhere in Europe. There would certainly be no TV roaming, since this spectrum just is not available in the type of size elsewhere, which would mean that to repeat the strategy at Sky Italia or at its other DTH properties in South America and Asia Pacific, the entire service might have to be thought out again from scratch
Just what EU telecoms commissioner Viviane Reding will make of a technology which is a direct rival to Europe’s recommended standard DVB-H, being deployed in the UK, is anybody’s business. But the key to this is will she or can she legislate against it? and we don’t think so. There is a trend towards technology neutral spectrum allocation and Ofcom would have to repay the auction price if this spectrum were not genuinely technology neutral. But then again if making DVB-H a preferred standard fails at the first challenge, then it bodes badly for the rest of Europe in Mobile TV.
In the end, it will be commercial interests which Qualcomm manages to leverage, both among broadcasters like Sky, and among cellular operators, that will decide whether this spectrum is played around with a little and then sold off, or becomes a springboard for broadcasting and an element in a whole new formula for quad play for DTH suppliers.