FLO TV expansion starting in big markets, expanding outward

As soon as TV broadcasters go dark in the analog airwaves on Friday, Qualcomm (NASDAQ:QCOM) plans to turn on transmitters in 15 new markets and fill in coverage holes in key metro markets such as Chicago, Los Angeles, New York and Washington, DC. Throughout the remainder of the year, FLO TV will add service in an additional 24 markets and boost power in several other markets with the aim of completing a nationwide footprint covering 200 million people and the top 100 markets by the end of 2009.

Not too much has changed from Qualcomm’s original launch plans in February, when Congress forced it to delay its expansion by four months to give consumers more time to prepare for the digital TV transition. Several broadcasters have voluntarily made the switch to entirely digital early, opening up the 700 MHz spectrum in a few of FLO TV’s expansion markets, but the overall effect has been minimal. Qualcomm’s market launch list was winnowed down by three markets--Atlantic City, NJ; Greensboro, NC and Wilmington, Del. Qualcomm was also able to fill in coverage holes in 16 existing markets. Those efforts expanded its footprint by 10 million people, but it remains 60 million points of presence short of its goal of covering 200 million by year end, and key cities like Boston, Houston, Miami and San Francisco have stayed dark. Those four metro areas will be among the first to go live on Friday, allowing Qualcomm to offer service in all of the US’s largest cities for the first time.

“We’re not happy that the government delayed everything,” FLO TV’s new President Bill Stone said. “In the end, it was a speed bump, but it still delayed our nationwide launch. We had real expenses. We had transmitters in place that weren’t powered up. We paid for site leases. And then there were lost revenues.”

Stone, however, said he doesn’t plan to dwell on the delay; rather, he plans to focus FLO TV on the future, which includes not just a large-scale build out but a new business trajectory. FLO TV is expanding beyond its traditional wholesale model targeting mobile operators into the direct-to-consumer space. It plans to go after the automotive in-vehicle entertainment sector through a partnership with Audiovox, and it will also sell “FLO TV accessories” which will allow customers to beam the FLO TV signal to any device with a wireless connection and media player such as the iPhone. Most significantly, FLO TV will come out from behind the operator curtain, establishing a direct relationship with its viewers.

“It’s important for us to have our own FLO TV brand,” Stone said. “It’s important for us to get that brand out there as much as possible.”

Stone said there is no set launch date for FLO TV’s consumer brand, only that it will take place later this year. Currently FLO TV is available only through its MVNO partnerships with AT&T (NYSE:T) and Verizon Wireless (NYSE:VZ, NYSE:VOD), which together support nine devices. While those phone-based services will be key part of its business, sticking to handsets only would greatly limit FLO TV’s potential. But rather than viewing than viewing FLO TV’s retail efforts as competitive, Stone said, operators will likely welcome the additional exposure. The more popular mobile TV gets, the more demand Verizon and AT&T we’ll see for the service from their own customers, Stone said.

“You’ve got to have a ton of users for this to work,” Stone said. “As you add users, the economics get better. The way to do that is through both [business-to-consumer] and wholesale.”