Will Bill Stone amp up MediaFLO?

In an interview last year after he took over Handango, Stone offered his opinion on why mobile media has to be kept separate from mobile operators: “If you have a passion for content and mobile entertainment, then an operator is not the place to be. Look at it from their viewpoint: They make $45 a month from voice minutes and $15 a month from data — and the majority of that is SMS and [multimedia messaging service]. That doesn't mean you can't have a great content experience and business. Take Verizon Wireless. They have a great mobile content experience. They're brilliant on execution, but they don't do anything sexy.”

MediaFLO technically is a network operator as it owns its own infrastructure, but it doesn’t sell its services directly to the consumer, wholesaling its services to wireless carriers. That hybrid approach would allow Stone to focus solely on video content. While MediaFLO would still sell mainstream video content to Verizon Wireless and AT&T, it could dedicate other channels in its lineup to niche or targeted programming, which it could sell to MVNOs or to the Tier I operators as part of a service focused on specific segments such as youth or sports enthusiasts.

Stone, however, faces several challenges in taking over MediaFLO. While the company has built a sizable network, FLO TV is still only available on a handful of devices. Qualcomm doesn’t release any subscriber numbers, but analyst firms like ComScore’s M:Metrics have estimated that mobile video consumption in the US is under 3% of the total population of wireless subscribers. Furthermore, most of those subscribers are turning into on-demand and unicast video services such as MobiTV or consuming clips on services like Verizon’s V Cast or YouTube, which can be accessed by any phone with a data connection and video player. Getting the FLO service requires not only buying a specialty phone but also a sizable subscription fee of about $15 a month. FLO TV also isn’t offered nationwide, due to interference problems in markets where analog broadcasters are still transmitting. That prevents Qualcomm and its carrier and content partners from marketing a nationwide service.

Qualcomm hopes to rectify that coverage problem soon, launching in an additional 25 markets this quarter — including Boston, Houston, Miami and San Francisco -- and bringing another 60 million people into its footprint by year end. It’s waiting for the DTV transition to be complete, freeing up its 700 MHz spectrum nationwide. Congress, however, is debating extending the DTV cutover date from Feb. 17 to June 12, which Qualcomm strongly opposes, in order to give millions of Americans more time to buy the digital converters necessary for their analog TVs to work after the transition. If Congress extends that date, MediaFLO’s nationwide launch will be pushed into the summer.

While MediaFLO deals with those possible delays, other competitive threats loom. Satellite TV broadcaster ICO is preparing to launch its own terrestrial-satellite digital TV service, but perhaps the biggest threat comes from traditional broadcasters, which are planning to launch their own mobile TV services using their new DTV spectrum. The broadcasters could not only transmit their existing local and national programming, they could do so using their existing infrastructure and existing business models, pitting MediaFLO’s paid TV channels against a free-to-air channels.