By Olga Kharif OCTOBER 11, 2005
As carriers gird for an expected surge in demand for TV mobile phones, many are looking to Qualcomm to deliver the goods
When Qualcomm announced plans for a network that would deliver video over mobile phones last November, analysts met the idea with more raised eyebrows than approving nods. Qualcomm (QCOM ) had built its reputation on licensing wireless technology and making cell-phone chips. The concept, dubbed MediaFLO and championed by Paul Jacobs, who later became Qualcomm's chief executive, came across as costly and too far outside the company's core areas of expertise.
Even though demand for TV over cell phones had taken off in Asia, it was still unproven in the U.S. What's more, the number of technologies for beaming video to wireless handsets was already on the rise. Investors wondered what would set MediaFLO apart -- and whether Qualcomm would ever break even on the estimated $500 million it would take to build the network.
Almost a year later, Jacobs's announcement is looking distinctly less odd. Early video services from providers Cingular Wireless and Sprint Nextel (S ) have attracted more than 500,000 subscribers, according to MobiTV, which provides TV services for both carriers.
BALLOONING BASE. Cingular has seen its video-user numbers surge with virtually no advertising. "It has been very popular, and that tells us that there's something there," says Rob Hyatt, executive director for mobile content at Atlanta-based Cingular, the largest U.S. wireless operator. Other providers, including Verizon Wireless, have joined the race to add customers intent on watching news, sports, and entertainment clips over their cell phones.
Mobile video is set to take the wireless industry by storm (see BW Online, 12/1/04 "TV Phones Prep for Prime Time"). The U.S. mobile video user base may balloon to more than 20 million by the end of
2007, up from less than 1 million today, says Albert Lin, an analyst at American Technology Research (ATR). Assuming each subscriber pays $5 a month for such services, that would translate to a $1.2 billion market. Worldwide, more than 250 million people are expected to be watching mobile video by 2010, generating some $27 billion in sales, vs. with $200 million today, according to market consultant ABI Research.Why the meteoric rise? For starters, the technology has improved, and prices on video-capable handsets have dropped. In fact, now that some devices are available for less than $100, "adoption rates are going up like a hockey stick," says Key Sar, associate director of content programming at Verizon Wireless, the second-biggest U.S. mobile-phone carrier.