Qualcomm’s Paul Jacobs on MediaFLO’s Value

Qualcomm (s qcom) is looking at options for its MediaFLO mobile television service, which represents an investment of hundreds of millions of dollars but never performed as well as Qualcomm hoped. On its earnings conference call yesterday, Qualcomm CEO Paul Jacobs said, “With respect to our FLO TV business, we’re engaged in discussions with a number of partners regarding the future direction of the business. We are considering a number of alternatives and we will update you as appropriate.” He also said he expected something to get done within the next year.

On June 30, I sat down with Jacobs, and we discussed the options for MediaFLO and what might attract interest from buyers. The service uses about 6 MHz of spectrum in two chunks of the 700 MHz band, as well as a network of towers that deliver the signal. It is in essence a downlink-only cellular phone network, configured to the MediaFLO standard. That infrastructure might be valuable depending on whether Qualcomm owns or can transfer the tower leases, and there’s always the spectrum assets, which are in hot demand — especially the 700 MHz spectrum.

Jacobs is clearly aware of its value. When asked whether he would consider selling the spectrum he told me:

“We want to see FLO continue so it’s not like we’d want to sell the spectrum, but there are certainly people who would buy it for the spectrum. The spectrum is extremely valuable. So what that means is there’s a high bar. The business that’s generated through that spectrum, by the broadcast system needs to be valuable too. … whether it’s an operator, a content player, a web company — there’s a wide range of companies that could make use of [MediaFLO] and deal with the business model where they are trying to get a lot of content down to a lot of people and they can’t really afford to do it on the cellular network.”

He declined to tell me who Qualcomm was talking with, but he did say that Qualcomm never wanted to be in the television delivery market in the first place, and that it always intended to find someone to take on that role while Qualcomm focused on selling the chips needed to receive and transmit the MediaFLO signals.

“[W]e put FLO TV operations into our strategic investments for financial reporting because we always intended to get out of the operator business. …. It’s not operating the way we want it to — it’s not necessarily our core business, so we’re looking at our options. Is it partnerships, is it rejiggering into more of the data casting concept with some video? Is it somebody who is really good at operating that wants to drive that business? I mean, there’s really just a bunch of options on the table right now.”

For the future, Jacobs implies that its international deals offer a better model for Qualcomm’s MediaFLO business:

“If we look at internationally, it’s pretty exciting. There’s a lot of traction we’re getting around the world, and those models are much more our traditional models where we are a tech supplier … it’s not that we’re there trying to aggregate content and run the service. That’s where I’d like to get to. It’s really what we said we’d do with FLO TV from the very beginning, but I think there’s probably some pressure right now to get things to go in a different direction.”

However, Jacobs defended the idea of MediaFLO, and believes it is still valuable … to someone.

“The rationale for doing it is still there. The data networks, the carrier networks are getting overloaded by data — and a lot of it is video, so that idea was right. Now it’s just a question of did we get the right business model and the right go-to-market strategy.”

Jacobs admits that the application chosen for MediaFLO — paid cable TV to the phone — wasn’t exactly the right one, and Qualcomm has been shifting the network to handle more live sporting and television events. He also believes there’s a market for data casting, or moving content such as movies, magazines or even apps that someone would pay for down to users. The question is, does it make sense for anyone to spend big money buying the spectrum and tower network just to create such a business? My hunch is the buyer would purchase MediaFLO for strategic reasons rather than to build a real business.

Related GigaOM Pro Research (sub required): Qualcomm’s Big Push for Mobile TV