CROWN CASTLE INTERNATIONAL CORP. cut its losses in mobile video last week, agreeing to lease its Modeo L.L.C.’s nationwide spectrum for a dedicated mobile broadcast network to a pair of venture capital firms. What will become of that spectrum, though, is far from clear.
The Houston-based tower company announced an agreement effective immediately to rent the spectrum for $13 million per year to a venture formed by Telcom Ventures L.L.C. and Columbia Capital L.L.C. The joint venture will have the right to acquire the spectrum or renew the lease for another 10 years under the same terms beginning in 2013.
Crown Castle said it will take a one-time hit of $10 million in “operating and general administrative costs” related to the aborted Modeo business, and will write off all its Modeo assets other than spectrum in the third quarter of this year. The lease agreement includes assets related to Modeo’s DVB-H trial network in New York.
Partnership paramount
A longtime player in the cell-tower industry, Crown Castle’s exit from the mobile television network space is no surprise. Like rival HiWire L.L.C.’s network, which is being built by Aloha Partners L.P., Modeo had failed to move beyond the experimental stage. Meanwhile, Qualcomm Inc.’s MediaFLO USA Inc. is already being used by Verizon Wireless customers, and the network is only a few months away from a deployment with AT&T Mobility.
Analysts agree that finding a viable business model without a wireless partner will be a challenge for operators of mobile multimedia networks. Aloha Partners has yet to cement a pact with a service provider, but has partnered with T-Mobile USA Inc. to trial a lineup of 24 channels in Las Vegas. Modeo had yet to make even
that much progress.
“It would be very tough (to deploy service) without a cellular partner,” In-Stat analyst Michelle Abraham said earlier this month. “You’d have to build out a nationwide network, for one thing. I don’t think either (Crown Castle or Aloha Partners) plan to do that unless they have a partner.”
Spectrum of issues
Analysts were quick to point out that Modeo’s spectrum-a 5-megahertz block of 1.6 GHz radio astronomy spectrum-is likely what doomed Crown Castle’s effort. Aloha Partners and Qualcomm own spectrum in the 700 MHz UHV TV bands, allowing them to broadcast at extremely high power. Modeo’s network would require a much denser-and far more expensive-buildout.
“Both MediaFLO and HiWire are licensed at 50 kilowatts, whereas Modeo was a fraction of that,” said Vinod Valloppillil, VP of product marketing for Roundbox Inc., which develops mobile broadcast software for both the MediaFLO and DVB-H standards. “For the kind of spectrum Modeo was on top of, the buildout looks a little more like a cell network, with towers every two or three miles.”
Satellite speculation
So analysts were left puzzling over what Columbia Capital and Telcom Ventures have planned for the spectrum. Columbia Capital declined to return phone calls, and efforts to reach Telcom Ventures were unsuccessful.
Some onlookers believe the joint venture will use the bandwidth to “drive test” WiMAX technology, deploying a service on a limited network and testing coverage. But others say the 5-megahertz block may be too limited for the technology, pointing to Sprint Nextel Corp.’s plans to use a 20-megahertz fire hose for its WiMAX service.
Instead, the two VC firms may be looking to support XM Satellite Radio Inc., in which they each have a substantial stake. In-Stat analyst Gerry Kaufhold noted that Modeo’s spectrum is a Digital Audio Broadcast band, which could be ideal for mobile music. And both Columbia Capital and Telcom Ventures had been investors in WCS Wireless, which XM had eyed for acquisition before company sold its licenses to NextWave Wireless L.LC. The satellite radio company has since grabbed spectrum by other means, and has struck deals with AT&T Mobility and Alltel Corp. to deliver its music to mobile subscribers.
“The spectrum isn’t only suited for mobile video,” JupiterResearch analyst Julie Ask posted on her blog last week. “If (Crown Castle) hadn’t sold their spectrum and this market were further along, I think we would have been looking at an XM/Sirius situation-and we may still be longer term.”
