Qualcomm Dodges Bullet in Dispute Over Digital TV Conversion—For Now

1/28/09Follow @bvbigelow

Top executives at San Diego’s Qualcomm (NASDAQ: QCOM) must’ve breathed a sigh of relief today, when the U.S. House of Representatives defeated a bill that would have delayed a planned switch to digital TV on Feb. 17. The House vote against the delay followed a bill the Senate passed unanimously on Monday, which called for postponing the digital conversion by four months.

“We opposed the delay of the Feb. 17 DTV transition date, which was set by the U.S. government three years ago,” Qualcomm CEO Paul Jacobs said today during a conference call held to discuss the fiscal first-quarter financial results.

But Jacobs added, “We expect there will be further developments” regarding the proposed delay. Processing that snippet of corporate-speak through my journalistic converter provided this translation: “Stay tuned, because this isn’t over.” Jacobs says the wireless technology company will continue to ask that nine TV stations in four crucial markets—Boston, Houston, Miami, and San Francisco—be excluded in any legislation that would delay the switch.

The Feb. 17 conversion date is crucial to Qualcomm because the company paid more than $550 million last year to acquire operating licenses for the 700 MHz spectrum being vacated by broadcasters.

Qualcomm invested untold millions after that “to extend our innovative FloTV service and to build out the network” for Qualcomm’s MediaFLO mobile TV service, Jacobs said. Qualcomm’s MediaFLO offers 15 channels of digital TV programming on the same frequency that previously carried a single station’s analog broadcast. The optional service costs an additional $15 a month for customers using MediaFLO-equipped phones on Verizon and AT&T wireless networks. 

Competitors are developing similar TV capabilities for mobile devices, but analysts say Qualcomm has had a lead that could erode if the digital conversion date gets delayed for too long.

“Unlike other companies, we are prepared to launch our FloTV service and turn on 100 new transmitters across the United States immediately after the transition to DTV,” Jacobs said. He estimated MediaFLO’s potential audience at 180 million viewers in 80 media markets. Qualcomm says the markets in Boston, Miami, Houston, and San Francisco that it has sought to exclude from any delay represent 40 million prospective customers. Cutting them out apparently would help the company salvage part of its investment.

The Obama Administration, however, has supported the proposed delay to June 12, arguing that millions of Americans are  unprepared for the switch in broadcast TV signals from analog to digital. The Nielsen Co. estimates that over 6.5 million U.S. households still rely on broadcast analog TV signals. (TVs connected to cable and satellite would not be affected by the conversion.) A four-month delay would enable the administration to allocate additional funding for a program set up to help low-income families buy TV converter boxes they need to translate the broadcast digital signal into analog for older TVs.

The converter boxes cost between $40 and $80 apiece. The Commerce Department’s National Telecommunications and Information Administration was providing coupons that gave consumers a discount on the price. But government financing arranged for coupon reimbursements hit a $1.34 billion limit, so the agency now is only sending out new coupons as older, unredeemed coupons expire—freeing up more money.

As Qualcomm’s Jacobs put it, “We expect further developments.”

Bruce V. Bigelow is the editor of Xconomy San Diego. You can e-mail him at bbigelow@xconomy.com or call (619) 669-8788 Follow @bvbigelow

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