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Back in March, 2007, the outlook for Qualcomm's (QCOM) $800 million bet on broadcasting TV signals to cell phones was all smiles. Verizon Wireless had just launched the first commercial service based on Qualcomm's MediaFlo TV network, an eight-channel package, for as little as $15 a month. At about the same time, AT&T (T) said it would introduce MediaFlo by late 2007. Qualcomm even revealed it was testing the service with British Sky Broadcasting, a coup given the European Union's decision to back a rival wireless mobile-TV technology. Several Asian trials were under way as well. In short, MediaFlo was on a roll; analysts began predicting Qualcomm might spin off the business with a public stock offering as early as this year.

Yet one year later, Verizon Wireless is still the only commercial provider of MediaFlo service, and it has yet to disclose any data on customer usage. While Verizon rarely reveals subscriber tallies for specific premium services, it does periodically trumpet statistics that illustrate the growing popularity of text messaging and downloading ringtones, music, and video games. The vacuum of similar pronouncements about MediaFlo a full year after its launch as V Cast Mobile TV isn't an encouraging sign. Nor is the fact that Verizon, with a lineup of nearly 40 handsets, offers just four with the necessary TV tuners.

Qualcomm says all is well with the venture. 'We [and Verizon] are both happy with the uptake and how it's going,' says Gina Lombardi, president of MediaFlo USA. Yet Lewis Ward, a research manager at consultancy IDC (IDC), estimates Verizon Wireless has only signed up tens of thousands of subscribers for the TV service so far. Verizon didn't make a spokesperson available to discuss the topic.

AT&T, meanwhile, has delayed its MediaFlo launch twice without explanation. 'We still plan to announce [MediaFlo],' says spokesperson Mark Siegel, declining to offer a new target date or discuss the cause for the delay. Likewise, there's been no announcement that any of the foreign carriers testing the service are preparing for a commercial launch.

Not yet in demand

To be sure, MediaFlo isn't the only mobile video service that's taken off more slowly than expected. While most don't feature live broadcasts, carriers have been offering downloads of short video clips and TV episodes for some time. Both Sprint (S) and AT&T offer MobiTV, which transmits live but jittery feeds of real and customized cable channels over the cellular network. With more than 3 million users worldwide, MobiTV may be the most successful service, and yet it's taken more than three years to build that customer base.

'In the early going, [these services] were overhyped,' says Seamus McAteer, senior analyst at researcher M:Metrics. 'Today, mobile video aggregate viewership is only about 2% [of U.S. wireless users]. And I don't see its promise fulfilled for another 18 months.' Just two years ago, some analysts were predicting 10% adoption by 2008.

Some experts question the willingness of consumers to pay very much, if anything, to watch video on even the biggest phone screens. 'There have been some struggles regarding how [mobile video] is priced,' says David Chamberlain, an analyst with consultancy In-Stat. A survey of 1,004 users last year by In-Stat found that while many people were interested in viewing mobile video, 80% of the respondents said they wouldn't pay $15 a month for it.

And among the small percentage of cell-phone subscribers who do watch video on their phones, the vast majority opt for the occasional $2 download over monthly subscriptions, according to IDC.

To spur demand, at least one carrier is making mobile video more affordable. On Feb. 28, Sprint Nextel introduced a $100 all-inclusive monthly plan with unlimited calling and mobile Internet services"”including Sprint TV, which costs $15 to $20 extra with other calling plans. Yet MediaFlo appears to be resisting this tide. This summer, it plans to roll out premium packages, offering extra content for sports and movie fans. MediaFlo's Lombardi says the company's own surveys suggest consumers would actually pay more for extra programming.

On the cheap‾

But many experts believe that, to take off, mobile video will have to be ad-supported and possibly free, much like it is on the Internet. MobiTV has revved up its ad sales efforts and now derives about 10% of its revenue from advertising, says Paul Scanlan, president and co-founder.

Yet much like MediaFlo, MobiTV's business still relies primarily on monthly subscription fees, a model that will face intensifying competition from free services such as Google's (GOOG) YouTube and Nokia's (NOK) Medeo, an ad-supported mobile video portal announced in December. With the proliferation of next-generation handsets and networks, a growing number of wireless users have the speedy data connections needed to connect with these services through a mobile Web browser. 'We are seeing growth. We are seeing user interest,' says Hunter Walk, head of product management at YouTube, which doesn't run any ads on its mobile service yet.

All these changes could mean MediaFlo and others will have to offer free services, too. MediaFlo recently launched a preview channel on Verizon Wireless, where customers can test-drive the service without paying for it. But that may not be enough. 'I do think there's a bright future for mobile TV,' says Neil Strother, an analyst with JupiterResearch. 'I just think it's going to take time.'

Kharif is a senior writer for BusinessWeek.com in Portland, Ore.

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