Crown Castle Pulls Plug On Modeo

Tower operator Crown Castle International appears to have given up on Modeo, the mobile TV service based on the DVB-H standard that it tested successfully in New York City earlier this year.

In a press release issue late Monday, Crown Castle said it will lease the spectrum used for Modeo to two private equity firms for $13 million a year and write off Modeo’s physical assets, which includes an operations center in Pittsburgh  and various small transmitters in the New York area, while retaining the spectrum itself.

Crown Castle says it will lease the U.S. nationwide 1670-1675 MHz spectrum it used for Modeo to a venture formed by Telcom Ventures, LLC and Columbia Capital, LLC, two communications-focused private equity firms, for a $13 million annual lease fee beginning July 23, 2007, and running until Oct. 1, 2013. 

At the termination of the lease, Telcom Ventures and Columbia Capital will have the option of acquiring the spectrum for $130 million or renewing the lease for a period of up to 10 years on the same terms, but at an increased annual fee of $14.3 million. As part of the deal, Crown Castle is handing over the physical assets related to its New York trial and serve as “the preferred provider of tower infrastructure” for future tower sites for the new wireless venture.

Crown Castle had previously said it expected to incur roughly $10 million in operating and administrative costs this year relating to the Modeo effort, but as result of the spectrum lease deal it now says “substantially all of the operating and general and administrative expenses in Modeo are expected to be eliminated.” 

The company will adjust its full-year 2007 financial outlook in conjunction with the release of its second quarter 2007 earnings on July 31, 2007, and expects to “write-off all, or substantially all, of its Modeo assets, other than its Spectrum, in the third quarter 2007.”

Modeo, which featured programming from six networks including Discovery and Fox News Channel in its New York trial, never reached any deals with wireless operators to commercially deploy the service. It is one of three new mobile TV efforts to broadcast live TV signals to cell phones this year. 

Qualcomm’s MediaFLO subsidiary has launched a commercial service with Verizon Wireless, V Cast Mobile TV, which features eight channels of programming and is available in some 30 markets. And Aloha Partners is now testing a DVB-H service in Las Vegas called Hiwire, in partnership with satellite operator SES Americom, that has 24 TV channels.

Just what Columbia Capital and Telcom Ventures will do with the Modeo spectrum and assets remains unclear. At press time, Crown Castle and Columbia Capital executives had not responded to requests for comment.