By Tara Seals

AT&T Inc. has agreed to buy 12MHz of wireless spectrum in the 700MHz band from Aloha Partners LP for $2.5 billion, which may signal Alohas exit from the wireless space.

Aloha is the largest holder of 700MHz spectrum to date, covering 196 million U.S. residents in 72 of the top 100 markets in the U.S. The company was taking on the Qualcomm MediaFLO System and Crown Castle Internationals Modeo network in the mobile television space; its subsidiary HiWire was trialing its DVB-H network in Las Vegas in the second quarter. But now that AT&T is set to acquire all of its holdings, HiWires future seems bleak.

The news is the latest blow to the viability of mobile television overlay networks, which rely on the idea of building out a purpose-built network with television-tailored standards and codecs, then using it to wholesale service to mobile operators interested in delivering live television. Uptake for mobile television has not been rapid, judging by initial services like MobiTV and Verizons MediaFLO-delivered VCAST (launched in March) failing to hit a goldmine to date. MediaFLO, which also uses the 700MHz band, is forging ahead with its plans; meanwhile, Crown Castle is writing off all of its Modeo assets this quarter (other than the spectrum itself, which it is leasing to other companies).

As for AT&T, the phone giant will use the spectrum to deliver high-speed voice, data and video to mobile subscribers, it said, but has not named specific plans.

AT&T has declined to say whether the move has any bearing on its participation in the upcoming FCC auction of the 700MHz airwaves in January. The auction is a highly anticipated event, as the 700MHz band offers propagation characteristics that support wireless indoor coverage and high-speed 4G throughput in a cost-effective manner. The auction, a result of the spectrum being freed up as UHF television goes by the wayside in light of the transition to digital television, is expected to bring a range of new players to the service provider table, including Google Inc. The FCCs has placed open-access mandates on part of the spectrum swaths, drawing the ire of Verizon Wireless and other traditional cellcos but offering a move to new business plans should they remain in place.

The deal is subject to government approvals, and should close in six to nine months.

AT&T Inc. www.att.com
Aloha Partners LP www.alohapartners.net
Crown Castle International www.modeo.com
FCC www.fcc.gov
Google Inc. www.google.com
Qualcomm Inc. www.qualcomm.com
Verizon Wireless www.verizonwireless.com