AT&T’s purchase of spectrum in the 700MHz band from Aloha Partners is the clearest signal to date that investors are no longer convinced mobile broadcast TV in the U.S. is ready for prime time, according to an analyst.

“It’s difficult to make a business case for mobile broadcast TV that can generate anything like the revenue you can get from cellular services,” said Tim Farrar, president of Telecom Media and Finance Associates.

The analyst said that  anytime mobile TV companies go in head-to-head competition against two-way cellular carriers in an auction they are going to have a hard time justifying the cost.

Particularly since Aloha, which used its allotment of spectrum for a mobile TV network Hiwire, and MediaFLO, Qualcomm’s mobile TV network, acquired their 700MHz spectrum cheaply, said Mr. Farrar. (see Say Aloha to Mobile TV)

An upcoming auction of more blocks of 700MHz spectrum promises to be cutthroat. Analysts expect the prices paid to be well above the reserve prices set by the FCC.

Providence, Rhode Island-based Aloha purchased the 700MHz spectrum licenses at U.S. Federal Communications Commission auction in 2001 and 2003. .

“Aloha owned 12MHz bandwidth of spectrum that is easy to use for two-way cellular services and that is most likely what AT&T will use that spectrum for,” Mr. Farrar said.

AT&T on Monday said it agreed to purchase spectrum licenses covering 196 million people in the 700MHz frequency band from Aloha for approximately $2.5 billion, pending regulatory approval.

But AT&T also bought Aloha’s mobile TV service Hiwire, which a company representative said AT&T will include in its future plans but did not offer a firm commitment.

Mobile broadcast TV on dedicated networks has not come close to forecasts, amassing a total of 1.2 million subscribers globally in two years, Mr. Farrar said.