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Verizon plans bandwidth-gobbling mobile video service

'Now, about that $3.6bn spectrum deal...'

The smart choice: opportunity from uncertainty

Verizon plans to launch a mobile-video service by the end of this year, a move that would put even more traffic onto its already overburdened network.

"We could have something out that would be the beginnings of an integrated offering in time for the holidays," Verizon CEO Lowell McAdam told The Wall Street Journal on Friday (paid subscription required).

McAdam must feel confident that his company's planned $3.6bn acquisition of 122 Advanced Wireless Services (AWS) spectrum licenses from SpectrumCo, a joint venture of Comcast, Time Warner Cable, and Bright House Networks, and from Cox Communications, will find smooth sailing through the Federal Communications Commission's approval process. Or perhaps he's merely putting pressure on the FCC to approve it.

That spectrum acquisition, announced last December, met with strong opposition at a US Senate hearing last week from representatives of the Rural Cellular Association, media advocacy group Free Press, and others, not only because of what they deem to be the anti-competitive advantage that such a spectrum grab would provide Verizon, but also for for what they feel is the equally anti-competitive joint marketing and joint operating agreements that would be part of the deal.

McAdam's remarks could be seen as a way to convince regulators that the spectrum increase is necessary in order to provide sufficient bandwidth to keep customers satisfied – and, yes, to save wireless telecom jobs, a traditional argument in a US election year.

Wireless spectrum is, of course, a finite resource that is being increasingly flooded by demand for data services, with a large percentage of that demand coming from wireless video. At Wednesday's Multicore 2012 conference, part of the DesignWest conference in San José, California, LSI's marketing VP for networking components Noy Kucuk emphasized the spectrum crunch by entitling his keynote "Combating the Wireless Spectrum Apocalypse of 2013."

Kocuk cited a recent study which showed that even though only 10 per cent of mobile users are currently video watchers, the transmission of that video consumes a full 38 per cent of all wireless network traffic.

"Obviously, most operators ... want to increase data use – that's the whole point." Kocuk said. And he emphasized that the need for more available spectrum – and more-efficient use of it – will only grow.

The reason that Verizon and others want to increase data and video traffic is, of course, so that they can charge a premium for usage over and above their monthly subscription caps – which McAdam's planned addition of video would most certainly accomplish, should Verizon be successful in its efforts to woo content partners of sufficient quality.

The days of unlimited data plans are now over at Verizon and at its number one competitor AT&T – although also-rans Sprint and T-Mobile still offers such plans. For Verizon to fatten its revenues enough to both fund infrastructure build-out as well as increase shareholder returns, it needs to offer services that demand higher bandwidth usage.

A mobile video offering may be just what the doctor investment community ordered. ®

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