With LTE promotion figuring at the top of Verizon’s (NYSE:VZ) list of to do items for the year, the carrier has come up with a video search application that works only on its high-speed 4G network. Christened Viewdini, the Android app searches for mobile content from a host of video services such as Netflix, Hulu, mSpot as well as Comcast’s Xfinity and Verizon’s own FiOS programming. LTE adoption rates have been sluggish so far but Verizon has built its LTE network to cover over 200 million Americans, or two-thirds of the U.S. population, which is well ahead of both AT&T (NYSE:T) and Sprint (NYSE:S). With Viewdini, Verizon will be looking to promote the faster video streaming capabilities of its LTE network to generate interest as well as to boost data consumption on the underutilized network.
LTE adoption will offset upfront costs
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Increased adoption of 4G will help Verizon at least partially recover the huge costs it has incurred to set up the network. It will also reduce dependence on its 3G networks, which are under great strain due to the heavy data usage of smartphones such as the iPhone. Further, LTE as a network technology not only supports higher speeds but is also more efficient than current 3G networks at handling data, thereby reducing maintenance and handling costs for the carrier.
However, promoting video consumption on LTE is at odds with Verizon’s earlier announcement that subscribers looking to upgrade to LTE will only be eligible for shared data plans and have to give up their unlimited 3G plans. (see Verizon Looks To Substitute Unlimited Plans With Shared Data Plans For LTE) Although users can share the data among many mobile devices, their restricted nature could cause users to overshoot their data caps should they watch a lot of bandwidth hogging videos online.
Viewdini opens up the possibility of toll-free video viewing
Verizon can alleviate these concerns by charging content providers as well as streaming services for the video traffic that Viewdini generates for them, potentially giving subscribers unlimited access to the videos with little or no overage charges. Mobile data traffic is exploding and content providers as well as streaming services may not think twice about jumping on the opportunity to boost subscription rates.
However, this would go against the net neutrality rules that require service providers to show no partiality to one kind of data traffic over another. Wireless services are still a grey area, so Verizon may get a free pass here. Comcast has already been flouting these rules, openly capping broadband usage while giving its own Xfinity app users a free ride. Should Verizon go ahead with such a business model, not only will the app help Verizon stimulate demand for its LTE network but also help it monetize every bit of data that flows through its network, either from the end subscriber or from the traffic seeker.
Currently, the biggest deterrents to watching videos on smartphones are slow speeds as well as high 3G data charges. Viewdini could potentially remove both the constraints as LTE would take care of the higher speeds and the streaming services of their users’ bandwidth consumption. If Viewdini is indeed Verizon’s move to get video services to pay up for their subscribers’ bandwidth consumption, it will help the carrier increase its data revenues and ARPU levels at an even faster rate than what has been seen historically.
One may wonder, however, if such a ploy will cause video service providers to hike their prices in response, thereby passing on the additional carrier costs to their subscribers – effectively meaning little gain for the customer. But if Netflix’s fiasco from last year has taught us anything, it is that customers are highly price sensitive for these services. Streaming services such as Netflix will therefore be looking to increase traffic for their services and then try to leverage that to negotiate favorable deals with content providers instead of directly passing on costs to their subscribers.