At first glance, it would appear that Verizon just is keeping with the global average. Cisco Systems’ Visual Networking Index pegs video at 51 percent of all traffic bound for mobile devices. But Cisco is counting on all traffic to mobile smartphones and tablets whether they’re connected to cellular or Wi-Fi networks. According to Cisco’s calculations one third of “mobile” traffic never hits the cell tower, traversing Wi-Fi networks instead.

Meanwhile, McAdam is claiming that half the load on its mobile airwaves is now video, which is frankly quite a lot. McAdam had a good explanation for why: LTE. As its customers move to LTE’s faster pipe, the video experience improves — buffering and choppiness drop away — which in turn encourages more video watching. In fact, a better connection seems to naturally begets more data usage in general. Only 23 percent of Verizon’s subscribers have an LTE device, but they account for well over 50 percent of Verizon’s network traffic.

I doubt Verizon is saddened by this development. As more customers start consuming more video they’ll have to upgrade (the ones that aren’t still clinging to their grandfathered unlimited plans, at least) to bigger data plans to handle that load.

But Verizon does face a perplexing problem. It’s doubtful many customers are going to start paying upwards of $100 a month for the 10 GB-plus data plans necessary to support hard-core video consumption. So while it wants to encourage its customers to consume more video, there are plenty of economic incentives convincing mobile subscribers to do the opposite.

That’s probably why we’ve been hearing McAdam talk up new mobile video technologies like LTE-broadcast lately. By streaming content to multiple users simultaneously – either for immediate or later consumption – Verizon can deliver more video at less cost. Theoretically, at least, it can pass those sizable savings on to its customers, thus encouraging mobile video’s growth.

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Speaking to reporters at a Verizon event in New York City, McAdam said the carrier would watch T-Mobile’s new no-contract strategy closely to see how consumers respond. “I’m happy when I see something different tried,” CNET quoted McAdam as saying. “We can react quickly to consumers’ shifting needs.”

Lowell McAdam (right) with Google’s Eric Schmidt

To be honest, you wouldn’t expect McAdam to say anything different. In the past, carriers have expressed dissatisfaction with the subsidy model that dominates the U.S. mobile industry. That model dictates they sell increasingly expensive smartphones at cut-rate prices and thus take a big financial hit when they first sign up a new customer. Eventually they recoup those costs over the course of a two-year contract through higher service fees.

Most carriers have already eliminated subsidies entirely for tablets, and as McAdam points out, they would more than willing to do so for phones, if customers are amendable. That said, Verizon has done quite well for itself with the current system — it has no reason to gunk up the works unless there is some massive shift in consumer sentiment.

There’s a reason why T-Mobile was the carrier to challenge the long-established contract-and-subsidy model: it had nothing to lose. It is the smallest — by a big margin — of the four national operators, and for the last several years it has barely grown. You can call its Un-carrier strategy an act of genius or you can call it an act of desperation, but T-Mobile had to do something and had to do that something quick. McAdam only has to sit back and wait to see if it works. And he’ll likely have to wait a while since many of the customers who might be interested in what T-Mo is selling are still locked into contracts.

So what if T-Mo’s new contract-free plans prove wildly successful? Would other carriers give up on contracts completely? I seriously doubt it. Verizon, AT&T and Sprint may have their issues with the subsidy model, but they also love to the stability of long-term contracts. The last thing they want is a constantly shifting customer base, in which huge numbers of subscribers turn over each quarter. Even if the carriers didn’t have to absorb device subsidies, there are still substantial costs associated with acquiring new customers. They would much rather just lock down the ones they have.

All three carriers offer prepaid services for customers who demand or don’t qualify for postpaid services, and most carriers will sell you a postpaid plan without a contract if you pay for your device upfront. In fact, they benefit considerably if you do so because they’ll charge you the same monthly rates they do for subsidized customers – they get their cake and eat it too.

That’s where I think the other carriers will have the biggest difficulty adjusting to contract-free models. To make that model the work they’ll have to charge lower voice, SMS and data rates to those customers who eschew subsidies. If carriers are no longer recouping the cost of the device, they can’t justify the rates they charge today. Lowering rates is not something they want to do.

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By broadcast, McAdam was referring to LTE-broadcast, one of the many multicast technologies that’s been kicking around the wireless industry for years. LTE-broadcast would turn cell towers into the equivalent of mini-digital TV towers that could multicast video, audio and even data to multiple users simultaneously.

Right now mobile multimedia works through an on-demand unicast model. Every time you stream a video or a song to your smartphone, you get your own dedicated portion of the cell’s capacity to deliver your content, even if the guy right next to you is watching the same program. That unicast model and video’s intensive bandwidth demands explain why mobile video is such a network hog.

LTE-broadcast, however, would turn a portion of a network’s bandwidth into a multicast network, sending a single video or audio stream to multiple devices similar to the way TV and radio towers broadcast their programming.

If this all sounds familiar, you’re probably recalling Qualcomm’s FLO TV service of the last decade, which shut down in 2010 for lack of subscribers, devices and compelling content. Or perhaps the TV broadcasters’ own Dyle mobile digital TV initiative, which appears to be going nowhere very slowly. But there are some pretty key differences between those efforts and the LTE-broadcast technology that McAdam is talking about.

Qualcomm’s FLO technology required (and Dyle requires) a special receiver and therefore a dedicated TV handset to receive their respective transmissions. That pretty much doomed them from the beginning. But LTE-broadcast is based on the evolved Multimedia Broadcast Multicast Service (eMBMS) technology being standardized for LTE. Chipmakers like Qualcomm have already committed to supporting eMBMS in their future radio silicon. That means future handsets will be pretty much eMBMS-ready whether carriers chose to use the technology or not.

eMBMS also uses the same LTE radio infrastructure, requiring only upgrades to the network core. So if a carrier decides to get into the broadcast business, the equipment is largely in place. The barriers to entry are much lower for LTE-broadcast, but there’s still one big question: will consumers actually use it?

The age of personalized multimedia

The problem is that an increasingly technically savvy public is moving away from broadcast models completely when it comes to digital content. Consumers are personalizing their radios with Pandora and Spotify. The reason HBO Go rocks is we don’t have to be at home a pre-determined hour –- or set our DVRs –- to watch the next episode of Game of Thrones. We just pull content out of the air whenever we please.

There are still plenty of people consuming broadcast video and audio on their TVs and car stereos, but on smartphones and tablets streaming is king. By imposing a broadcast model, carriers would be going against mobile data trends.

That’s why McAdam highlighted the Super Bowl as the ideal use case for LTE-broadcast. Blockbuster live events would attract hundreds of thousands of simultaneous viewers that would best make use of the technology. Verizon already streams entire NFL games through its NFL Mobile app, so being able to multicast those games would save it enormous amounts of network capacity — or so you might think.

There are a lot of cells out there

The thing about mobile networks is that they’re much denser than TV broadcast networks. Instead of using a single tower to cover a whole city, hundreds if not thousands of towers — each sporting multiple sectors — blanket any given metropolis with mobile broadband. Even if thousands of people in the same city are watching the same game on their phones, chances are few of them are going to be in the same cells at the same time. Multicasting effectively becomes unicasting if there is only one person receiving the transmission.

Nokia Siemens Networks’ conception of a heterogeneous network

What’s more, cells will start shrinking and multiplying as carriers begin deploying small cells and heterogeneous network (HetNet) architectures. The more cells in the networks, the less chance you’ll have users simultaneously streaming the same content in any given cell, unless you’re talking about big events. But playoff games and the State of the Union Addresses don’t occur everyday.

According to a new research report from iGR, carriers are weighing those factors, and some of them are leaning towards deploying LTE-broadcast selectively, targeting venues where people are most likely to stream the same content. Airports would be a good example, but so would a sports arena. Ticketholders might be watching the same games live, but they could all view the same replay videos simultaneously.

The iGR report also proposes that LTE-broadcast could turn our phones and tablets into mobile DVRs. We could subscribe to particular TV programs on apps like HBO Go. At set times, the LTE-broadcast network would schedule the download of various shows, beaming them down to thousands if not millions of devices simultaneously and caching them for later consumption. There’s nothing to prevent LTE-broadcast from being used for other types of media or data like digital magazines or device OS updates.

iGR projects that mobile video will account for 71 percent of mobile network data traffic in 2016. By utilizing LTE-broadcast, the study concludes, carriers could reduce capacity demand on their networks by 12.5 percent overall and by 15 percent at peak hours, the study found. The bottom line is unicast on-demand video will remain supreme, but a 15 percent capacity savings when the network needs it most is certainly nothing to scoff at.

Photo courtesy of Shutterstock user Peter Sobolev

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Verizon plans to finish its network build in mid 2013, six months ahead of schedule, offering LTE everywhere it has 3G coverage. That puts it well ahead of all of its U.S. competitors. AT&T’s LTE network covers about 170 million people, Sprint’s LTE rollout is just getting started, and we won’t see a T-Mobile LTE signal until right about the time Verizon completes its LTE rollout.

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AT&T revealed at the show that it activated 10 million smartphones in the fourth quarter, mostly iPhones and Android devices. That figure bests its previous record set in Q4 of 2011 of 9.4 million smartphones sold. According to the carrier, it averaged 110,000 smartphone sales a day during the three-month period.

Verizon hasn’t released its gross smartphone activations, but at a Citi conference held in conjunction with CES Monday, Verizon CEO Lowell McAdam said the carrier racked up 2.1 million net new subscribers in Q4, FierceWireless reported. Adam added that 85 percent of the device smartphones sold in the quarter were smartphones, and that 23 percent of its subscriber base now uses an LTE device, up from 16 percent in the third quarter.

That big jump in 4G subscribers has a lot to do with the new LTE-enabled iPhone 5, which went on sale in September. In fact, both carriers saw huge boosts in iPhone sales leading into the holidays. According to research group Kantar Worldpanel ComTech, in the 12 weeks leading up Nov. 25, iOS phones accounted for 71.8 percent of AT&T’s smartphone activations and 55 percent of Verizon’s — big increases over the same period in 2011 when the iPhone 4S was released.

The iPhone is also doing well at the single U.S. nationwide operator that doesn’t yet sell it. At the same Citi conference on Tuesday, T-Mobile USA CEO John Legere said it is connecting 100,000 iPhones a month and it currently hosts 1.9 million Apple smartphones on its GSM and HSPA+ networks, TMoNews reported. Though T-Mo doesn’t offer the device to its customers, it’s actively encouraging consumers to bring their unlocked iPhones to its network.

Of course, T-Mobile is only connecting the same number of iPhones a month that AT&T sells in a day, but that should change once T-Mo starts selling the device directly later this year.

Photo courtesy of Shutterstock user Stanislav Komogorov

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Lowell McAdam, CEO of Verizon Wireless’ parent company Verizon Communications, told attendees at the UBS Global Media and Communications Conference that the company is working on a way to streamline the bill-paying process as to accommodate the growing number of households with several data plans, according to Fierce Wireless. Unlike voice minutes, which can be pooled, data charges are usually billed per device and can’t be spread out as to let one family heavy that uses a lot of data snag a few megabytes from another family member that uses less.

This could allow Verizon to do some interesting promotions for smartphone/tablet combination purchases or incentives for current smartphone owners to add tablets to their plans. Obviously pricing will be key, as well as policies on overages, but it’s an interesting idea that other carriers are exploring as well and could help accelerate even further the adoption of mobile technology within families.

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McAdam’s appointment is sure to have implications far beyond Verizon, however. It’s no secret that McAdam and Verizon Wireless are partners with Google’s CEO, Eric Schmidt. McAdam and Schmidt teamed up back in 2009 with news of Verizon’s commitment for Android-powered smartphones on the Verizon network. With no Apple iPhone to offer, Verizon needed a comparable mobile platform, and Google needed a carrier partner to help Android gain traction. Although Android has grown market share beyond iOS and BlackBerry for many reasons since then, McAdam’s commitment to a large array of Android devices helped jumpstart the Android army in the U.S. That relationship is sure to continue, as McAdam recently admitted that his company is working with Google on an Android tablet.

Such growth of Android may be good for developers looking for a profitable future and customers who want a compelling choice in smartphones (and tablets), and Verizon is happy to sell you one, of course. But the bigger concern by this tech “bro-mance” deals with net neutrality. Google and Verizon have jointly outlined a stance on net neutrality and that stance allows wireless carriers to manage network traffic as they see fit. In fairness, it was Verizon’s Seidenberg that publicly penned the company’s net neutrality suggestions, but make no mistake: McAdam will continue down the path of protecting Verizon’s wireless assets with the help of Schmidt at Google.

Google wants the world to use it as a search engine and suite of web apps to beget ad income, which last year accounted for 97 percent of revenue. Verizon will be moving towards a tiered pricing bucket for wireless data and is even offering cloud-based services that compete against third-party developers on its mobile network.

Aside from naming McAdam as the future leader of Verizon and the broader industry implications, the news also illustrates the lightning-fast pace of a wireless world. It was only back in 2000 that McAdam was tapped as the executive vice president and chief operating officer of a brand new entity called Verizon Wireless. In the span of a decade, a mobile company was created to complement a wired parent, and now the child is ready to lead the future.

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