Verizon Wireless revs up mobile video

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Verizon charges a flat fee of $15 per month for its V Cast service, which includes access to downloads of video, music and games. The mobile operator began offering a special 24-hour subscription in October for $3.

Verizon's prices are actually cheaper than what other providers, such as Sprint Nextel, charge for mobile video. Sprint, which was the first company to offer video service on its mobile phones, includes some video as part of its Power Vision data package. These packages offer different levels of access to video content and range in price from $15 to $25 per month.

Sprint plans to offer an additional 40 channels of mobile TV to customers who buy service through its joint venture with cable operators Comcast, Time Warner, Cox Communications and Advance/Newhouse Communications.

Just like with Verizon's V Cast and Sprint's Power Vision services, mobile subscribers from the Sprint/cable joint venture will also be expected to pay an additional $15 a month for access to some of the same TV content they already watch at home as part of their cable TV package.

And herein lies the problem that carriers face in getting people to watch video on their phones, say analysts. Why would people pay a hefty monthly fee to watch the same TV programming they already get as part of their cable TV package at home or that they can access for free on the Internet?

"While YouTube may be very popular on the Web, it's also very free," said the Yankee Group's Aldort. "So I don't see people signing up for V Cast to get access to this content."

If mobile operators truly want to entice mainstream consumers with their video services, they will have to change their business models, said Iain Gillott, founder of iGillottResearch. Instead of putting the cost burden on consumers, carriers need to find a different way to pay for the service.

"They have to flip their business models around so that the service is advertisement-driven rather than subscription-based," Gillott said.

While mobile operators have begun experimenting with text-based advertising, they have not introduced any advertisements into their video services. But that could change.

"Advertising is something that we think about a lot," Chan said. "We want to make sure the experience is optimal. And when the time is right, we will consider how or if we add advertising."

For now, some analysts, like IDC's Lewis Ward, believe mobile operators don't need to lower prices because they can still generate a significant amount of revenue from the higher priced services.

"It may always remain a niche service, but they'll make money from it," he said. "The ARPU (average revenue per user) on video is about $6 or $7. So it doesn't take deep penetration to generate the same amount of cash it would take with a lower margin service, like SMS text messaging."