SAI says the application will work over Wi-Fi and AT&T's 3G network, meaning that users will be able to view programming anywhere with a fast data connection.
Rumors suggesting that an iPhone-friendly version of Hulu swirled around this time last year, however, they predated the launch of the App Store, and Hulu flat-out denied that one was being worked on.
This time around, though, it's far more plausible, with the upcoming iPhone OS 3.0 software update, which lets developers bake streaming media into their applications. For Hulu, this means that the advertising could be stuck into the mobile stream and that users would be able to watch videos without leaving the application.
One of the things that keep this rumor from holding water is that Hulu is in direct competition with Apple's iTunes business. Users of Hulu can watch ad-supported, full-length television shows and movies on their personal computers for free, instead of paying Apple to download a copy for offline viewing.
If such an app were available on the iPhone, it would also offer portable TV and movie watching, something not yet offered in Apple's own mobile iTunes app, which is limited to video podcasts. In past instances of this, the company has simply denied applications such as Podcaster from making it through the app approval process, only to launch it as a first party feature later on.
On the other hand, some of Hulu's competitors have already gotten a foot in the door, including Joost and CBS-owned TV.com, which has its own iPhone application that streams in content in chunks. In addition, Google's YouTube, whose application comes preinstalled on the iPhone, has recently reached an agreement with major studios, including Sony Pictures, Lions Gate Entertainment, and CBS (publisher of CNET News), to offer visitors full-length TV shows and feature films.
If Hulu can't manage to pull off getting advertisements in the stream, using this system, it would be fairly simple to force users to sit through advertisements between clips.