Verizon Wireless quietly admitted Tuesday its much-vaunted LTE network is suffering speed slowdowns so serious, some customers in New York, Chicago, and San Francisco are being randomly kicked off Verizon’s 4G network to slower 3G service until congestion eases.

Fran Shammo, Verizon’s chief financial officer, volunteered that online video was the likely culprit and he was surprised by usage growth well in excess of what Verizon predicted.

Current estimates from the company suggest Verizon’s LTE customers are responsible for 64% of all data traffic on Verizon’s wireless network nationwide. But in large cities, Shammo said traffic numbers are much higher.

Shammo

“There are certain pockets where we’re absolutely going to experience that down tick from the LTE network to 3G because of capacity constraints,” Shammo admitted.

The sudden revelation Verizon now has insufficient capacity for its LTE service is a significant reversal for Shammo, who has repeatedly told investors Verizon has enough wireless spectrum for the next 4-5 years.

In May 2013, Shammo told investors attending the JPMorgan Global Technology, Media and Telecom Conference:

As I have said before, our spectrum position right now is very good, with the AWS transaction that we completed with the cable carriers last year, with the sale of the spectrum that we are doing with AT&T later this year, obviously giving that spectrum to someone who can utilize it better than we can at this point in time. So I think our holdings are exactly where we need to be. And I have said before we really don’t need spectrum for the next four to five years, with the way that we deployed CDMA and how we will utilize that spectrum from our CDMA deployment over to the 4G network as we need it.

Later that same month, Shammo confidently repeated his assertion Verizon was all set for spectrum at Barclays Global Technology, Media and Telecommunications Conference:

Well, we have — from where we sit today, we have a very good spectrum portfolio which is why we went after the AWS spectrum, which is really going to be used for our capacity of LTE. The 700 megahertz that we have contiguous across the United States is used for the coverage piece. So we’re in pretty good shape for the next four to five years, even with reallocating our 3G spectrum over to our 4G network. […] And we think, look, we think that there will be enough spectrum there. We think that technology change — I mean, people are already talking about LTE advanced. Well, LTE advanced is nothing more than creating a bit more speed on the network. But really LTE advances around being able to utilize the spectrum much more efficiently within the network.

Carriers can boost coverage with more cell towers, street level picocells, or in-building femtocells.

Some critics suggest Verizon is ginning up a spectrum crisis as new FCC chairman Tom Wheeler begins to look at the current state of wireless spectrum and competition in the wireless industry. They also point to the fact Verizon has so much unused, warehoused spectrum, it has tried to sell the excess off to third parties.

“We have A band [unused spectrum] in our pocket today that we put for auction a year and a half ago and we did not get what we thought it was worth,” Shammo said yesterday. “We brought it back into the portfolio. But we can use that as a trade for some different spectrum. We put it up for auction so obviously it was on the block [and was] never taken off the block. But obviously it is not for fire sale. If a transaction makes sense then we will execute the transaction. If it doesn’t, then we will deploy it.”

In the short-term, Shammo promised customers the congestion issues were already being dealt with by “lighting up” acquired AWS spectrum formerly owned by cable operators, and adding data systems and small cell-type antennas in high congestion areas.

Shammo added that since Verizon was finished expanding its wireless network out to new, unserved areas, future investments would be directed at improving service within current coverage areas.

“I think by year-end you’re going to see us [concentrate] all of our CapEx around densification and then you will start to see us talk about things like VoLTE (Voice over LTE) and multicast (video) and some of these LTE advanced technologies that will come in the next year,” said Shammo.

Cord-cutting is a real, measurable phenomena and is especially common among those under 30 who don’t care about traditional cable television service.

Those are the views of Verizon’s chief financial officer Fran Shammo, speaking this week at the Wells Fargo 2013 Tech, Media & Telecom Conference in New York.

Shammo told investors Verizon FiOS subscriber numbers showed the company has an excellent position in the broadband market because it is the only national provider other than Google offering fiber-to-the-home service.

Verizon TV customers are regularly encouraged to upgrade to 50Mbps Quantum service with a push of a button on their remote control.

“Broadband is absolutely key,” said Shammo. “Most of our customers are taking our 50Mbps [FiOS Quantum] or higher speed and part of that is because you need that speed inside the home [to support] your wireless devices that run off of Wi-Fi. If you’re running hot water with five people, you are eventually going to slow down the hot water and it is going to run cold. The same thing happens when you are running five wireless devices over your Wi-Fi network.”

Shammo said as more online video becomes available people will gradually shift more of their viewing time away from traditional television.

“We’re also seeing fewer people taking [our cable television] product,” said Shammo. “They really want the broadband speed and if you look at the demographics, those 30 and below don’t care if they have linear TV. They are looking at getting their content through other means.”

Shammo said he doesn’t necessarily have a problem with that because heavy online viewing will stimulate upgrades to faster Verizon FiOS Internet speeds.

“We invested in FiOS for broadband and for television and we think we have a superior product,” said Shammo. “But we’re smart enough to realize that the ecosystem will eventually change and people are bringing content in over-the-top. We want to make sure we have the fastest — the best broadband […] and we believe we have the best linear TV product but we know that over the top video is going to become more popular.”

Behind the 8 ball.

Intel’s plan to launch a competing virtual cable television operation delivering programming over existing broadband connections is dead and the cable industry has tentative plans to bury the technology overseas.

OnCue was to feature dozens of popular cable networks and a large library of on-demand content using hardware that combined live, on-demand, and streaming video. The service was supposed to be up and running this year, but despite months of talks, Intel was unable to announce any significant carriage agreements with major cable networks. Cable programmers were reportedly fearful of alienating their biggest customers — large incumbent cable, telco and satellite companies — potentially leaving networks exposed to retaliation during contract renewal talks.

The cable industry has repeatedly warned that reselling programming to streaming providers dilutes the value of those networks. The clear implication: sell to our competitors and we will demand significantly discounted rates when our contracts come up for renewal.

Intel has reportedly been shopping the remnants of the service to new buyers. A late October rumor that Verizon Communications was a likely buyer has gone unconfirmed. Today, Bloomberg News reports Dr. John Malone’s Liberty Media has shown an interest (since denied by Liberty) in acquiring the service. Other media accounts suggest Verizon and Liberty could jointly buy the service, but Malone is loyal to the cable industry and is reportedly uncomfortable doing business with a telephone company.

Should Liberty Media acquire the technology, cable companies in the United States can stop worrying about OnCue as an online competitor. Liberty Media would only deploy the technology as an advanced set-top box offered through its owned and operated European cable systems.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Bloomberg Is Intel Abandoning Web-TV Project 10-30-13.flv[/flv]

Bloomberg senior West Coast correspondent Jon Erlichman reports that Intel may be turning over its web-TV project to Verizon and looks at possible reasons why the company may be abandoning the project and what it could mean for Verizon. He speaks on Bloomberg Television’s “Bloomberg West.” (2:28)

Are you getting the mobile broadband speeds your provider advertises for its whiz-bang 4G network? How do you know which carrier really delivers?

The Federal Communications Commission is hoping you can help them find out with a free Android app to be unveiled on Thursday.

The FCC has successfully used volunteer crowdsourcing before to keep wired Internet Service Providers honest through its “TestMyISP” speed measurement project for home broadband connections. When the first results were announced, an embarrassingly bad rating for Cablevision forced the cable company to quickly beef up its broadband infrastructure to match the speeds it promised customers.

Now the FCC’s new chairman Tom Wheeler hopes a similar effort will help the federal agency understand whether the promises wireless carriers make to customers are actually being kept.

With wireless broadband gaining in prominence, the FCC wants to do a better job monitoring a service most Americans use in some form while on-the-go. If providers like AT&T and Verizon Wireless are caught dramatically underperforming in coverage and speed, the agency may take that into account as part of its mission of regulatory oversight.

Consumers will also benefit from having an unbiased source that can offer regular analyses on the speed and performance of each carrier — useful information to have before being locked into a two-year contract.

Verizon, AT&T, T-Mobile, and Sprint are among the carriers agreeing to take part in the speed test project.

The FCC Speed Test app will initially be available for Android smartphones. There are no details about the release date of an Apple iOS version of the app, but the FCC’s Mobile Broadband Speed Test home page shows links (not yet active) for both versions of the app.