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Verizon CEO: We looked at buying Hulu

CEO Lowell McAdam also says he has high hopes for Isis, the mobile payments joint venture that Verizon is part of, and predicts a nice revenue stream by 2013.

Verizon CEO Lowell McAdam
Sarah Tew/CNET

Verizon Communications considered buying Hulu when the streaming-video site was shopping itself around to potential acquirers earlier this year.

Hulu was just one of the online video options Verizon looked at, CEO Lowell McAdam said at a UBS investor conference today in New York.

"We continue to look at alternatives," he said during a one-on-one discussion onstage, which was Webcast.

Verizon was among many potential suitors looking at Hulu when it was seeking a buyer this summer. Hulu ultimately did not find a partner.

That Verizon looked at Hulu, which streams television shows and movies, underscores the growing interest in delivering video across an Internet pipe, known in the industry as "over-the-top service." Verizon, which is newer to the pay-TV business than its cable counterparts, has been more willing to embrace over-the-top as a service, but still believes its core Fios TV product will remain dominant for years.

"Over-the-top will be complementary," McAdam said.

Verizon is reportedly planning its own online video-streaming service to reach customers outside Fios territory and take on Netflix, Hulu, and the traditional cable providers. McAdam declined today to comment on the speculation.

McAdam hit upon several different topics during his onstage discussion with an analyst. He said the company would introduced shared data plan--a sort of family plan with a shared pool of data instead of voice minutes--sometime next year. Wireless executives have long talked about the concept of a shared data plan, which would allow consumers to connect multiple devices, but pay one bill.

He also expressed some comfort in Verizon's prospects even in this period of economic uncertainty. The continued growth of Fios, as well as growth on the wireless side with 4G services, should keep the company relatively insulated, he said.

The company is nearing the end of its Fios deployment, with a goal of having the service available to 18 million people. McAdam said he has a goal of getting to 50 percent penetration in its Fios markets, implying that he hopes to take significant market share from his cable and satellite competitors.

That stance puts Verizon in the position of having conflicted partnerships with cable. Last week, Verizon struck a deal to acquire spectrum from Comcast, Time Warner Cable, and Bright House Networks for $3.6 billion. As part of the deal, Verizon Wireless stores will sell cable service, even in areas where Fios is available. McAdam said the bundled cable products will begin selling in January.

Unlike the cable companies, whose execs spoke earlier at the conference and expressed a willingness to offer a tiered pricing structure on home Internet service, McAdam said it isn't something the company plans to do next year.

"Fiber in the home is such a large pipe that it's not taxing on the network," he said.

On mobile payments, McAdam said he had high hopes for Isis, the company's mobile payments joint venture with AT&T and T-Mobile USA. Isis plans to hold trials next year for its service, which allows customers to wave their phones in front of special checkout readers to pay for goods.

McAdam said he expects a significant roll out of the service by the end of next year, and sees a "real revenue stream" by 2013. Isis plans to make money through hosting and transaction fees, he added.

McAdam also talked up the opportunities that come from Verizon's 4G network, which he said was still "relatively empty." While Verizon has been providing lower subsidies on the LTE phones, which mostly run between $250 to $300 with a contract, he said he has kept LTE pricing at the same level as 3G to stimulate usage. He said he wasn't seeing a significant increase in usage on 4G, but anticipates more with the rise of new apps, and the increasing popularity of video services and tablets.

The penetration and revenue from 4G will be as good, if not better, than 3G, McAdam said. That's particularly the case if you factor in the new applications that can run on the network.

The company continues to monitor the usage between 4G and 3G in balancing where to put more capital.

"We feel like we're in a good place," he said.

McAdam also acknowledged a willingness to eventually sacrifice once-lucrative businesses, including text messaging, which cost the carriers little but offers a lot of profits. A lot of European companies have started to see their text messaging revenue falter as a result of alternative online options, but that trend hasn't fully hit in the U.S., he said.

"I do expect SMS to be under attack," he said.

Text messaging will become like older telecom services, such as long distance, that have fallen by the wayside as far as revenue goes. The trick is to replace it with new sources of revenue, McAdam said, pointing to machine-to-machine connections, or putting cellular modules into nontraditional devices such as smart grid equipment or ATM machines. He said health care and security are among the two industries that could use more wireless connections.

Updated at 8:34 a.m. PT: to include an additional comment from McAdam on shared data plans.