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I believe YouTube has to make the fix, because as far as using it on the iPhone, it thinks you are on EDGE still.
 
YouTube only re-encoded for MP4, not for multiple quality levels of MP4. So, you get the lowest common denominator.
 
Yeah, I was expecting youtube videos to look better over 3g but the look just as bad as edge to me. They look much better over wifi.
 
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