One of the central problems in video transmission over lossy channels is the choice of source and channel coding rates to allocate the available transmission rate optimally. In this paper, we present a structural distortion model for video streaming over time-varying fading channels. Based on this model we study the average video distortion for various bit-rate allocation strategies and channel conditions. We argue that sensitivity to channel variations should be one of the selection criteria when choosing an optimal bit-rate allocation. We demonstrate that a simple bitrate allocation strategy, which aims to minimize current distortion, is not necessarily optimal in terms of time-average distortion. System robustness is crucial for the streaming performance when frequent allocation updates are not feasible. It is achieved at the expense of higher source distortion in the encoder. Categories and Subject Descriptors C.2.1 [Computer-Communication Networks]: Network Architecture and Desig...