ESPN considers picking up the tab

Zack Christenson Research Fellow, American Consumer Institute
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On Friday, the Wall Street Journal reported ESPN is in talks with at least one wireless carrier about the possibility of subsidizing bandwidth fees of users viewing sporting events and videos via their mobile phone.

Most mobile phone carriers impose data caps on wireless plans to keep users below a certain amount of bandwidth per month. Now, it appears that ESPN has come up with a way to help consumers consume their content without draining consumer data usage, or their bank accounts.

This revelation is great news for consumers.

Right now, consumers who wish to use their smartphones for heavy web browsing could incur significant costs. This is extremely detrimental to those who rely on their smartphones as their primary Internet-connected device, as many young and minority consumers do.

As many continue to worry about the costs of wireless service, this news should be welcome as it introduces a potential new business model to keep costs for consumers low.

This new business model is a good example of what many in the policy world have been discussing for some time.  That is, as both wireline and wireless broadband becomes increasingly important in the lives of consumers, and in an era of increased convergence among mobile and wireline technologies, content creators and distributors will be looking for new ways to meet consumer demand for their content, applications and services, and for consumers to access them.

But some net neutrality proponents aren’t welcoming the news. Public Knowledge came out against the deal, arguing that the potential deal would violate net neutrality principles. Of course, the “Open Internet” rules imposed by the FCC don’t apply to wireless services (only terrestrial broadband).

But even if the Open Internet rules did apply, why would this violate it?

Net Neutrality rules are meant to prevent prioritized access, or throttling content of one preferred content provider over another. This deal would do no such thing. ESPN content wouldn’t be served to a user faster than, say, a sporting event coming from a different channel.  And users wouldn’t be spending a single dime more to get the content.

ESPN wants to ensure that their content is being watched—without their viewers being forced to spend more money to do it. It’s odd that some public policy advocates who complain about the potential cost to consumers for usage based pricing are now complaining about a business model that would have such costs defrayed by the media companies whose services customers are demanding on their mobile devices.

Who really wants to stop a deal where a content provider would actually pay to cover the costs that would normally be shouldered by consumers?

Deals like this benefit consumers, the very thing that net neutrality organizations like Public Knowledge claim to be after. By restricting the ability of ISPs to make these deals with content providers, government would be passing a huge cost onto the persons who we most want to protect—the consumer.

Although this business model is new to the smartphone and tablet world, the concept isn’t that different from one used in recent history. Toll free 800 numbers have long operated this way—with a business subsidizing the cost of the phone call in order to provide value to the consumer. The idea being floated by ESPN is only a natural extension of an existing business model to an emerging technology.

We’ve actually seen an application of this business model in the Internet economy as well. For example, Netflix includes pre-paid envelopes with their DVDs, subsidizing the cost of postage and paying the costs directly to the Post Office. In addition, Amazon uses this business model with the Kindle, covering the costs for wireless connectivity to deliver e-books.

There could be a number of applications of this business model in the digital world—textbook publishers might want to pay for downloads of textbooks, hospitals might want to pay to access online health services, and of course, entertainment companies might want to pay so that more consumers can access their content.

A number of players in the Internet ecosystem are developing new business models to meet consumer needs, and should have the flexibility to do so, as policymakers have long intended. We should encourage these innovative new business models, especially ones that keep costs for consumers low.

Zack Christenson writes on digital tech issues for the American Consumer Institute Center for Citizen Research.  For more information, visit www.theamericanconsumer.org.