ESPN Wants To Pay-To-Play

Blog ››› ››› SIMON MALOY

The dream of wireless providers like Verizon and AT&T -- or any company, really -- is to be able to charge twice for providing the same service. In working towards that goal they're getting a big assist from ESPN and tearing down net neutrality in the process.

The Wall Street Journal reported last week that ESPN is in talks with "at least one" major U.S. wireless internet provider to "subsidize wireless connectivity on behalf of its users." This means that they're willing to pay a wireless carrier like AT&T a significant chunk of change to enable ESPN viewers to stream unlimited sports programming to their mobile devices without having to worry about exceeding the carrier's monthly data caps. So wireless subscribers would pay AT&T for access to the internet, and ESPN would pay AT&T for access to the customer. One service, two charges.

And if AT&T does end up pairing with ESPN on this scheme, that wouldn't be surprising given that AT&T has been trying to work out ways to double-charge for their services for quite some time. Last February the Journal reported that the wireless carrier was scheming out a way to charge developers of data-intensive mobile apps for the traffic AT&T subscribers incurred while using their products, and on May 15 AT&T CEO Randall Stephenson told investors that he expects those plans to be in effect soon. They also tried to double-charge customers for the privilege of using Apple's FaceTime videochat app -- a potential violation of the almost-impossible-to-violate Open Internet rules. They eventually made FaceTime available to all subscribers except those who still have unlimited data plans grandfathered in from before AT&T switched over to tiered plans with data caps.

That should give you an idea how much wireless carriers love data caps and how central they are to their future business models. It's a lucrative proposition for them: set up the cap, charge customers who go over it, and charge companies who can afford to pay to get around it. And that's where the net neutrality concern comes in: wireless carriers who allow companies to circumvent their data limits are, in effect, prioritizing the content of those companies and disincentivizing subscribers from seeking out content from companies who haven't paid for the exemption. As Public Knowledge put it: "Imposing data caps on consumers and then allowing wealthy content holders to buy their way around them is a recipe for stagnation online."

So it's not that great a deal for consumers or smaller app developers who don't have deep pockets, but it's FANTASTIC for the wireless providers and the companies that can pay their way through the caps -- the wireless company gets a big check, and ESPN gets enhanced access to subscribers. It's anti-competitive and doesn't really represent the ideals of a free market. As Andrew Leonard at Salon points out, conservative bloggers and industry-funded telecom mouthpieces are defending ESPN's proposed deal with wireless carriers by comparing it to the introduction of toll-free 800 numbers, the exact same language AT&T has used in the past to defend such arrangements. One writer for the impressively named American Consumer Institute Center for Citizen Research lauded the proposed deal under the headline: "ESPN considers picking up the tab." Whose "tab" is ESPN picking up? Nobody's. It wants to pay a wireless provider to get around the customer-access limitations that carrier put in place.

As for the data caps themselves, this new vigor for pay-for-play data cap exemptions for high-bandwidth apps does much to undermine the initial rationale for imposing the caps: controlling network congestion. When AT&T made the switch from unlimited to capped data plans, it said it was because the popularity of audio and video streaming apps on smartphones and tablets put too much stress on its network. Now that the caps are in place, mobile providers are saying they can carve out exceptions for popular apps that stream audio and video --  for a price. A 2012 report from the New America Foundation whacked monthly data caps for mobile providers as an ineffective remedy to network congestion and said the only reason they exist is to boost profits:

Though mobile providers may need to utilize some usage limitations on their network given greater capacity constraints as compared to wired broadband, the use of flat monthly caps makes little sense when congestion on the network is likely to be time and geographically limited. Instead, the decision by AT&T Wireless and Verizon Wireless to move users onto tiered plans and the current price levels are largely influenced by Wall Street demands to report ever-growing revenue and profit margins. Rather than effectively managing use of the network, data caps are a strategy for ISPs to increase their revenue per user.

In the end, though, there really isn't anything in the FCC's Open Internet rules that would stop Verizon or AT&T from making a deal with ESPN. A company that provides wired broadband internet almost certainly could not enter into such an arrangement, but the FCC gave wireless providers far more leeway. They have a much freer hand to set their own rules, and they're gaming the rules they made up to boost their own profits while sticking it to consumers.

Posted In
Media Structures & Regulations
Internet Freedom
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