You want to watch the World Cup final but do not have a log-in for the WatchESPN app. You download the 120 Sports app to find it is showing highlights of the game, but with buffering and a reduced quality. Currently, it is legal for your Internet service provider (ISP) to favor some web traffic over others. In our hypothetical example, if 120 Sports wanted to compete with ESPN, it would have to pay the ISP for higher speeds. Competitive pricing would disappear if the Internet is reclassified from an information service to a telecommunication service. However, it would open the Internet to heavy taxation. The expiration of Internet Tax Moratorium later this year means both companies and users will have to pay more to use the Internet. If the FCC does not pass its net neutrality regulation, this may be just one of many ways that growth in sports viewing may be stifled by a projected 17 percent increase in broadband costs.
UNESCO and Stanford Professor Paul Kim predicts that global mobile Internet users will overtake computers in the near future. We are beginning to see this with events such as the World Cup, where 1.7 million viewers watched the second half of U.S. versus Germany and over 3.5 million unique viewers watched the U.S. take on Belgium online. There is a tremendous market for mobile sports viewership that remains somewhat untapped. Earlier in the month, ABC, ESPN, and ESPN 2 combined to reach more than 99 million people with World Cup coverage. Univision reported that it reached 70.9 million people. Not maintaining net neutrality could have a devastating effect on the growing mobile market, as Forbes predicts:
“The increase in costs, when passed through to consumers in the form of higher prices, will lead to a decrease in the otherwise growing base of nationwide broadband subscribers by as much as 65 million by 2020.”
Mobile sports businesses may need to prepare for an Internet where ISPs can restrict apps, content and services. For example, AT&T Wireless, Verizon Wireless and T-Mobile all stopped Google Wallet, a mobile payment app that was looking to tap into a new $56.7 billion market, from reaching its customers. These ISPs prevented 75 percent of U.S. mobile users from accessing this technology and effectively stifled the market. If Google — a company so powerful that Internet traffic dipped by 40 percent when there was a five-minute power outage — cannot convince ISPs, then what weight do mobile sports businesses’ carry in a disagreement?
There is some good news if net neutrality legislation does not pass. According to David M. Spencer, founder of Talent Resources’ Sports, endorsement deals and sponsorship deals for players and teams should not be affected. However, mobile sports businesses should look at what has happened to the digital music business, where organizations and start-ups have to pay huge up-front licensing fees to rights holders before they can get their services to users.
Athletes and teams will struggle to cover these costs without passing them to consumers. LeBron’s app would not have been successful without Samsung, but other athletes do not have brand recognition or capital to repeat his efforts. Even though business will not immediately suffer, they will be at the mercy of ISPs, as well as possibly derail the massive expansion and potential of the mobile sports market.