By Mark Conrad
(Editor’s Note: What follows is Part 2 of the article. Part 1 was published in Vol. 11, Iss. 11 of Sports Litigation Alert.)
The saga of the Federal Communications Commission’s attempts to establish rules of the road for the Internet can be summarized by a paraphrase of the famous Winston Churchill quote about Russia: a ten-year regulatory riddle, wrapped in an mystery of complex administrative law questions, inside an enigma of skeptical court rulings and considerable disagreement among communications policy wonks and economists. While this issue would seem to be far from the radar screens of the sports industry, those who are or will be involved in digital streaming sports content may have a lot at stake. This article is an attempt to unwrap the riddle of “net neutrality” for those who are not techno-savvy geeks, but wish to get a general handle on a very elusive topic.
The Potential Effect on Sports Media
Suffice it to say, many players in the communications field will comment on the proposals, but up to this point, very little has been publicly heard from the sports industry. Assuming that the proposed rules survive judicial and Congressional scrutiny (admittedly a big assumption given the skepticism of the court in Comcast and Verizon), the potential effect on the streaming of sports content on broadband ISPs could be major. First, it is likely that such streaming will be more prevalent in future years, as broadband viewing becomes more viable and serves as yet another platform for revenues — both from advertising and from rights fees. While some major sports events are already streamed, it has been my experience that the technical limitations remain and are more persistent than, say, in broadcast or cable. I enjoy a fairly high speed broadband system in New York than is the case in other areas (particularly rural areas, where broadband coverage is less prevalent. Even then, there are blips and frozen video images. It is fair to assume that more technology problems occur in other areas of the country.
If the FCC interprets the “commercially reasonable” standard for high-speed liberally (or, if there is no net neutrality at all), then there are opportunities to improve the broadband quality through fast lanes (assuming the sports content disseminators can afford it). If Netflix could negotiate a high-speed deal with broadband providers, then sports programmers could do the same. The quality of the video could improve and such streaming deals could become a more dominant avenue of disseminating sports. It could also hasten or weaken the power of traditional cable operators, who were responsible for expanding sports content since their modern incarnation in the 1980s. With chord-cutting increasingly being utilized, streaming of sports via a special lane of the broadband would be a very viable alternative. The NBCs of the world (which carry the Olympics) would be very happy. Also, leagues like the NFL could utilize this opportunity through their broadcast and cable partners.
But others can be adversely affected. A compelling argument for some form of a fair strict net neutrality would be the protection of newer sports services with heavy doses of bandwidth. For example, online sports gaming (meaning player interactive games, and not to be confused with gambling) becoming a more popular genre for younger users, questions on broadband capacity abound. Known as esports sites, services like Twitch and Riot can take up more space than HBO and Facebook.[3] Without net neutrality, they would be at the mercy of a broadband provider, who could easily relegate them to a slow lane, or even shut them down. That is what the majority of the FCC wants to avoid.
However, with the rules as presently proposed, a “commercially reasonable” speed prioritization could be a fee for these services to occupy a faster lane which they may need to be viable but for a fee which they cannot afford. In other words, their business viability can be compromised. The FCC’s proposed rule prohibits intentionally slowing down lanes; but is it possible for an ISP to increase broadband lanes for those who pay for it? That, in effect, may be slowing the traffic for the rest. With these esports firms dependent on venture capital money, it could dry up due to slow lanes.
Another question is whether controversial content websites could be relegated to a slower lane or even taken off the broadband. The original challenges to the net neutrality involve takedowns of bit torrent sites (known and used by many teens to illegally download copyrighted materials). However, in looking at sports, without some kind of protection, would it be possible to “slow” or, even give it for free to generate more subscribers (at a time when cable chord-cutting is costing that industry millions of subscribers).
Depending on how the present rules are interpreted, there could very well be restrictions on this practice (under the vague “commercially reasonable” standard) and in particular, broadband providers such as Comcast may be precluded from engaging in such deals due to its market power. What if we have this scenario: a web site that offers interactive games, video and chat engages in raunchy humor, aimed for a male audience. The broadband ISP’s management finds that there is considerable pressure by individuals and organizations critical of the content to either ban the service (highly unlikely) or to “keep it slow” in an attempt to make access more difficult. As a private business, the lack of a net neutrality requirement could permit this scenario to happen.
Turning to the more traditional sports providers, imposing a stricter form of net neutrality requirement may impact the major sports organizations because it may limit the ability of such organizations to utilize a faster speed to stream MLB, NFL or NBA games. This may be a good thing or not, depending on how one sees it. Without net neutrality, major broadband providers could strike deals to give them faster and greater bandwidth in return for a fee (much like the present cable system), which they can certainly pay. Other sports may not have this option and may be forced to accept a lower lane, or, worse, have less leverage in securing a streaming rights deal. Or, even worse, say that a Comcast wants to give the NHL a faster lane. The NHL has an exclusive national broadcasting and cablecasting agreement with NBC and Comcast gives NHL games a “free fast lane.” However, it denies the NBA a free fast lane in part because ABC/ESPN has a broadcasting/cablecasting agreement with ABC. While this scenario is admittedly unlikely (in part because of an anti-discrimination agreement that Comcast made with the FCC when it acquired the network), one it remains a distinct possibility in a net neutrality-free environment.
There are no easy answers to this dilemma (or should I say enigma), but one that should be followed by anyone interested in the dissemination of sports content through an broadband Internet service provider. It is quite possible that these new proposed rules will be challenged in court, giving the D.C. a third chance to determine this issue. Or,
Congress can impose statutory changes in the 1996 prohibiting any form of net neutrality, especially if the Republicans take control of the White House and Senate and keep their majority in the House. But ultimately, the issue may boil down to the technology itself.
What is broadband going to be like in five years? Maybe there will be enough bandwidth to accommodation everyone at faster speeds and the difference between a “fast lane” and “slow lane” would be less important (like a highway where the speed limit for the local part is 100 MPH and the express lane 125 MPH). Or, will website require so much more bandwidth that it strips capacity. Will the divide between high-speed services in the big cities and more limited service in rural areas become more pronounced? Or, more to the point, will the continuing consolidation of the cable broadband industry centralize its power even more, creating an environment where sports content providers (and everyone else) fear them? Will the FCC win its battle to have net neutrality in its present proposed form? No one can say for sure, but it may be take a long regulatory journey to find out.
[3] See Patrick O’Neil “Why today’s ruling on net neutrality could decide the future of esports, The Daily Dot, May 15, 2014, retrieved at http://www.dailydot.com/esports/net-neutrality-esports-twitch/
