Opinion: Why AT&T’s New Data Plan Is Bad News for Sports Leagues but Good News for Broadcasters

A sterling pitching performance by Detroit Tigers starter Armando Galarraga may not have resulted in a perfect game, but, in a sushi bar in New York City, it provided a perfect example of why AT&T’s decision to eliminate unlimited data plans for smartphones is a dumb move for sports fans who have grown accustomed to watching major events over the 3G network.

To Make Service Reliable
First, the background. In recent years, AT&T’s lack of reliable cellular voice and data service has become one of the biggest jokes in the tech space (as Steven Colbert said of the Apple iPad: it is just like a big iPhone because it also cannot be used to make phone calls). So, this week, AT&T took steps to reduce that burden by eliminating unlimited data plans and instead introduced a $15 monthly plan for up to 200 MB of data and $25 for up to 2 GB of data. Users who go over the 2 GB limit will then be charged an additional $25 for another 2 GB of data.

The move sounds like a great deal for users of smartphones who don’t consume a lot of data. A number of devices, such as the Blackberry, typically have pretty solid gating features that can keep data usage well below 200 MB per month (AT&T says 65% of its consumers are below that threshold).

But, for those who rely on next-generation services like cellular-delivered video, rich Web surfing, and more, the new caps could spell trouble. Such users can easily consume upwards of 30 MB a day (and that is simply for business e-mail and Web surfing).

Video Boosts Data Count
And here is where the trouble begins. Let’s go back to the sushi bar. The TV is tuned in to the YES Network and the New York Yankees/Baltimore Orioles game. During the game, a game break alerts viewers to ongoing developments in Detroit.

Desiring to watch history firsthand, a diner taps into MLB TV’s great iPhone application and transforms the sushi bar into a sports bar. Two additional quick taps, and patrons were watching the final two innings of the Tigers game, albeit on a 3-in. screen.

The drama was tremendous. The bad call was bad. But the ability to so easily watch the ending live was one of those transformative technological experiences that makes one simply say “cool.”

But here’s the rub. An unscientific test of how much data is consumed in watching video found that it can range from 3 MB to 5 MB per minute. The 15 minutes spent watching the end of that game consumed roughly 55 MB of data.

With the current AT&T unlimited plan, using 55 MB of data is a non-factor. But, in a pay-per-byte model, that non-factor becomes a big factor: a surcharge that will curtail mobile users from taking full advantage of the features on their smartphone or tablet.

Technology takes one step forward and two steps back.

Using conservative estimates of 3 MB per minute, a baseball fan will use approximately 540 MB of data to watch a three-hour ballgame (make it a football game or a Yankees/Red Sox game, and that usage jumps to 720 MB for a four-hour event). With consumers paying $30 for every 2 GB of data, that works out to a surcharge of approximately $2.90 per hour. Will consumers be willing to pay $10 to watch a single baseball game? We will be the first to say no.

And that is why, today, in many ways, is a sad day for a mobile/handheld-video market that has only recently matured and grown from a nascent market to one with real revenue potential. Devices like the iPad, introduced only two months ago with an “unlimited 3G” plan for $30 a month, are now the Hummer of mobile devices: data-guzzling beasts that can quickly empty a wallet.

So where does this leave the mobile-video industry or, more important, content owners and creators looking to reach consumers on the go? First, all should be concerned that the new pay-per-byte business model could suffocate future growth of subscribers and revenues.

Old-Media Answer
Content also may need to look for new partners, and, ironically, the limitations of new-media delivery could send networks and leagues looking to old-media delivery in the form of Mobile DTV.

Mobile DTV was a hot topic at the NAB convention in April and for good reason. The system takes a small sliver of the 19.8-Mbps over-the-air broadcast signal and uses it to deliver a DTV signal to mobile devices that have a Mobile DTV receiver. More than 800 TV stations and 16 of the top 20 broadcast station groups are working together under the auspices of the Open Mobile Video Coalition, figuring out ways to deliver upwards of 30 channels to handheld devices within a given market.

Clear Advantages
The advantages over cellular-based delivery are clear. First, it scales up, just like over-the-air delivery of HD. Fans in a stadium can fire up mobile devices and, via an over-the-air antenna, instantly receive a consistent, quality video signal. Today, a crowd of 15,000, let alone 70,000, can bring a cellular network to its knees at a stadium or arena. Not so with Mobile DTV.

Second, it will offer “Web-like” services with VOD content, personalized ads, and even cached Web content with such information as weather, sports scores, news stories, and more. Another important feature for sports leagues and networks is that it supports blackout restrictions and other rights-specific issues.

But most important, given the AT&T development, because it scales up, consumers won’t have to worry about overage charges and data plans.

How quickly Mobile DTV becomes a household phrase remains to be seen. But, if cellular carriers like Verizon, Sprint, and T-Mobile follow AT&T’s lead and look to charge customers based on how much data they consume, it could get the public-relations gas it needs.

Pressure on the FCC
Of course, there is also the possibility that AT&T is making a Machiavellian move to put pressure on the FCC and the federal government to move ahead with aggressive reallocation of spectrum. What’s the best way to get the government to capitulate with requests for opening up White Space spectrum to handheld devices? Hit a few dozen households with hundreds of dollars of cellular-data overage fees after their children consume Nickelodeon videos in the backseat of the car on a long road trip, and concerned parents will be calling the FCC and their congressmen asking for relief.

But broadcasters will be holding a trump card. A Mobile DTV service that can reach nearly all consumers, potentially ride on top of existing rights deals, and ensure that consumers can get the critical information they need — whether sports score, hurricane warning, or simply the local newscast — without having to worry about increasing their phone bill bit by bit and byte by byte.

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