Lessons to be learned from cricket's internet outing

Professor Martin Cave

It’s hardly an ideal outcome but one that could well become a reality with the news that YouTube has signed a two year deal with the Indian Premier League (IPL) to exclusively broadcast what it claims to be the first major sporting event to be streamed across the globe. Starting in March this year 60 IPL matches will be broadcast over 45 days in all countries apart from the US.

It looks as though these games will be free to view, with the IPL and YouTube (owned by Google) sharing advertising revenues. On paper this looks like the type of deal that could open up the tournament to a wide global audience, without having to subscribe to cable or satellite television. However, there are serious concerns that far from offering free open access to the IPL, over demand on YouTube’s bandwidth will significantly reduce the number of people who are able to access the games.

In India itself, millions will be denied the opportunity to witness the IPL as the country’s broadband network is so underdeveloped that companies are forced to restrict access to rich media websites and private broadband connections will not be strong enough to keep up with the millions expected to logon to IPL games.

Here too in Britain, the physical expansion of the internet, such as the laying down of fibre optic cabling and improvements in the internet's information-carrying capacity, has not kept pace with the numerous virtual breakthroughs. The IPL’s popularity in this country is likely to severely limit the ability for cricket fans to successfully view games online in real time.

By 2007 it was estimated that YouTube, owned by Google, consumed as much bandwidth as the entire internet in 2000. This illustrates the need for investment in next generation networks to maintain, not to mention expand, bandwidth. Even cynics recognise that, as more and more content is put online, our internet connections will inevitably slow down unless capacity is expanded. Large-scale fibre optic investment is essential and desirable for many reasons. While investment in next generation “smart networks” would vastly improve the deteriorating bandwidth situation, it would also offer a boost to the economy and the jobs market. This would happen not only in the building of infrastructure but also in the subsequent growth in opportunity provided by a more efficient and developed broadband network. Conversely, without increases in bandwidth and network efficiencies many small and medium-sized businesses may be forced out of the crowded networks as “bandwidth hogs” (i.e. YouTube) take up capacity.

The Government has pledged to introduce a 50 pence broadband tax, to be tagged on to every monthly fixed line phone bill, as part of the Digital Economy Bill currently being debated in the House of Lords. What it has not outlined is how this money will be spent - it is unlikely to cover the billions of pounds that it is estimated will be needed for fibre-optic upgrades.

That leaves the private sector to make up the shortfall in investment, and here the onus seems to have fallen on Internet Service Providers (ISPs) to foot the bill. But pressure does not seem to have been put on the content providers, such as YouTube and Google, to contribute anything to the very infrastructure that enables their valuable online content to be broadcast. There are certainly profits to be made by ISPs who invest in next generation networks, but there is also huge risk and intimidating initial cost. Those that take risks, invest, create smart technologies, and new-economy jobs deserve reward. In contrast, network and content free-riders, such as Google, undermine investment, economic growth, innovation, and job creation and do not deserve protection and regulatory favouritism. It is understandable that while many online content providers do not have the resources to invest significant sums of money, there are some who have made unimaginable profits from the internet and should be encouraged to put something back, if for no other reason than to protect their own livelihood. A sound regulatory framework for broadband expansion must leave ISPs and content providers free to develop innovative new pricing models to finance investment.

If next generation investment lags behind the rest of the world, the UK risks losing its competitive edge to countries that are willing to take the plunge into high speed internet access. At that stage the post-recession economy will have bigger things to worry about than an inconveniently buffered cricket match.

Professor Martin Cave is a leading telecoms economist at Warwick University Business School.