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AT&T's Sponsored Data Steps Into Net Neutrality Pit

AT&T
January 10, 2014 10:11AM

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Analyst Jeff Kagan tells us he thinks the Sponsored Data idea from AT&T has merit and he predicts that other wireless service providers will follow suit. Sponsored Data is a way to increase revenue for carriers like AT&T with no pain to the customer. We can expect to see more creative thinking in wireless going forward, if the FCC doesn't shut it down first.

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Earlier this week, AT&T took the cover off a new way for customers to watch mobile content and use apps over its wireless network without impacting their monthly wireless data plans. Dubbed Sponsored Data, the carrier compared it to 1-800 numbers or free e-commerce shipping.

But it didn’t take long for the Net Neutrality debate to surface.

Here's the deal: Sponsored Data opens up new data use options for AT&T wireless customers and mobile broadband channels to businesses that choose to participate as sponsors. Data charges resulting from eligible uses will be billed directly to the sponsoring company.

Customers will see the service offered as AT&T Sponsored Data, and the usage will appear on their monthly invoices as Sponsored Data. Sponsored Data will be delivered at the same speed and performance as any non-Sponsored Data content. AT&T’s idea is to allow advertisers a new way to engage with customers, such as encouraging them to try a new app, promoting movie trailers and games, or pointing them toward mobile shopping sites.

The FCC Is Not Happy

"Customers love mobile content. Whether it's shopping, banking, entertainment or personal wellness, mobile content is increasingly available for customers almost anywhere and anytime," said Ralph de la Vega, president and CEO, AT&T Mobility. “And that's what makes this a win-win for customers and businesses -- customers just look for the Sponsored Data icon and they know the data related to that particular application or video is provided as a part of their monthly service.”

But the Federal Communications Commission (FCC) isn’t thrilled with the concept. FCC Chairman Tom Wheeler told the Wall Street Journal, "Make no mistake, we're ready to intervene. We want to encourage innovation, with the full capability and legal authority to intervene in those circumstances where there are untoward impacts on competition and consumers."

AT&T is also seeing resistance from California Congresswoman and Net Neutrality supporter Anna Eshoo, who wants to see the program squashed: "The announcement of a sponsored data program by AT&T puts it in the business of picking winners and losers on the Internet, threatening the open Internet, competition and consumer choice."

AT&T Fights Back

AT&T responded almost immediately. Jim Cicconi, AT&T senior executive vice president of External and Legislative Affairs, said the company is completely confident this offering complies with the FCC's Net Neutrality rules, which AT&T supports.

"AT&T's sponsored data service is aimed solely at benefiting our customers," he said. "It allows any company who wishes to pay our customers' costs for accessing that company's content to do so. This is purely voluntary and non-exclusive. It is an offering by that company, not by AT&T."

We asked Jeff Kagan, an independent technology analyst, for his take on Sponsored Data. He told us the AT&T plan is simply a new idea. Whether it is better or worse, he said, will depend on how the marketplace reacts over time -- if the FCC doesn't shut it down first.

"I think this Sponsored Data idea has merit and I think other competitors will follow suit. It's a way to increase revenue for carriers like AT&T with no pain to the customer," Kagan said. "I think we can expect to see much more of this kind of creative thinking in wireless going forward."

Tell Us What You Think
Comment:

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GXH:

Posted: 2014-01-11 @ 10:28am PT
DoItRight makes the point clear. Those businesses having the ability to pay for an 800 number will get more business. Net-neutrality is about businesses with the best ideas and products having equal access to customers whether from the little guy or big guy. This isn't about giving AT&T customers an advantage this is about AT&T creating a new revenue stream. And if a business wanted equal access to Verizon, T-Mobile, Sprint, nTelos, etc, etc customers, does it mean each company doing business on the internet would need to pay each of these carriers/wireless companies a sponsored data rate?

So far the internet has been protected from those who would like to steer the traffic, slow packets down for their competitors, or give an advantage to certain vendors offering services on the net--such as sponsored data.

If the FCC does not stop AT&Ts sponsored data they will have failed the American people and all internet users by breeching net-neutrality.

GXH:

Posted: 2014-01-11 @ 10:15am PT
I have been on the fence between AT&T (better coverage in my area) and T-Mobile much better plan, unlimited data (albeit throttled once you exceed data plan premium allotment), unlimited overseas, etc, etc. But their coverage in my area is 2G--that's right not even 3G.

So I was going to go AT&T with their share plan. But the manner in which they handled the T-Mobile CEO at CES 2014, and this sponsored data business surcharge has made the decision for me. AT&T argues that technically their sponsored data doesn't violate net-neutrality. But technically has nothing to do with the spirit of the net-neutrality and just because you can doesn't mean you should.

Businesses already pay for the volume of data they put on the net by buying larger web hosting services, bigger data pipes, etc, etc. And customers pay to receive that data. What AT&T wants to do is to charge businesses for preferred access to their customers and to steer the customers to businesses willing to capitulate and pay for the advantage. There is nothing neutral about that type of access.

It may not technically violate net-neutrality but perception is reality and my perception is that sponsored data does violate net-neutrality. Net-neutrality is about fair and equal access, not incentive based access for those that can afford it.

If T-Mobile can do what they are doing, and Sprint can do unlimited data too, then it seems to me AT&T and Verizon are on course to be the next IBM and Compaq. IBM held the PC market, but felt they didn't need to listen to the customer, so the customers moved to Compaq, who then made the same mistake as IBM and the customers went to Dell. Verizon and AT&T will argue they need to satisfy their stockholders but that is simply a cover used to allow them to write plans and fee schedules in spite of public/customer sentiment. They are wrong and will lose their dominance in the marketplace as IBM and Compaq did in the 80s.

So I guess I have to vote my conscience with my dollars and go with T-Mobile.

DoItRight:

Posted: 2014-01-10 @ 11:16am PT
I do not think that AT&T's idea is a threat to net neutrality *IF* executed properly, i.e. like real 1-800 numbers and not like the mess that are cellular numbers in the US and Canada compared to Europe, where they have different prefixes enabling different pricing conditions much like 1-800 numbers. It then becomes indeed a positive choice rather than a negative discrimination. I can, as a consumer, go to example.com or example.att. The only difference is that example.att does not trigger the bandwidth-meter at AT&T. In both cases, the neutrality of internet traffic is not affected. packets from the .com and the .att domain travel equally fast on the internet. As long as consumers know ahead who pays for the bandwidth, by using a specific TLD for the bandwidth-sponsored domains in much the same way that a specific prefix is being used for the minutes-sponsored phone call, everybody is happy. The marketing department will compare the effectiveness of the different incentives and will decide if paying for the bandwidth is a more or less effective incentive in relation to other incentives that they give potential customers anyway.



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