Despite Limited Interest In AT&T's Sponsored Data, Company Still 'Bullish' On Its Awful Precedent

from the creative-gatekeeping dept

After hinting about such a project for some time, you might recall that AT&T introduced "Sponsored Data" at the company's developer summit around this time last year. It works like this: if companies pay AT&T a fee their content is specifically allowed to bypass AT&T's already entirely arbitrary (as in, not tied to any real world costs or network conditions) usage caps. To hear AT&T pitch it at the time, this would be akin to "free shipping" or a 1-800 number for data, and an incredible boon for consumers who want to conserve their pricey data allotments.

While some consumers seemed quick to applaud the idea, they weren't understanding the awful precedent AT&T was setting. If you allow AT&T to set arbitrary caps then charge companies to bypass them, you're injecting a company with a rich history of anti-competitive behavior into a content and service ecosystem that works much better with it out of the way. Also, as VC Fred Wilson correctly noted at the time, such a model puts smaller companies and developers at a distinct disadvantage to their deeper-pocketed counterparts. What AT&T pitches as a great creative boon to industry is actually AT&T just desperately trying to retain gatekeeper power.

While AT&T executives have spent two years claiming that interest in this idea is through the roof -- one year later, just ten (mostly smaller) companies have signed up for AT&T's pilot. While Sponsored Data played a starring role at last year's AT&T Developer Summit, executives didn't mention the project once during this year's event. To hear AT&T tell it, there's still tremendous interest in the idea -- despite the fact there's clearly not tremendous interest in the idea:
"Nonetheless, AT&T CMO David Christopher told FierceWireless that the carrier is still "very bullish" on the program...What we said last year, and what we've continued to say, is Sponsored Data is a really unique, interesting capability that is going to take time for it to evolve into various business models," Christopher said in an interview. "We are seeing interest from a variety of developers and content owners in Sponsored Data."
While some companies aren't eager to court net neutrality controversy, others seem entirely oblivious to the threat such a model poses to innovation and smaller developers. Beyond just the obvious neutrality implications, the idea doesn't appear to be gaining traction with companies because new wireless shared data plans have most people signing up for significantly much more data than they need in order to avoid costly overages. In other words, when you have more cellular data than you need, and you're spending a lot of additional time using Wi-Fi, having a few apps or ads that don't impact your data allotment doesn't mean all that much in practice.

As such, it seems like only a matter of time before AT&T mutates the Sponsored Data idea into something notably more awful with a better sales pitch. As I've noted previously, while most of the net neutrality discussion focuses on outright blocking of websites or throttling of connections, the real danger zone is these kinds of "creative" pricing efforts where carriers try to use their gatekeeper power to desperately avoid being dumb pipe providers. It's here, under a glossy coat of PR paint where the real neutrality violations are going to occur, but as we've seen, it's difficult to craft neutrality rules that protect consumers from obnoxious shenanigans -- while allowing for real pricing and service experimentation (should that actually happen in the broadband sector someday).

In this case, we appear to be just lucky in that AT&T's implementation was just so bad most companies were bright enough to steer clear. That's not always going to be the case. As we've seen with the positive reaction to T-Mobile's decision to let the biggest music streaming services bypass its cap (which of course hinders smaller companies or nonprofits not big enough to get whitelisted), it's very clear it's possible to create new business models that tilt the playing field and screw smaller companies and consumers -- all while receiving thunderous applause for the effort.
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Filed Under: net neutrality, playing favorites, sponsored data, zero rating
Companies: at&t


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  1. icon
    Derek Kerton (profile), 6 Feb 2015 @ 10:55am

    Domino Theory Isn't Right

    Karl,

    It seems to me that all the good arguments against sponsored data rely on the Domino Theory. That is, "Well, this is barely OK, but it's just one step away from being wrong. Therefore this is as good as wrong." But, much as I dislike sponsored data, I can't agree in Domino Theory criticisms. It's like thought crime, and you're the precog:

    "it seems like only a matter of time before AT&T mutates the Sponsored Data idea into something notably more awful"

    Now, you argue that, based on their history, AT&T can be expected to take the next step, and topple the next domino, entering into shady bad-guy territory. I agree with this. But...precog argument again...I don't believe in pre-crime policing.

    "some consumers...weren't understanding the awful precedent AT&T was setting" - but precedent to crime isn't a crime.

    I think freedom dictates that we let the stakeholders to the borderline shady plays. Now, it would be better if there were more competition, so we could vote with our wallets, but that's another problem on which we agree.

    "[the sponsored model] model puts smaller companies and developers at a distinct disadvantage to their deeper-pocketed counterparts."

    Perhaps. But what about a startup that has a service targeting a segment of consumers that just don't have data plans, or have tiny ones. Let's say I'm a startup with one service/app aimed at seniors, and another aimed at latino immigrants. I know my target market has particularly low subscription rates to mobile data. With sponsored data, I have the flexibility to create a biz model where I pay the freight, and can actually have a market to address. In this case, Sponsored Data enables the biz model.

    The important thing is that the network is still neutral, meaning that the company that pays for Sponsored Data doesn't have their packets prioritized over a competitor that chooses a more conventional model. This is unrelated to whether the user pays the freight or the content company. I know, you don't trust AT&T not to prioritize in some sneaky way...and you may be right. But then your beef is against the prioritization, not the payment model.

    I'm glad this idea is not taking off. I hope it flops. But I think it's a fair idea that opens up different biz models, and that's OK.

    In short: For fair biz, each packet needs to be billed the same fair rate, somebody needs to pay, and Sponsored Data should get the same prioritization as regular data. So long as somebody pays, there is no preference, there are just different biz models.

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