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
    JP Jones (profile), 6 Feb 2015 @ 12:49pm

    Re: Domino Theory Isn't Right

    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.

    But this is exactly why it's a scam. The entire thing is a scam. There is absolutely no reason to pay for "packets." It doesn't matter how much total data I use.

    Here's an example. Let's say the capacity of AT&T's network is some random number, like 100 gigabytes per second (purposefully not using bits). Let's say all other users with me on that network are using 70 gigabytes/sec. I use (in my imaginary world with impossible speeds) 1 gigabytes/sec of that, maximum.

    If I use all of my bandwidth all the time, AT&T is still under capacity. All it costs them is the tiny fraction of my bill that pays for the electricity needed for my portion of data transfer. If I download at max capacity every day for a month, I download roughly 2,592 terabytes of data. If I download at max capacity for a week, and then shut off my computer for the rest of the month, I only use about 60 terabytes.

    Other than the difference in electricity, which again is miniscule (and more than covered by your bill, either way), AT&T isn't paying a cent for the 2,500 extra terabytes you downloaded. The network pays for it's bandwidth capacity (the maximum speed it can sustain at a given point in time) not it's network throughput (how much data actually passes through the network).

    This is the lie that makes the ludicrous seem reasonable. If you accept the lie that having, say, Netflix pay for your 250 gb of movie watching means you don't have to pay for it that sounds good for you. If you accept the lie that Pandora is now paying for your streaming music, it sounds good for you.

    Unfortunately, the lie is the key. Without the lie, important questions start getting asked, like, "well, if I can stream Pandora at max bandwidth all the time without overloading your network, why can't you stream, say, Sony Music instead?" Or "if I'm paying for my 50 mbps download rates, why does Netflix also have to pay for the capacity I'm already paying for?" And finally the most important question: "if using more data than I'm allocated costs more money, why doesn't using less mean I pay less?"

    Right, because it's a BS metric. Now, before techies start arguing about how this isn't 100% true (transmission costs, maintenance, technicians, and improving infrastructure all have non-zero costs) keep in mind that most of these costs are independent of the amount of data transmitted. You'll see analysis indicating that transmitting 1 gb of data costs anywhere from 1 cent to 10 cents but most of these calculations are based on average bandwidth infrastructure and the numerous fixed costs above.

    The key point is that those costs exist whether an individual uses 1 gb of data or 1 mb of data, making the metric mostly imaginary (sort of like calculating the miles per gallon efficiency of an electric car; while it may give you a perspective on efficiency, it's ultimately comparing apples to oranges and doesn't accurately reflect the comparison between the two).

    "Fair biz" only works when the game isn't already completely rigged in favor of the house.

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