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 @ 8:52pm

    Re: Re: Re: Domino Theory Isn't Right

    Analogy time:

    It's more like paying $6 for the sandwich, then Subway charges you $3 more if you want it in the next hour because there's a long line. Then they hand you half the sandwich because they didn't stock enough ingredients and other people already used them. Unless you ordered a ham sandwich, because the company that sells ham paid extra, and now they suddenly have enough ingredients for a whole sandwich.

    The issue is that with the ISP is that it's pretty much all fixed costs. If the ISP is going to build an infrastructure to support a minimum level of service, the money they pay into it is effectively a fixed cost. They can't pay the technicians less, or buy less of their equipment, or install less lines.

    I'm not saying that the fixed costs don't exist. I'm saying that the fixed costs are reliant on meeting the demand for bandwidth capacity at the maximum capacity required. If less bandwidth is used, the ISPs still have to pay the same fixed costs.

    That's why paying a monthly fee for a certain bandwidth capacity makes perfect sense. If I want 50 mbps, I pay the company for that capability, and I'm paying to account for their fixed costs. They now have a fixed revenue stream to account for my requirement.

    So what you're telling me is that ISPs are operating at a loss of fixed costs, and having to charge extra for imaginary costs to make up for it. I pay $110 per month for 100 mbps internet access. I rarely get 100 mbps, but I usually stay over 50. You're saying that my $110 per month, along with all the other customers, is not enough to cover their fixed costs?

    AT&T spent $19 Billion in one year on their network.

    Yeah, so? AT&T also received over $128 billion in revenue, meaning less than 15% of their net income went to improving their network. And you're telling me they can't afford to spend more on giving me the service they've advertised?

    Maybe if I were spending $20 per month on my internet and they needed extra revenue to cover the network upgrades and still make a profit I might accept their logic, even knowing the charges were bogus. But since I know they have a huge income and less than a fifth is going to improving my service, I'm not paying a fifth of the price, and there's no technical reason to charge per gigabyte when I'm already paying for bandwidth in megabits per second, I can't wrap my head in the knots required to eat their bull**** sandwich.


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