AT&T’s Sponsored Data Raises Big Concerns For Consumers and Content Providers

    January 12, 2014
    Sean Patterson
    Comments are off for this post.

Though it was easy to miss among the flood of CES coverage this week, AT&T has announced a plan to capture new revenue from its data network. Called “Sponsored Data,” the plan would see AT&T charging mobile content providers for AT&T subscribers’ data usage. In other words, Netflix or Facebook could pay AT&T for its customers to access their mobile services without it counting against their monthly data caps.

How would Sponsored Data influence your mobile habits? Tell us in the comments.

On a surface level the plan seems like a win for customers, and that’s certainly how AT&T has tried to spin its announcement. Customers who pay high prices for small amounts of data would be offered a break on many of the mobile services that they use the most.

However, actually looking at what the plan means for AT&T’s data network and the mobile industry as a whole uncovers a range of concerns for consumers, content providers, and the future of mobile access.

In its original announcement of Sponsored Data, AT&T characterized its new plan as a way for content providers to better reach consumers on AT&T’s network.

“The Sponsored Data model is just one way we’re helping companies tap into our network to offer differentiated experiences and transform the way they do business,” said Andy Geisse, CEO of AT&T Business Solutions.

Though the plan certainly would help content creators reach AT&T customers, these same companies already have essentially equal access to those customers as it stands. Sponsored Data could also help customers stay under their bandwidth limits, but AT&T will not be refunding subscribers for unused data. This means that AT&T will essentially be charging twice for the same data – once for customers and again for content providers (that, it must be pointed out, already pay their own bandwidth costs.)

So, Sponsored Data is essentially a plan for AT&T to charge more for the same data passing over its network. While this may be perfect for AT&T and larger content providers, the plan immediately raised red flags for net neutrality advocates who believe network operators should not function as gatekeepers between customers and content.

Do you think AT&T’s Sponsored Data violates net neutrality principles? Post your stance in the comments.

The plan was quickly criticized by Congresswoman Anna Eshoo, who represents most of Silicon Valley. Eshoo released a statement saying that Sponsored Data would put AT&T “in the business of picking winners and losers on the internet, threatening the open internet, competition, and consumer choice.”

The fear is that customers who hit their data limits would not be able to access non-sponsored content without fear of being charged more by AT&T. In this way, AT&T could potentially manipulate the content flowing through its network, extracting higher revenue from both consumers and content providers.

Sponsored Data may also set up a system in which companies have to pay AT&T to access its customers in a meaningful way. While big content providers such as Netflix, Google, and Facebook can undoubtedly afford to pay AT&T’s sponsor fees, smaller content companies and the startups that have made the internet as competitive as it is today could be shut out as customers choose not to risk their data on the unknown.

AT&T would argue that it isn’t specifically picking winners and losers using its network. However, it will be providing its customers with a false choice: AT&T sponsored content for free or other content at the cost of their precious data. For most customers the choice between free and not free isn’t much of a choice. By giving its customers this illusory choice AT&T can claim that it won’t be directly choosing what its customers can access, though it will be very much influencing its network’s winners and losers.

Though AT&T may have found a way to technically skirt net neutrality concerns while exerting influence over its network’s content, the Sponsored Data plan might just be enough to draw out government regulators.

Federal Communications Commission (FCC) Chairman Tom Wheeler weighed in on the topic this week, telling the Wall Street Journal that the FCC will be taking a wait-and-see approach to AT&T’s new program. Wheeler made it clear that the FCC is well aware of the concerns surrounding Sponsored Data, and that the organization is “ready to intervene” if the program is deemed anticompetitive or interferes with customers’ internet access.

Should the FCC curb AT&T’s Sponsored Data ambitions? Let us know in the comments.

Underlying all of the net neutrality debate is a fact that has largely gone unmentioned. By offering to provide sponsored content to consumers without any potential limit on data use, AT&T is tacitly admitting that its data caps are not in place to better manage its network. AT&T and other mobile providers in the past have characterized data caps as necessary to create stable networks for all of their subscribers, but it now appears that the incredibly high per-GB prices on its data caps represent nothing more than a price gouge on consumers.

This is precisely why the language in AT&T’s Sponsored Data announcement sounds so disingenuous. AT&T could provide customers with a truly unlimited data plan, allowing them to peruse all the apps and streaming content they please without fear of extra charges. This would also enable content providers to give customers as much content as they can in a truly competitive marketplace without having to pay for AT&T’s Sponsored Data. Instead, AT&T is creating a new tier of content provider access to its network that will be prioritized by customers due to AT&T’s expensive and unneeded bandwidth caps.

  • rb

    The key words in this whole debate are “their network” AT&T built it, paid for it and owns it. I believe they have the right to use their own property however they see fit. State and Federal governments have been picking winners and losers with subsidies and special tax breaks for decades. Why can’t a private business do the same. If you don’t like what AT&T does with what it owns….change providers. They own their network and should be free to do whatever they want with it.

    • TB

      Your whole premise is based around points:
      1. AT&T’s network. While AT&T certainly invested in its network, there were many government subsidies provided as well. Ownership does not necessarily give a company the right to do whatever they want.
      2. Glad to hear you have choices in a provider. That is not true throughout the country or the world. Where I live, we have very spotty AT&T coverage and even worse Verizon coverage. We can’t get Sprint or any of the “less known” providers here at all. So is the next thing you’re going to say “well, then move”….RIGHT. Until we have equal access throughout the country, we can’t just change providers.
      3. AT&T has no interest in lowering anyone’s rates. They are interested in making more money. Once a rate is in place, it takes the FCC or some other government agency to push them to lower it.

  • Rita

    The greed that these companies show never ceases to astound me. The ‘double dipping’ is outrageous, especially since NO NEW EQUIPMENT would be implemented to achieve it for the same number of subscribers. Sure they might use the additional revenue to purchase additional equipment, etc. as the number of subscribers grows, but isn’t that what they’re supposed to do with a portion of their profits? However, in this case, they are just looking for more ways to increase the pocketbooks of the top echelon, again. One reason why I left their service for Sprint.

  • Eva

    I can’t imagine future providers actually blocking content, subscribers would just go to another provider that didn’t. Also, as the tech improves, more and more people will get unlimited access thus long term making this issue almost moot. Meanwhile, I don’t see how this current scheme is hurting anybody. Current users can save on bandwidth. Internet sites who did not pay for special access may not love it, but if those sites are good, people will still visit and some may even be able to spend more time there since they may have more bandwidth left after saving in other areas. End result could be more surfing in general which overall helps internet sites. And theoretically, if ATT makes more money from internet sites, they could pass that savings on as lower prices for their regular customers. THEORETICALLY! I won’t be holding my breath though. ;-P IMO, ATTs main problem is they have a reputation for poor customer service in most other areas.

  • http://www.arielreliable.com Fitzy

    Well, why are people still with ATT anyway? It makes no sense with the number of companies around with UNLIMITED data usage plans. Once upon a time when ATT controlled the long distance market, the ACTUAL cost of a long distance call became the same as a local call, yet ATT continued to charge huge premiums to call Gramma. Look it’s not just ATT, there are several companies out there that just aren’t consumer/pocket book friendly, my advice is to ignore this ‘sponsored’ content and be an informed consumer, go look around and price out the services you require and go with them. When the market shifts, the robber baron companies will shift with them. I give the example of Metro PCS, they started out with rather limited coverage, but they were dirt cheap, it was $45 a month (phone service), but as people attracted by the prices signed on, the coverage got better and better and the prices dropped to $25 a month. ATT already has the infrastructure to deliver good services, if they drop their prices rather than raise them, they will stay in business. Simply put, if a company treats you right, you just “might” tell somebody, if they treat you wrong, real or perceived, you will tell EVERYBODY. I’ve never been an ATT customer, but I do hear the stories and also about other companies usually the ones who require contracts.

  • John

    Got rid of AT&T and never looked back. Greedy ass company.

  • Steve Litten

    I would use the sponsored sites more often if I was not worried about going over my Data limit.

  • http://jackkennard.com Jack

    AT&T now has caps on internet service (dsl), and I thought it only was to sell more tv services. But with Sponsored Data for mobile and internet services they can increase earnings from both sides, from the isp client and the supplier like Netflix or Amazon movies.

  • http://www.armandsblog.com Armand Gaudette

    At&t charges way to much for their present service to begin with. No more charges for anything. Sponsored Data will just lead to more tangent ways for At&t to collect more revenue which will only benefit At&t and not the consumer.

  • Mike

    This is bad news for every consumer. The problem is people always like things that save them money right up to the point it costs them more and by then its too late.

    The problem with this business model is that smaller content providers which don’t have billions to spend will ultimately lose out big time to the ones that do. Its bad enough already that the search engines make your content show up on page 20 when it could be on page 2 with a level playing field. Now it goes another step farther and if the consumer finds you they will see you cost money when others don’t and thus it becomes even harder to sell them even if your better.

    The world wont come to an end but it wont be a better place either because of this.

  • michael logan

    I would be on the sites non stop when out and about. it is the data limits that keep me from using these sites out of the house as they are data hogs!