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

    January 12, 2014

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.