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Summary:

AT&T is officially putting its idea of a subsidized internet to the test. A new program allows internet companies to exempt their content from data plans. Instead the content providers would foot the bill.

AT&T flagship store logo
photo: AT&T

AT&T launched a new billing program called Sponsored Data Monday at its developer conference at CES, which shifts mobile data costs from the consumer to the content provider. The idea is to create a two-sided charging model for mobile data, letting app developers and content providers foot the bill for their customers’ data use. That kind of the model has the potential to save consumers money, but as we’ve pointed out before it also messes with some of the foundational principles of the internet.

AT&T and other carriers have been hinting at such a subsidized mobile internet for some time, but this is the first time that it’s actually put those ideas into practice. Under the program a content or service provider would pay AT&T to exempt their app, websites or even specific bits of content from consumers’ mobile data plans. Anytime someone consumed such exempted content on the mobile network, AT&T customers wouldn’t see it deducted from their data buckets. Instead, AT&T would subtract that data from a kind of universal data pool bought by the content provider.

No sale cash register

Ma Bell gave several positive examples about how this model could be used not only to spare its customers’ data plans, but also give developers more opportunities to expose their content to the public. For instance an app startup could temporarily exempt its newly launched app from all download and usage data charges in order to encourage more AT&T customers to try it out. A movie studio could pay the mobile freight for its video trailers to promote an upcoming film release.

There’s even an enterprise use case. Businesses with bring-your-own-device (BYOD) policies could opt to pay for data charges incurred on specific apps (such as an enterprise email client), creating a separately billed virtual work-phone within an employees personal handset. AT&T can track and charge for almost any kind of content through its policy engines. According to an AT&T spokesman, a proxy server in AT&T’s networks match content requests from the phone or tablet against sponsored requests from content provider in real-time and then bills accordingly.

The flip side of all this though is that content providers that can afford to pay for data costs will be able to entice more AT&T customers over to their services. Instead of encouraging more variety in content consumed it could reinforce the status quo as consumers naturally gravitate to the websites, apps and videos from the big internet brands willing to foot the data bill.

Google's Lame Defense of its Net Neutrality Pact

But one of the foundational principles of the internet is that it’s neutral, that no content is prioritized over other content. While AT&T stressed it won’t actually prioritize traffic in the Sponsored Data program — apps and content will work the same on the network no matter who’s footing the data bill — this type of program creates a kind of de facto hierarchy from the consumer’s standpoint. If all other things are equal, why not watch the video or use the app that doesn’t drain your data plan?

While AT&T cited small app developers and healthcare providers in its examples, the key targets here are obviously the big video providers like Netflix, YouTube and Hulu. If AT&T can get those companies to pay for data consumption, it benefits in numerous ways. Not only do its customers conserve their data allotments (which they can then spend on non-sponsored services), it also encourages those consumers to eat far more video, boosting AT&T’s data revenues. “Win-win” is a tired term, but in this case, it sums up the situation. There’s no way AT&T can lose.

AT&T hasn’t announced any specific content provider customers for Sponsored Data yet, but it may provide some updates at its developer conference in Las Vegas later today.

Register photo courtesy of Shutterstock user Robert Kyllo

  1. burn it with fire.

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  2. While I hate the non-neutral notion of an “internet fast lane”, and I think that Randall Stephenson’s classic rant about content companies “Getting a free ride” is about as realistic as James Clapper complaining about lawbreakers….

    …this doesn’t seem entirely evil. So long as the content is not prioritized, and the transport is ONLY paid for once, then it is just a “toll-free” business model that is fair. This would require that any content provider could foot the bill without barriers or preference.

    Content transport is already paid for twice, once by the content provider for their aggregate bandwidth, and once by the consumer for the hop from the cloud to their device. Shifting the consumer bill back to the provider is OK because it is non-exclusive for content providers and doesn’t add a third charge, as Mr. Stephenson famously wanted.

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    1. The consumer is going to foot the bill either way. Content Providers will eventually have to raise the rates to the end consumer to make up for the costs they pay to the carrier.

      ATT is just looking for more money, without upsetting their end customers. The end customers will eventually have to pay a higher monthly bill to Hulu Netflix etc…

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  3. Thomas Sachson Monday, January 6, 2014

    Toll-free data will be a great boon for consumers — if done properly — with digital content and service providers competing to provide as much free bandwidth to their customers as possible — SO LONG AS the carriers don’t slow down for-fee usage / bandwidth in the process. The mechanism for accomplishing this is very coherently explained at http://www.freebandtechnologies.com

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  4. Christian O'haver Monday, January 6, 2014

    One example small mkv files formats 7 gb becomes 700 mb !! Same time theses companies protest against video data compression formats ? Patent licensing group MPEG-LA ?

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  5. How is this different from a big enterprise, say Google giving its apps for free but a small app developer can’t afford to do that. Of course consumers have an incentive to choose the free app over the paid one….. !

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