More sites offer “free data” to mobile users, raising stakes in net neutrality debate

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Websites as diverse as Expedia, StubHub and Slate are trying a new tactic to attract mobile device users: they’re picking up the tab for the data, meaning that consumers don’t have to worry that visiting the site, or watching a video there, will affect their monthly mobile bill.

As the Wall Street Journal explains (subscriptio required), “free data” could become the next “free shipping” as websites try to induce cost-conscious consumers to give them a try on their phone:

When AT&T Inc. rolled out a plan early this year to let companies pay for data its subscribers consume, it looked like a long-odds attempt to get a cut of the valuable traffic generated by sites like YouTube and Facebook. But the idea is starting to get some traction.

Hershey Co. , Hotels.com and eBay Inc. unit StubHub have been taking part in experiments by services that pay users’ data cost or offer bonus data when people visit their websites, sign up for free trials or watch movie trailers from their smartphones or tablets.

College-video site Break and Hotels.com are also among those experimenting with data offers, according to the story, which quotes an ad executive saying, “It turns out people have a really, really high sensitivity to using data.” (Consumers can, of course, use Wi-Fi to avoid burning through their data plans.)

For now, it’s too soon to say if the practice of companies’ paying for data will become widespread but, if it continues to catch on, there might be big implications for consumers, phone carriers and the FCC.

“Free data” offers can be seen as akin to the FCC’s proposed internet “fast lanes” — which would allow internet providers to charge websites for preferential treatment. Already, sites like [company]Netflix[/company] have complained that companies like Comcast are demanding a toll to have their traffic delivered, a tactic that carriers could start to exploit in the mobile phone world.

The practice of carriers’ giving “free data” treatment to special sites is not entirely new, of course: [company]T-Mobile[/company], [company]AT&T[/company] and others have been offering free music streaming as a way to induce consumers to sign up for their plans. And the debate over “zero rating” (the industry term for no-data-cap treatment) is a hot topic in Europe, and the developing world.

But if more ordinary websites, such as StubHub, continue to pay carriers to reach mobile consumers, it could entrench the practice — and, in turn, complicate the FCC’s efforts to include wireless carriers within the agency’s impending set of new internet rules (the former rules, which were struck down in court, exempted the wireless industry).

According to advocacy group Public Knowledge, the recent growth of “free data” arrangements should provide a new incentive for the FCC to reconsider how it regulates the wireless internet industry.

“We’re not a big fan of using data caps to violate net neutrality in this way.  The scarcity/congestion rationale for the caps is falling apart.  Data caps and charging companies to bypass them seem more like a revenue maximization scheme than a network management technique,” said John Bergmayer, a senior staff attorney.

Bergmayer added that the FCC should invoke its so-called Title II power, which would treat internet providers as a utility, so that it has the proper legal footing to oversee “free data” arrangements in the future.

Libby Jacobson, a spokesperson for [company]Verizon[/company], meanwhile said that the wireless internet providers should continue to be exempt from regulation. She pointed to a company blog post last week that argued the industry is “different” from broadband internet, in part because it is just as competitive as in 2010, when the FCC first decided to exempt it from net neutrality rules.

4 Comments

elliesaine

You are exactly right that ‘“free data” offers can be seen as akin to the FCC’s proposed internet “fast lanes.”’ Established companies will be able to afford to pay for this, while small competitive startups will not–thus keeping excess profits flowing to incumbent ISP’s, while keeping new entrants out.

UI UX

Until the carriers can get deals from the likes of YouTube, Pandora etc. this is just another experiment by carriers that will fail. I don’t know of any content provider that can afford to pay these costs for a long time without ultimately passing on the costs to the user. The recent price wars amongst carriers mean larger data bundles at lower costs, so can’t imagine any Tier 1 content provider paying a penny to the carriers.

jonsmirl

It is so easy to manipulate this and ruin the Internet for every except the giant ISPs. Just keep slowly raising the price of consumer data plans without expanding them. It’s an oligopoly so they will all collude to do this. Never mind that this is an industry where cost of product is falling, not rising.

As the consumer prices keep rising this will trigger an ever increasing demand for ‘free data’ from the web companies. Sooner or latter they will be forced into paying for this. Of course these sites will get billed at high ‘business’ rates.

What did we achieve? ISPs get to double their profits without lifting a finger and higher consumer prices because that free data isn’t free, it is just added into your purchase price. And everyone will use the Internet less – because it has been artificially perverted into an expensive activity.

Data profit margins at ISPs are already in the 90% range, they will abuse this to drive them to 99% profit. If ISP were losing money they might have a case; but they are some of the most profitable companies in the world. Title II will stop their oligopolistic abuse and limit their monopoly profits.

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