AT&T New Mobile Data Service -'And Now a Word from Our Sponsor!'

By Peter Bernstein January 07, 2014

If you are a telecommunications industry aficionado, you are probably aware of the January 6, launch of its AT&T Sponsored Data service. In fact, if you are really passionate about you likely have weighed in with an opinion someplace online. 

Let’s just say you are not alone. The blogosphere is awash with comments pro and con.  Industry observers, including my TechZone360 colleague Gary Kim, have not been shy about sharing their feelings.  As you will see below, and as you might have suspected, I have some thoughts on the subject as well. 

In brief, if you have not delved into the details, AT&T is giving content providers the ability to pay for sponsored content on mobile network, specifically on 4GLTE.  The goal is to get smartphone and tablet users to avail themselves of having big bandwidth hogging content (think videos) for viewing on the macro-cellular network instead of Wi-Fi, and have content sponsors pick up the tab so U.S. consumers do not bust through their monthly data plans and get hit with significant overage charges. 

As the AT&T item announcing the service is tantalizingly entitled, “Enjoy Mobile Data Without Impacting Your Wallet.”  AT&T already has takers for the service launch:

  • Healthcare giant UnitedHealth will pay for consumers to access certain mobile health apps and websites.
  • Mobile marketing company Aquto will let its clients use sponsored data for mobile ads.
  • Cloud computing company Kony intends to help its business customers pay for employee data when accessing work-related content.

AT&T has not disclosed how much these agreements will cost the sponsors, but does say that there is a lot of interest and additional partnerships could be revealed as early as March. They have also positioned this as similar to toll free numbers where we access businesses for free.  In addition, they are sticking to the story that such content will go over the best effort internet and hence does not run afoul of net neutrality issues. Plus as numerous articles have pointed out, Amazon currently picks up the charges for users downloading eBooks even if they do not have a wireless account.

The end of the beginning or the beginning of the end

On a very frigid day in the much of the U.S., it only seems appropriate to start with an admittedly anecdotal taking of the communal temperature on this.  Below is a picture of the first page of Google when you put in the search term AT&T Sponsored Data Plan.  It is illustrative of the heat that has already been generated.  Clearly this is a topic that is “Hot! Hot! Hot!”  

Source:  Google

Just as clearly, it is one that is not going to go away any time soon. There is way too much at stake as the headlines indicate.  It touches third rail issues like net neutrality and goes to the heart of the future of competition and economic vitality and even viability of competitors in the wireless, wired, cable, content provider and OTT business just to name a few usual suspects.  The ripple effects throughout the ecommerce world could be profound. 

A victory lap cut short

When I first saw this story, I felt like taking a victory lap. Back in 1994 the very first column I wrote as the first outside non-technical columnist for the late but great Telephony Magazine was on the subject that I thought voice telephony would be sponsored.  In other words, given the right value prop I would not have to pay to make calls.  My idea back then was that Disney should give me a bucket of minutes to call anywhere. They would do so if I were willing to: dial their 800 number, listen to a 30 second ad and based on speaker dependent voice recognition (on file from my first interaction), I would then sing their signature Mickey Mouse song introduction and then be connected to my called party. Let freedom ring!

My victory lap stopped when I realized the limitations of the AT&T solution. Freedom, in this instance is going to have a price, i.e., captivity.  This was not a chance to have unrestricted internet access ala Wi-Fi in Starbucks. It is a chance for them to do three very important things from their perspective: 

  • Get people in the habit of using the AT&T marco-cellular
  • An opportunity to give advertisers unencumbered access to content, and once can rightfully assume a whole lot of personal information they can then use to better profile customers
  • What others have called a “double-dip” or “two bites of the apple”

That last one really has caused a stir.  What has been pointed out is that if I am on a monthly mobile data plan for let’s say 2Gbps of service I pay for the full amount.  However, most of us, fearing overages are diligent in making sure we default our devices to Wi-Fi and hence husband the use of the marco-cell bill which could blow past 2Gbps with just a simple download of a movie.  In fact, for those of us with multiple devices and/or family members on our plans this can become a household budget killer in literally a screen touch.  What this means is that most people do not use their full monthly allotment and sponsors would in effect be paying for capacity that was already paid for.

I have seen arguments already that this is a good thing because the money generated would be put back into increasing much needed network capacity and fuel an accelerated small cell deployment.  Indeed, other benefits cited include finally making cost-causers (social networks, portals, etc.) finally pay some share of the expense of running a network, and stanching the economic loss from the continuing drop in ARPU.  Contrarians point out that given exploding mobile data margins at the big wireless service providers in the U.S., it may be a case of wishful thinking about how much might be plowed back into the network as opposed to the extra cash flow being used for other things.  In fact, one of those other things that is high on service provider lists is weaning people off of the steep subsidization of devices.

The flip side of all of this, and why my victory lap was cut short, is a sensitivity to the perspectives that this is a start of a slippery slope where big ISPs and well-heeled content providers ultimately get better quality of service (QoS) than the rest of us, and use their financial clout and ability to have premium differentiated access as creating a barrier to entry. 

This is not an inconsequential concern. In fact, many content providers for their part seem ready, willing and certainly able to pay-to-play and unlevel the playing field itself.  As noted the ramifications of what in essence would be the end of net neutrality has serious economic consequences that could be jarring.  They could also happen a lot faster than you might think.

The more I have thought about this, and despite the allure of having what is a governor on my content consumption if I opt-in on the sponsored stuff, I tend to side with those who think this is not the wisest move and does represent a slippery slope.  I also question how much interest there will be given the inexpensive option of freedom of choice that comes with Wi-Fi access as the way to mitigate possible excessive overuse charges.

My preference, as I have written on numerous occasions the past few years, is to have the communications service providers make me a partner.  In exchange for my attention to directed ads, and access to certain personal information, give me a micro payment for my attention and a discount off of any transaction that occurs as a result of it.  In that way, communications service providers get the traffic they want, ISPs get the clicks they want which are falling, and advertisers get the mind share they desire and a higher probability of wallet share.  It is a win for everyone. 

As you like me hopefully continue to ponder the pros and cons of AT&T Sponsored Data, competitors and Wall Street are doing likewise.  It may be too early to judge the outcome of this experiment, but it is not going to be long before industry observer reactions become competitor ones. In fact, the noise from CES in Las Vegas this week is we may not have to wait more than a few hours. 

I have predicted that 2014 was going to be a watershed year across the entire technology industry landscape.  Who knew that it would take less than a week to get validation. I can already hear a voice file playing, “And, now a word from our sponsor,” and being directed to a native advertising video.  I guess the good thing is it won’t cost me anything, except possibly my personal privacy.




Edited by Cassandra Tucker
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