Will Amazon Embrace Sponsored Data Consumption for Its Smartphone?

By Gary Kim April 25, 2014

If a report by Boy Genius Report is correct, Amazon might be the first large entity to actually try to use a sponsored data access feature, a key selling point of its smartphone. Amazon has experience with that sort of thing, bundling data with content consumption.

But other widespread applications use the same model. Telcos and cable companies sell voice service where the cost of using the network is embedded in the retail price of the product. Video entertainment is sold using the same principle.

If correct, Amazon would build on its experience with the Kindle content delivery approach, essentially buying wholesale data access from AT&T to use in support of its content sales business.

AT&T has been attempting to create a bigger market for sponsored data of this sort that would resemble the way enterprises pay for their customers’ use of long distance calling using toll-free numbers.

“Prime Data” would allow users of Amazon’s new smartphone to consume content without having the charges count against usage caps.

That would remove a barrier to consumer use of the new Amazon smartphone as a platform for bandwidth-intensive video entertainment.

In principle, that would provide benefits to the consumer that are similar to managed services such as voice and linear video entertainment (cable TV, satellite TV, telco TV). Consumers buy the service, and use of network facilities is just part of the cost of doing so.

Though there is no direct connection between the concept of sponsored data and the use of content delivery networks and network neutrality, there are parallels. All three have direct implications for the flow of revenue within an Internet-based application ecosystem.

Consumers will be hesitant to use Internet streaming video services if the cost of data is too onerous. So one impediment to the widespread viability of mobile video services is the potential cost of data usage. Sponsored data is among the techniques a mobile video service provider could employ to reduce barriers to usage.

Content delivery networks, on the other hand, likewise are ways any managed service provider using the Internet can assure the quality of services being sold. Few voice or video service providers want to deal with the consumer irritation when a service they have paid for does not work well.

Network neutrality rules have prevented use of such content delivery networks in the recent past, even if major application and content providers use just such techniques in the Internet backbone to enhance application performance.

Sponsored data, and Prime Data, would represent important new ways app providers can reduce barriers to adoption of mobile video, and thus create one more underpinning for widespread mobile video services that better compete with linear video subscription services.

But CDNs, extended all the way to the end user device, play a role as well. 

Edited by Alisen Downey

Contributing Editor

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