Tuesday, January 7, 2014

AT&T Sponsored data may be a way forward without violating net neutrality

AT&T recently presented their platform for "toll-free" or "sponsored data" whereby a content owner can pay for the data usage caused by the end user. This way the sponsored data will not count towards the users included plan data.

AT&T has been shopping this idea around for quite a while and has so far not presented any customers. Initially this kind of pricing was seen as a direct threat towards the principle of net neutrality which has been endorsed by the FCC. The way AT&T describe their sponsored data program, it now appears as if it will not violate the principles behind net neutrality.

While the sponsored data program does in fact create two different classes of data, it does so only on the billing side, and according to AT&T, not on the delivery side. In my view, this will most likely not raise any red flags from the FCC. Some net neutrality purists may disagree but I also think the general impact on competition and end users is going to be minimal.

The main competitive threat that I can see from a sponsored data program would be if it would lead to higher end user pricing for the data plans or less included data. I think the odds of this happening are very slim as long as the FCC focus on maintaining four or more national carriers to ensure competition on a macro level.

If the macro level competition between the carriers is fierce, I doubt it will be possible for any carrier to significantly raise prices or lower included data caps without losing a significant amount of customers.

But if there are no adverse effects on end users and content owners can still be assured that their content delivery will still be as good as before, what is the business case for sponsored data?

I think this is still work in progress at AT&T and part of the reason why they have yet to present any customers for this. The way I see it there are two main pain points this can partially help to address. 

First, if we look at the end user side, there are plenty of people who use data plans with extremely limited amount of data included in their plans to save money. If your content is important to this group of users, sponsoring data might make sense to make sure they freely can access it.

Second, for content owners, if your content is a major data-hog but high value, you might want to sponsor it to make sure it reaches its audience.

As I see it, neither of these two pain points are slam-dunks and it might take some time before sponsored data finds its market. 

As long as the FCC ensures competition on a macro level and net neutrality on the delivery layer, end users should be just fine.

No comments:

Post a Comment