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There's Nothing New About AT&T's Sponsored Data (And Why the FCC Won't Ban It)

Jan 10 2014, 8:01am CST | by

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There's Nothing New About AT&T's Sponsored Data (And Why the FCC Won't Ban It)
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There's Nothing New About AT&T's Sponsored Data (And Why the FCC Won't Ban It)

Federal Communications Commission (FCC) chairman Tom Wheeler has been urged to investigate AT&T's new Sponsored Data offering, whereby customers can use certain internet services without dipping into their monthly data plan.

The plan would see content developers and app creators paying for users’ wireless data in a service comparable to 1-800 telephone service. So far, only ad tech firm Aquto, mobile commerce software provider Kony Solutions and health care company UnitedHealth Group have signed up.

However, Public Knowledge acting co-president Michael Weinberg has written to Wheeler, claiming that the scheme threatens the open internet and asking the FCC to open proceedings.

“Gather the information required to evaluate if the scheme interferes with the operation of the internet, if it is or has the potential to be an anticompetitive practice, or if it creates an opportunity for preferential treatment,” he writes .

“By opening a thorough investigation into AT&T’s scheme, you make it clear to AT&T and all other ISPs that the FCC takes its commitment to an open internet seriously.”

The concern, also expressed by Rep. Anna Eshoo (D-Calif.), is that the plan will unfairly favor larger players that can pay AT&T’s fees, and inhibit the ability of smaller firms to compete.

“On its face, the ability for consumers to access ‘toll-free’ content seems like long-awaited relief from frustrating data caps. But embedded in programs of this type are serious implications for fairness and competition in the mobile marketplace,” she says in a statement .

“And we must ask just how beneficial a program like this is to consumers who could ultimately foot the bill for the added cost of doing business.”

So far, Wheeler’s said only that he’ll be taking a look at the service to see whether it amounts to anti-competitive practice or entails preferential treatment. “I am not advocating intervention unless there is an unmistakable warrant for it,” he told CES attendees yesterday.

But the FCC has only limited powers when it comes to regulating wireless – and they don’t cover services such as Sponsored Data. While wireless companies are banned from offering unequal access to content providers, the company’s made a point of saying that sponsored data won’t get preferential speed or priority.

More, the FCC is specifically charged with considering benefits to customers – and, in the short term at least, it will be hard to argue that giving people freebies isn’t in their best interests. While that may change in future thanks to skewed competition, it’ll take some time, meaning a wait-and-see policy is necessary.

And while this sort of offering may be new to the US, it’s widely available elsewhere. In the Nordic region, for example, Telenor offers a similar service for users of Facebook and Telia for users of Spotify. It’s not regarded as a net neutrality issue there: just another little bonus.

And – as the comparison with 1-800 telephone service shows – it’s a model that’s widely used in other industries. Indeed, John Strand, CEO of Strand Consult, rather cheekily compares the service to the way many newspapers operate.

“A paywall is essentially a data cap on news articles. Readers get access to a set number of articles, e.g. 10 stories per month, and thereafter, pay a fee to get access. Some stories, whether by editor choice or advertiser subsidy, don’t count against the paywall; that is exactly the same model as AT&T’s sponsored data in which some apps, subsidized by an app maker or advertiser, don’t count toward the data cap,” he says.

“It’s interesting that many journalists have no problems with paywalls and sponsored content on their own websites — business models which pay their salaries — but react negatively when other parties try the same thing.”

Wheeler has little choice but to say he’ll keep an eye on the service – he can hardly do otherwise. But until the service is up and running and it’s possible to see the long-term effects on competition, a full investigation is unlikely.

Source: Forbes


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