AT&T Sponsored Data and Net Neutrality

By Matt West

Director of Telecommunication Services, NPI

February 13, 2014

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On January 6, AT&T announced a new way for eligible 4G customers to enjoy mobile content and apps over their wireless network without impacting their monthly wireless data plan. In many ways, the program is the equivalent of toll-free dialing for the subscriber’s data plan.

Content or application providers that are willing to "sponsor" their data with AT&T will essentially be paying the cost of the data rather than the subscriber. While AT&T has not yet announced any business signed up for the program, you can bet they are in talks with various providers. A natural candidate would be a deal with their local service provider, AT&T U-Verse. If such a deal were to happen, AT&T U-Verse subscribers might be able to stream movies over their wireless phone or tablet without it accruing against their data plan. This would give AT&T U-Verse an edge over a competitor such as NetFlix or Comcast.

Only a week later, the D.C. Circuit Court of Appeals announced its long-awaited decision to strike down the FCC's network neutrality rule. Net neutrality was the FCC Rule that barred internet service providers (ISPs) from either blocking or restricting access in anyway to any one website. For example, a carrier could not give higher priority to Google over Bing or Yahoo. Without net neutrality, ISPs are free to strike similar "toll free" deals with content and application providers. Left unchecked, this could create the new "wild west" of the internet. For example, maybe CNN strikes a deal with Verizon’s high-speed internet service division to ensure streaming video from gets higher priority than streaming video from Fox News.

Sponsored data is a good thing. It opens the door for both consumers and businesses to access data sources without impacting wireless data plans. Imagine if or Microsoft picked up the tab for all data accessed through their cloud-based applications. Or, if retailers allowed consumers to shop their sites without driving up data plan usage.

The lack of net neutrality, on the other hand, is a bad thing. It potentially stifles competition across the broader business sector. ISPs will be well positioned to force businesses to pay for faster load times, leaving those who cannot financially compete to suffer decreased speeds in content delivery. Imagine if former startups like Facebook and Twitter started their ventures under these conditions. Would they have survived? Or, how a new retail marketplace would compete with Amazon if Comcast gave preferential treatment to the market leader’s site traffic?

A business climate without net neutrality can also potentially drive companies with international audiences to move more content distribution overseas so as to not risk having their traffic throttled. We’re already seeing similar behavior in the response of businesses and their international customers to NSA surveillance disclosures. It is rumored that Cisco’s sales in Asian markets have been impacted as those customers no longer trust that the vendor’s devices do not have a backdoor for NSA spying. Could global enterprises’ (and their customers’) reaction to net neutrality follow a similar course? Possibly.

Now is the time for enterprises to influence ISP’s behavior towards net neutrality. NPI recommends enterprise customers get a clear statement from their providers regarding any net neutrality-driven partnerships, and what those agreements entail.