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AT&T Toll-Free Data: Innovation or Rip-Off?

Sarah Thomas
1/9/2014
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Since AT&T announced its plans for toll-free data, reactions across the web have been streaming out, some lauding the big carrier for its innovation, others condemning it for finding another way to rip off customers. (See AT&T Unveils Toll-Free, Sponsored Data.)

So, what is it, an innovation or a rip-off? Well, it could be both, but I'm leaning toward innovation. If you can accept that data caps are here to stay, then this is the kind of service plan experimentation we need to see to make them more palatable to consumers.

That said, consumer watchdog groups immediately took issue with the announcement. Free Press called it a lose/lose for consumers and app makers because it bills the brands for data usage without reducing the cost of the user's plan. Federal Communications Commission (FCC) chairman Tom Wheeler has even pledged to look into it to see if it "interferes with the operation of the Internet."

It might not directly save you money on your plan (although it could help avoid overages), but when an app you use all the time -- say, Facebook or ESPN -- partners with AT&T Inc. (NYSE: T), it could free you up to move to a lower data cap. It makes them pay, instead of you.

Granted, this takes a lot of monitoring and the help of AT&T to figure out what cap suits you best, but it's now an option for bill-minded consumers. They might even find themselves engaging more with interesting, relevant content from the brands that are footing the bill, which makes it attractive for them to get on board as well.

On the flip side, not every brand or app can afford to get on board. It's been argued that AT&T's toll-free data creates an unequal playing field for apps developers. A giant like ESPN would have no problem paying for the right to be excluded from the cap, but startups and smaller names might not have that ability.

That may be true, but just because a brand is sponsored doesn't mean consumers have to use its app or go to its site. They may be more compelled to do so because it's free, but the choice is still up to them. I'm not sure anyone would suddenly stop using an app because it's not sponsored. Let's not forget WiFi is still the network that's most used. That un-level playing field already exists today, and innovative startups have managed to emerge from the noise just fine.

Like most things in life, it comes down to execution. Favoritism, even net neutrality, could muck it up, as could the interface for how sponsored data is presented or the ads we have to endure to get to these apps... But, in theory, AT&T's toll-free data is the kind of innovation we need to see from wireless operators.

This is a good step forward and a move I expect other operators will mimic. My hope is that AT&T doesn't take any steps back in its execution.

— Sarah Reedy, Senior Editor, Light Reading

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brookseven
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brookseven,
User Rank: Light Sabre
1/12/2014 | 10:46:49 AM
Re: Win or fail?
Scotte,

1 - Verizon sold only some wireline customers to Frontier.  They had previously sold some lines to Fairpoint.  Verizon still has about 15M wirelne customers.

2 - I think you are asking if Wireline telcos are measured/judged by their investment in their local wireline networks.  Outside of FCC violations, in general the answer is no.  Rate of Return Carriers still want to keep up their Rate Base, but there is no incentive (outside of customer value) in investing in a network for a Rate Cap carrier.

I do not understand why you would think an Enterprise that had AT&T as one of its ISPs would sponsor data to AT&T wireless customers more than others.  The real question is if the vendor perceives any value in the toll free data.  

 

seven
ScottEStewart0101
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ScottEStewart0101,
User Rank: Lightning
1/11/2014 | 9:28:41 AM
Re: Win or fail?
What will be the big kicker here, is businesses choosing to pay only one carrier and not others for sponsored data. Perhaps a provider that sits on ATT's Ethernet pipe would be more inclined to pay ATT for sponsored data, but not Verizon because VZ sold their wire lines to Frontier. perhaps ATT would begin giving discounts on wireline enterprise customers that help subsidize content. Wouldn't be illegal, because they are gauged by their overall spend in an individual MSA.
Sarah Thomas
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Sarah Thomas,
User Rank: Blogger
1/10/2014 | 1:43:44 PM
Re: Good or Bad?
With Facebook, you can change your settings to have the videos auto-play only over WiFi.

When you put it like that, UH does sound interesting. I'm on AT&T, so I'll get to experience these soon enough.

Hope your last CES was a good one!
RitchBlasi
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RitchBlasi,
User Rank: Light Sabre
1/10/2014 | 1:28:44 PM
Good or Bad?
As I mentioned, laying the groundwork.  That said United Healthcare actually makes sense.  For example, if someone goes to its website and wants to watch or download a video presentation explaining how the Affordable Care Act impacts Americans (and we all know that presentation could take some time), UH would pay the cost for its subscriber instead of eating up their data plan.  Sounds like a pretty good customer service play for UH.  The advertising stuff - yeah, pretty lame.  

Also, think back to that Facebook announcement a few months back where it said that it would proactively send videos or whatever to its subscriber base - think you guys covered the announcement.  In that case, the unsolicited video message could be paid by FB...no?  I think that might be one of the reasons FB joined the GSMA - to get a better handle on how what they do impacts companies in the mobile ecosystem.

Sorry, I am geeking out -- too much CES!!!!  But thank God, it was my last.

 
Sarah Thomas
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Sarah Thomas,
User Rank: Blogger
1/10/2014 | 1:16:33 PM
Re: Good or Bad???
Video companies would be the most logical to take advantage of this, and be the most helpful to customers. I was surprised there weren't any at launch, but maybe they are still to comes. The launch partners sound kind of lame -- UnitedHealth Group, Kony Solutions, and Aquto -- but I guess we'll have to see how they use their sponsorships.

 
RitchBlasi
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RitchBlasi,
User Rank: Light Sabre
1/10/2014 | 1:03:33 PM
Good or Bad???
My take on this is that it is more about laying the foundation for companies with bandwidth intensive services - like Netflix, Hulu, etc. - to offset the costs and data usage of streaming video services for customers as more folks transition use from wired to wireless environments.  Wi-Fi has served both those issues for now, but again, it is limited in scale and availability.  As someone growing up in a mobile world, do I really want to be required to find a free Wi-Fi hotspot or would I be glad that my video provider is taking some of the burden off my shoulder?  To me, it doesn't sound like AT&T is double-dipping...they are trying an innovative pricing solution to bandwidth management.  
Sarah Thomas
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Sarah Thomas,
User Rank: Blogger
1/10/2014 | 10:45:25 AM
Re: Win or fail?
It's not being forced on users and doens't change how they access content and where. It really is a choice, even if AT&T is helping to make one choice much more attractive over the other.
Sarah Thomas
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Sarah Thomas,
User Rank: Blogger
1/10/2014 | 10:30:30 AM
AT&T's response to net neutrality
Probably because it knows it's attracted the FCC's attention, AT&T put out a statement today, saying that toll-free data does not violate net neutrality.

AT&T senior executive vice president of External and Legislative Affairs Jim Cicconi says, "We are completely confident this offering complies with the FCC's Net neutrality rules, which our company supports. AT&T's sponsored data service is aimed solely at benefiting our customers. It allows any company who wishes to pay our customers' costs for accessing that company's content to do so. This is purely voluntary and non-exclusive. It is an offering by that company, not by AT&T."
^ip4g^
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^ip4g^,
User Rank: Lightning
1/10/2014 | 12:09:46 AM
Re: Win or fail?
How different is this from Walled Garden ?
brookseven
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brookseven,
User Rank: Light Sabre
1/9/2014 | 7:00:58 PM
Re: Win or fail?
Yep - why do 4G when you can do free WiFi if you are a restaurant?

seven
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