How to Solve the Sponsored Data Dilemma
Wireless carriers are walking on thin ice.
Now convinced that video will save them from sinking profit margins and the pain of capital expenditures, they've started down the path of sponsored data services: allowing video distributors to pay to have their streaming content not count against consumers' monthly data caps.
It sounds like a net neutrality violation -- content producers can pay for preferential treatment -- but legally it's not. Partly because we're talking about mobile carriers, which the Federal Communications Commission (FCC) has been wary of constraining, and partly because the definition of net neutrality is still blurry, particularly in the legal sense. So far, carriers like AT&T Inc. (NYSE: T) and Verizon Communications Inc. (NYSE: VZ) have been able to move forward with sponsored data services because in theory anyone can take advantage if they're willing to pay. But what about the content producers that can't pay? Consumers shouldn't be punished on their monthly phone bills if they choose to watch the DC Eagle Cam (which streams live video of a pair of bald eagles and their recently hatched eaglets in the National Arboretum) rather than sponsored content.
So what's the solution?
Let's take a step back. Oddly enough, the sponsored data problem ties in to another issue I've mulled over for years now: the fate of free, broadcast TV. (See 'Free' TV Model Under Threat and ABC Makes TV Less Free.)
Broadcast networks make tons of money from licensing agreements today and would be devastated if all or even a significant percentage of Americans still watched their shows for free over the air. They count on the money that cable companies and others pay to retransmit their shows, which is why they challenged Aereo so vigorously in court. Aereo proponents argued that the startup company was just making TV available that is free anyway. But the reality is that broadcast networks really aren't free because most people now pay to access them in their cable bundles.
That's all a roundabout way of saying that the free TV model really doesn't work anymore. But the big question is, should it? When TV was the best form of mass communication and information distribution, it made sense to give everyone free access. (Plus back then the TV industry could support itself on advertisements.) Now, however, we have the Internet, and it's not really clear to me why we should have the inalienable right to watch The Good Wife or NCIS for free.
Which brings us back to the issue of mobile video. Carriers and content companies are exploring sponsored data features to make mobile video free to stream. But just like with broadcast TV networks, there's a hidden cost. In the TV world, that cost is rising cable rates and periodic programming blackouts. In the mobile video world, the cost comes in the form of viewers being disincentivized to watch media that isn't subsidized by a sponsor. Non-profit, educational and governmental organizations aren't likely to pay to have users be able to watch their videos without it counting toward the monthly data cap. They can't afford to.
So here's my idea. Just like broadcasters are often required in franchise agreements to set aside a certain amount of air space for PEG (public, education, government) programming in return for access to the airwaves, mobile operators should be required to set aside a certain amount of their spectrum capacity to enable free streaming -- as in streaming that doesn't count toward a data cap -- for qualifying content producers. I don't know where the line gets drawn for which producers should qualify, but an easy place to start would be to allow any non-profit educational institution in on the deal. Maybe this would get too onerous if some online lecture series suddenly became extremely popular (we can only dream), but we could put safeguards in place. We could limit the amount of uncapped streaming from qualifying content producers to a specific amount. It might not be perfect, but it would be better than only giving consumers incentive to watch content from companies willing and able to pay for delivery.
My solution doesn't solve the issue of startup video companies that are now operating on an uneven playing field. (Maybe YouTube Inc. helps with that?) It also doesn't address zero rating services like T-Mobile US Inc. 's Binge On, or the fact that Verizon is exempting its own Go90 video service from data caps. (I have a very nuanced view on the latter, but that's a whole other post.) (See also Understanding T-Mobile's Free Video Play.)
However, making carriers support uncapped streaming for select, non-paying video producers is an interesting place to start -- and maybe a way to help Americans get a little more of what they're paying for.
— Mari Silbey, Senior Editor, Cable/Video, Light Reading