Here’s Why No One Is Buying into AT&T’s Sponsored Data Plan

Photo credit: Rich Polk/Getty Images

Remember when AT&T (NYSE:T) announced a bold new program in which large companies would pay for the data customers are using? It was all part of a grand scheme called the “sponsored data” program. How exactly does it work? As AT&T explains it, certain content won’t eat into your personal data plan in certain circumstances.

To use the company’s own words: “Sponsored Data is an AT&T service that enables companies to sponsor the data usage for specific content on behalf of eligible AT&T wireless customers. With AT&T Sponsored Data customers can browse, stream and enjoy content from our data sponsors without impacting their monthly data plan allowance.”

What does that mean exactly? Again going with AT&T’s own example: “a customer may access an application for healthcare from their insurer. Within the application, there is an educational video. The customer sees the AT&T Sponsored Data name, identifying that the video is sponsored. When the customer clicks the icon to play the video, the data usage incurred while watching the video is not applied to the customer’s monthly data allowance.”

Sounds cool, right?

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Evidently, not many people think so. And the companies AT&T was hoping to entice into signing up have yet to do so. In fact, the program has failed to attract any of the big-name companies the telecom giant had hoped. There have been a handful of smaller companies that have hopped on board, but the public at large remains unconvinced that the idea has much merit.

After all, would you want to watch a sponsored video from a healthcare company — nothing more than an advertisement — simply because it wouldn’t count against your data plan? Probably not.

How do things look from the other side of the fence? Is this actually a good idea from the perspective of app makers and content producers? Not really. It is actually placing more of a burden on them by forcing these companies to incur an additional cost just to get their content to people. What the whole idea appears to be is simply another way for AT&T to rake in more revenue while not actually doing anything of value for its customers or for content providers.

Not only does it appear that AT&T is fine with pressing forward with its “do nothing, get paid” strategy, but it seems the company is trying to convince the rest of us that companies are begging for such an opportunity. Fierce Wireless, an industry news site, reported on just how AT&T Chief Executive Randall Stephenson was spinning that idea, claiming that content providers have been actively hounding the carrier for new methods to give them money.

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“I think you’d be stunned if we weren’t getting those phone calls. We are getting those phone calls,” he said to the publication. “The content guys are asking for it.”

So there you have it: Some people just can’t help but want to throw more cash at AT&T.

This whole notion also plays a part in a bigger discussion about net neutrality, in which all the major telecoms have a vested interest. As things look now, net neutrality, which allows Internet service providers to treat content with an equal footing, is seemingly dead in the water.

The conversation has slowed as of late, but the idea of a “fast lane” for those who are willing to pay additional fees to ISPs and data carriers looks like it will prevail. Netflix (NASDAQ:NFLX) has already bitten the bullet and negotiated with Comcast to make sure its streaming service isn’t throttled when delivered to customers.

Although the move may have been necessary from Netflix’s point of view, it sets a dangerous precedent.

But how does sponsored data become a part of the net neutrality fight? By giving companies with more resources and available capital to spend on advertising an upper hand. Naturally, if a company wishes to participate in a program like AT&T’s sponsored data setup, having additional reserves in the advertising budget will help enable it to get its content out. For startups and entrepreneurs hoping to have their content spread naturally or virally, they are suddenly at a disadvantage.

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This will allow carriers and data service providers the opportunity to pick winners and losers to some extent, simply based on who is willing — or able —  to pay the most.

Feeding off the notion that AT&T’s new plan is a further threat to net neutrality, Re/code spoke with Gary Greenbaum, CEO of Seattle-based Syntonic. Syntonic recently signed up to be a part of AT&T’s sponsored data plan, and Greenbaum seems confident that the AT&T concept won’t hurt smaller businesses or put them at a disadvantage.

“Just because my company can’t afford to have a Super Bowl ad doesn’t mean we shouldn’t have the Super Bowl game,” he told Re/code. “I don’t see why the FCC needs to introduce new laws when existing laws are in place to protect consumers.”

And things probably won’t stop there. The “sponsored data” model is something we could see spread to other areas in the business world. Also, if AT&T sees even the smallest amount of success, it can be expected that all of the firm’s competitors will jump on the opportunity to put their own sponsored data models in place.

As of right now, though, it looks like the plan is getting little attention, which can be seen as a positive for both consumers and content producers. There may be some merit to the plan as it evolves, such as allowing customers to stream movies or television shows, or even music through some variation of the sponsored data concept. But right now, this whole thing looks like a giant cash grab.

AT&T wants its customers to believe that it’s offering a whole new range of content for free. But it seems that even at that price, nobody is buying.

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