AT&T’s ‘Sponsored Data’ Program: Friend or Foe?

source: http://www.flickr.com/photos/mrvjtod/

Consumers have been excited to see what will come from CES 2014, and AT&T (NYSE:T) had some big news to share at the developer conference on Monday. The tech giant finally unveiled its new service for “sponsored data” after two years of rumors, and said it expects the sponsored content to begin showing up during the first-quarter. According to Gigaom, AT&T’s new sponsored data service is exactly what its name suggests: it is a new billing program that allows content providers to pick up the tab for mobile data costs. AT&T’s new project facilitates a two-sided charging model for mobile data — charging consumers for some content, while making providers foot the bill for others — but some critics are already claiming that it’s a more troublesome program than a helpful one.

Nonetheless, there are certainly advantages to AT&T’s service, and it operates by giving content providers the opportunity to pay AT&T to exempt their app or websites from consumers’ mobile data plans. Thus, visitors to those sites who agree to pick up their consumers’ charge won’t see any data deducted from their totals, and instead, AT&T will subtract that data from a universal data pool brought by the content provider, as explained by Gigaom. 

It sounds like a confusing scheme, but some non-U.S. Wi-Fi providers have already tried the program and have enjoyed success from what it can promise customers. Recode highlights Gogo, Boingo, and Virgin America as three such examples of providers who already offer some free content, and so far, things look like they’re going relatively smoothly.

Offering content providers the opportunity to subsidize data gives developers the opportunity to expose their content to the public and facilitates an incentive for consumers to visit newly sponsored apps or sites. The program is especially appealing to startups who need to offer an incentive for customers to explore new apps and websites, and companies could soon be able to offer to pay for all the download and usage data charges as an encouragement for new consumers to learn about their product.

There is, however, a con to this situation, which Gigaom pointed out just as soon as it broke AT&T’s story. It is true that AT&T’s program sounds like a money-saving opportunity to consumers, but it also raises the concern of certain tech companies who recognize that sponsored data will disrupt some of the fundamental standards of the internet. One of the current principles of the internet that Gigaom points out is its neutrality. However, having some content sponsored, and some content not, leads to certain websites and apps possibly enjoying priority over others.

In addition, if only those companies that are affluent enough to foot the bill of their consumers’ data usage benefit from this program, then they could start to enjoy more success than their competitors, and thus lead to a decrease in variety on the internet. AT&T’s sponsored data thus first looks appealing to startups and newer companies, but it has the potential to instead become their worst nightmare, if bigger companies choose to let it do so. So, sponsored data: friend or foe? AT&T says friend. Critics says foe. Consumers will be able to decide starting some time in the first-quarter.

More From Wall St. Cheat Sheet:

More Articles About:   , , , , , ,  

More from The Cheat Sheet