Advocates Say AT&T's New 'Toll-Free' Data Plan Hurts Small Businesses

AT&T said today that it's moving forward with a controversial “sponsored data” plan, which allows companies to pay to have their material exempted from consumers' data caps.

“With the new Sponsored Data service, data charges resulting from eligible uses will be billed directly to the sponsoring company; the customer simply enjoys their content via AT&T’s wireless data network,” AT&T says in a statement about the new plan.

The new plan means that wireless users with 4G service will now be able to stream content from companies that pay AT&T's fee -- without having that data count toward their caps. When consumers access the “sponsored” material, an icon will appear informing them that the data is excluded from their caps. Three companies have already signed with AT&T -- ad tech firm Aquto, app developer and m-commerce software provider Kony Solutions, and health care company UnitedHealth Group.

AT&T has made no secret of its intention to unveil this kind of offering. Last May, CEO Randall Stephenson told investors that the company planned to allow content companies to pay to exclude their material from data caps. It was reported at the time that ESPN was in talks with carriers about participating in this kind of arrangement.

Ralph de la Vega, president and CEO of AT&T Mobility, boasted today in a statement that the company's new offering is “a win-win for customers and businesses.”

But advocay groups disagree. They rightly say that AT&T's new scheme will harm small companies that can't afford to pay for the data-cap exemption. For that reason, AT&T's plan clearly goes against the spirit of net neutrality -- though probably not the regulations themselves. As the neutrality rules currently stand, wireless companies aren't allowed to discriminate against competing apps, but have flexibility when it comes to companies that aren't competitors. Still, AT&T's sponsored data program is at odds with the principle that carriers shouldn't discriminate against certain types of content.

“This is but the latest example of how data caps are increasingly becoming used to threaten the open internet,” Michael Weinberg, acting co-president of Public Knowledge, said in a statement. “The company that connects you to the internet should not be in a position to control what you do on the internet. AT&T's announcement positions itself to do just that.”

He added: "In addition to being a ripoff for both consumers and content creators, AT&T's plan erects a massive barrier in front of anyone hoping to be the next big thing online."

Free Press also criticized AT&T's move, arguing that it calls into question the company's justification for data caps. “Caps are supposed to help wireless carriers manage congestion. But if getting a big check from another company suddenly makes AT&T’s congestion concerns go away, that shows data caps aren't necessary in the first place,” policy director Matt Wood said in a statement. “Content and app providers that can't pay this new toll to reach customers will be at a huge disadvantage, and may never get off the ground in the first place if they can't afford AT&T's sponsor fees.”

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3 comments about "Advocates Say AT&T's New 'Toll-Free' Data Plan Hurts Small Businesses ".
  1. Paul Scivetti from Synergen, Inc , January 6, 2014 at 8:49 p.m.
    Where this hurts is when you have 2 companies with basically the same app experience (aka 'a commodity') and one pays AT&T and the other doesn't. In that case, the payer wins. However, users still want the content they want. If you have the best content and you build a better user experience, you win. I don't see this as a major game changer for most small companies.
  2. Pete Austin from Triggered Messaging , January 7, 2014 at 4:56 a.m.
    The problem with AT&T's plan is that it doesn't scale. Big media companies could afford the resources to negotiate a payment with them. But there are hundreds of thousands of little startups on the Internet - their payments would be pocket change to AT&T and management time is scarce for startups, and it's unlikely that either side can afford to deal with this.
  3. Leonard Zachary from EquityStep , January 7, 2014 at 12:14 p.m.
    Simply it creates an uneven playing field as it pertains to wireless broadband and the app store ecosystem. The network operator has created a unique tier. The haves and have nots. The obvious winners are the folks who can pay, the losers are everyone else. Even worse is AT&T is charging twice for the same data- most folks do not go over their data caps even though they have paid for it- that's free money for AT&T which is now being sold as "sponsored" data. Brilliant.