AT&T Marketing Practices Part II: Zeroing In

About 20 years ago, in the midst of UN sanctions, I was in Belgrade, Serbia at a flea market. It was an interesting scene, because the swap meet had become a major source of black market consumer goods, much smuggled from Romania and Bulgaria. So hard by the scrap metal, used appliances, previously owned prosthetic limbs and folk art were cases of Marlboro cigarettes and Pampers.  

At one stall, I made a rare find. It was a tin containing about $20 in U.S. coins. I bought the whole lot for about $3 -- and the guy who sold them to me smirked as if he had found the world's biggest mark.

Of course he did. The coins, ineligible for currency exchange, were literally worthless in Serbia. So he got $3 for nothing. Woo hoo! And I, the sucker, netted $17.

I have more or less just described AT&T’s business model.

If you are one of the handful of Americans who still watches commercials, you know that AT&T already offers subscribers of its recently acquired DirecTV subsidiary free streaming on its wireless network. You can watch a whole movie or next week’s Eagles-Cowboys showdown without using any data from your plan. Now, if its announced $85.4 billion acquisition of Time-Warner goes through, presumably the same deal will apply for streaming CNN, TNT and HBO.



It is called “zero-rating,” a loophole in net-neutrality rules that otherwise forbid networks from favoring certain kinds of traffic. And why not a loophole for that? Toll-free access. It's like a flea-market mini-bonanza. Woo hoo! At the expense of those suckers at AT&T!

“It violates the spirit if not the letter of net neutrality and generally makes markets less competitive,” says Siva VaidhyanathanRobertson Professor of Media Studies and Director of the Center for Media and Citizenship, University of Virginia.

“The net neutrality problem should be clear. The network would favor AT&T-owned sources of content over others. So AT&T subscribers would be more likely to watch CNN than Fox or HBO over Netflix. And independent or new video services would be completely out of luck as the big video companies get all the good data pipes and cost users no data.”

Not to mention all the data they vacuum at near Facebookian scale in the process. Not to mention the competitive advantage in securing news subscribers. As other providers rush to secure their own walled gardens of content, what looks at first blush like a valuable consumer benefit turns out to be an industrywide end run around net neutrality -- a nearly universal global policy aimed at guaranteeing free flow of information online and protecting against excessive economic and political concentration in too few hands.

So if you're wondering why AT&T would pay top dollar for some mainly declining cable properties, the answer is that sometimes the whole exceeds the sum of its parts. Free streaming will generate more audience for the channels, and presumably more wireless subscribers, too. 

The question remains the overall effect on the consumer. Did we just make a killing, along flea market free-money lines, or did we just get sucked into a future screwing? I'm pretty sure you know the answer to that one.

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