Why AT&T's toll-free data call should be disconnected

AT&T has been flying kites for some such service for several years now, and now we finally get to see its shape. The idea is simple: companies/content providers will be able to ‘sponsor’ selected data across AT&T’s mobile data network so that its volume is NOT subtracted from each user’s data allowance. In practice the user might see some sort of ‘free download’ logo associated with content and would then feel empowered to view, safe in the knowledge that it wouldn’t push them over their quota.

It’s not unreasonably being envisaged that such an option might be used by companies offering a special promotional video download (for instance).

Or it could be used as a standard method of billing for mobile access in a corporate environment where the users are all BYOD. The work-related apps are then all zero-rated and paid for by the company.

Or, if the access is initially priced low enough, it might be used by the likes of Netflix to zero-rate its material. It might be priced so that it appears that users are better off paying slightly more for their viewing material if Netflix (for example) takes care of the wireless bill.

Or, if the bandwidth is priced at a huge, wholesale discount it could feasibly be sold to an aggregator who could then offer it to smaller content providers.

There are many use cases, limited only (as they say) by the imagination.

But the essential element from the industry point of view is that if AT&T bounds through the regulatory hurdles (and as this is mobile there isn’t much of a hurdle in the US) it will have manged to change the internet access model from one-sided to two-side. And this, after all, is the main goal of all the neutrality-busting efforts AT&T and the other large telcos are pushing. They want that little foot in the door that establishes an upstream billing relationship. Those paying attention would have heard it from ETNO about a year ago when there was an orchestrated kerfuffle kicked up over Google paying for telco infrastructure.

Back in the US, once AT&T gets this neutrality escape hatch in place, it will be happily billing the company(s) sponsoring the data to gather in payment for all the material downloaded. Then over time (the marketing thought might go) users will develop an inclination towards that ‘free’ logo.

Over time, again, AT&T may be able to imply that the ‘free’ or sponsored material is rated more highly by the network than just the ordinary material.

Over time, slowly but surely, AT&T is winning a value chain position. It is becoming a gatekeeper and even retailer, rather than a ‘neutral’ access provider.

That’s the plan. Will it work? Should it work?

There is no doubt that the approach starts to breach neutrality, but it is also very defensible. AT&T can argue that there is no discrimation under the classic (though useless) source/type/destination neutrality definition since it is only messing with the billing, not the treatment of the data. This is no different from someone making an 800 call, it might say.

True, but if we look at business discrimination it’s clear that AT&T is offering a select service that only some content providers could or would utilise. To the extent that users like the concept, that will favour a company that has paid money to AT&T to use it, and disfavour the rest.

Which brings us to feasibility. The big problem here is that AT&T is essentially attempting a double-dip. Because most users stay comfortably within their limits they will most often be clicking a “toll free data” service to pay for something that they’ve already paid for (even expressing this gives you a headache). The whole thing sounds complicated to implement and explain and, given the small amounts of content likely involved, not really worth the push.

But think forward. Here’s just one danger from all this. As usage rises steadily over 5, 10, 15 years, why won’t AT&T push the free data service more and more (especially to the big video providers) and keep the user cap as low as it can get away with?

As they pay up, AT&T's model is becomes decidedly more two-sided - as time goes on a greater proportion of its revenue will come from the content providers (via users of course who will be paying one way or another to the content provider) and - here is the crucial point - AT&T and the other big providers will now be in a position to lever up the cost of what we might call the wholesale data access rate. Getting the dosh from upstream makes you less prone to price competition - you become more like a cable company holding customers hostage at the end of the value chain.

"What, Mr Netflix, you’re not prepared to pay? Explain to your users then why they'll have to pay premium rates to view your content."

What do you think. Is AT&T fair or foul?