AT&T announced today that it will start offering a “Sponsored Data” model for mobile data, allowing third parties to pay for mobile data used by consumers on smartphones, tablets and mobile hotspots. The following comment may be attributed to Jan Dawson, Chief Analyst at Jackdaw Research:
AT&T’s announcement has been rumored for some time, and has generated mixed feelings in the past, raising concerns about net neutrality, consumer transparency and other issues. The announcement itself has positive and negative implications, as outlined below.
AT&T’s announcement is a rare sign of real innovation from a carrier in charging for services – the first time a carrier has charged anyone but the end user for mobile data – and that makes this an important milestone. This gives developers a great additional option for engaging users, and especially for lowering the barrier to entry from engaging with their apps. It will have the biggest impact for applications involving video, since that’s the biggest driver of bandwidth consumption, but it will be useful for other services too. It might also help solve the issue of who pays for the data when employees bring their own devices to work – today employees often bear all the costs of using their own devices, even when they’re working, and the solutions on offer have been pretty terrible. This offers a more granular, sophisticated approach to the problem.
Despite all this, concerns will remain. Some have expressed concern that only major content providers will be in a position to afford to sponsor users’ data, creating a two-tier system where smaller content providers can’t compete effectively. There is also potential for fraud, with bandwidth-intensive applications claiming to be providing sponsored data, much as premium rate phone lines once scammed users. The 1-800 number analogy therefore has a 1-900 number counterpart. AT&T will have to work to provide better verification for consumers to avoid this problem in the medium to long term. Educating consumers on this model will be challenging, too, as it’s very different from what’s been done before. The biggest challenge from a developer perspective will be implementing the technology in a way that takes advantage of AT&Ts network without confusing or frustrating users on other networks.
Overall, this is a good bit of innovation from AT&T, but a lot will depend on the early applications that make use of the model. If some applications get out of the gate quickly which show real consumer benefit from using sponsored data, that could help turn this into a real success for AT&T. But if there aren’t good, pro-consumer applications pretty quickly after launch, there’s a real risk that the negative publicity will overwhelm sponsored data before it has a chance to take hold.