Companies Avoiding AT&T's 'Free Shipping' Data Idea So Far
Has Had Talks With ESPN, But Nobody is Biting (Yet)
Early last year we noted that AT&T, the company that really started the network neutrality debate to begin with
, had come up with yet another awful new idea: charging app makers a fee if they wanted to send data to consumers without impacting their usage caps. While AT&T presented the idea as akin to a 1-800 number for data or "free shipping," what it actually is a troll toll imposed by AT&T allowing them to rake in new cash -- and impose their power on a content ecosystem and app marketplace that operates better with companies like AT&T out of the way.
AT&T then proceeded to insist that some un-named content companies were begging for this kind of system, said companies apparently oblivious to the fact that such a system would not only put content companies in the position of having to subsidize AT&T's network, but would also place AT&T in position to determine market winners and losers.
Now a report in the Wall Street Journal
strongly suggests that ESPN was at least one of the companies engaged in those conversations:
ESPN, the cable sports channel majority-owned by Walt Disney Co., has had discussions with at least one major U.S. carrier to subsidize wireless connectivity on behalf of its users, according to people familiar with the matter. Under one potential scenario, the company would pay a carrier to guarantee that people viewing ESPN mobile content wouldn't have that usage counted toward their monthly data caps.
There's still no evidence that any companies have asked
for this new model. In fact, the Journal
notes that while companies have had talks with AT&T in the year and a half since AT&T suggested this idea, none of them have signed off on such a plan yet. At least some of these companies appear to see what AT&T is actually up to here in terms of trying to shift market power equilibrium:
Some media companies may balk at paying carriers to relax data caps, arguing that their popular apps and services are a major reason users buy data plans to begin with. At least one other major media company that considered the idea rejected it on those grounds, a person familiar with the matter said.
While AT&T's idea sounds new and exciting to those who haven't dug into it, this is still AT&T's dream vision to retain control by imposing strange, arbitrary and unnecessary new tolls on the companies using their network. Years back, AT&T wanted to charge content makers a toll so their traffic saw network priority. In this new idea, AT&T wants to charge content or app makers a toll so that their apps have less of an impact on a user's cap. The end result is the same, with AT&T imposing arbitrary tolls on content companies to obtain preferred customer status, picking winners and losers while avoiding the dumb pipe fate that terrifies all incumbent carrier executives.
It's an idea AT&T is pitching as a cost-saving endeavor for consumers, but given this is AT&T
, you'd be naive to think cost savings will be in the equation. You'll still pay the same steep data rates, content companies will now just pay a fee to obtain preferred "reduced cap impact" status and marketing, then pass the higher development costs on to you. It's a ridiculous and potentially dangerous idea that hopefully most content companies and consumers won't be duped by.
Naturally, this makes sense for ESPN This scheme makes perfect sense for ESPN. First, their content would use a good deal of bandwidth, so customers may freak out when they notice how much data it's consuming, an event that might cause them to reconsider whether they want to use ESPN on their mobile devices. Second, I suspect that ESPN feels that it hasn't reached the price ceiling with these customers just yet, so these people may be willing to pay more to cover the cost of the "free" bandwidth they're getting, should ESPN sign on.
Re: Naturally, this makes sense for ESPN
said by ISurfTooMuch:Excellent analysis. And why ESPN, Netflix, Hulu, & other video providers eating up huge amounts of bandwidth will eventually sign up for a service like this; unless the FCC or courts prevent it.
This scheme makes perfect sense for ESPN. First, their content would use a good deal of bandwidth, so customers may freak out when they notice how much data it's consuming, an event that might cause them to reconsider whether they want to use ESPN on their mobile devices. Second, I suspect that ESPN feels that it hasn't reached the price ceiling with these customers just yet, so these people may be willing to pay more to cover the cost of the "free" bandwidth they're getting, should ESPN sign on.
"If you want to anger a conservative lie to him.
If you want to anger a liberal tell him the truth."
Re: Naturally, this makes sense for ESPN For ESPN, it makes sense, but I'm not so sure about Netflix and Hulu. The difference is that their programming isn't live, which means that watching it later on a wired or wi-fi network isn't such an issue, and it's also theoretically possible to download the content and store it for later viewing. Also, I think that Netflix and Hulu users will be more sensitive to price increases. Actually, a better way to put it is that sports fans will probably be more willing to accept higher prices than those watching non-sports programming. And finally, sports programming doesn't compress as well as other programming because of more on-screen motion, so it will often require more bandwidth to stream.
Actually, Netflix missed an opportunity to make something like this work. If they'd charged an additional fee to use their service via a mobile app and a cell network at the outset, they might have been able to build in these charges and have people swallow them in exchange for the convenience of having mobile access to movies. But, by launching mobile apps and not charging extra for them, they set a precedent of including them for free with a subscription, and that will be extremely difficult to undo without incurring customer backlash. Granted, ESPN did the same thing, but, as I said, I think they feel that they can charge their customers and get away with it.