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VC Highlights Problems Inherent in AT&T's 'Sponsored Data'
by Karl Bode 10:17AM Thursday Jan 16 2014
For years we've talked about how AT&T's long-festering plan to introduce a "1-800 number for mobile data" was a pretty bad idea, given it gave more power to AT&T, while giving the biggest content companies with the deepest pockets an unfair advantage over smaller content companies and startups. Last week AT&T formally introduced the idea under the moniker of "Sponsored Data," heavily playing up the benefit of having select content (ESPN, etc.) not count against a user's usage cap.

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Many users focused solely on the idea of "free data" and couldn't quite grok the deep problems with such a model.

Aside from content companies simply passing the costs on to you some other way, venture capitalist Fred Wilson pens a blog post arguing that startups can easily be harmed in a world where giants like ESPN, Facebook and Google get to pay to have their services and content higher on the food chain. He offers up a few examples:
quote:
Entrepreneur: I plan to launch a better streaming music service. It leverages the data on what you and your friends currently listen to, combines that with the schedule of new music launches and acts that are touring in your city in the coming months and creates playlists of music that you should be listening to in order to find new acts to listen to and go see live.

VC: Well since Spotify, Beats, and Apple have paid all the telcos so that their services are free on the mobile networks, we are concerned that new music services like yours will have a hard time getting new users to use them because the data plan is so expensive. We like you and the idea very much, but we are going to have to pass.

Entrepreneur: I plan to launch a service that curates the funniest videos from all across the internet and packages them up in a 30 minute daily video show that people will watch on their phones as they are commuting to work on the subway. It's called SubHumor.

VC: Well since YouTube, Hulu, and Netflix have paid all the telcos so that their services are free via a sponsored data plan, I am worried that it will hard to get users to watch any videos on their phones that aren't being served by YouTube, Hulu, or Netflix. We like you and your idea very much, but we are going to have to pass.
With this week's defeat of already fairly wimpy neutrality rules (which already largely excluded wireless services), Wilson worries we've entered "Internet 3.0," where nothing inhibits incumbent fixed and mobile carriers from experimenting with all manner of cumbersome pricing layers, most of which will be to the detriment of those that can't afford to pay to play. Is AT&T's idea setting the stage for the new normal? Or is it an idea destined to fail courtesy of informed consumers?

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jmn1207
Premium
join:2000-07-19
Ashburn, VA
kudos:1

Same Anti-Consumer Business Model

This is simply the most lucrative way these giants have found to do business. This is just another creative method to keep the consumers directly out of the system. When no real competition exists, these companies are free to devise new techniques to generate even greater profits.

It is like ESPN 3 only being made available to the ISP, and not to individual consumers. The big companies get a break and pay $1 per subscriber if they have over a million users. Otherwise it costs an ISP $10 per subscriber if they have fewer than 1 millions users. Bye bye little guy, and good luck to the paying customers in trying to influence the market unless you decide to live in a cabin in the woods.

tshirt
Premium
join:2004-07-11
Snohomish, WA
kudos:5
Reviews:
·Comcast

How is this different...

...then Netflix trying to force ISP's to host a Netflix specific CDN-like device on their network.
Netflix pays once to transport each piece of content/ads/etc onto the device and then a relatively small command and control flow gives them a huge advantage over any other outside provider with little transport cost for NF.

This is another example of large content consolidators marking their territory/staking out their claim for a piece of the pipeline

TAZ

join:2014-01-03
Tucson, AZ
kudos:3

2 recommendations

Re: How is this different...

Netflix didn't force anyone to do anything. They're not the only game in town for movie and TV show streaming.

Also, the Open Connect appliances could actually serve to improve the user experience of other services by removing load from an ISP's other peering and transit links. As it is, many of these are congested at various times of the day, and certain ISPs don't seem to see any need to resolve it by adding capacity.
BosstonesOwn

join:2002-12-15
Wakefield, MA
Reviews:
·Verizon FiOS

2 recommendations

What ? I don't get your reference here ?

It's no where near the same. Netflix offered it to the isps for FREE. There was no money changing hands. Any video provider can do the same, also just a note youtube does this also.

And Netflix doesn't pay the transport out to a provider when I request a movie, they pay a set fee called a 95 percentile. And they only pay that to their provider. The provider is who pays to dump it out onto say comcast. And Comcast has to pay due to their customer requesting the data. But this mostly comes out in the wash with peering agreements.
--
"It's always funny until someone gets hurt......and then it's absolutely friggin' hysterical!"

tshirt
Premium
join:2004-07-11
Snohomish, WA
kudos:5
Reviews:
·Comcast

Re: How is this different...

said by TAZ:

Netflix didn't force anyone to do anything.

They are still trying, attempting leverage their current popularity, by manipulating stream quality...only "participating partners" can successfully get a good stream.

said by BosstonesOwn:

It's no where near the same. Netflix offered it to the isps for FREE.

It's not actually free, NETFLIX is paying for this exclusive on network cache.

said by BosstonesOwn:

And Netflix doesn't pay the transport out to a provider when I request a movie, they pay a set fee called a 95 percentile

and their 95th percentile will drop substantially if they only need to send one copy to each device on each ISP's network which can be done during their lowest usage periods, only direct users and the C&C traffic during busy times.
THEY pay less for transport, but buy the device instead giving them better quality and availablity at prices Joe's startup can't match.
done a different way but not a different end effect than AT&T paying for dedicated line transport and even prepaying end delivery "overages" for mobile users, to assure THEIR content is the most available AND cheapest (since that seems to be a big market driver)...at least at first.

KrK
Heavy Artillery For The Little Guy
Premium
join:2000-01-17
Tulsa, OK

2 recommendations

Re: How is this different...

Netflix isn't manipulating stream quality. They merely point out ISP's stream quality issues. They offer a solution for free to help relieve traffic congestion, but some ISP's who see Netflix as a threat to their Pay-TV business don't want a "solution", they want Netflix to fail and so will not accept CDN.

If there is a problem with Netflix stream quality, the problem lies with your ISP--- Not Netflix.

--
"Fascism should more properly be called corporatism because it is the merger of state and corporate power." -- Benito Mussolini
BosstonesOwn

join:2002-12-15
Wakefield, MA
Reviews:
·Verizon FiOS

1 recommendation

Are you a paid shill ? I mean really, I don't see the problem here.

Netflix pays for their gear to be placed inside the isp network ? Since when ? Last time I checked the gear is available for free to an isp if they choose it, just like google search appliances and youtube appliances.

No they don't pay less on the 95%, they are paying based on 95% usage which is constant pushes. Since they have customers that are always not on the CDN device. Your forgetting that Netflix is a global company now and stream as such, there is no low points in their day. Their bandwidth usage is fairly constant.

I have 2 of their CDN boxes in my network for testing with our gear, and we A) didn't pay for them. and B) monitor their bandwidth, they are intelligent in that they report nodes to each other for getting the content faster for the customer.

Netflix is trying to improve the service by getting the isps to have less congestion on the interconnect, AT&T is trying to control that interconnect and charge a fee to let packets in.

I don't get what part you don't get about what AT&T is doing here.
--
"It's always funny until someone gets hurt......and then it's absolutely friggin' hysterical!"

tshirt
Premium
join:2004-07-11
Snohomish, WA
kudos:5
Reviews:
·Comcast

Re: How is this different...

said by BosstonesOwn:

Are you a paid shill ?

No, Are you deliberately so obtuse? Do you get paid to be rude?
said by BosstonesOwn:

Netflix pays for their gear to be placed inside the isp network ?

Netflix PAYS for the device.

said by BosstonesOwn:

they are paying based on 95% usage which is constant pushes

the 95% is less because they send 1 copy to the device, which then freely send thousands of copies inside the ISP's network rather than sending those thousand of copies to individual customers, and each country/timezone has different peaks NF only need to send one set of content to a local CDN and from there feeds ONE copy to each local ISP's device.
total bandwidth direct from NF's CDN out to the internet is greatly reduced and because it is mostly not realtime the local distribution can be during local off hours lowering the peak further.
Think about it, very simple math.

said by BosstonesOwn:

have 2 of their CDN boxes in my network for testing with our gear...

So YOU receive a payment in gear, dare I say the S word?

I didn't say caches/ local content storage doesn't work, in fact I've advocated that approach before, but this is about WHO is controlling who's content is most available cheapest to use.
Different method same endpoint.
BosstonesOwn

join:2002-12-15
Wakefield, MA
Reviews:
·Verizon FiOS

1 recommendation

Re: How is this different...

No I get paid to architect and secure environments for fortune 500 companies. And sometimes being rude is part of that deal.

Yes Netflix owns the devices. Doesn't mean they are a gift to the provider. They are netflix inventory.

The CDN devices are beneficial to both sides. Not just Netflix, you see there is these things called peering agreements and when they become lopsided one company has to pay to compensate for the traffic differences, or what happens is the provider chokes the pipe down on one side to make it even again ALA Verizon/Cogent. The 95% rule does something for a provider like Netflix, it makes it fair for them.

Now , like I said if you knew how big Netflix was you would see there is no non peak time for them. They are a global streaming provider ! The united states is not the center of the world ! Get your head out of the clouds. They stream all over the world in different time zones, and yes it all propagates from 3 locations.
--
"It's always funny until someone gets hurt......and then it's absolutely friggin' hysterical!"

anonanaki

@12.109.156.x

Re: How is this different...

by your logic, i wonder which company is ripping me off by running my own cache server at home since fast broadband is not an option.

whatever you're being paid to "architect and secure" is way too much.
BosstonesOwn

join:2002-12-15
Wakefield, MA
Reviews:
·Verizon FiOS

Re: How is this different...

huh ?
No company is ripping you off if your running your own cache server, your concept there makes no sense and is irrelevant.
--
"It's always funny until someone gets hurt......and then it's absolutely friggin' hysterical!"

swintec
Premium,VIP
join:2003-12-19
Alfred, ME
kudos:6
Reviews:
·Time Warner Cable
·VoicePulse
·Sprint Mobile Br..
·RapidVPS
said by tshirt:

...then Netflix trying to force ISP's to host a Netflix specific CDN-like device on their network.

Do you know which site you are on? it isnt the same because people love netflix and hate AT&T.
--
Usenet Block Accounts | Unlimited Accounts

tshirt
Premium
join:2004-07-11
Snohomish, WA
kudos:5
Reviews:
·Comcast

Re: How is this different...

said by swintec:

...

I am constantly reminded.
Millenium

join:2013-10-30
kudos:1
Reviews:
·Time Warner Cable
said by tshirt:

How is this different then Netflix trying to force ISP's to host a Netflix specific CDN-like device on their network.

Netflix trying to improve their own distribution compared to AT&T trying to control everyone else's.
Skippy25

join:2000-09-13
Hazelwood, MO

Re: How is this different...

Surely can't say that any better.
Skippy25

join:2000-09-13
Hazelwood, MO
You have absolutely no clue what you are talking about.

It must be nice to live in a box with only one window and one view of your surroundings.
InvalidError

join:2008-02-03
kudos:5

Someone is still paying for that "free" sponsored data

"Sponsored data" is exactly what the label says: data fees covered by sponsors. The money trail between your pockets and the carriers might be more convoluted but the carriers still ultimately get paid for their "free" data, just not directly from your invoice.

From the carrier's point of view, receiving a single up-front lumped payment from a content or service provider is far more convenient than potentially having millions of overage billing charge disputes per year, which makes it a much cheaper way of doing business.

People might not like it because of all that Network Neutrality and unfair advantage stuff but there are some substantial advantages to doing things that way and flat-out denying them would be unreasonable IMO.

Startup

@comcast.net

Another Option on Sponsored Data

There is another Boston based start-up that provides a technology to leverage unused wireless capacity and hence provide options for significantly reducing cost of sponsored data to continue the innovation