ATTProcter & Gamble's latest "ode to Mom" Olympics video, Google's reunion video, and the trailer for "Her" or any other must-see flick -- these are just a few choice tidbits in the smorgasbord of video content served up daily. But some people think twice before watching video on their mobile devices because they're afraid that it will eat up their precious data plan minutes.

How to fix this? How about having the providers of the video pay the carrier every time someone downloads a video stream, and then let the viewer watch stuff without having it charged against her data plan minutes?

That's the idea that AT&T put forward this week, and while at first glance it seems like a win-win for both consumers and brands, the move quickly came under fire from critics.

Sponsored Data

AT&T introduced the idea of "Sponsored Data" earlier this week. Its idea is that a video provider could subsidize the cost of carrying its content. 

Viewers will see a "sponsored" symbol in the status bar when they click on the content. They will see their usage on their monthly invoice labeled as "Sponsored Data." But all fees will be billed directly to the sponsoring company. 

AT&T officials said the plan plan gives customers a break on skyrocketing data plan costs. They argue that businesses will benefit by being able to reach more people -- because consumers will be more likely to engage with content they perceive as free.

"Customers love mobile content. Whether it's shopping, banking, entertainment, or personal wellness, mobile content is increasingly available for customers anywhere and any time," said Ralph de la Vega, president and CEO of AT&T Mobility, in a press release announcing the new service.

AT&T laid out a number of use cases for its new plan. For instance, companies in the healthcare segment could leverage Sponsored Data to unleash patient wellness videos. Retailers could deliver video that encourages customers to browse mobile shopping sites.

Other possibilities dreamed up by AT&T include content that inspires customers to test drive a new smartphone or tablet app, promotion for movie trailers or games, and attaching sponsored data access to products and services as a way to enhance customer loyalty programs. 

There was even a corporate enterprise pitch, encouraging firms with "Bring Your Own Device" policies to pay for employee data use for specific business-related apps and services.

The Dark Side

At first blush, AT&T's program seems like a boon for consumers, who theoretically will be able to access a lot more video on the cheap.

But critics were quick to lambast AT&T for trying to rewrite the rules of "net neutrality." They claim a sponsored data program defies the vision of the open internet and will favor big companies with deep pockets over smaller firms that can't afford the new charges.

Critics are also skeptical that the move will save consumers money. Let's say, for example, that Netflix signs on as a Sponsored Content partner. Yes, this means you'll be able to watch trailers or promo videos without taking a hit to your data plan minutes, since Netflix will be footing the bill. But the fear is that eventually Netflix will just pass along that cost to consumers by raising the price of streaming movies. 

Some also characterized the move as an end-run around data caps. Supposedly those caps were put in place to keep networks from becoming overcrowded and sluggish, but some see a more nefarious purpose. 

"This is but the latest example of how data caps are increasingly becoming used to threaten the open Internet," said Michael Weinberg, acting co-president of Internet advocacy group Public Knowledge, in a statement. "As AT&T CEO Randall Stephenson announced in May, data caps are all about forcing content creators to pay and are no longer about any sort of network congestion."

Weinberg called on the Federal Communications Commission to investigate data caps and gather basic information about their use. He said it is impossible for the FCC to examine the impact of AT&T's Sponsored Data announcement on net neutrality until it develops an understanding of data caps.

Free Press, another Internet advocacy group and media policy promoter, went even further, calling the AT&T program a "wolf in sheep's clothing."

"The reality is that it's not free," wrote Josh Levy on the Free Press blog. "AT&T has invented a new form of double dipping: It charges customers for monthly data plans and goes back and charges websites and content provides again for the same data. AT&T gets paid twice for the same product. Nice work if you can get it."

Eyes Wide Open

AT&T's Sponsored Data rollout did grab the attention of the FCC. At a talk at the Consumer Electronics Show, FCC Chairman Tom Wheeler put AT&T on notice that it would dig deeper into the ins and outs of the program.

"My attitude is, `Let's take a look at what this is, let's take a look at how it operates,'" Wheeler told the CES crowd. "And be sure that if it interferes with the operation of the internet, that if it develops into an anticompetitive practice, that if it does have some kind of preferential treatment given somewhere, then that is cause for us to intervene."

AT&T contends there is no ulterior motive to undermine net neutrality. It is adamant that Sponsored Data content will perform no differently than regular content -- meaning, companies that pay for Sponsored Data won't have their video put in a "fast lane" that streams their video at better speeds. And AT&T insists smaller companies will not be shut out or punished because they can't afford to pick up the tab.

Given the ultra-competitive nature of this category, it's likely that other carriers will jump in and try to keep up with AT&T. As that happens, we'll see whether there's a bigger -- and scarier -- price to pay for a free lunch of viral video. 

Originally published Jan 9, 2014 8:09:52 PM, updated January 18 2023