AT&T chose the 2014 CES event to introduce its new Sponsored Data program, which allows a 3rd party to partner with AT&T to offer content to consumers that will not impact their data usage.
Referring to it as “toll-free” data, AT&T believes this type of program will remove (or perhaps, lessen) the sensitivity to data usage which is prohibiting consumer’s consumption of certain content, while using mobile broadband.
I remain one of the few that still has an unlimited data plan – so technically – this should not even be a consideration for me. However, I find that when I am streaming video or downloading music and apps or even updating apps (activities which consume the largest amount of bandwidth) – I tend to do these when I am connected to a Wi-Fi network. Not so much because of the bandwidth, but typically due to speed – where it is simply faster than my mobile broadband.
Nonetheless, I will admit that I have not chosen to purchase a tablet with a cellular connection – primarily because my unlimited plan would no longer apply – and I tend to do my heaviest bandwidth intensive activities on my tablet rather than my phone.
Demand for Mobile Broadband Continues to Grow
According to Ericsson’s most recent Mobility Report (November 2013), the number of mobile broadband subscribers is expected to reach nearly 8 billion by 2019 or 86% of all mobile subscriptions. That compares to just under 30% at the end of 2013.
Additionally, in many markets, mobile broadband will be the only broadband connectivity for many consumers
As such, consumer consumption of video, web & other data via the mobile network is expected to grow 10-fold from 2012-2017, according to Cisco’s most recent VNI forecast.
So what is the real driver for “sponsored” data?
According to AT&T, it is an opportunity for businesses to better engage with customers and their own employees. The premise of this program is ultimately a marketing ploy – and perhaps a pretty good one.
According to AT&T, when sponsored content shows up on customers’ phones, a Sponsored Data icon would be displayed to show that the content costs them nothing to watch. Any data charges resulting from eligible uses will be billed directly to the sponsoring company; the customer simply enjoys their content via AT&T’s wireless data network.
Now the net neutrality advocates will claim that this squeezes out the little guy and forces consumers towards specific content or that specific content will take priority.
AT&T was clear to state that “sponsored” data would not get preferential treatment or prioritization of traffic. In fact, it stated that traffic is not impacted at all and this type of program is simply a new billing model where AT&T bills the sponsor for the data, rather than the consumer. “Sponsored” data will be delivered at the same speed and performance as any non-sponsored data content.
The Cost of Bandwidth
AT&T believes that a variety of industries such as healthcare, retail, media and entertainment and financial services will be quick to jump on this opportunity and why not? There are plenty of companies that are willing to shell out $4 million for a 30-second spot at the Super Bowl.
How much bandwidth would that buy?
Based on a survey of current mobile broadband packages across US carriers, the average cost of a GB of bandwidth is approximately $6.50 – so that 30-sec ad would buy about 616GB (if I did my math correctly!) of data.
And let’s face it – with the exception of downloading video – and we are really talking about a movie – not a snippet on YouTube – most applications do not require a significant amount of bandwidth.
But it would be nice when I have already purchased an app – that the bandwidth needed to update the app would be free for any updates.
Target Markets
Putting on my consumer hat – I can see a lot of opportunities for this type of service.
#1. It would be great if any paid app would be “sponsored” – but who pays? The App stores or the developers?
#2. Loyalty Programs – hotels, airlines, credit cards, etc. If I am paying an annual fee for a credit card – particularly those associated with some type of loyalty program – it would be great if I could access my account, create bookings, etc. bandwidth free. Or make it a perk of the higher tiers….
#3. Job Applications. Since so many businesses have put the job application process on line – it would be encouraging if access to the application site would be “sponsored”.
#4. Promotional Tools – the opportunities are endless for new companies to get consumers to check out their products and services.
#5. Remote Intranet Access – although many companies still cover the cost of mobile phones for its employees – for those that don't it would make sense if employees could access internal websites without data penalty.
These are just a few quick thoughts, but clearly the possibilities are as endless as the imagination.
Concerns
The biggest concerns that have been voiced are that these businesses will simply pass the cost of this type of service back onto the customer and that companies that could afford to offer “sponsored” data will be favored over those that do not.
The first part is possible. Yes, maybe the cost of an app will increase by a small percentage – but if the app is worthwhile, I would be willing to pay that difference – especially if the updates didn’t impact my bandwidth.
Yes, the big companies will likely be the first to adopt this type of program – but not necessarily. This may be the type of non-traditional marketing tools that start-ups are looking for – and like any marketing plan – they would simply need to decide who, what, where, when and how to determine their budget.
Personally, this will not drive my decision making on which sites I visit – it’s all about the content.
Finally, another concern is advertising – what will a consumer have to endure to get to this “sponsored” content? This is the tricky part.
For most businesses, I expect they will start small with their application of this service – to understand demand and the cost benefit that can be derived. Maybe it is just a competitive differentiator. But it is an innovative approach to testing new billing and engagement models. To be fair to businesses, it would be great if multiple wireless carriers offered such a program – then we might really see some innovation or at least more competition.