The tech blogs are abuzz with news of a nefarious plot by the nation’s second largest mobile network operator to increase its profits by lowering the prices consumers pay to access data-intensive content and services through the economic miracle of fee shifting. Instead of the consumer paying for a higher data cap in order to access data-intensive programming, the content provider will be able to pay AT&T on the consumer’s behalf. This has the left-wing interest groups such as Free Press (0) and Public Knowledge (1) and their allies in the blogosphere hoppin’ mad.
It’s a big deal, with coverage by all the tech blogs: The Verge (2), Gigaom (3), BGR (4), Digits (5), AppleInsider (6), The Switch (7), Examiner (8), Re/code (9), iMore (10), VentureBeat (11), Reuters (12), GeekWire (13), LAPTOP Magazine (14), WebProNews (15), MacRumors (16), Gizmodo (17), NYT Bits (18), TechnoBuffalo (19) and Gotta Be Mobile (20). Many are upset at AT&T for offering a plan that would violate their understanding of net neutrality, although the plan is carefully designed to conform to the FCC’s Open Internet rules; they just think the rules are too permissive in the mobile space. All AT&T is doing is shifting some of the costs of data from consumers to those content and services providers who want to offer what’s effectively a coupon to users on small data plans that makes it easy for them to try out new services.
People who have the $20 data plan with a 300MB cap would be able to try out video streaming services without exceeding their caps and potentially running into higher bills for more capacity. The plan is apparently interesting to ESPN, which already charges ISPs to allow their customers to access its video content at ESPN 360.
If your ISP doesn’t pay ESPN for its content, you’ll see this when you go to ESPN360.com:
If your ISP pays ESPN, you’ll see something like this:
ESPN owns the exclusive US rights to the BCS title game, so if you want to watch it live you need to have access to ESPN by cable, satellite, IPTV, streaming, or mobile. ISPs are naturally irked about having to pay an ESPN360 subscription fee for every customer they have when a relatively small number ever go there, but this payment model mirrors the deal that ESPN gets from cable operators, who pay fees to ESPN on the basis of total subscribers, not simply those who are sports fans and who aren’t offended by ESPN’s business practices (and the East Coast bias that accounts for its skimpy coverage of the perennial American League Western Division champion Oakland A’s.)
Hence, money transfers between content providers and ISPs aren’t unprecedented. It’s worth noting that EPSN probably has a larger share of the overall market for sports programming than any ISP or mobile operator has with regard to its market. The novelty of the plan is that it moves money in the opposite direction (from the content company to the ISP) for the first time.
It seems to me that this is an experiment that needs to take place, and that the outrage is premature at best. Some content distributors will clearly not choose to participate; in fact most won’t. But for a start-up company or an established firm seeking to expand the reach of its products, this is a reasonable move that is likely to add a great refinement to the mobile marketplace.
If it causes unanticipated problems down the road, there are a raft of enforcement options available to rein it in, but we won’t know the consequences until we try it. So let’s proceed in the interest of science.