Free Press and Public Knowledge would like the Federal Communications Commission to prevent internet service providers such as AT&T and Verizon from providing an innovative method of giving consumers more access to online content without taking a hit to consumers’ data plans. Ironically, the pricing method, sponsored data, has some precedence from back in the days when AT&T and other carriers offered 1-800 number services to small businesses. Unfortunately for consumers, Free Press and Public Knowledge use of selective memory is resulting in consumers receiving misleading information about the impact sponsored data plans may have on their buying power and consumer welfare.
As Richard Bennett describes it in a piece posted today, sponsored data plans, where a content provider would pay an internet service provider to allow the ISP’s customers to view certain pieces of content, is a fee shifting mechanism. Rather than consumers running the risk of running over their data caps when viewing, say a rebroadcast of my Florida State University Seminoles winning the national championship, the content provider, say ESPN, would pay Verizon to allow customer access.
How would a content provider benefit? If it can get more eyes streaming an event at no extra charge in terms of data usage, consumers may find themselves wanting to view other paid content or purchase an advertisers goods and services from ESPN’s website.
The internet service provider could also benefit because it is one less piece of content that it would have to pay for in order to provide to its subscribers.
Is there some precedence for this? For we old heads ( a group that the likes of Free Press and Public Knowledge don’t bother to hire it seems) we remember the 1-800 number days. Large and small businesses and even residential consumers purchased 1-800 number services from long distance carriers in order to incentivize customers to make the long distance calls necessary to place orders for goods and services. Heck, even I had one so that my fiance at the time and my mom could call me for free. No one bitched and moaned at the time about businesses using these numbers. It was good business judgment and smart competitors jumped on the band wagon and bought the services.
Fast forward over twenty years and all of sudden what is basically a 1-800 number service for content providers is a no-no in the net neutrality world. All of a sudden the “open internet” is under assault because internet service providers and content providers wish to exercise autonomy in developing a strategic partnership that can increase traffic while earning profits for shareholders.
Let’s take a closer look (let me pause here as I hold my nose) at some of Free Press and Public Knowledge’s arguments. I’ll start with Public Knowledge’s argument first because it is the most unconscionable. It comes from Michael Weinberg, Public Knowledge’s acting co-President:
“The FCC needs to protect consumers and creators from internet service providers (ISPs) who want to pick winners and losers online. This is but the latest example of how data caps are increasingly becoming used to threaten the open internet. 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. In December, Stephenson admitted to investors that they had addressed the network capacity issues that were used to justify data caps in the first place. It is time for the FCC to heed Public Knowledge’s over two year old call to investigate data caps and gather basic information about their use. It is impossible for the FCC to examine the impact of today’s announcement on net neutrality until it develops an understanding of data caps.
“When it was reported in May that ESPN was in negotiations with a major carrier to pay to be exempt from data caps, Public Knowledge highlighted that this was an obvious violation of net neutrality. The company that connects you to the internet should not be in a position to control what you do on the internet. AT&T’s announcement positions itself to do just that.
“In addition to being a ripoff for both consumers and content creators, AT&T’s plan erects a massive barrier in front of anyone hoping to be the next big thing online.”
The FCC needs to do what? At the first sentence it should be game over. Why would we want the government to step in and regulate a contractual arrangement? Aren’t firms free to enter into a fee shifting agreement like this? Is there a rule somewhere in the Communications Act that prohibits this? How does allowing free access to content violate net neutrality rules? Is there any mention of tier packaging or tolling of data speeds here? Public Knowledge’s argument is way off.
Let’s look at Free Press’ argument. This one comes from Free Press’ policy director Matt Wood (Take a deep breath. Now hold nose and dive in):
“While sponsored data will be pitched as a way to save customers money, it’s really just double charging. The customer is still paying for the connection, and won’t get a refund just because Facebook or YouTube or ESPN are also paying for some data usage now. Both the customer and the content or app provider are paying for the same data. Only AT&T makes out better.”
Really? Why wouldn’t the customer pay for their connection? And why should the customer expect a refund? If a cable subscriber got access to HBO free for six months as part of a promotion, would Free Press and Public Knowledge expect the customers access to the cable company’s network to be free also for that six months? I hope not. There are fixed and variable costs of the network that have to be recaptured regardless of the freebies a consumer may be receiving. Also, in the days of 1-800 number services, did consumers see their access line and subscriber line charges go to zero when they used an 800 number service? The answer is no.
Free Press and Public Knowledge are staffed by very bright and articulate people, but there comes a time when you have to allow reason to take over and take a break from singing at the windmills. AT&T’s sponsored data service is a strategic partnership that the FCC should not intervene in. Consumers won’t be harmed because it will be up to them to choose whether to access sponsored content. Smaller content providers are free to find alternative methods of financing their own sponsored data arrangements should they find investors or underwriters who believe that type of business model would be feasible for the content provider.
Fee sh, select