AT&T Plan to Bill Content Providers for Network Time Sparks Interest, Concerns

Would you be more inclined to download a movie through Netflix (NASDAQ:NFLX) or to access Pandora’s (NYSE:P) online music website via your smartphone if the companies paid the mobile data costs?

AT&T (NYSE:T), the nation’s No. 2 carrier, figures you might, and has a plan to find out for sure. In an interview at the Mobile World Congress in Barcelona this week, the carrier’s head of technology, John Donovan, told the Wall Street Journal that AT&T is trying to sell content providers on a program that would have them pick up the tab for the time their members spend accessing their services. If the plan takes hold, Donovan said, it would open new revenues streams for both AT&T and the content providers it partners with.

“A feature that we’re hoping to have out sometime next year is the equivalent of 800 numbers that would say, if you take this app, this app will come without any network usage,” Donovan told the Journal.

Most wireless carriers in the U.S. subsidize phone sales but count on fees from data-plan contracts for smartphones to drive revenue growth. And they have been looking for new pricing models to maximize profits as more consumers turn to mobile devices to access the Internet for social networking, games, and a variety of downloads.

Carriers also say they’re grappling with rising data traffic that can occasionally compromise the reliability of their networks. Last week Verizon’s (NYSE:VZ) 4G LTE (long term evolution) network suffered its fourth outage in three months. The company hopes its plans to buy spectrum from Comcast (NASDAQ:CMCSA), Time Warner Cable (NYSE:TWC), and privately held Cox Communications and Bright House Network will, if they pass regulatory muster, help remedy that.

It’s not clear at this point if AT&T’s data-fee proposal for service providers would end up taxing networks further. It’s also not clear subscribers would be more likely to download a new song or movie if their content providers baked data-usage costs into their service fees.

Some consumer advocates say they are concerned that AT&T could stifle competition among content developers, shutting out smaller players who don’t have the financial backing to subsidize subscribers’ data usage. “You have to raise all this additional capital to reach the customer or alternatively you have to compete with well-established players who can afford to pay,” Harold Feld, legal director for consumer group Public Knowledge, told the Journal.

In an opinion piece posted in Time’s Techland forum, tech blogger Jared Newman, declared that “If a service like Netflix has to pay AT&T to stay competitive, that results in either less money Netflix can spend to acquire new content, or more money it must charge users to cover its additional expenses. Either way, consumers lose.”




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