There's A (Preferred) App For That

A couple of weeks ago, AT&T was informed that they would have to allow shareholders to vote on whether the wireless carrier should commit to operating its mobile broadband network according to net neutrality principles. This week we learned just how much AT&T opposes internet freedom for mobile broadband.

The Wall Street Journal reported yesterday that AT&T is “considering a way to let the providers of mobile services pay for the cost of the data traffic associated with things like streaming movies and smartphone applications.” Right now, AT&T offers tiered data plans for smartphones: you pay up front for a certain amount of data per month, and get hit with fees if you go over. AT&T is proposing that makers of data-intensive apps pay AT&T a fee which would allow AT&T consumers to use those apps without it counting towards their data limit. AT&T's John Donovan told the Journal that it's “the equivalent of 800 numbers that would say, if you take this app, this app will come without any network usage.”

At first glance it seems like a big win for consumers. But the policy threatens to undermine the openness of the mobile internet and restrict subscribers' access to online media -- a significant concern, given mobile broadband's rapid growth and emergence as a key vehicle for media consumption.

Why Data Caps?

Back in 2010, AT&T made the switchover from unlimited data plans to tiered plans because, they said, the explosive popularity of the iPhone and iPad had put untenable stress on their network. In December 2009, AT&T said that three percent of smartphone users were using 40 percent of their network capacity, and that most of the “high-bandwidth activity” was from “video and audio streaming.” So they put the tiered data plans into effect to discourage excessive bandwidth usage.

But now they're creating a mechanism by which app developers whose products stream video and audio -- Netflix, YouTube, Spotify, or whatever -- can pay to allow AT&T subscribers to go back to their old data-gorging ways. If you argue that tiered data plans are necessary to alleviate congestion on overtaxed mobile broadband networks, and then roll out a policy that allows unlimited access to “high-bandwidth activity” mobile apps, you've kind of stomped all over your argument for tiered data plans.

Harold Feld of the consumer advocacy group Public Knowledge said AT&T's new plan “shows how fraudulent the AT&T data cap is, and calls into question the whole rationale of the data caps. Apparently it has nothing to do with network management. It's a tool to get more revenue from developers and customers.”

Not Neutrality

AT&T's proposed policy is a threat to the idea of network neutrality, which translates to a threat to consumers. The Open Internet Order passed by the FCC in December 2010 put into place net neutrality provisions for fixed broadband providers, mandating that internet service providers could not discriminate against (or favor) certain types of internet traffic based on financial or political considerations. The rules, however, left mobile broadband largely to its own devices, as the commission felt it needed a better sense of the direction and evolution of the mobile market before putting regulatory strictures in place.

AT&T's proposal would, in effect, favor the traffic from app developers who pay AT&T's traffic fees.

Think about this way: if you're an AT&T customer with a tiered data plan, you're already likely to be wary of using data-intensive apps out of fear of incurring overage charges. But suddenly you're granted unlimited access to, say, Netflix because they paid AT&T's traffic fee. That's a powerful incentive for you to use Netflix over other streaming video services, and it has nothing to do with the quality of the service provided, but rather the content provider's willingness (or ability) to pay AT&T.

It also creates an entry barrier to the app market, with the potential to choke off innovation. Established companies with deep pockets would likely be able to pay AT&T's traffic fees, but the same can't be said for small developers and start-ups. They would have to scratch together that money just for the chance to compete on the same plane as the larger developers.

The policy could enable AT&T to act as a gatekeeper to the wireless app market. As Time's Jared Newman sees it, the potential for abuse is staggering:

And it's a slippery slope. If AT&T's network gets congested, do you really think the carrier would slow down data speeds to its premium app makers? I would be shocked if the non-paying apps aren't the ones to get punished when there's not enough data to go around, as an added incentive for those who pay. Also, what's to stop AT&T from raising prices on app makers, or reducing the amount of non-sponsored data available to customers once everyone becomes comfortable with the whole arrangement?

The Double-Dip

Right now, if AT&T customers want to watch a movie on Netflix on their iPad, they have to pay AT&T for access to Netflix. Under AT&T's proposed plan, they would still pay AT&T for access to Netflix, and Netflix would pay AT&T for access to the customer. AT&T has thus figured out how to get paid twice for performing the same service.

And it's hard to imagine content developers not paying for that access. Remember that AT&T already put caps on the amount of data subscribers can use, so a developer that doesn't pay to allow unlimited access to their content is putting themselves at a competitive disadvantage. As GigaOM's Stacy Higginbotham put it:

Give consumers a $10 per GB overage fee and you've given them something to fear when downloading a mobile application. So if someone hesitates before playing Pandora or watching a YouTube clip, then half of AT&T's job is done when it comes to coercing developers to sign up for this toll 1-800 plan.

If you think this wouldn't affect you, as an AT&T subscriber, think again. When AT&T starts charging app developers for access to subscribers, the developers are going to want to recoup those expenses somehow, and you can be plenty sure those costs will fall squarely on consumers in the form of increased subscription fees or content restrictions. What's more, content developers already pay for their own bandwidth. So there's this cascading effect of increased costs in which developers will pay twice to access AT&T's subscribers, the subscriber will still pay AT&T to access the developer's content and will likely end up paying the developer more to offset the costs of providing said content to the AT&T subscriber.

AT&T's proposal hasn't been fully fleshed out yet and the company is being tight-lipped on the details, but it has the potential to put the wireless provider in the position of directly influencing which content customers can access on their mobile devices. That runs contrary to the ideals of an open internet and benefits no one.

Except AT&T.