Is AT&T's 'Sponsored Data' Evil?

NEW YORK (TheStreet) -- Tech reporters, unlike finance reporters, were able to leave the East Coast icebox this week and go to fabulous Las Vegas for the Consumer Electronics Show.

There, instead of discussing consumer electronics, they got to fight over a service, AT&T Wireless's (T"sponsored data" program

The idea is that, instead of charging users for receiving data, AT&T will charge the people pushing the data. For example, video services can pay AT&T to give you a price break on watching a movie. App companies can pay to let you use their apps for free.

It's not so much that you're having to watch ads in order to get free stuff. You probably do that already. But with sponsored data you get free stuff if companies pay AT&T to make it free for you.

Some analysts, like Om Malik, call this "double-dipping," a dirty deal that will kill start-ups in favor of incumbent services like Facebook (FB). Others, like Scott Cleland, call it no different from any other advertising

Sponsored content is based on "data caps," a limit on how many bits you can download each month, which AT&T and other mobile carriers have been imposing for a few years now. The idea is that AT&T won't count data against the caps if the sender pays to get the data to you.

There's no real cost to AT&T in data caps, other than accounting for them. It doesn't really cost AT&T more to move big hunks of data than small ones. With mobile, we're talking about turning on radios. Once the infrastructure is in place, the cost of turning on a radio is practically nil. And as technology improves, it gets even cheaper.

Now, why should advertisers do this? Data caps pretty much only matter if we're talking about video files. To download things like this column, such caps are irrelevant. And this only involves mobile networks. If I'm using WiFi it's irrelevant. If I'm on a wired connection it's illegal, because the costs of switching carriers is so high.

For now, this also only applies to AT&T. But there's an assumption that the other carriers will follow suit, as airlines did with baggage fees, seeking a new money stream from video and app companies desperate to subsidize consumers' viewing pleasure.

But why shouldn't T-Mobile (TMUS) or Verizon (VZ) or Sprint (S) advertise higher caps to consumers, even unlimited data, and make this irrelevant? This starts to sound like a great reason for me to drop AT&T, not use it.

In its press release , AT&T suggested app developers might use this to create a free "teaser" rate for using their apps, or that movie companies might offer trailers free, or that it could be used to build customer loyalty.

Will it? That's the unanswered question. How much of my data use is going to be sudsidized in this way? How much value are you creating for the people paying for the download, and how and where do they make up that value?

No matter what the nominal price of watching something, there's always a price for it on the Internet. That price is time. This is especially true for video, which requires full attention. I pay for video with time. The more valuable I am as a consumer, the more valuable that time becomes, both to me and to those who want to sell me things.

There is no such thing as "free" content, sponsored or not. There never was. You pay for it with the time it takes you to absorb it. What app developers, what mobile "content providers" want are pieces of your time, and the assumption is they will pay AT&T for it, and that you will give it for a lower mobile bill.

But, as with Web advertising, which people long ago learned to ignore, time is more valuable than the subsidy. As we increasingly value our time, we will increasingly resist "sponsored content", just as we increasingly resist other forms of Web advertising.

And when the likelihood of creating value for the downloader becomes less than the cost of the download, sponsored content will die a natural death. I suspect that will come sooner than anyone now expects.

The cost of moving data keeps declining. The cost of my time keeps going up. This "sponsored content" business may have already passed its sell-by date.

At the time of publication, the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

 

More from Opinion

Tuesday Turnaround: Micron, Autonomous Driving, and J.C. Penney

Tuesday Turnaround: Micron, Autonomous Driving, and J.C. Penney

Cable Stock Investors Should Keep an Eye On Wireless Broadband's Rise

Cable Stock Investors Should Keep an Eye On Wireless Broadband's Rise

Trump Blinks on China Trade War That's Looking Harder to Win

Trump Blinks on China Trade War That's Looking Harder to Win

Monday Madness: GE, China, and Micron

Monday Madness: GE, China, and Micron

Attention 60 Minutes: Google Isn't the Only Big-Tech Monopoly

Attention 60 Minutes: Google Isn't the Only Big-Tech Monopoly