Sponsored data: threat or opportunity?


One of the major problems mobile users face is that there is usually an imbalance between the data allowance included in a mobile contract and the requirements of popular mobile applications. As the network evolves and applications using video, pictures and sound become more popular, users will need a higher data allowance.  The solution to this problem, until now, has been to move users to higher tariffs or charge for the additional data usage. New alternatives propose ‘sponsored data’ as a way to fund or subsidize mobile browsing.

The idea is simple: companies would pay the mobile operator for the data usage associated to browsing the sponsored content. For example, a company could sponsor the delivery of a value added service, meaning the end user could consume the sponsor’s videos without that having any negative impact on the user’s data usage allowance. Or an online service, such as a streaming platform, could subsidize or cover the cost of internet browsing to promote its platform. This is a very attractive proposition for users.

Network Neutrality

Here comes the controversial part of this story. A ‘sponsored data’ service was announced recently in the US, but perceived by some as a form of discrimination against companies not involved in the deal.  While large companies might pay to support mobile browsing of their content, others like start-ups and smaller players would not be in a financial position to offer a similar arrangement. From this point of view, sponsored data would undermine the unwritten principle of ‘net neutrality’, which prescribes that the network should be neutral and not prioritise certain content, sites or platforms based on financial criteria. 

But perhaps this is not so controversial after all. To date, only a few companies have made such arrangements with telecoms providers. Furthermore, companies sponsoring data do not get better access to the network: their bandwidth and content are not prioritised.

In Europe, there is a range of ‘sponsored data’ services that have been welcomed favourably. Telia Sonera has a special agreement with Spotify that allows customers to use the music service without impacting their mobile data allowance. Telenor has a similar arrangement with Facebook. In Spain, customers of Tuenti Móvil, a Telefónica VMO, can use up to a Gigabyte on the Tuenti social app in addition to their usual mobile data allowance.

Also, this is not exactly a new business model. The sponsored data model is similar to the ‘pay walls’ used by newspapers and other news portals, which allow users to consume a restricted number of articles per month or gain unrestricted access after paying a subscription fee.

The quality of access to information

In the United States, a federal court ruling recently removed the last barrier blocking more aggressive business models related to mobile data. According to the court ruling, operators can set streaming deals, allowing companies to pay to stream their products to online viewers through a faster, express lane on the web – contradicting the  point of view of the Federal Communications Commission.

The debate will continue and focus not so much on the content itself, but the way we get access to content and the quality of communications – especially given the use of mobile data is expected to increase even further. The only thing that is certain is that the content is as important as the infrastructure that allows us to reach it.

 Previously featured on Colt Blog.

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