Here's Why AT&T's Latest Attempt to Protect Data Caps Won't Fly

AT&T really, really wants somebody to pay up for using its mobile data networks.

Jan 6, 2014 at 3:15PM

AT&T (NYSE:T) is hell-bent on keeping its wireless data customers under bandwidth caps. But that attitude destroys some of the most attractive features of your AT&T-connected smartphone or tablet. Why pay extra for a high-speed data plan if you're just running into the data cap after a couple of hours of HD video?


Ma Bell's latest scheme to protect its data cap idea without losing customers to less restrictive networks sounds great with the right spin: "Similar to 1-800 phone numbers or free shipping for Internet commerce, AT&T's new 'Sponsored Data' service opens up new data use options for AT&T wireless customers and customer-friendly mobile broadband channels to businesses that choose to participate as sponsors."

Under the "Sponsored Data" program, the high-bandwidth services you love can foot the bill for your huge downloads or media streams. Like toll calls or free shipping, the costs of making the system work are shifted to the service provider.

But I don't expect data sponsors to flood into this program. Here's why:

  • Press releases of this ilk tend to come with supporting quotes from launch-day partners. This release only talks about AT&T itself, devoid of supporting partner statements. It's fair to say that media streamers aren't exactly chomping at the bit to join this program.

  • AT&T expects customers to sign up for access to this program, rather than just including it by default. In the chicken-and-egg world of building a new service or product, AT&T is unlikely to get enough early adopters to make it worthwhile for data-hogging services to even consider joining up. Remember, gift cards are profitable because so many of them go unused. Microsoft dominated the web browser market for years simply by making Internet Explorer the default browser on new PC systems. Convenience is king, and making your customers do something is often a bad idea.

  • On that note, AT&T won't even list its bandwidth sponsors for you. Instead, each partner must notify AT&T's customers separately when they join the program.

    If Google decides to foot the bandwidth bill for YouTube videos on AT&T's mobile network, you need to look out for an email from YouTube. Then you'll need another confirmation from digital video giant Netflix. That's assuming both of them can afford to cover AT&T's inflated bandwidth rates in the first place, which is hardly guaranteed.

    And if neither of these digital media giants sign up for AT&T's new scheme, you can expect plenty of wireless users to just assume that the largest media services are included -- and then act shocked when their un-subsidized data bills arrive.

Data caps are designed to protect an outdated business model, and it seems unfair to make service providers and/or customers responsible for protecting AT&T's profit margins. Sprint made "unlimited" a selling point many years ago, and the company is still in business.

How many failed reactionary plans will it take before AT&T drops the data cap focus, too? Whatever the answer, AT&T just added another near-certain failure to the list.

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Fool contributor Anders Bylund owns shares of Google and Netflix. The Motley Fool recommends Google and Netflix. The Motley Fool owns shares of Google, Microsoft, and Netflix. Try any of our Foolish newsletter services free for 30 days.

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