Sandvine submitted comments on July 14 to the FCC’s latest Notice of Proposed Rulemaking (NPRM) on the Open Internet. Much of the NPRM focuses on legal questions that others are better placed to address. However, when it comes to real-world experience with the FCC’s notion of Commercially Reasonable Practices, Sandvine draws on some significant experience.
As I pointed out in my last blog post, the FCC has been paying undue attention to the (so far) commercially-uninteresting and technologically-unfeasible notion of Pay for Priority while other Commercially Reasonable Practices get deployed. One such practice is “sponsored data”.
Sponsored data is the notion that some third party pays for the cost of the bandwidth to deliver content or applications to the end user. For an operator in Mexico, Sandvine supported a trial promotion whereby Coca-Cola would sponsor a fixed amount of data for anyone buying their drinks within the promotion period.
Sandvine has been working with telematics and car companies whereby the car manufacturer would sponsor the cost of sending diagnostic information over the network. In addition, the user could opt to pay for certain in-car-only applications and could also subscribe to full Internet access in the car.
While Sandvine is not involved, in the U.S. and elsewhere, Tesla has been sponsoring Remote Diagnostics for its car owners on an opt-in basis for some time. GM OnStar has been doing this for many more years. For years, Amazon has been offering free 3G wireless connectivity by sponsoring the data charges for users’ downloads of its book library to the Amazon Kindle. Amazon pays the operator for the bandwidth, not you or me.
One argument against Sponsored Data is that the small edge providers could not afford it as much as the big guys. Of course this proposition is true universally, across every aspect of business in all markets, which in no way makes it inherently unfair. The big guys can afford more advertising, a better technological infrastructure (including co-locating servers) to deliver their content and applications with better performance, and they can negotiate better deals with suppliers to name just a few advantages.
Size is a benefit of success in all free markets, which doesn’t make it wrong, as long as there is no structural barrier for the little guy to become big. Sponsored data does not represent a structural barrier. In fact, adoption to date of AT&T’s Sponsored Data plan would seem to suggest the opposite – smaller application providers, like Syntonic and Aquto (hardly household names), have been amongst the first to sign up. According to the well-read industry publication GigaOm:
“So far we haven’t seen any big internet companies like Netflix, Amazon or Google rise to the bait, but we have seen a few examples of smaller companies exploring new business models with sponsored data at their center.”
While there is no requirement in any business to make it easy for someone small to over-compete against someone large (they normally have to have some sustainable disruptive advantage), with offerings like AT&T’s where sponsored data is easily and rapidly available (like a 1-800 number), it may accelerate such a disruption if the value proposition of the new app/content/service supports it.
With sponsored data, small application and content providers could participate to the extent they can afford. As long as the terms, such as the price per MB, for sponsored data are not unduly discriminatory against small edge providers, everyone can participate to the extent they deem commercially sensible. Wouldn’t a new game developer be interested to pay for some of the cost of its new game downloads? Any application that includes advertising as part of the business model would have an incentive to get that app into users’ hands as quickly as possible – and sponsored data could be one strategy for that.
Dear FCC, say no to haters of sponsored data.