Mobile Net Neutrality

September 1, 2014

This post is a copy of a piece I wrote for SBI, and has been made free for the public. You can read the original post here

Description

In 2011, Google and Verizon released a joint statement encouraging regulators to enforce net neutrality for wireline networks but exempt wireless networks from net-neutrality rules. Although not formally legislated, these suggestions appear to be the de facto standard for internet access in the United States and most of the world. In Europe, mobile net-neutrality laws are working their way through the European Parliament. Much of the world has non-net-neutral cellular-service providers.

According to bandwidth manager Allot Communications, 49% of worldwide cellular providers provide some form of toll-free data to specific services or websites. Of carriers with toll-free websites, 65% had Facebook on the white list. Indeed, Facebook was a pioneer in toll-free mobile-web access, launching 0.facebook.com in 2010 with support from 50 carriers (that made the website data exempt) in 45 countries. Plans for unlimited access to certain services are common worldwide: For example, MNT in Cameroon bundles unlimited use of Facebook's WhatsApp instant-messaging service into prepaid plans, and Claro in Brazil offers a social-media plan that includes unlimited use of Facebook and Twitter.

In the United States, T-Mobile exempts popular-music services from its bandwidth caps. Although T-Mobile has made only the largest music providers exempt, CEO John Legere claims his goal is to make all music streaming exempt, and T-Mobile will white-list additional services that subscribers vote for (although the voting website has since come down).

AT&T offers a sponsored-data program, in which web services pay AT&T to make data traffic to their servers exempt from subscribers' data allotments, although few major web services have used this service.

Implications

The extent to which websites are paying or otherwise compensating mobile carriers to arrange free mobile access remains unclear. Many of these unique cellular plans or add-on packages may simply be an effort by cellular carriers to attract customers to avoid their data service's becoming a commodity (and therefore race to the bottom in price). These plans may simplify billing for low-end users who make limited use of mobile data and have difficulty in estimating their data usage, but the plans will irritate power users who make very dynamic use of many mobile apps and services.

Impacts/Disruptions

Sponsored data programs such as AT&T's are the most threatening to innovation because they grant any incumbent with large cash reserves a substantial advantage over startups, especially in data-heavy applications. For example, T-Mobile's free-streaming plan may harm music start-ups that aren't large enough to make it onto T-Mobile's white list. Significantly, free streaming could influence users' decisions by encouraging use of free streaming services in place of purchase of music tracks.

This post is a copy of a piece I wrote for SBI, and has been made free for the public. You can read the original post here