When I hear that somebody’s passing out free stuff, my usual reaction is, “Two, please.” But I don’t work at the Federal Communications Commission, which is casting a suspicious gaze upon some US telecom firms who are handing out free Internet bandwidth to their customers.
Most customers of Comcast Corp., AT&T Inc., and T-Mobile USA Inc. pay for a limited amount of digital data each month. But all three companies have begun letting customers download certain kinds of data with no limits.
The FCC announced in February that it would henceforth regulate the Internet like an old-school public utility. The new rules are being challenged in federal court, but in the meantime, the agency will decide whether it’s all right for Comcast, AT&T, and T-Mobile to give away free stuff.
On Dec. 16, FCC Chairman Tom Wheeler sent letters to executives of the three companies asking them to explain themselves. Wheeler stressed that he hasn’t launched a formal investigation. But Wheeler worries that the free data giveaway could give these giant companies an unbeatable advantage over smaller rivals.
Well, cry me a river. Fairness is overrated, especially in business. If a bigger, richer company can offer better products and services than its poorer, smaller rival, bring it on.
In 2014, T-Mobile launched Music Freedom, a program that lets its cellular customers listen to streaming music all day long, from leading music services like Apple Music, Pandora, iHeartRadio, and Rhapsody, without affecting their data cap. Then in November of 2015, T-Mobile doubled down with Binge On – unlimited watch-till-your-eyes-bleed video streaming from a host of providers, including Netflix, Hulu, and HBO.
T-Mobile’s data giveaways have pumped up its market share. Back in 2011, the company had just 33 million subscribers. Today, it’s got 61 million.
AT&T also is dabbling in free data, for the benefit of its advertisers. According to an October report in the New York Times, advertisements account for half the data you download when visiting the most popular news sites. And downloading all those ads devours your monthly data quota. No wonder half of Americans now use ad blocking software, leading to billions in lost revenues for ad companies and website operators.
So AT&T is working with a pair of Boston-area companies, Tube Inc., and Aquto, to let advertisers cover a user’s data costs. Visit a site that uses DataMi, Tube Inc.’s “sponsored data” service, and whatever appears – text, audio or video – doesn’t count against your cap. Advertisers are hoping we won’t block ads that cost us nothing.
In October, AT&T joined with Aquto to release “Data Perks,” an app that pays you in data when you sign up for retail offers or look at online ads. For instance, you can add 54 megabytes of data to your monthly quota by watching a demo of Rosetta Stone language learning software, or earn 1.2 gigs if you purchase five Disney movies.
Meanwhile, Comcast has caught the FCC’s eye with Stream TV, a cable alternative service that the company is testing in Massachusetts and several other states. Stream TV is available only to Comcast Internet subscribers. For an additional $15 a month, they can watch premium channel HBO and a variety of local broadcast channels on their Wi-Fi-connected devices, including computers, tablets, and smartphones, but not on a standard TV. It’s Comcast’s attempt to rope in “cord-nevers,” the people who have never subscribed to traditional cable service and perhaps never will.
But unlike other video streaming services, Stream TV is not subject to Comcast’s Internet data cap. Watch a lot of Netflix or Amazon Prime, and you might have to pay for extra bandwidth; with Stream TV that’ll never happen. Critics rightly say that this gives Stream TV an edge over rival streaming services. They hope the FCC will use its new Internet authority to shut the service down.
But Comcast says that Stream TV isn’t an Internet service at all. The shows are transmitted to customers over the standard cable system, then pumped over the household Wi-Fi network. If the programs never touch the Internet, the FCC’s tough new rules are irrelevant, and the cable company can do as it pleases.
The FCC may allow these experiments with free data to proceed, but merely studying the issue is kind of a drag. It may lead Internet companies to hesitate about introducing the next new idea that might trouble the sleep of some regulator in DC. And that’s too bad, because the only thing I like as much as free stuff is new stuff.