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AT&T promises sponsored data services in coming months

An At&T logo is seen atop a store in Beverly Hills, California August 31, 2011. REUTERS/Danny Moloshok
An At&T logo is seen atop a store in Beverly Hills, California August 31, 2011. REUTERS/Danny Moloshok

By Sinead Carew

NEW YORK (Reuters) - AT&T Inc plans to give consumers options to save money on mobile data fees as soon as this quarter while offering sponsors a new way to entice consumers to use their services.

The company announced details on Monday at AT&T's developer conference at the Consumer Electronics Show in Las Vegas. The offering will let sponsors subsidize consumer data fees, which have gradually become more expensive in recent years as phone companies charge for mobile web-surfing based on how much data their customers download.

AT&T, the No. 2 U.S. mobile operator, compared the offering to 1-800 telephone services where businesses such as florists pay for inbound calls with a view to attracting more consumers.

It will start with deals from companies including a health insurer, an advertiser and a software firm but may expand to businesses ranging from media companies to retailers.

AT&T and its leading rival Verizon Wireless have both talked about the idea of offering sponsored data for two years, but the plans have been slow to materialize as the operators sought partners and worked out how best to offer the service.

AT&T's first partners include insurer UnitedHealth Group Inc, Boston-based advertising start-up Aquto and Orlando-based mobile software developer Kony Solutions.

It said the offering could also work well for retail, media, entertainment and financial services customers or could be used by employers aiming to sponsor their own workers' data usage for certain corporate applications.

Under the new service, AT&T said data charges from use of sponsored content would be billed directly to the sponsor and will appear on the consumer's invoice as sponsored data.

For example, AT&T said that UnitedHealth customers could view healthcare information or videos from their insurer without incurring data or customers using Aquto's service could watch ads without incurring data fees.

Kony customers, which include hoteliers, could potentially use its reservation systems to let customers book hotel rooms while on the go without having to pay AT&T for the airtime.

Mark Collins, AT&T senior vice president for voice and data products, said the service would complement existing data services for cost-conscious customers.

Collins declined to disclose financial arrangements for the service but said that agreements would differ between sponsors depending on their agreements and that some companies will engage in revenue-sharing deals with the operator.

ReconAnalytics analyst Roger Entner said UnitedHealth was a good launch partner for AT&T because it could provide an important service by giving lower-income consumers easier access to key health information.

"Consumers will like it. Americans always like 'free'," Entner said.

COMPETITION

But on Monday, congresswoman Anna Eshoo, a member of the House of Representatives Communications and Technology Subcommittee, warned that such a system could harm competition.

The "program by AT&T puts it in the business of picking winners and losers on the Internet, threatening the open Internet, competition and consumer choice," she said in a statement. "It's exactly why net neutrality rules came to exist in the first place and why these rules should apply equally to all forms of broadband Internet service."

"On its face, the ability for consumers to access ‘toll-free' content seems like long-awaited relief from frustrating data caps. But embedded in programs of this type are serious implications for fairness and competition in the mobile marketplace."

Jan Dawson, analyst at Jackdaw Research worried that unless AT&T provides strong safeguards there could be potential for fraud if providers of bandwidth-hungry applications falsely claim to be offering sponsored data.

But he said that the service was an important milestone since it would mark the first time an operator would charge someone other than its customers for its data services.

"It will have the biggest impact for applications involving video, since that's the biggest driver of bandwidth consumption, but it will be useful for other services too," Dawson said.

AT&T said sponsored data will be delivered at the same speed as any non-sponsored content. It will provide more details along with executives from the three sponsors it named to an audience of developers and media at the CES show in Las Vegas.

(Editing by Ken Wills and Eric Walsh)

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