Is free Internet data worth the cost?

Earlier this month, US phone and Internet giant AT&T announced its new Sponsored Data service, that would allow mobile customers to access certain sponsored websites or services, free of data charges – because the charges would be borne by the sponsor companies instead.

This is not the first time such a business model has been tried. Facebook, Google and even the non-profit Wikipedia have arrangements with mobile providers in certain developing countries to provide free access to their websites (or in telco speak, to “zero rate” that traffic).

But free isn't always the best deal. 63 It is always important to consider, if you're not paying, who is – and why? The consumer movement has never been about low cost at any cost. In particular, competition and consumer law protects consumers against low-pricing practices that can damage consumers or markets, such as predatory pricing (when this substantially damages competition in a market), and bait pricing (where an unrealistically low price is used to entice consumers to buy, but they are then induced to pay more).

Similarly the problem with the original example is that giving consumers access to selected content or applications for free, whilst charging for everything else, upsets the otherwise relatively level playing field that makes the Internet a platform for competition and innovation by a range of content providers – from small to large, voluntary to profitable, from anywhere in the world.

It makes it very much more likely that only the largest and most profitable content providers (it is any coincidence that Google and Facebook are already doing this?) will gain, and retain, the majority of traffic from mobile consumers, leaving behind smaller competitors and start-ups who can't afford to pay mobile providers to provide free access to their sites or apps.

Just as a polluting company offers cheap products by offloading the external costs of its pollution, so too mobile providers who offer free Internet content only from selected companies could be doing long-term damage to the online ecosystem.  Consumers are better off when they can choose for themselves what websites they want to visit and what apps they want to use, rather than having these decisions made in backroom deals between content and network providers.

This principle has been further threatened last week with the release of a US Federal Court ruling striking down rules that the US Federal Communications Commission (FCC) had formerly imposed to prevent all ISPs discriminating in favour of or against particular Internet content or services.  These rules were already looser for mobile providers, which was why AT&T was able to introduce Sponsored Data. Now that even fixed line Internet providers in the US have escaped the FCC's rules, we can only expect further degradation of the Internet as an open, neutral and competitive content platform.

Continue reading at "Net neutrality, and the cost of ‘free data’ for consumers" in Digital News Asia. Also download below the presentation on this topic delivered at the 2013 Asia-Pacific Regional Internet Governance Forum.

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