AT&T’s recent announcement about sponsored data was probably one of the main press stories from last month’s Consumer Electronics Show (CES) in Las Vegas. Let’s take a step back here – CES is all about the latest cool devices, web enabled trousers (there’s an idea) and smart cars that will drive you home. So why should an announcement about a new billing and charging model create such news, and the subsequent moans that ‘it’s not fair’ from the odd commentator? First off, it enables customers to consume content without having to worry about the data costs of that content. Second, it gives an option for content providers to make their offers more attractive to customers, and third, it gives a potential new revenue stream for mobile operators.
For years, many of us in the charging and billing industry have been talking about how operators can get a firmer foothold on the content value chain and not unintentionally become a dumb pipe. Turns out that one of the main answers was about charging and billing all along. By being able to offer content partners the choice to pay for data delivery gives operators a degree of influence with content partners, and provides an incentive for customers to use the ‘free’ content. For those people who bemoan this, it’s worthwhile noting that pricing is a basic tenet of marketing. Shopping centres offer free car parking in order to attract more customers. Many people shopping on-line will spend a bit more in order to qualify for free shipping. In these cases it’s not only the consumer that benefits; the on-line store benefits and the shopping centre profits as they get more orders and traffic, even though they’ve got to pay for the shipping costs, or pay a fee to the car parking company.
This is the same offer for content providers. By paying delivery charges then they’ll profit from increased usage, traffic and advertising which will all drive revenues upwards. If the delivery charge is too high, it will affect a content provider’s margins, and they’ll either look to negotiate more favourable rates, or decide it’s not worth it. The point to make is that they’ve got a choice.
Like content value chains, mobile advertising has been discussed as the next big thing for the last ten years. But with LTE it looks like it could be starting to take off. But while advertisers are getting all excited about LTE and its ability to deliver video to smartphones, some ad companies have realised the potential of too many video ads driving up a customer’s data usage and eating up a customer’s monthly allowance. So we’re now seeing mobile advertising become somewhat less mobile as some advertisers have now decided that video adverts to LTE devices go over wi-fi only. This sort of messes up the opportunity for location based ads as most wi-fi connections to LTE devices are in the home or workplace. Sponsored data opens up the potential for mobile advertising to be, well mobile, with advertisers footing the bill for the delivery charge, without the fear of customers getting hit with overage charges or having their speed throttled for watching adverts.
The potential for sponsored data is significant. It’s not just about getting advertisers to pay for mobile ad delivery charges, or having content providers pick up the data tab: education and health apps are obvious examples of social applications that could be delivered using sponsored data. As for the argument that the customer is buying the bundled data in the first place, so the operator is effectively getting paid twice, there will no doubt be cases where a customer doesn’t use up his monthly data allocation and avails himself of a sponsored data service. But this is missing the point. The existing model where the customer pays for all data is very much stacked against the customer, so many organisations are not taking full advantage of mobile as a communication and delivery mechanism (e.g. healthcare providers and even advertisers). The opportunity here is to give the customer the choice, to give the content provider an extra marketing option and to enable the mobile operator to establish their place in the value chain.
All this from a new charging and billing process. How cool is that (as they say in Las Vegas).
Martin Morgan
Thanks Martin
Interesting to see that sponsored data is coming under fire from politicians and the FCC for potentially contravening net neutrality principles (http://www.theregister.co.uk/2014/01/13/att_plays_down_net_neutrality_concerns_over_sponsored_data/). This seems to imply that operators should not be allowed to offer any kind of competitive advantage to OTT partners, whether it’s special tariffs, network QoS, access to customer insights etc.
How crazy is that? (as they say in Las Vegas – or even in Dublin). Apart from making billing uncool again, forcing operators to become dumb pipes isn’t going to provide any benefit to consumers. Conversely (as your article points out) allowing operators to add value to OTT services running over their networks can create a win/win/win for operators, OTT players and consumers alike.