Why You Shouldn’t Get Too Excited About AT&T’s Toll-Free Data Plan

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AT&T announced its plan Monday to offer toll-free wireless data to certain websites that are willing to pay for customers to stream unlimited content. But there’s a catch: The Federal Communications Commission could scrap it to keep the internet more open and free.

AT&T, the nation’s second largest wireless carrier, first announced its “Sponsored Data” service in 2012. Like phone companies charging businesses to get free long distance calls via a toll-free 1-800 number, it will let app providers pay for the 4G their customers need to use their product. That gives them more freedom to use apps with data-guzzling services — like video streaming — without counting against customers’ data usage limits.

But while allowing more low-cost streaming of ads and movie trailers comes as an advantage to some free apps and mobile sites, it could be a serious disadvantage for others — especially startups.

Well-funded, established websites will be able to pay AT&T’s fee, but the added costs could prevent the next Spotify, YouTube or Vine from debuting. “YouTube could afford this now, but it never would have gotten off the ground if it had to pay such a charge in the early days,” said Guy Rosen, CEO for Onavo, a mobile data-compressing and tracking company, in a CNET article. “And what about the next video-sharing app? What happens to them?”

That’s where the FCC comes in.

Back in 2010, with the help of Congress, the FCC adopted three rules aimed at keeping the internet open and free for innovation. The rules mandate internet providers treat all web traffic equally, an idea known as net neutrality.

The first rule requires internet providers be transparent about how they manage and run their networks. The other two rules are aimed at preventing traffic censorship. That means that broadband providers aren’t allowed to block content. Also, those internet providers can’t “unreasonably discriminate” against or give preference to some sites over others.

AT&T’s toll-free data plan would technically violate that last part of the rule. But the FCC wrote the rules broadly, largely focusing on internet service provided in the home rather than on mobile devices. That was a huge blow for consumer advocates at the time, and is exactly what’s at play here. The only reason AT&T isn’t violating net neutrality is because the plan is designed for mobile internet customers.

“This would create a fast lane on the public internet for services that pay to have their traffic prioritized above other traffic, while all other internet traffic travels in the slow lane,” CNET reported in 2010 when the rules passed. But the “unreasonable discrimination” rule should prevent that.

Some advocates have already asked the FCC to take action against AT&T.

“The FCC needs to protect consumers and creators from internet service providers who want to pick winners and losers online,” said Michael Weinberg, acting co-president for Public Knowledge, a digital rights advocacy group, in a statement Monday. “This is but the latest example of how data caps are increasingly becoming used to threaten the open internet.”

The FCC might go after AT&T for breaking the “unwritten” rules, but it’s not clear yet. While net neutrality regulations don’t include language barring mobile internet providers from unreasonable discrimination, they did say any practice that violates rules meant for home providers undermines Net Neutrality’s core principles: “…other conduct by mobile broadband providers, particularly conduct that would violate our rules for fixed broadband, may not necessarily be consistent with internet openness and the public interest,” the FCC said in its policy. Regardless of the letter of the law, AT&T’s “Sponsored Data” could ultimately create favoritism — exactly what the FCC hoped the net neutrality rules would prevent.