The Internet Could Suffer if Companies Start Paying Your Wireless Bill

Matt Rourke/AP

By John McDuling,
Quartz

| January 8, 2014

AT&T's new pricing arrangements could transform the economic of the entire smartphone ecosystem.

Sometimes, the most significant announcements get lost in the noise of celebrity meltdowns and shiny new product releases.

That was arguably the case this week when US telecom behemoth AT&T unveiled new pricing arrangements at the Consumer Electronics Show in Las Vegas, which could transform the economics of the entire smartphone ecosystem.

Under these so-called sponsored data plans, companies that provide apps to their customers will pay for the bandwidth used to consume their apps on smartphones, rather than data consumers paying for the bandwidth themselves. Already, three companies have signed up to do so: health insurer United Health, advertising company Aquto and software developer Kony Solutions, Reuters reports. For willing companies, the arrangement is a way to win the loyalty of its customers away from competitors; when an AT&T customer uses these companies’ apps on a wireless network, it doesn’t eat into their data allowance.

For years, telecom operators in the US and abroad have been trying to figure out how to charge app developers, who they claim have captured much of the value in the smartphone ecosystem by drawing hefty userbases, without being lumbered with the associated costs.

Wireless carriers spend billions of dollars acquiring spectrum and deploying infrastructure to operate their networks. When customers gorge on app use—AT&T claims that traffic on its network has increased 30,000% over the past six years—it puts strain on these networks and necessitates more investment just to keep them operating.

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AT&T's new pricing arrangements could transform the economic of the entire smartphone ecosystem.