Maybe AT&T could monetize FaceTime

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AT&T (NYSE:T) has faced loads of criticism ever since it announced plans to offer Apple's (NASDAQ:AAPL) FaceTime video calling feature over cellular at no extra charge only to its Mobile Share data plan customers. And now that public interest groups Free Press, Public Knowledge and the New America Foundation's Open Technology Institute intend to file a formal complaint against AT&T because they feel the operator's FaceTime policy violates FCC's net neutrality rules, one has to think AT&T could have played this better and maybe even generated new revenue streams while keeping net neutrality advocates at bay.

In a letter to AT&T, the group alleged that the operator's FaceTime restrictions will have a particularly negative impact on deaf and hard of hearing customers, and said, "Making mobile use of the application available only to those customers who pay for unlimited voice and text messages harms individuals and innovation alike."

AT&T implemented its new policy because Apple's iOS 6, used in the new iPhone 5, will enable FaceTime use over cellular for the first time. Previously, the app was limited to use over Wi-Fi.

I believe AT&T is sincere in wanting to protect its network from massive amounts of traffic that FaceTime could generate, but the FaceTime policy clearly has upset a number of subscribers and potential subscribers. I'm baffled as to why the operator issued what it had to know would be a vastly unpopular decree, particularly when its competitors are promising FaceTime access to all of their customers.

Given that many of AT&T's customers are now on tiered data plans, it doesn't seem likely that they would want abuse FaceTime and rack up massive overage charges for exceeding their usage caps. But AT&T is nonetheless concerned, perhaps because it figures customers on its grandfathered unlimited data plans are power users who will run marathon FaceTime video chat sessions over its cellular network unless they are totally prohibited from using FaceTime over anything but Wi-Fi.

Regardless, it seems there must have been a better way for AT&T to handle this. Carla Fitzgerald, vice president of marketing at Smith Micro Software, has suggested the operator could implement a new business model that would let anyone use FaceTime for a nominal fee. "The strategy of pushing their Mobile Share plans on subscribers in order to monetize specific apps over the network isn't going to fly. Instead, carriers need to modify their business models to make impulse data purchases easier," she said.

Fitzgerald suggests AT&T could charge users $1.99 for a half-hour of FaceTime use over cellular when Wi-Fi isn't available. That would let customers use the service on an ad hoc basis when they want and guarantee AT&T is paid for enabling use of this data-generating app over its networks.

I find some merit in that approach, but I'm not sure it would avoid the wrath of net neutrality's defenders, who I don't think would take kindly to the idea of a specific app, whatever it is, incurring an additional network access charge. But this would nonetheless be a more consumer-friendly option than blocking the app's usage for anyone not on a shared-data plan.

It might also get AT&T out of some potential regulatory hot water because the groups planning to file an FCC complaint are specifically concerned that AT&T's FaceTime restrictions violate the FCC's "No Blocking" provision, which is all about preventing Internet service providers from conducting outright blocking of services and apps that compete with their own products.

Given that the company had other options, I'm starting to wonder if AT&T's FaceTime policy really isn't about promoting its shared-data pricing plans after all but was instead conceived as way to encourage a showdown at the FCC in order to strike a blow against net neutrality. Seriously, why else would a single operator implement such a controversial policy that blocks most of its customers from using what some consider one of the iPhone 5's most attractive apps?

Whatever the background story is, there must have been a better way for AT&T to protect its network via pricing and policy and not raise so much unnecessary rancor. Suggestions for AT&T, anyone? Please feel free to post them below and also answer the poll on our home page.--Tammy