YouTube to pay for your mobile data charges? Carriers betting on it

Mike Dano


NEW ORLEANS--Should content providers like Netflix and Google (NASDAQ:GOOG) pay wireless carriers so that mobile customers can visit their sites for free? Some wireless carriers seem to think so.

During this week's CTIA Wireless show, Verizon Communications (NYSE:VZ) CTO Tony Melone floated the idea of "toll free" data access. "There is room for an 1-800-type of service where certain destinations could offset the cost of the network to get customers to those destinations," he said, according to CNET. Melone declined to say whether Verizon has had discussions on the topic with content suppliers, but said the chances of such a scenario actually hitting the market were 51-49. Those aren't great odds, but it's a significant figure considering it would require Internet content providers to drastically change their cost structure and business model.

And Melone isn't alone in considering this idea. AT&T's (NYSE:T) John Donovan, the company's senior executive vice president of technology and network operations, told the Wall Street Journal in late February that the carrier was working on a service that would allow app developers to pay the wireless carrier directly for some of the data used by app consumers. And this week T-Mobile's Brad Duea, senior vice president of value added services, told the Journal that the carrier is considering a mobile video service that would be free to users and paid for by the content providers, advertising sponsors or T-Mobile.

And carriers in the United States aren't the only ones interested in getting content suppliers to put some money into the networks their services run over the top of. During the Mobile World Congress trade show earlier this year in Barcelona, Spain, the CEO of Indian carrier Airtel, according to CNET, suggested that Google's YouTube pay an "interconnect charge" similar to the termination fees network operators pay one another to complete a voice call. 

Of course, as Melone noted, this type of business model could run afoul of the FCC's net neutrality stipulations. But, as with just about any federal regulation, there could be wiggle room, and in the hotly competitive wireless market there are probably plenty of companies willing to push the envelope.

The more interesting question is: Would any content supplier be willing to submit to this model? Would Google pay a wireless carrier so a user could visit YouTube without worrying about racking up data charges?

There is precedent for this.

For example, Google in 2010 provided free Gogo-powered in-flight Internet service to flyers on AirTran, Delta and Virgin America planes in a promotion of its Chrome Internet browser. In a somewhat related play, Comcast's Xfinity branded streaming video service doesn't count against the company's 250 GB wired broadband Internet cap--unlike similar streaming services from rivals like Netflix.

But perhaps the most relevant example comes from Facebook, which in 2010 introduced a mobile site called 0.facebook.com that, on launch, was available to the subscribers of 50 different international mobile carriers for free. "Thanks to the help of mobile operators we collaborated with, people can access 0.facebook.com without any data charges. Using 0.facebook.com is completely free," Facebook wrote at the time. "People will only pay for data charges when they view photos or when they leave 0.facebook.com to browse other mobile sites. When they click to view a photo or browse another mobile site a notification page will appear to confirm that they will be charged if they want to leave 0.facebook.com."

1-800-Facebook, indeed.

Is the pendulum swinging in the favor of network operators and owners? Will Netflix eventually be forced to cover users' data access charges in order to thwart rival video services and endear itself to customers?

My guess is probably not, at least on a significant scale. While there may be a handful of startups that want to make a splash by providing free mobile access to their services, I'm guessing the majority of the Internet and content industry will balk at any model that involves significant access charges. Moreover, such a strategy may not pay off anyway--if mobile Internet searches were free through Microsoft's Bing, for example, I think most users would still pay for the few megabytes it would take to search for stuff on Google.

And perhaps more importantly, even if carriers do somehow manage to get over-the-top players to chip in for network expenses, that won't necessarily help them in the long run. It's relatively easy to switch wireless carriers--all you have to do is port your number--but leaving Facebook means losing personal data and connections to the people and things that matter. So far no wireless carrier offers anything like that. +Mike Dano

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