In making this $14.99/month offering exempt from data caps for its own wireless subscribers, the Dallas-based telecom giant is engaging the exact sort of self-promotion that open-Internet advocates warned would happen after the Federal Communications Commission’s 2017 repeal of its 2015 net-neutrality rules.
“Although your company has repeatedly stated publicly that it supports legally binding net neutrality rules, this policy appears to run contrary to the essential principle that in a free and open internet, service providers may not favor content in which they have a financial interest over competitors’ content,” senators Edward J. Markey (D-MA), Ron Wyden (D-OR) and Richard Blumenthal (D-CT) warned in a June 4 letter to AT&T CEO Randall Stephenson.
AT&T defended this “zero-rating” arrangement by saying any other firm can buy into it.
“This is based on a Sponsored Data arrangement and is a program we offer on the same terms to any entities who wish to sponsor data for their customers,” spokesperson Jim Kimberly said in an email. “This is similar to arrangements some of our competitors have.”
There is a chance that AT&T will find it worthwhile to pay AT&T to promote an AT&T service. That is, wireless users might find that having HBO Max not count against the hard caps on the company’s cheaper wireless plans or the much higher throttling thresholds on its unlimited plans (up to 100 gigabytes) will motivate them to spend money on that service instead of Netflix
But the present and recent past of the wireless industry suggests that AT&T’s newest growth-hacking venture will only buy it bad publicity.
“AT&T’s whole strategy has been about owning both the content as well as the pipes to deliver it,” wrote Craig Moffett, founding partner at MoffettNathanson, in an email. “So I suppose it stands to reason that they would land on zero rating as at least one way to ensure at least the appearance of corporate synergy. “
Alas, he continued, zero rating isn’t much of an incentive these days: “At a time when most customers are on unlimited plans anyway, it’s not clear it will move the needle very much.”
This tactic is even less likely to work in the context of smartphone viewing, another analyst noted.
“If they’re going to watch TV—even if they’re watching it on their phone, they’re probably watching it on WiFi,” said Alan Wolk, co-founder and lead analyst at TV[R]EV (also a Forbes contributor). “And they’re not watching it that much.”
See also T-Mobile’s attempt to promote the Quibi smartphone video service by offering a year of it free to multiple-line subscribers. After a year, those who opt in will have to choose between keeping the $4.99/month Quibi as a freebie or getting Netflix as their no-cost bonus.
Given that choice, would you go with a service that expects you to watch on a hand-sized screen or one that welcomes you to tune in via the biggest display in the house?
T-Mobile did not provide numbers on Quibi sign-ups to date.
Then there’s Verizon
Considering the vast sums AT&T and Verizon have sunk into entertainment plays—the former burned $67 billion to buy DirecTV only to see it get chewed up by cord cutting before dropping $109 billion on Time Warner, while the latter has already written off over half the $9.9 billion it spent for AOL and Yahoo—the larger lesson here may be that telcos should avoid the content business as if were COVID-19.
(Disclosure: I’ve written for Yahoo Finance, one of those Verizon media properties.)
But as Moffett noted, a company trying to play in both communications and content will find it has goals that don’t necessarily mesh: HBO would do best if it’s available on every platform, while AT&T’s networks do best if they see the highest possible utilization.
And even a company with AT&T’s resources can’t throw its weight around that much: “They can put their thumb on the scale to help one business or the other on the margin, but it’s ultimately only a modest benefit.”