AT&T’s Terrible Plan to Bill App Makers for Your Data Use

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AT&T thinks it’s figured out a new way to make money off the rise of smartphones: Instead of just having consumers pay for mobile data, AT&T plans to allow app makers to cover the cost of data themselves, so it doesn’t count against users’ plans.

For example, if Spotify pays a bunch of money to AT&T, a Spotify user with a 3 GB per month data plan won’t get any closer to his or her limit when streaming music through the service. Speaking to the Wall Street Journal, John Donovan, AT&T’s senior executive vice president of network and technology, said app makers might choose to pay for data in hopes of luring new customers. “It’d be like freight included,” he said.

(MORE: FCC Passes Ruling to Protect Net Neutrality)

Net neutrality advocates are beside themselves with outrage, and rightfully so, for this is a scene out of their worst nightmares. AT&T would be fostering an Internet that favors the highest bidder, rather than the best service. It’s exactly what the government’s net neutrality rules are designed to prevent, except not all the rules apply to wireless data, so AT&T can essentially do what it pleases.

To put this in real world terms, let’s say Hulu decides to pay AT&T for subscribers’ data use, but Netflix does not. Users will gravitate towards Hulu regardless of how its video selection compares with Netflix. New video services will have a harder time getting off the ground without paying the toll to get noticed.  If you’re an app maker who wants to compete, you’ll have to pay.

Meanwhile, the money must come from somewhere. If a service like Netflix has to pay AT&T to stay competitive, that results in either less money Netflix can spend to acquire new content, or more money it must charge users to cover its additional expenses. Either way, consumers lose.

And it’s a slippery slope. If AT&T’s network gets congested, do you really think the carrier would slow down data speeds to its premium app makers? I would be shocked if the non-paying apps aren’t the ones to get punished when there’s not enough data to go around, as an added incentive for those who pay. Also, what’s to stop AT&T from raising prices on app makers, or reducing the amount of non-sponsored data available to customers once everyone becomes comfortable with the whole arrangement?

Supporters of AT&T’s plan might argue that competition makes everything okay. You don’t like what AT&T is doing? Take your business elsewhere. Unfortunately, wireless carriers tend to copy each other. AT&T switched to tiered data plans in 2010, and Verizon followed a year later. All carriers jack up their prices for text messaging, even though it costs them practically nothing. If AT&T’s app plan becomes reality, and people don’t go ballistic, you can be sure other carriers will follow along. And the Internet will be worse for it.

(MORE: AT&T Kills $5 Incentive for Data Cap, Adds Data)