[This post is by FMC contributor Greg Capobianco]
When someone else starts paying for something that you used to plunk down cash for, it generally looks like a win. But looks can be deceiving. In the following case, even what seems like a superficial consumer benefit could inhibit expression, innovation and entrepreneurship in the mobile music space.
According to the Wall Street Journal, telecommunications giant AT&T is considering a plan that would allow “providers of mobile services [to] pay for the cost of the data traffic associated with things like streaming movies and smartphone applications.” Right now, consumers directly pay for their own bandwidth usage, just as they pay for voice service and text messaging. (Whether that price is fair is another story.) But under the AT&T proposal, data consumed through certain apps would not count against a subscriber’s monthly allotment.
Additionally, AT&T has decided to modify the unlimited data plans available to long-time customers who had been “grandfathered in.” We have only recently been able to learn how truly restrictive those plans actually are. The company will now throttle a user after using 3 GB of data service on its 3G network — a new definition of “unlimited,” indeed. It’s not hard to see how this could suppress the extraordinary growth of innovative music apps on mobile devices. How can an industry be expected to expand when greater use of its services results in an increasingly worse consumer experience?
Remember that little thing called net neutrality? Where thousands of artists, indie labels and music fans rallied in support of keeping the internet a place where your next great expression or innovation could compete alongside the biggest companies? Well, because the FCC’s 2010 Open Internet Order explicitly excluded wireless networks from being subject to their guidelines, AT&T’s proposal would not run into any obvious regulatory hurdles. Instead, consumers would likely find themselves choosing amongst big, mainstream apps that could afford to pay the bandwith fee to AT&T. Smaller, independently created apps? Not so much.
Up ‘til now, mobile has been a hotbed of innovation for music. The pace has simply been astounding. For example, Pandora founder Tim Westergren said that when its app launched in 2008, use of the service nearly doubled overnight.
Now, consider what could have happened to Pandora if AT&T’s apps ‘n’ caps plan had been in place in 2008.
Popular streaming apps like the aforementioned Pandora, as well Spotify, rdio, MOG, etc., could quickly feel the effects of the new plan. Although some of these services have been around for a while now, they remain quite vulnerable to changes in their cost structures. Pressure by established music distributors to absorb the bandwidth costs of using AT&T’s network could turn their narrowly profitable business models upside down.
Even worse is the possibility that the next big app innovation may never get off of the ground because of this new scheme. If all of the big guys are willing to pay for a user’s bandwidth themselves, how much hope does the newcomer, who can’t yet afford that luxury, have at winning over consumers?
We have questioned the necessity of data caps on both wireline and wireless networks, especially in light of the basket of negative consequences that come with them. Last year, we joined our friends at Public Knowledge in sending a letter to the FCC asking the Commission to investigate how such limits are set and their potential impacts on the marketplace.
The combination of smaller start-ups having to compete against established players to offer a satisfactory customer experience, along with artificial usage limitations, does not foster an environment where mobile music can flourish. We need networks that offer independent creators and innovators access to a competitive and affordable broadband marketplace, mobile or otherwise.