AT&T Takes First Step in Toll Free Data World

AT&T has taken the first significant step towards toll free data services today, launching a service dubbed the “Sponsored Data” solution. The basic premise of such a service is that the consumer should not necessarily need to pay for the underlying data consumed to access a service. In other words, this has the potential to replicate what 1-800 numbers did for voice calls once upon a time. And indeed, what Amazon did with the original Kindle service, where it provided “free” cellular downloads of ebooks with its premium Kindles.

Of course, someone has to pay for the data consumed – hence the word “sponsored” – and AT&T’s goal is to encourage the content providers to support this. Early trial participants include UnitedHealth, which is looking to be able to improve customer support services by sending relevant health details to a customer’s phone as part of a call center service.

Toll free solutions were all the rage – as least for debates – two or three years ago, as carriers looked for ways to drive additional data use by a consumer base that was, perhaps, concerned about overage charges. The same case remains today, but the types of data that would truly require such a service are more focused around video. A video content provider, for example, could decide to launch a premium service where it supports “free” cellular data for the first couple of streams/downloads per month. While not something that Netflix would necessarily need to do (it currently dominates video streaming on tablets), an upcoming content provider could opt to take on such a solution in order to drive consumer acceptance.

There are a number of key caveats with the AT&T service. Firstly, to qualify, the customer must by using a post-paid service, not a prepaid product. Secondly, these are the really early days and the carrier has not unveiled compelling content partners to drive consumer awareness. The prepaid restriction is significant: these are the users that the carrier – and certainly the content partners – should be trying to attract as they are more cost conscious and therefore a better target for the solution. Another concern is that consumers could be confused about which content is free, or not, leading to customer service chaos.

And this raises another point: what AT&T is offering potentially works because the carrier does not offer unlimited data service. Sprint and T-Mobile do not need to provide such a service necessarily, thanks to unlimited smartphone data plans. Indeed, we can expect T-Mobile to shout long and loud about this key difference, turning what should be a key billing innovation from AT&T into a negative.

In other words, while this service has significant potential for AT&T, the carrier needs to tread carefully or pay a PR price for the innovation. Lining up an A list of sponsors will be key to turning this potentially interesting service into success.

Toll free data services have the ability to further turn the smartphone market on its proverbial head: theoretically, if there are enough compelling content solutions offering sponsored solutions, a carrier could offer smartphone services without the obligatory data plan. For example, what if Facebook were to try again, offering a “Facebook phone” with sponsored/free data access. Such as move would drive a very different billing solution, and potentially drive very different mobile behavior from the consumer base. But it’s a very brave step out from today’s data offerings…