AEI, Anticipating Net Neutrality Ruling, Defends AT&T Sponsored Data

By Michelle Maisto  |  Posted 2014-01-13

AEI, Anticipating Net Neutrality Ruling, Defends AT&T Sponsored Data

The American Enterprise Institute (AEI), a Washington, D.C.-based nonprofit focused on "expanding liberty" and "strengthening free enterprise," hosted a discussion Jan. 13, ahead of what it said is an expected decision on the FCC vs. Verizon suit from the U.S. Court of Appeals and in light of the controversy surrounding AT&T's new Sponsored Data plan, both of which focus on net neutrality.

A heavily debated concept, net neutrality promotes the idea of the Internet as an open and equal market in which Internet service providers can't give preference to some Internet traffic—can't slow down or speed up traffic, for example, or force sites to pay for users to access their content.

The members of the morning's panel were Jeffrey Eisenach, an economist and director of the AEI's Center for Internet, Communications and Technology (CICT); Richard Bennett, a visiting scholar at AEI; Roslyn Layton, a visiting Fellow at AEI's CICT in Copenhagen; and Bret Swanson, president of Entropy Economics and a visiting Fellow at AEI's CICT. All were critical of net neutrality as a workable concept—Eisenach, with other economists, has said there's no "economic basis" for it—and called foul on the way AT&T has been pounced on for supposedly violating it.

Introduced Jan. 6, Sponsored Data lets businesses cover consumers' data costs when they interact with sponsored content, whether a Website, a video, an app or more.

"When T-Mobile [mobile virtual network operator GoSmart] released a program that allows free Facebook access, it wasn't a problem. But when AT&T tries something like, that it's abuse of its market power," said Layton. She went on to downplay the issue as a first-world problem.

"Maybe we have too much time on our hands that we're worrying about these issues in the United States," said Layton.

Bennett called the controversy around Sponsored Data "manufactured," and added to the number of voices saying that the offer isn't really something new.

"If you get an [Amazon Kindle] and you have the 3G option, Amazon pays the carrier for underlying 3G service. You don't have to use the [data] on your cell phone service to receive books. … So there are precedents for [Sponsored Data]."

He offered connected cars as another example, saying drivers will enjoy Sponsored Data–like service to connect their cars to the Internet.

"The thing that bothers me about this is that the Internet is still an evolving system. … There needs to be freedom for engineers to innovate and develop ever more [sophisticated systems]," said Bennett.

Swanson took up the argument that Sponsored Data will give an advantage to deeper-pocketed players, saying it wasn't true.

AEI, Anticipating Net Neutrality Ruling, Defends AT&T Sponsored Data

Companies are always making strategic decisions about how to spend their money, he argued. An upstart Web firm could use Sponsored Data to "make a splash" and "reach consumers in a way they otherwise wouldn't be able to."

Later in the call he added, "To say Sponsored Data plans only benefit large, established providers is wrong. … We've seen any number of players over the years … use something like this, whether advertising or partnerships to enter new markets. … [Banning it] would be like prohibiting an upstart from advertising in a magazine. … To presume this could only benefit large players is incorrect."

Layton argued that the presence of new FCC Chairman Tom Wheeler, who was confirmed in October 2013, is likely to change things. The net neutrality debate has been ongoing for more than a decade, she said, and likely isn't something Wheeler wants to inherit.

"If I were the new chairman, I don't want the day-old bread," said Layton.

"Wheeler would like a game-changer and to not keep playing out the stalemate. There's an argument that we need net neutrality because it supports innovation, [but] that's impossible to measure," she continued.

Wheeler has said that the FCC will look into Sponsored Data, though during a Jan. 9 speech at the Computer History Museum in Silicon Valley, he suggested his distaste for over-regulating.

"I am not interested in protecting competitors from competition, nor am I interested in presiding over a festival of rent seeking," said Wheeler. "But I am committed to maintaining our networks as conduits for commerce large and small."  

Public Knowledge, a nonprofit consumer-advocacy group, also based in Washington, D.C., is among the groups that have argued against Sponsored Data and in favor of net neutrality.

"The way we see it, net neutrality is when the company that connects you to the Internet can't control what you do on the Web," Bartees Cox, director of media relations at Public Knowledge, told eWEEK after the AEI call. "We see what AT&T is planning to do as a violation of this. By excluding certain companies from a data cap, they have automatically limited choices for viewers and the opportunity to enter the online video market for new entrants."

As for the pending net neutrality decision, Cox added that experts said that an agreement wouldn't be reached before January.

"It seems that most people took that as them saying that they should have a decision by January. The truth is, nobody knows when a decision will come down. It could be tomorrow or the end of April."


Follow Michelle Maisto on Twitter.

Rocket Fuel