ATandT Considering Offloading Data Costs to Service Providers: Report

AT&T is considering a 2013 business model in which mobile service providers would shoulder some of the costs associated with high data use, says a new report.

AT&T knows all too well that Apple iPhones, Long-Term Evolution (LTE) network rollouts and high-speed mobile broadband support don't come cheap. Faced with all three, the carrier is considering new ways to unload its cost burdens, including letting mobile service providers pay for the cost of the data traffic associated with some particularly burdensome applications and features, such as streaming movies, The Wall Street Journal reported Feb. 28.

AT&T Senior Executive Vice President John Donovan likened the cost model to 800 numbers or "freight included."

"A feature that we're hoping to have out sometime next year is the equivalent of 800 numbers that would say, if you take this app, this app will come without any network usage," Donovan told the paper in an interview at the Mobile World Congress event in Barcelona, Spain.

With AT&T and Verizon Wireless no longer offering unlimited data plans, consumers may need little convincing of the benefits of downloading a video from a content provider willing to pay the price of the data transmission. Convincing content providers of the perks may take a little more doing. However, Donovan says AT&T is seeing interest from companies that see the model as a way to court consumers who are nervous about data-intense services.

They see an opportunity, said Donovan, to "create new revenue streams that don't exist today and find a way to split them."

Least convinced of the benefits of the model are consumer-interest groups, which believe it could favor deep-pocketed app developers and content providers.

The issue traipses back into the net-neutrality space€”one extensively argued tenet of which is that, in the interest of maintaining a truly open Internet, special treatment shouldn't be given to those who can afford to pay more. Current Federal Communications Commission (FCC) rules are less stringent on mobile networks than landline ones, however, which would reportedly make it difficult to challenge such a model if AT&T were to go through with it.

If it does, it's difficult to imagine Verizon and others won't follow suit. With smartphone and tablet use rising, along with machine-to-machine connections, carriers are scrambling to find ways to better support the data-hungry ecosystems they've helped build, and to profit still more from them.

Spectrum is one key to this, and Verizon is the latest carrier working to convince the FCC to let it take on some more. Verizon struck deals to purchase spectrum from Cox Communications€”after it waived the white flag on its wireless business, finding the market too difficult to compete in€”as well as with the cable conglomerate SpectrumCo, a joint venture between Time Warner Cable, Comcast and Bright House Networks.

However, T-Mobile and nine public interest groups have asked the FCC to stop the deal, which they believe would unfairly benefit Verizon by giving it an "excessive concentration" of wireless spectrum.

Verizon, according to an Associated Press report, has defended the deals, saying that turning on currently unused spectrum will benefit wireless subscribers.

During the fourth quarter of 2011, AT&T enjoyed what it called a "blowout quarter for sales," bringing in net income of $6.7 billion on revenue of $32.5 billion.

Verizon, during the same quarter, posted the highest revenue growth in company history, bringing in $28.4 billion in revenue and signing 1.5 million new wireless customers.