Verizon to Let Companies Pay to Provide Free Mobile Data to Customers

The sponsored data pilot will have companies that stream music or video pay for the data so customers don't have to use their data plans.

Verizon pilot project

Verizon is starting a pilot project that will allow its customers to stream online video or music content without having to use up the data in their personal data plans. Instead of having customers pay for the data that is used, Verizon will charge partner companies a fee to provide the data for Verizon's customers.

The new pilot project will begin within days, with a planned expansion of the service early in 2016, according to a Dec. 10 story by The Washington Post.

Competitor T-Mobile already offers its customers the ability to stream music and video without having to use up their data allotments each month. T-Mobile offers its Music Freedom free music-streaming service for customers, which began in June 2014 and now includes access to 44 music-streaming services. In November, T-Mobile unveiled its free "Binge On" unlimited video streaming service for customers who have Simple Choice cellular plans with 3GB of data or more per line. The fledgling service can stream video content from some 24 content providers to start, including HBO, Hulu, Netflix, Showtime, Sling TV, Starz and WatchESPN at 480p DVD quality. T-Mobile doesn't charge content companies to participate in its programs.

AT&T also has worked to provide similar sponsored data services to its customers in recent years, but few mainstream services are part of that effort, the Post reported.

The practice of providing free data to customers which is paid for by sponsor companies is called "zero-rating." The feature is apparently welcome for customers, but has been raising some legal questions when it comes to net neutrality laws in the United States because it could be interpreted as giving some carriers an edge. It is certainly possible that the practice could potentially be subject to legal battles at some point in the future.

In November, Tom Wheeler, the chairman of the Federal Communications Commission, said he is heartened by T-Mobile's free Binge On video streaming services for customers, calling them "highly innovative and highly competitive," according to an earlier eWEEK report. The FCC's net neutrality rules, which were adopted in February, have a goal of encouraging competition and innovation, and "clearly this meets both of those criteria," Wheeler said.

At the same time, Wheeler said his agency will be "keeping an eye on" the Binge On feature to ensure that it complies with the net neutrality rules, which mandate that all content must be delivered equally without favor to any particular providers or companies.

Questions about whether such services raise net neutrality flags were quickly raised by critics, who said they were concerned that Binge On or similar services could potentially and unfairly leave out other content providers from participating. These kinds of issues are likely to continue to surface each time new services such as Binge On are unveiled by carriers, which is why the FCC said it will monitor their progress and deployment.

Verizon also made big news in August when it said it will be dumping its long-standing two-year contracts for its mobile devices and services. Customers who want to maintain or renew their contracts will still be able to do so, but it will be an option and not mandatory, according to the company.

The contracts will continue to offer subsidized pricing on new devices that customers may purchase, while customers who choose the no-contract plans will be able to spread the full cost of their phone or tablet evenly over 24 interest-free months and will be able to upgrade anytime once the device is paid in full.

Earlier in August, Sprint also announced that it is ditching two-year smartphone contracts and subsidized, discounted handsets as a way to retain customers. Instead, Sprint now vows to stop offering contracts by the end of 2015 and move entirely to leasing plans that will allow customers to switch phones more often, according to an earlier eWEEK story.

The moves by Verizon and Sprint follow T-Mobile's move more than two years ago to end contracts for customers. AT&T also offers no-contract leasing plans.