What is ‘free data’ and why it matters to future of innovation

The way we consume content has changed and consumers have a variety of options thanks largely to innovation that has occurred over the last decade. And with the increased demand by consumers for content on the go and their desire to cut their cable cords, more traditional media companies are adapting and making efforts for their content to be available across any device, says Joshua Baca, senior vice president at DDC Public Affairs.

According to a recent study, over 80 percent of smartphone users stream content on their devices, and users younger than 25 consume on average, 6.2 GB of data a month for video streaming. This trend is forcing internet service providers (ISPs) to adjust their business models. They have begun to offer their customers “free data” plans that allows streaming content from certain sources without it counting against their monthly data caps they pay for.

Recently, AT&T’s DirectTV launched DirectTV Now, a new online streaming cable service that allows consumers to watch cable on a device of their choice, like a smartphone or a TV streaming device. Verizon has a similar service with Go90 and T-Mobile offers similar packages with certain content providers.

All of this seems positive for consumers on the surface, but it is reigniting the long debate over net neutrality’s rules for an open internet. It’s also drawing scrutiny from regulators. On Dec. 1, the Federal Communications Commission (FCC) wrote to AT&T and Verizon expressing concerns that their free data plans could be in violation of net neutrality by giving an unfair advantage over to each company’s own content. AT&T noted that the FCC has no clear policy against such promotional packages.

All of this is occurring on the heels of major consolidations, such as Comcast with NBC Universal, and the proposed merger between AT&T and Time Warner. Verizon recently acquired Yahoo and AOL. The trend is clear and ISPs see an advantage of owning both the pipes and the content.

Under the Obama administration, FCC decisions like opening up the market for set-top boxes and President Barack Obama’s continued support for net neutrality, has yielded the perception that they are friendlier to the platform providers over the ISPs.

But the FCC under President-elect Donald Trump is likely to look very different. Current Chairman Tom Wheeler is expected to step down and the President-elect’s FCC advisory team has been a vocal opponent of net neutrality.

If predictions prove correct and the regulations are softened or eliminated altogether, the potential merger of AT&T and Time Warner, ISPs and content providers, could become the new normal.

The debate over an open internet and free data will have massive consequences for the future of innovation. Will emerging content-only companies thrive under this new model? How will future start-ups be disadvantaged by such a model? It’s clear that the decisions the next administration makes on the net neutrality and mergers will dictate that direction.