This week, AT&T ended its controversial “sponsored data” policy, which exempted use of the telecom’s streaming video services, notably HBO Max and AT&T TV, from counting against data caps of AT&T wireless and wireline internet products. 

It’s unclear as to specifically how many AT&T customers this will impact. But it doesn’t appear that it will be many.

On the mobile side, AT&T has been promotionally tying HBO Max only to unlimited data plans. Meanwhile, on the wireline side, the telecom has been bundling HBO Max, as well as its IP-based pay TV service, AT&T TV, with fiber internet products, which don’t have usage caps. 

AT&T does, however, employ usage-based pricing on non-fiber wireline internet products—a pricing policy that was suspended at the outset of the pandemic, but returned at the beginning of 2021. Notably, Comcast, the biggest ISP in the U.S, pushed back plans to reinstate a 1.2 terabyte usage cap.

AT&T has been phasing out DSL for some time, but it still reported 653,000 DSL connections as of the end of the second quarter of 2020, located in Alabama, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South Carolina, and Tennessee. These customers are capped at a very low overhead of 150 gigabytes of monthly data usage before having to pay an additional $10 for each additional 50 gigs they use. 

If these users are trying to stream video, 150 GB goes fast. 

Given that the fastest downstream speed offered for AT&T’s legacy DSL services is 6 megabits per second, it’s highly doubtful that there are a lot of AT&T DSL users even attempting to stream HBO Max’s premiere of the Snyder Cut Thursday in 4K/HDR. But they'll still use 0.9 GB an hour trying to stream base-level HD resolution (720p).

AT&T also caps its limited number of LTE fixed wireless customers at 350 GB. 

And, perhaps most importantly, AT&T Internet customers who have downstream speeds of 300 Mbps and below are capped at 1 terabyte. Of AT&T’s nearly 15.4 million wireline broadband users, fiber customers, uncapped with speeds of 500 Mbps and above, represent the fastest growing cohort. But most AT&T wireline subs still fall into the group capped at 1 TB. 

For the millions of customers in this group, streaming 4K content on services including HBO Max and AT&T TV will chew up about 7.2 GB per hour. According to OpenVault, a company that consults cable operators and telecoms about how their networks are used, 14.1% of U.S. internet customers exceeded an average monthly usage of 1 TB in 2020. That number will undoubtedly grow in 2021, most likely in a significant way. 

A Little Background

In 2014, AT&T introduced the concept of “sponsored data,” which allowed services running on its networks to pay for the privilege of having their customers’ data usage “zero rated”—meaning, it didn’t count against customer usage caps. 

Ultimately, the only services that really ended up using sponsored data were owned by AT&T. And this week, the telecom ended the practice, blaming California net neutrality laws aimed at protecting consumers. 

"Unfortunately, under the California law we are now prohibited from providing certain data features to consumers free of charge," AT&T wrote on its website. "Given that the Internet does not recognize state borders, the new law not only ends our ability to offer California customers such free data services but also similarly impacts our customers in states beyond California.”

About 81%  of all U.S. smartphone users now use those gadgets to stream video, The NPD Group found in its new Connected Intelligence Smartphone and Tablet Usage Report, which based its findings via an opt-in panel.

As might be expected, usage is driven by users who are 25 years and younger who spend twice as much time watching on YouTube and Netflix mobile apps versus those who are older than 25 (see chart).

NPD said the younger set in the study consumes, on average, 6.2 gigabytes of data (cellular and WiFi) for video streaming purposes each month. By comparison, the older group averages 4.9 GB.

And while most of that video streaming happens over WiFi, NPD  Smartmeter, an opt-in metering app that tracks live smartphone and tablet usage, found that the average U.S. smartphone user consumes nearly 3 GB of cellular data per month, with video streaming as the top app driving that consumption.

That trend bodes well for new zero-rated video services from companies such as T-Mobile (Binge On) and Verizon (FreeBee Data). 

“Users are spending more time watching videos on their smartphones than ever before, as the adoption of smartphones that boast larger displays increases,” Brad Akyuz, NPD Connected Intelligence Mobility practice research director, said in a statement. “This mobile streaming behavior is further bolstered by the new offerings of wireless operators, such as T-Mobile’s Binge On and Verizon Wireless’ go90, which run on free sponsored data.” 

Verizon has begun to zero-rate streaming of go90 content for postpaid customers when they are connected to the mobile carrier’s LTE network.

That’s according to a new customer agreement distributed this week by Verizon, caught first by DSL Reports.

“Beginning on or about February 4, 2016, if you are a Verizon Wireless post-paid customer and you download the current version of go90 (release 1.4), you can watch any video on go90 without incurring Verizon Wireless data usage charges so long as you are connected to LTE," the agreement states. "Other activity that does not involve watching videos, such as downloading go90 from an app store, browsing or searching for shows, posting comments, sharing clips and viewing settings will incur data usage charges.”

Verizon, which launched the ad-supported go90 OTT service in October 2015, has already been experimenting with zero-rated policies that have gotten the attention of network neutrality advocates. Last month, it began to test FreeBee Data, a sponsored service that is exempt from mobile data-usage policies.

The current go90 agreement also makes note that Verizon may also offer  “promotions and/or plans that allow you to watch some or all go90 Content without incurring data use charges” from Verizon and other wireless providers.

Update: Verizon told Re/code that the new policy for go90 does “take advantage of Verizon’s FreeBeeData 360 service, which allows them to pay for customer’s data usage associated with watching videos on the Go90 app….“FreeBee Data 360 is an open, non-exclusive service available to other content providers on a non-discriminatory basis. Any interested content provider can use FreeBee Data 360 to expand their audiences by giving consumers the opportunity to enjoy their content without incurring data charges.”

Those data usage costs, the carrier added, “falls to Go90 and we wanted to give our users an opportunity to watch everything in the app without it counting against their data plans.”

Verizon's FreeBee approach followed the launch of “Binge On” from T-Mobile, which uses a proprietary, bandwidth-efficient encoding system that delivers mobile video in 480p format (DVD quality), and zero-rates streams from several content partners, including Netflix, HBO, Starz, Sling TV, and Hulu. AT&T, meanwhile, has dropped hints that it is evaluating sponsored-data services.

Verizon gave the FCC the heads up about FreeBee Data prior to the launch of the sponsored-data offering. The FCC, which will take a case-by-case approach on new sponsored-data and zero-rated policies and services, noted that it "will continue to communicate with the company [Verizon, in this instance] on this issue.”

 In the meantime, the FCC is on a fact-finding mission for services such as Comcast’s "Stream" IPTV service, an in-home, managed IP-based service tailored for cord-cutters that’s not delivered “over-the-top” and, therefore, not tied into the MSO’s usage-based broadband data trials, as well as T-Mobile’s Binge On service.

T-Mobile presented new stats indicating that Binge On is a hit with customers while also announcing a handful of new partners have joined the zero-rated service: Amazon Video, Fox News, Univision NOW (Univision’s recently launched subscription OTT service), and WWE Network.

Binge On, an optional service launched about three months ago, exempts streams from partnered OTT services from T-Mobile’s data-usage plans, and uses a proprietary, bandwidth-efficient encoding scheme that delivers video at resolutions at up to 480p. More than 40 partners are involved, including Netflix, HBO Now, Hulu, Showtime, Starz and Sling TV.

As usage goes, T-Mobile said customers on qualified data plans are watching more than twice the video than before via Binge On. The company added that one unnamed partner has seen a 79% increase in daily views since Binge On was introduced, and that its customers have streamed 35 petabytes of data for “free” so far, claiming that it’s equivalent to more than 109 million episodes of Game of Thrones (at DVD quality).

T-Mobile also introduced new “short codes” to change settings and to toggle the Binge On  service on or off (#BOF# (#263#) to turn it off,  and #BON# (#266#) to turn on Binge On).

Among other U.S. wireless carriers, Verizon Communications has since introduced FreeBee Data, a sponsored-data service, and AT&T has hinted that it’s looking into similar, sponsored-data offers.

Zero-rated and sponsored data offerings have been criticized by network neutrality advocates and by Google over claims that Binge On is “throttling” YouTube streams, but T-Mobile has been adamant that its approach isn’t throttling and is well within the FCC’s guidelines.