I didn't attend Mobile World Congress in Barcelona last week, and I don't know what I missed more, the yummy Spanish ham or all the cool new smartphones that were introduced.
But the thing that many attendees and press reports, even from those who did attend, also seemed to miss was the increasing importance of a big change in who pays for mobile bandwidth.
Whether you call it – "zero rating," "toll-free data," or simply associating it with Facebook's Internet.org initiative – the idea is that carriers make a certain amount of bandwidth available free for specific apps or use cases. The idea, according to Mark Zuckerberg's keynote presentation at MWC, is that by making a baseline amount of mobile net access free, more and more users will be enticed online, see the value of the internet, and over time become inspired to pay real money for additional access to mobile data.
Despite the concept's relatively low profile compared to net neutrality, more and more zero-rating deals are expected soon, especially in the developing world where many consumers may not be able to afford full-fledged data access. But there are also zero-rating arrangements in the developed world, including ones involving AT&T, T-Mobile, Google, Netflix, and others. The actual cost is often covered by the particular apps or services involved, typically consumer apps like Facebook or WhatsApp.
But the idea could also hold promise for corporate apps—particularly those aimed at low-income and underserved communities. Ecommerce and mobile payment services, for example, might be profitable enough to subsidize mobile data access that would increase the pool of potential customers.
More importantly, zero rating holds the promise of encouraging more people to go online in general, boosting the potential audience for all online apps and services. That could be the tipping point for making marginal operations viable and provide new upside for others.
Less than zero?
But zero rating doesn't have zero issues.
First, zero rating schemes could add to costs for mobile apps and services trying to break into new markets. If competitors are paying carriers to let their customers access them without incurring data charges, that could build significant barriers to new entrants.
Second, depending on how you look at it, zero rating could represent an end-run around net neutrality provisions. It doesn't create an internet "fast lane," of course. Instead it creates an internet "free lane," which could be even more anti-competitive for some apps and services in some markets.
Still, after zero rating received a bit of mainstream attention at Mobile World Congress, it will be useful to watch the progress of such arrangements, both in terms of deals signed and consumer usage, over the coming months. It could become a viable business model, a real threat to net neutrality, or not much at all. We should have a better idea soon enough.