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Could Amazon Be the First Major Customer for AT&T's "Toll-Free" Data Service?

Footing the bill for some of its customers' data use could make a lot of sense for Amazon.

Asa Mathat

AT&T has been pretty quiet about its plans for “toll-free” data service since announcing its plans at CES in January.

With sponsored data, companies foot the bill for certain kinds of data use, meaning it is free for consumers. AT&T said at the time that it was testing the service with a handful of partners, but has gone radio silent since then.

That could change Wednesday if, as some suspect, Amazon chooses to subsidize some of their customers’ data usage on the smartphone it is introducing. The Wall Street Journal reported earlier Tuesday that AT&T would be the exclusive carrier for Amazon’s new phone.

Paying for customers’ data use could make a lot of sense for Amazon, which makes most of its money from selling things. Footing the bill for the data used to sell physical goods and books is a no-brainer, given that such transactions use very little data. Music and movies are a trickier proposition as they use significantly more data.

“The AT&T Sponsored Data program has Amazon’s name all over it,” said TechKnowledge Strategies analyst Mike Feibus. “The whole point of a phone for Amazon is to grab our attention. Once Amazon has our attention, it can put its commerce engine to work selling us stuff.”

Amazon could offer its sponsored data as part of its Amazon Prime service, which recently got a $20-per-year price hike in order to cover some of the rising costs with the service. Amazon last week added a Prime music service that offers subscribers unlimited streaming (though the service lacks most recent releases and has a smaller catalog than other music services).

In a very real sense, Amazon was the pioneer of sponsored data with the original Kindle: It pays for all the data costs for delivering books and magazines to the e-reader. Amazon introduced the cellular-equipped Kindle back in 2007, initially partnering with Sprint and quickly switching to AT&T in order to allow the devices to work internationally.

Although sponsored data is a relative newcomer to the U.S. cellular market, it is used in other venues and regions. Wi-Fi providers Gogo and Boingo often provide access to either certain sites or the whole Internet, paid for by a sponsor. On Virgin America, for example, visits to eBay are free to the consumer. Facebook has also worked with a number of wireless carriers overseas to offer customers free access to the social network as part of its Facebook Zero program.

Asked at an event on Tuesday about the reported deal to be Amazon’s exclusive data provider, AT&T CEO Randall Stephenson said, “I read the same thing. It’s exciting, isn’t it?”

Critics worry that sponsored data could be another way that the Internet giants get preferential treatment, but AT&T mobile unit head Ralph De La Vega shrugged off such concerns in a January interview.

“Essentially it is a billing service,” he said. “That’s really all it is. It’s nothing to do with ‘Net neutrality’ principles.”

Additional reporting by Amy Schatz.

This article originally appeared on

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