At first impression, what’s not to like about Verizon’s Go90 gambit? See http://www.nytimes.com/2015/09/08/business/media/verizon-to-offer-free-mobile-tv-with-an-eye-on-millennials.html?emc=eta1&_r=0. The smartphone surely has the capability of offering a competitive alternative to other screens in the video marketplace including television sets and PC monitors. If a third party wants to subsidize my consumption of “must see” video, well thank you very much! I am a classic free rider likely to consume the video content without necessarily paying for the advertised products and services.
In class I regularly make references to beer, one of the essential food groups for my students. Most get the economic concept of free ridership when I explain how much I enjoy the Clydesdale advertisements for AB Inbev Budweiser, without having to buy the beer.
Free rider opportunities notwithstanding, there is a closer question whether sponsored data constitutes permissible price discrimination. Bear in mind that carriers like Verizon and Comcast can absorb the cost of content carriage, or receive advertising revenues making it possible for consumers to watch content without seeing their often skimpy data allocation evaporate. Netflix has not banked on competitors having the same zero cost of content delivery.
So would Netflix have a legitimate (and lawful) complaint about how sponsored data violates the FCC’s Open Internet Order? In the Internet Service Provider tilting the competitive marketplace for information, communications and entertainment (“ICE”) by taking the cost of content carriage out of the consumer’s cost calculation?