In January 2014, AT&T introduced sponsored data to the U.S. mobile data market, allowing content providers (CPs) to subsidize users' cost of mobile data. With growing industry adoption of this data plan, it is important to understand the implications of this new type of data pricing. Our work considers CPs' choice of how much content to sponsor and the implications for users, CPs, and ISPs (Internet service providers). We particularly focus on heterogeneity in users’ and CPs’ valuation of and ability to afford mobile data, as well as heterogeneity in CPs’ incentives to sponsor data. We model user, CP, and ISP interaction for heterogeneous users and CPs and derive their optimal behaviors. We then show that these behaviors can reverse our intuition as to how user demand and utility change with different user and CP characteristics. For instance, while all three parties can benefit from sponsored data, we find that sponsorship disproportionately favors less cost-constrained CPs and more cost-constrained users, exacerbating CP inequalities but making user demand more even. Our findings provide guidelines for the consequences of sponsored data in practice and can aid regulators in determining the possible consequences of different regulations on this pricing practice.
P. Hande, M. Chiang, R. Calderbank, and S. Rangan, “Network Pricing and Rate Allocation with Content Provider Participation,” IEEE INFOCOM, 2009