In 2010, powerful wireless internet providers scored big when the Federal Communications Commission exempted wireless telecommunications companies from key "Open Internet" (Net Neutrality-related) regulations. That exemption, which at the time was seen as an obvious, confusing oversight, has come back in the form of what could be a substantial challenge to Net Neutrality from AT&T's new "sponsored data" policy. 

AT&T: Sponsored Data 

Earlier this week, AT&T announced its "Sponsored Data" service that allows 4G customers to use certain apps and transfer certain wireless internet traffic without impacting their monthly data allotment. That's because AT&T is letting companies "sponsor" data for customers of their apps, taking the bill directly instead. 

AT&T likens the plan to a 1-800 phone number or free shipping, and says the service will allow customers more internet use with less penalty to their overall data plans. Businesses can sponsor apps and services for their employee, so they don't have to pay more to work with their own mobile device, and encouraging more mobile internet use with a variety of apps and services without having to worry about data overage charges. 

Frankly, this plan is of immediate benefit to AT&T customers who have low data caps and frequently use certain services (think Facebook, Instagram, Netflix, YouTube or Google anything, etc.) that have the kind of scratch to sponsor their data. But many Net Neutrality experts are up in arms about AT&T's plan, saying it violates a core tenet of Net Neutrality. And FCC chairman Tom Wheeler reportedly has his eye on the AT&T "Sponsored Data" rollout, taking a "wait and see" approach, while clearly not ruling out intervention. 

But even if Wheeler decides the AT&T plan violates Net Neutrality, in effect encouraging customers' preferential treatment of apps and services from companies big enough to afford paying for the data, the FCC may have its hands tied for now, due to its 2010 Open Internet exemption for wireless ISPs. Simply put, under the current rules, AT&T's plan is probably kosher. Let's look at why. 

Open Internet and Net Neutrality

Net Neutrality has been a guiding principle of the internet since before the internet was big. Originally a result of the decentralized (and chaotic) "wild west" nature of the early internet, Net Neutrality basically states that internet service providers (or ISPs: the DSL, Cable, dial-up, etc. companies that you access the web through) should treat all communications on the internet the same. 

Basically ISPs should not discriminate against any legal internet traffic based on origin or content: so your broadband company has to treat data from Wikipedia articles, individuals' blogs, foreign websites, Skype chats, online games, P2P traffic,,, the ISP's own websites and apps, and all other modes and sources of internet traffic the same. Under the principle, ISPs cannot give big internet sources (who may be willing to pay) preferential treatment either, providing, for example, YouTube data at a faster rate than a rival video website.

When the FCC codified its basic Open Internet rules, it included a nod to Net Neutrality in its second and third rules: No blocking of lawful content, especially those that compete with their own, and no "unreasonable discrimination" of "lawful network traffic over a consumer's broadband internet access service." Three simple rules aside, what counts as "reasonable" discrimination can be found in the roughly 200-page Open Internet Report and Order

In the details, there may be some wiggle room for ISPs in the case of bandwidth-hogging persistent transfers (think: that college roommate who Bit Torrented every single season of his top favorite 50 TV shows all school-year). But the rules are pretty specific about the kind of thing AT&T plans on doing: "a commercial arrangement between a broadband provider and a third party to directly or indirectly favor some traffic over other traffic ... (i.e. 'pay for priority') would raise significant cause for concern. ... it is unlikely that pay for priority would satisfy the 'no unreasonable discrimination' standard." 

AT&T's announcement conspicuously mentioned, "Sponsored Data will be delivered at the same speed and performance as any non-Sponsored Data content," but it's hard to imagine that the Sponsored Data plan doesn't at least "indirectly favor some traffic over other traffic." 

The Wireless Anomaly 

In any case, AT&T's plan is probably exempt from that rule, since the FCC's 2010 Open Internet Rules apply to "Fixed broadband providers." That's DSL, cable, fixed wireless, or other non-mobile internet providers -- wireless companies pretty much got a pass when the rules were codified. 

On top of that, according to Ars Technica's interview with Michael Weinberg, vice president at Public Knowledge, a consumer advocacy group, the FCC "kind of punted" the ball when facing regulation of data caps -- the limit that AT&T is supposedly helping customers keep away from. In 2010, according to Weinberg, the FCC was "unable to make any meaningful policy recommendations," on how Open Internet rules apply to data caps: partially because mobile wireless was still in its infancy, and partly because the FCC admitted it didn't know enough about them

So AT&T's plan is probably currently legal, owing to how current applicable rules and standards pertain only to fixed internet providers. It's also probably immediately beneficial to customers who hit their data caps often and could use a few sponsored services. 

But in the long run, the data caps and with sponsored data -- along with the fact that wireless internet is constantly evolving and expanding as a major force -- poses a challenge to Net Neutrality and the FCC's laissez-faire approach to wireless ISPs. It could seep into the discussion of fixed broadband too, as data caps start to become common with cable and satellite providers. Right now, all customers can do -- since we're not all chairmen of federal regulatory agencies -- is "wait and see."