This Startup Wants to Make Your Data Plan

Dirt Cheap

DataMi wants to let companies sponsor slices of your mobile data. But will it also break the Internet?

A few months back, I suggested to the rep at my mobile phone company that I was thinking about maybe, just maybe, giving up the $30-a-month all-you-can-eat data plan I’d had since back in grad school. That plan gives me the freedom to gobble up all the data I’d like using my iPhone. It’s a deal so delicious the company doesn’t offer it to new customers anymore. “Oh no, you hold on to that,” I remember the rep counseling, “You just don’t let a plan like that go.”

Hold on to it I did. But that rep and I were both outliers. The fact is that unlimited data plans are rather quickly becoming a thing of history. Companies like AT&T and Verizon are nudging users away from them — often as part of an upgrade to the latest smartphone or, as in my case, a switch to the latest innovation in family plans—in a bid to manage congestion on their sometimes creaky networks as we get into the habit of doing everything on our mobile devices. And so, we’re staring at a future of capped data and overage fees.

Into that bleak reality steps DataMi, a start-up based in the Massachusetts city of Chelmsford, just north of Boston. The company’s name is pronounced “data me,” as in my data, and it launched just a year and a half ago with the tagline, “Welcome to Free Data.” DataMi wants to give app developers, advertisers and content-makers the ability to pick up the data tab for mobile users visiting their websites or using their app. That might be one solution to our data-cap problem. The downside? Well, say some, it might just also be the end of the idea that on the Internet everyone gets an even shot.

Let’s set the stage. At the moment, cell phone users lacking an unlimited data plan pay a set price for a certain amount of data, say $40 a month for 3 GB of data. Every website you visit, video you watch, or email you send while using your cellular connection draws down from that data allowance.

What DataMi does is flip that model on its head. Instead of sucking 100 MB from my data bank to ‘pay for’ that Mary J. Blige album I bought, my music app could say, in effect, “This one’s on me.” It’s a bit like going to a bar with a budget for two, and only two, cocktails — but knowing that there’s a bourbon company rep at the bar willing to buy me a third. I’m happy. The bar’s happy. The bourbon company’s happy: if I can remember the transaction in the morning, they may well have a new, loyal customer.

In much of the world, that concept is called “zero rating,” a riff on an economics term for goods sold tax-free. In the United States, the phrase “sponsored data” is taking hold. But Mung Chiang, the Princeton University professor of electrical engineering who founded DataMi, would prefer we call it something else: “open toll-free data,” piggybacking on a concept familiar to anyone who has used a telephone or heard an infomercial in the U.S. in the last 50 years. Says Chiang, “People love 1–800-numbers.”

The fact is, the 1–800 Internet isn’t unheard of, either. Nearly a decade ago Amazon rolled out Whispernet, which covered the data demands of downloading e-books through the one-time cost of buying a Kindle. Since 2010 in El Salvador, Bangladesh, Zimbabwe, and scores of other emerging countries, Facebook has offered Facebook Zero, a data-free version of its site, with a pop-up touting that they can “Keep up with friends, share updates and send messages on Facebook with no data charges.” And just this June, the phone company T-Mobile began offering customers the option to “stop burning data” when listening to certain apps, including Pandora, SiriusXM and Spotify under a program called Music Freedom.

But what DataMi does that’s groundbreaking is to take that 1–800 power available only to the T-Mobiles, Facebooks and Amazons of the world — companies both savvy enough to negotiate with mobile networks and smart enough to make the technology work—and put it in the hands of app developers and website publishers of nearly any size. DataMi has negotiated deals with mobile network providers to make it possible for companies of all sizes to easily cover data tabs.

“The telcos weren’t designed to create these type of solutions in the networks,” says Harjot Saluja, a mobile industry veteran who became DataMi’s CEO in August of 2013. “We’re making it so easy that anyone can, in a matter of minutes, go on a portal and create a sponsorship for just two days of Thanksgiving.”

Soon various chunks of the data we use could be sponsored by all sorts of different advertisers, potentially making our mobile phone bills look like a NASCAR race car. That might not be pretty. But what would be far prettier is the price at the end of our bill. It could be just a fraction of what it is today: a couple bucks for the few bits of data no one has offered to cover.

If DataMi succeeds in the democratization of sponsored data, it won’t be without its critics. Some see sponsored data not as a clever solution but a cop-out that threatens the idea that to compete on the Internet you shouldn’t be forced to pay a gatekeeper. Are you going to keep using an app that drains your data budget when a similar one doesn’t? Raegan MacDonald, the European policy manager for the digital rights advocacy group Access, argues that “the real solution would be to provide data at a more affordable rate. But that’s not as fast or as easy.” There are echoes here of the net neutrality debate raging in the U.S. But if you believe that sponsored data violates the idea that all information on the Internet should be treated equally, that principle might well come with a cost to your wallet.

DataMi got its start as an academic research project at Princeton University’s EDGE Lab, headed by Chiang, a networks expert who is described admiringly by former Federal Communications Commission chairman Reed Hundt as “a volcano of ideas.” The insight that led to DataMi was that although cellphone use is placing considerable demands on mobile networks, that demand is unevenly distributed. Mobile operators could offer discounts for people willing to use data during non-surge periods, the way some electric companies offer cheaper rates to customers who forgo running their air conditioners on a handful of the hottest summer days.