Sponsoring Mobile Data: Analyzing the Impact on Internet Stakeholders

As demand for mobile data increases, end users increasingly experience high monetary costs for consuming data. Sponsored data is a new pricing model that allows content providers (CPs) to subsidize this cost. It thus offers the potential to benefit multiple Internet stakeholders: users can experience lower data costs, CPs can attract more users by subsidizing their data access, and ISPs (Internet service providers) can maintain their revenue flows by charging both users and CPs for data usage. The distribution of these benefits between different users, CPs, and the ISP, however, remains unclear. Concerns have been raised that sponsored data disproportionately benefits larger, less cost-sensitive CPs, but little attention has been paid to this effect in conjunction with sponsored data’s benefits for users. We do so by first formulating a model of user, CP, and ISP interaction for heterogeneous users and CPs and deriving their optimal behaviors. We then show that while all three parties can benefit from sponsored data, sponsorship benefits users relatively more than CPs. These benefits in favor of users are more pronounced in less cost-sensitive CPs’ sponsorship of more cost-sensitive users, indicating that content sponsorship can help to bridge the digital divide between users who can easily afford the cost of mobile data and those who cannot. We then show that sponsorship disproportionately benefits less cost-sensitive CPs and more cost-sensitive users, exacerbating CP disparities but reducing disparities between users. We finally illustrate these results in practice through numerical simulations with data from a commercial pricing trial.