AT&T Fell for Media’s Inflated Sense of Self-Importance

AT&T has entered the “content” business in a big way with the acquisition of DirecTV and TimeWarner. This is not a new plan–they’ve been in love with the glamour of Hollywood for years. But it is a misguided plan.

AT&T hopes to provide value and profit from exclusive content through focused advertising.

This is a fool’s errand.

Folks other than I have talked about the reasons why in greater depth for many years, most notably Andrew Odlyzko, formerly of AT&T Labs, whose “Content is Not King,” First Monday 6(2) (February 2001), persuasively showed that people pay overwhelmingly for connectivity, not content. And not by a small margin either.

The reason is simple: humans are gregarious. We are social animals. We want to reach out and touch someone.

Chris Anderson’s “The Long Tail,” Wired (October 2004), proposed that given infinite, instant availability, sales of things, particularly digital things, would tend to accumulate in the long tail of a Pareto distribution. That is, value would accrue to things that had had minimal value before. A follow-up analysis in 2008 at the Harvard Business Review noted that while this was the case, the long tail got longer and thinner so that the popularity of things on the thick end of the tail became more significant. (You can also see this with the current shape of income inequality.) That could provide hope for AT&T’s advertising plans, but it doesn’t because of two factors outside of their control: time and the supply of money.

Time and money are finite. Time cannot exceed 24 hours in a day. Money is artificially constrained by governments and their agents. But content is essentially infinite: All humans create things. All humans want to share what they create. Alas, there’s nowhere near enough time to consume infinity, and one’s personal supply of money restricts what little can be consumed even further. I have to choose between writing this, correcting a crontab entry, listening to a podcast, making dinner, lifting weights, watching the Champions League, voiding my bladder, and so forth. No matter how much I want to find out right now what happens when the Ice Dragon breaches the wall, for me to actually do so depends on those two things: time and money. I’ll wait, and get the DVD from the library.

Money, or the lack thereof, is what drives cord-cutting. Even were there infinite money, time trumps everything.

Or, you cannot squeeze blood from a stone.

Oddly enough, AT&T’s earlier foray into advertising, the Yellow Pages, was similarly profitable for the same reason telephony is: connectivity. Rather than shouting at customers “Buy Me!” the directory simply sat there, waiting, until a customer needed something. It, and the classified advertisements which provided much of newspapers’ revenues, have been gradually replaced not by pay-per-click advertising on the Internet, but by services built on the World Wide Web–basically Google and Craigslist–accelerated by the general decline in local economies. Everyone’s price sensitive these days.

But I can understand why they’ve made the choices they did. There’s only a certain amount of time in a day, and only a certain amount of time to spend reading or listening or watching or working or playing. It’s highly likely that the idea connectivity is more valuable than content never crossed their minds.

Better to invest in what enables connections and carries all of that content. And ignore the shiny distractions.

So what next? What could AT&T do with what they have?

What do people actually need? It’s not more advertising and it’s not more content; there’s plenty of that.

The Customer Perspective

There’s too much wrong with the FCC — in all its various political, technical, and regulatory aspects — to get into arguments on the line. However, I’d like to point out one small piece of anecdata from Number Two Daughter’s iPhone 6. From the customer’s perspective, Internet access providers are common carriers.

Number Two Daughter (15) has service with Cricket (a subsidiary of AT&T) and pays $30/mo. for cellular service with a 2GB/mo. soft cap on data usage. It’s a soft cap because after using 2GB, the transfer rate is throttled. A hard cap prevents usage.

She primarily uses the phone to chat with friends, watch movies, and keep up to the minute with BTS. Most of that activity happens here at home, so in the best of all possible worlds she’d be using our domestic Internet connection provided by Frontier Communications rather than the LTE connection provided by AT&T. However, there’s a mechanical difficulty with either the antenna or the wifi chip in her phone, so she doesn’t connect to the 802.11n network.

YouTube, Netflix, and Amazon Prime Video, nor even BTS, are not the top consumers of bandwidth; they are slightly more than bumps on the long tail. Apple Music and Spotify and Pandora don’t even register. iMessages and SMS chats are miniscule pinpricks. Facebook, Twitter, and Instagram are so 5th grade; only toddlers use those.

Snapchat was. And the month isn’t over yet.

The internet is NOT television. And no one wants “content.” They never have. They want a connection with other people.

Reach out, and touch someone.