If you've used or heard of programs such as T-Mobile's Binge On or Music Freedom, then you're familiar with an increasingly common business tactic known as zero rating: the decision by a cellphone carrier to let you stretch your data plan by exempting some services, such as Spotify or Netflix, from your monthly data cap.
But now, federal regulators are raising concerns about two such programs operated by AT&T and Verizon, saying that although they potentially help customers get more out of their plans, the programs pose “significant risks to consumers and competition” and may even violate a key part of the government's net neutrality rules.
The warning comes as part of a white paper published by the Federal Communications Commission, which finds that AT&T's Sponsored Data plan and Verizon's FreeBee Data program could choke off the rise of online video companies that are not owned by or affiliated with the telecom giants.
“Our concerns,” the report said of AT&T's plan, “are based in part, but not entirely, on the fact that unaffiliated mobile video service providers must pay a significant, clearly identifiable amount of money for the sponsored data needed to offer streaming video programming to … subscribers on a zero-rated basis.”
Consumer advocates argue that zero-rating potentially advantages large, wealthy companies at the expense of smaller start-ups or small businesses that cannot hope to afford special treatment by the network operators. Services such as T-Mobile's Binge On pose less of a problem, the FCC said, in part because they don't involve any fees between content companies and the Internet provider.
But AT&T's practice of exempting its own video service from mobile data caps is different, the FCC said. Not only does AT&T charge other content companies who may want to participate in the program, but AT&T has not shown, despite its claims, that it offers the same terms to all companies, including its own, the agency said.
“It may be the case that it's fair, but we have no way of telling,” said an FCC official, who spoke on the condition of anonymity because he was not authorized to discuss the issue publicly. The official added that the FCC would probably revise its report if it received further information about the deal between AT&T and its subsidiary, but that AT&T has not provided enough evidence. Officials from major fixed and wireless Internet providers met with FCC staff throughout 2016 to explain their plans.
In a statement, AT&T questioned the FCC's objections to a practice that gives consumers the ability “to watch video without incurring any data charges. This practice, which has been embraced by AT&T and other broadband providers, has enabled millions of consumers to enjoy the latest popular content and services — for free.”
Similarly, the FCC said Verizon's FreeBee program could give the carrier's own online video product, go90, an artificial advantage over other video providers. But go90 is not as developed as DirecTV Now, it said, and is less of a direct competitor to services such as Sling TV, Hulu and Netflix.
Aspects of programs such as AT&T's may run afoul of the FCC's net neutrality rules, the FCC said, by violating the “general conduct rule” — a catchall clause designed to give regulators the ability to investigate carrier behavior if it is suspected to be anti-competitive.
But with Republicans poised to assume control of the agency under the incoming Trump administration, many analysts expect the general conduct rule — and the broader net neutrality regulations of which they are a part — to be unenforced or rolled back.