Federal regulators are closing the books on a lengthy investigation into a divisive tactic that is favored by Internet providers and many Americans, but opposed by consumer protection groups who argue it unfairly tilts the playing field against small businesses.
The practice, known as zero-rating, occurs when Internet providers allow consumers to use as much of a certain website or app as they want without that consumption counting against their monthly data limits. T-Mobile's Binge On and Music Freedom are two prominent examples of this business model. T-Mobile, along with AT&T and Verizon, were involved in the roughly year-long inquiry by the Federal Communications Commission.
In a statement Friday, FCC Chairman Ajit Pai said the FCC will no longer "focus on denying Americans free data. Instead, we will concentrate on expanding broadband deployment and encouraging innovative service offerings."
In the fall, the FCC found that AT&T and Verizon's approach to zero-rating posed a particular risk to net neutrality, the idea that all Internet content should be treated equally. Agency investigators said in a report that the companies' decision to exempt their own proprietary services from data caps could unfairly hurt competing apps. They did not conclude that T-Mobile's programs posed a problem.
AT&T exempts its own streaming TV service, DirecTV Now, from its cellphone subscribers' data caps, which the FCC said could put other video services at a disadvantage if they do not sign up for AT&T's program. AT&T has said that its Sponsored Data service offers the same terms to all businesses that want to participate. Verizon's zero-rating program was problematic for similar reasons, the FCC found, though less so because the proprietary service it favors, Go90, is smaller and targets a narrower audience.
A separate service by Comcast also faced some FCC scrutiny. The company's Stream TV app was the subject of a number of agency questions. Comcast argued that Stream TV was not an example of zero-rating, because the content on the app travels over a dedicated part of a customer's cable connection that is technically separate from the public Internet. Still, consumer advocates such as Public Knowledge argued that this was a distinction without a difference and that the tactic still gave Stream TV a favorable advantage in terms of connectivity that went over and above what other streaming video services could provide.
“Our Stream TV cable package does not go over the Internet, so it can’t possibly violate a condition that only applies to Internet content,” Comcast said Friday.
While the FCC's report highlighted problems with AT&T and Verizon, it did not take any punitive actions against the carriers. Asked why in one of his final interviews before leaving office, then-FCC Chairman Tom Wheeler said that AT&T's refusal to answer questions forthrightly contributed to delays that ended up running out the clock.
“We asked specific questions,” said Wheeler, a Democrat. “And yes, they sent us [paperwork] back, but they assiduously did not answer the questions.”
Friday's decision by Pai, who became chairman last month, overturns the agency's report on zero-rating and officially closes the inquiry into the Internet providers' practices.
In a statement, AT&T said the FCC decision to drop the investigation was “a win for the millions of consumers who are reaping the benefits of services made available through free data programs. We’re pleased that these innovative products will be able to continue to flourish in the marketplace.”
Verizon said that it was “encouraged” that the FCC, under Pai, believes zero-rating benefits consumers.
“We’re quite certain our customers feel the same way,” said Verizon spokesman Rich Young, “particularly those who plan to watch the big game over the weekend — free of data charges.”
Pai has previously criticized the FCC report on zero-rating as a “regulatory spasm.”
A T-Mobile spokesman didn't immediately respond to a request for comment.