FCC raises fresh concerns over 'zero-rating' by AT&T, Verizon

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04 December, 2016

AT&T and Verizon each offer programs that allow content providers to pay a fee to be exempted from customer data caps, programs that they themselves take advantage of with their own apps and services.

Both AT&T and Verizon say their programs, which charge video providers instead of customers the cost of streaming the data, are open to any video company willing to pay the cost of their customers' data. Under its current structure, AT&T offers a cheaper data deal to DirecTV, its own video service, than it does to outside video providers. Zero-rated music streaming doesn't contribute to your overall data bucket, for example, and neither do video services.

The FCC this week sent letters (via The Verge) to both Verizon and AT&T, claiming that the data cap exemptions, called "zero rating", raise net neutrality concerns and could impact consumers and competition.

AT&T unleashed this week one of the most ambitious TV streaming service yet, and one that has piqued the interest of millions of cord cutters who are fed up with satellite and cable service providers, high-priced programming bundles and cumbersome set-top boxes.

The agency argues the practice could deter consumers from accessing mobile-video services not affiliated with the carriers, such as those from Netflix Inc. or Hulu, which is co-owned by Walt Disney Co., Comcast Corp., 21st Century Fox and Time Warner Inc.

AT&T responded shortly thereafter, saying its data exemption policy benefits consumers, and noting how the FCC has no hard-and-fast rules in place regarding the practice. "[We have] reached the preliminary conclusion that these practices inhibit competition, harm consumers, and interfere with the "virtuous cycle" needed to assure the continuing benefits of the open internet", John Wilkins, head of the FCC's wireless division, wrote in Thursday's letter. Thus, anxious the FCC, AT&T might be giving its DirecTV products an unfair leg up over competing video services.

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The FCC says that could harm the market for streaming services as it makes it more expensive for internet companies to compete with video services that are owned by the carriers.

"We will provide the FCC with additional information on why the government should not take away a service that saves consumers money", AT&T responded Friday. A similar letter sent to Verizon expresses concern over the "FreeBee Data 360" program and says it has the potential to "hinder competition and harm consumers" because Verizon does not need to pay to participate in the Sponsored Data program when it exempts its own app, but competing content providers do.

Net neutrality rules - implemented by the FCC previous year after intense lobbying against them by Internet service providers - were aimed at preventing ISPs from charging Web-based producers higher fees for faster connections, creating a two-tiered Web: a fast one for cash-flush content providers, like corporate and government websites, and a slower one for everyone else, like small nonprofit organizations and bloggers.

The FCC first raised concerns about zero-rating in a letter to AT&T in November.

Even if net neutrality somehow survives, it's unlikely Trump's FCC will lead a crack down on zero rating. AT&T subscribers who sign up can stream unlimited DirecTV content from their mobile devices.

However, the incoming administration of President-elect Donald Trump appears hostile towards the net neutrality rules, which are also strongly opposed by Republicans in Congress. Now, the FCC says that feature violates net neutrality rules.


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