FCC says AT&T and Verizon’s zero-rating plans violate net neutrality – Digital Trends

If you thought Verizon and AT&T’s plan to exempt videos streamed via certain services from their customers’ data plans sounded a little unfair, you weren’t the only one. In a sternly worded pair of letters sent to AT&T and Verizon, the Federal Communications Commission accused the carriers of a potential violation of the net neutrality rules it approved in 2015.

Net neutrality, for the uninitiated, is the principle that broadband providers should treat all content, sites, and platforms equally in terms of traffic. Columbia University law professor Tim Wu, who’s credited with coining the term, compares the idea to an electric grid. “The electric grid does not care if you plug in a toaster, an iron, or a computer … [It’s] a model of a neutral, innovation-driving network.”

More: T-Mobile’s latest family plan has net neutrality advocates pissed off

In 2015, the FCC reclassified broadband providers as so-called “Title II” common carriers, or services bound to “act in the public interest.” That includes ensuring that they can’t make any “unjust” or “unreasonable” charges, for one, or introduce any regulations that would actively suppress competing services.

Carriers like AT&T and Verizon have attempted to sidestep those rules with so-called “zero-rating,” or a policy that exempts certain applications and services from counting against subscribers’ data plans. Zero-rated music streaming doesn’t contribute to your overall data bucket, for example, and neither do video services.

AT&T began zero-rating its DirecTV on-demand and live-streaming mobile app in September and plans to do the same for its forthcoming DirecTV Now streaming service when it launches later in December. Verizon currently waives data charges for National Football League games, its Go90 video platform, and other participants affiliated with its FreeBee Data 360 program.

More: Net neutrality advocates feel less than warm toward T-Mobile’s Binge On

The FCC’s net neutrality rules do not expressly prohibit zero-rating, but the agency evaluates implementations on a case-by-case basis to determine whether or not they “hinder competition.” It found that AT&T and Verizon’s programs did. “[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. “It would [be] very difficult, if not infeasible, to offer a competitively priced service.”

AT&T and Verizon beg to differ.

“We will provide the FCC with additional information on why the government should not take away a service that saves customers money,” AT&T said Friday. A spokesperson for Verizon, meanwhile, said that the carrier “[remains] quite confident that [its] practices are good for consumers, non-discriminatory and are consistent with current rules.”

Both carriers contend they provide competitors like Netflix, YouTube, and others a means to the same zero-rated status as their first-party services. AT&T exempts streaming services from subscribers’ data caps on a metered basis, charging roughly $16 a month for each customer who uses 10 minutes of streaming video a day up to $47 a month for customers who use 30 minutes a day. But the FCC argues that the policy’s discriminatory, especially toward smaller startups which might not be able to swallow the cost.

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“[The program] strongly favors AT&T’s own video offerings while unreasonably discriminating against unaffiliated edge providers and limiting their ability to offer competing video services to AT&T’s broadband subscribers on a level playing field,” Wilkins wrote.

The FCC has requested responses from both carriers by December 15. It asked AT&T to provide the average median usage of DirecTV streaming compared to competing services, and the names of companies that have purchased data cap exemptions from AT&T.

The FCC first raised concerns about zero-rating in a letter to AT&T in November. The carrier responded, arguing that the practice was to its customers’ benefit. “These initiatives are precisely the kind of pro-consumer challenges to cable that the Commission heralded in approving AT&T’s acquisition of DirecTV,” Robert Quinn, AT&T’s policy chief, wrote in a letter to the agency.

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Another major U.S. carrier, T-Mobile, adopted a policy of zero-rating last year with the launch of Binge On, a video streaming service that exempts approved video and music streaming services from customers’ data caps. Wheeler has characterized the plan as “pro-innovation,” “pro-competition,” and in full compliance with the government’s net neutrality rules, but consumer advocacy groups have voiced concerns about the program’s exclusivity. Content providers must meet certain technical specifications that allow T-Mobile to identify their content as Binge On-friendly, for instance. And Binge One reduces the quality of streaming indiscriminately — even those hosted on services that haven’t opted into T-Mobile’s plan.

T-Mobile’s new One plan offers data-free video streaming, but at reduced quality. Subscribers can unlock improved definition for $25 a month on top of what they pay for the plan itself, an option that’s raised the ire of net neutrality advocates like the Electronic Frontier Foundation.

An FCC spokesperson told Digital Trends in August that the Commission’s policy review was “ongoing.”

The future of the FCC’s net neutrality policy is unclear. Roslyn Layton, Jeffrey Eisenach, and Mark Jamison, advisors that will oversee the FCC’s transition under president-elect Donald Trump’s administration, are outspoken opponents of the FCC’s Title II rules, and have argued that government regulations are not necessary to protect net neutrality. A Republican-led Commission, which Trump will have the power to appoint when he takes office on January 20, could choose to overturn the current rules entirely.

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