FCC Wireless Bureau’s Staff Report Questions AT&T and Verizon Zero Rating Practices in Mobile Broadband Market…But To What Effect Under the Trump Administration?

By Doug Bonner

On January 11, 2017, the FCC released its most extensive “policy review” of mobile broadband operators sponsored data offerings for zero-rated content and services since the Commission’s 2015 Open Internet Order.  

Rebuffing Republican requests, and a stated commitment by the Chairman not to take action on any controversial post-election items before the Trump Administration takes office, the FCC Wireless Telecommunications Bureau (WTB), under Chairman Wheeler’s direction, released this Bureau report following a year long investigation into the zero-rating practices in the mobile broadband market.  “Zero-rating” generally refers to the practice of not counting consumer use of certain sponsored applications under a customer’s data usage caps under mobile carrier sponsored data plan.    

While not finding zero rating plans per se harmful, the report singles out sponsored data offerings by “vertically integrated mobile broadband providers” which “may harm consumers and competition in downstream industry sectors by unreasonably discriminating in favor of select downstream providers, especially their own affiliates.”  Report at 17.  The Report expresses “serious concerns” about AT&T Mobility’s Sponsored Data program, and that “we believe there is a substantial possibility that some of AT&T’s practices may violate the [Open Internet Order] General Conduct Rule.”   Report at 12. 

In particular, the Report refers to AT&T “hefty per-gigabyte charges on unaffiliated third parties [edge providers]” that consumers might use for their Sponsored Data which compete against AT&T’s DIRECTV Now affiliate.  The WTB also references Verizon’s FreeBee Data 360 sponsored data program as posing similar concerns as AT&T’s but describes it as a “nascent” service with only a limited content portfolio at this time in contrast to DIRECTV Now’s full range of live TV and full length movies and shows.  Report at 17.

Chairman Wheeler in a final speech to the Aspen Institute on January 13 defended the Report’s conclusions arguing that if the large ISPs can determine “which applications and clouds work better than others in terms of access speed and latency, then they will control the future.”     

FCC Republican Commissioner Pai issued a statement criticized the “midnight regulations” of the Bureau-level report as done without a Commission-level majority, and which he saw only after its release, as “casting doubt on the legality of free data offerings” that are popular among consumers.

Commissioner Pai expressed confidence that the Report will “not have any impact” on FCC policymaking or enforcement activities following President Trump’s inauguration. 

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