Too Little Too Late: FCC Finally Realizes AT&T's Zero Rating Is Anti-Competitive

from the thanks-for-the-help dept

Mon, Nov 14th 2016 8:40am — Karl Bode

For much of the last year we've talked about how the FCC's decision not to ban zero rating (or the practice of exempting some content from usage caps) when crafting net neutrality rules was a horrible oversight. As we warned initially, it simply opened the door to wireless carriers and ISPs abusing net neutrality in entirely new and creative ways. As a result, despite having net neutrality rules, we now have companies like AT&T, Verizon and Comcast all exempting their own streaming content from the caps while still penalizing smaller streaming startups and competitors.

While the anti-competitive implications of this should have been clear to most people, the FCC apparently decided it was best not to ban the practice, instead promising to enforce net neutrality on a "case by case basis." But outside of launching a glacial-moving "informal information inquiry" last year, the FCC had given no indication it planned to actually protect this aspect of net neutrality. That was until last week, when the agency fired off a letter to AT&T stating that its plans to exempt its upcoming "DirecTV Now" streaming service is technically anti-competitive and could harm consumers and competitors:

"In the letter to AT&T from the FCC's Jon Wilkins, the agency states that this behavior "may obstruct competition and harm consumers by constraining their ability to access existing and future mobile video services not affiliated with AT&T."

"It is not difficult to calculate usage scenarios in which an unaffiliated provider's Sponsored Data charges alone could render infeasible any third-party competitor's attempt to compete with the $35 per month retail price that AT&T has announced for DIRECTV Now," the letter said. "Unaffiliated video providers not purchasing Sponsored Data would likewise face a significant competitive disadvantage in trying to serve AT&T Mobility's customer base without zero-rating."

And while it's great the FCC finally woke up to the fact that ISPs are using caps to both raise rates on uncompetitive markets and hamstring streaming competitors, the FCC's letter is almost comical in how late in the game it has finally arrived. Given that the man heading up Trump's telecom transition team (Jeffrey Eisenach) is a paid consultant and think tanker with ties to large broadband providers, there's every indication a Trump Presidency will go easier on incumbent ISPs like AT&T and Comcast than ever before.

As a result, the FCC's move here should generally be seen as the agency giving a pointless lecture on playing with matches after the barn has burned down. For what it's worth, AT&T is simply responding to the inquiry by claiming it can't possibly be acting anti-competitively because other companies can get cap-excempt status too -- provided they pay AT&T significantly more money:

"While we welcome additional questions, we hope the FCC will consider the enormous value consumers find in obtaining free data or free streaming where someone else is footing the bill for their data. We welcome any video provider that wishes to sponsor its content in the same “data free” way for AT&T Mobility customers and we’ll do so on equal terms at our lowest wholesale rates," the company added. "Saving consumers money is something we all should support."

In short, you've got a company using arbitrary usage caps to give its own content a leg up, and a regulator that couldn't be bothered to see the negative impact of this behavior apparently until it had one foot out the door of governance. Where we head now isn't clear, but I think it's fairly apparent that all of the griping concerning usage caps and zero rating will likely seem downright quaint in around three to six months.

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Filed Under: competition, fcc, net neutrality, zero rating
Companies: at&t

20 Comments

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That One Guy (profile), 14 Nov 2016 @ 6:52am

"It's not OUR fault we rigged the system in our favor..."
We welcome any video provider that wishes to sponsor its content in the same “data free” way for AT&T Mobility customers and we’ll do so on equal terms at our lowest wholesale rates," the company added. "Saving consumers money is something we all should support."

Let's just run that through the PR-to-English translator shall we?

"We don't unfairly discriminate, any company is more than welcome to pay us pools of money, at which point we will be downright pleased to throw them a rope so they can climb out of the pit we threw them in."
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Anonymous Coward, 14 Nov 2016 @ 9:04am

Re: "It's not OUR fault we rigged the system in our favor..."
I also ran it through the cable co executive translator:
"Hey we can get paid twice for the same data! There is nothing you can do about it! Also, we will call it a reasonable fee and then annually raise the price 200% because you have no other choice at that point but to pay it because our caps are only going to be worse from here."
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Anonymous Coward, 14 Nov 2016 @ 9:17am

"In short you've got a company using arbitrary usage caps to give its own content a leg up, and a regulator that couldn't be bothered to see the negative impact of this behavior apparently until it had one foot out the door of governance."

Come on, I have been whining about the FCC and just this for so long people are long past annoyed with me. But what do I keep hearing? Give us more, give us more!

I am not sure you are all awake here. This is exactly what the FCC was created for. It's doing it intended job!
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Anonymous Coward, 14 Nov 2016 @ 9:28am

Isn't the FCC's signaling against zero-rating useful for reference for whomever is appointed after the Trump administration's pick?
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Anonymous Coward, 14 Nov 2016 @ 9:32am

Re:
Explain
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Retsibsi (profile), 14 Nov 2016 @ 9:54am

Late certainly, but not so late as to state the FCC's position and make it substantially harder for whoever is appointed as the new head to reverse it without making it clear that such a stance is wholly at odds with the public service ethos it's supposed to have...
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Anonymous Coward, 14 Nov 2016 @ 9:54am

Re:
This implies they care. The Trump admin. looks poised to put up the very people who created zero-rating to run the FCC. Don't hold your breath about anything getting done about it.
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Anonymous Coward, 14 Nov 2016 @ 10:07am

the only body that could have done something, yet it sat there, thumb up ass, brain in neutral, ignoring everyone that warned it and now it decides something is wrong and changes are needed? what a bunch of fucking idiots!!
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PRMan, 14 Nov 2016 @ 11:01am

Re:
It's obvious they assumed that Clinton had the presidency in the bag and they would have time later to go case-by-case.
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Anonymous Coward, 14 Nov 2016 @ 11:22am

Re:
If their job is to not do anything, then yes. All these rules and guidelines but no one is following them. And no one is being punished. I don't know why people keep talking about how great the FCC is right now. All they have done is create illusions that they are doing something all the while nothing has actually changed. In fact it is pretty safe to say we have more Net Neutrality violators today than we did before Net Neutrality was passed.
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Karl Bode (profile), 14 Nov 2016 @ 11:37am

Re: Re:
Yep, this. Nobody made back up plans because nobody thought they'd need any.
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clemahieu (profile), 14 Nov 2016 @ 12:38pm

Voter exhaustion
Given the number of political things people need to focus on now, how can we expect anyone except a handful of people to understand nuanced legislation like this?

Considering who's in charge of the FCC now, giving the government control over any part of the internet has been, and continues to be a huge mistake.

Whatever damage companies can do to the internet, the government can do worse.
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Dumbass, 14 Nov 2016 @ 6:48pm

Re:
No Dumbass because Trump is a fucking travesty and PENCE is making all th epicks anyways. And the GOP now own the house senate and Executive branch but you're too stupid to put 2 and 2 together equals You done fucked up by voting that piece of shit into office.
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another anonymous coward, 14 Nov 2016 @ 11:34pm

Re:
"Come on, I have been whining about the FCC and..."

Have you, anonymous coward?
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Anonymous Coward, 15 Nov 2016 @ 12:14am

Re: Voter exhaustion
Your are wrong, the ISP's who are also content providers can turn the Internet into cable V2, with all the bundling etc. that they desire, so long as the government stays out of their business.
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Richard Bennett (profile), 15 Nov 2016 @ 9:30am

Careful about that slander and libel thing.
Sorry, but Jeff Eisenach does not work for Verizon and the other ISPs. He said so on Twitter yesterday, so making that claim opens you up for some legal problems that you probably don't want.

Just sayin', as they say.
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Richard Bennett (profile), 15 Nov 2016 @ 9:33am

See this tweet.
https://twitter.com/JeffEisenach/status/798226574256603136
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Wendy Cockcroft (profile), 16 Nov 2016 @ 5:38am

Re: Re:
Take a deep breath and repeat after me: "Mid-term elections are two years from now."
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Wendy Cockcroft (profile), 16 Nov 2016 @ 5:41am

Re: See this tweet.
Effectively, he does: http://www.nytimes.com/interactive/2016/07/25/us/politics/document-eisenach-AEI.html?_r=0

He's just not on the company payroll.
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Richard Bennett (profile), 16 Nov 2016 @ 9:26am

Re: Re: See this tweet.
Compared to John Podesta, Eisenach is Mother Teresa. He discloses all relevant sources of funding, which is a lot more than TechDirt and Public Knowledge do.
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