The Federal Communications Commission has finally released its staff review on zero-rating by mobile networks like AT&T and Verizon. The bad news for telcos: the report says the practice of letting people watch AT&T or Verizon’s video services without incurring any data charges violates net neutrality rules.
The better news for telcos: none of that matters.
President-elect Donald Trump takes a dim view of net neutrality and with both the House of Representatives and Senate under Republican control, it’s widely expected that net neutrality rules will be relaxed or even scrapped entirely under a Trump administration.
That means Wednesday’s report on the FCC won’t end up being much of a problem for AT&T and Verizon, who all but shrugged off its findings. “It remains unclear why the Wireless Bureau continues to question the value of giving consumers the ability to watch video without incurring any data charges,” AT&T said in an official response.
The FCC argues that zero rating gives telcos an unfair advantage over competitors. Say a customer subscribes to a service plan allowing 10 gigabytes of data per month. Her use of the zero-rated services, like go90 on AT&T, won’t count towards her monthly data usage allowance.
Several carriers introduced unlimited data programs in 2016, including the zero-rated video service on T-Mobile’s Binge On, while Sprint also experimented with zero-rating videos of the 2016 Copa American soccer tournament. Customers of AT&T can watch data-free TV on its DIRECTV app.
Zero rating seems like a great deal for consumers at face value, but there’s been a long-standing argument that it distorts competition. Facebook came under fire in 2015 because its Internet.org project in India used a similar practice, allowing customers to access the social network without a data plan. Campaigners said this threatened fundamental principles of net neutrality.
But with Trump about to come into power, decisions by the FCC, which upheld net neutrality last year, are now subject to change. The regulatory body’s current chairman, Tom Wheeler, will step down when Trump takes office, making way for someone else.
“Trump has made clear he doesn’t believe in net neutrality,” says Cyrus Mewawalla, managing director of CM Research in London. “He thinks it’s a market distortion.” Some reports have suggested Trump will pick Jeffrey Eisenach to run the FCC, an economist who worked for the Federal Trade Commission under Reagan and more recently as a consultant for Verizon, and who has been highly critical of net neutrality.
Mewawalla suspects some sort of policy relaxing or scrapping net neutrality rules will come into effect in 2017, which could shift the balance of power from Internet companies back to telcos. In practice it would benefit AT&T and Verizon most, and hit Netflix hardest. “Right now AT&T can’t charge Netflix anymore than what it charges any other business.”
How much it’s allowed to charge a bandwidth user like Netflix could differ depending on the time of day, and according to peak and non-peak time, Mewawalla adds. “We could see an impact on the U.S. economy of billions of dollars.”
