FCC takes aim at AT&T, Verizon over ‘zero-rating’ services

The Federal Communications Commission (FCC) expressed concern Wednesday about “zero-rating” services from AT&T and Verizon that “may harm consumers and competition.”

In a report issued Wednesday examining four different zero-rated services, the FCC’s Wireless Bureau found that AT&T’s Sponsored Data program and Verizon’s FreeBee Data 360 program may stifle competition by “potentially unreasonable discrimination in favor of their own affiliates.”

Zero-rating is the practice of giving consumers free data when they use certain apps or services. In these cases, Verizon and AT&T direct their users to their own services or those of an affiliate, which critics say is unfair to consumers and third parties.

{mosads}Both companies were quick to push back on the report, saying their customers want options to conserve their data.

“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,” Joan Marsh, AT&T’s vice president of federal regulatory, said in a statement. 

“This practice, which has been embraced by AT&T and other broadband providers, has enabled millions of consumers to enjoy the latest popular content and services — for free. We hope the government continues to support a competitive marketplace that lowers costs and increases choice for consumers.”

“We don’t agree with their view on free data and we don’t think our customers do either,” added Will Johnson of Verizon. “Hopefully the next FCC will take into account the views of our customers who greatly benefit from watching professional football, soccer, basketball and other great content on go90 free of data charges.”

FCC Commissioner Ajit Pai, one of the two Republicans on the panel, also issued a statement echoing the arguments from the two companies. Pai, who some consider to be a leading candidate to chair the commission in the Trump administration, said he was “disappointed” in the report and how it was released.

“This report, which I only saw after the FCC released the document, does not reflect the views of the majority of Commissioners,” he said. “Fortunately, I am confident that this latest regulatory spasm will not have any impact on the Commission’s policymaking or enforcement activities following next week’s inauguration.”

The report singled out AT&T’s zero rating of service from DirecTV, a subsidiary of the mobile company. It accuses AT&T of imposing higher costs to use its sponsored data program on unaffiliated companies than it does on DirecTV, inflicting “significant unreasonable disadvantages on edge providers and unreasonably [interfering] with their ability to compete against AT&T’s affiliate.”

The report expressed similar concerns about Verizon’s go90 app but noted that its offerings are much more limited than that of AT&T’s DirecTV Now service.

The findings were also denounced by Mobile Future, a trade association representing communications and technology companies.

“Rather than tipping the scales toward preferred business models, the FCC should let consumers decide for themselves which models, and free data, they prefer,” Diane Smith, the group’s interim chair, said in a statement.

Critics of zero-rating say the practice is a violation of net neutrality, a principle enshrined in the FCC’s Open Internet Order that requires all internet traffic to be treated equally.

A group of senators, led by Sen. Ed Markey (D-Mass.), praised the report on Wednesday for calling out what they see as a violation of the net neutrality rules. The group also included Sens. Ron Wyden (D-Ore.), Al Franken (D-Minn.), Bernie Sanders (I-Vt.), Elizabeth Warren (D-Mass.), Tammy Baldwin (D-Wis.) and Richard Blumenthal (D-Conn.).

“These guiding principles will help the FCC, industry, and the public evaluate zero-rating offerings and identify plans that distort competition, stifle innovation, and hamper user choice and free speech,” Markey said in a statement. 

“I will continue to work with my colleagues to encourage the Commission to enforce these guidelines and ensure that the internet remains a permission-less environment where anyone with an idea or voice can participate.”