AT&T's deal to buy Time Warner spotlights debate over zero-rated offerings

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AT&T’s blockbuster deal to acquire Time Warner has brought increased attention to the hot-button issue of zero-rated offerings for mobile users.

The nation’s second-largest mobile network operator recently said it will spend $85.4 billion to acquire Time Warner in a move that includes HBO, CNN, TNT and TBS, as well as Warner Bros. Pictures and Warner Bros. TV Studios operation. AT&T is preparing to launch its OTT DirecTV Now offering in the next few weeks, and CEO Randall Stephenson promised in September that the 100-channel service will be zero-rated for the company’s wireless customers, enabling them to watch without taking a toll on their monthly data allotments.

But some FCC staffers already view AT&T’’s DirecTV Now model “as an example of improper zero-rating,” according to a Wall Street Journal report citing people familiar with the matter, because it gives the carrier an edge over other streamed video offerings. And some companies are likely to urge federal regulators to require conditions for the Time Warner tie-up, arguing that the DirecTV strategy is anticompetitive, the Journal said.

Mobile carriers are increasingly offering zero-rated content in an effort to leverage their distribution muscle and differentiate themselves from the competition. T-Mobile was the first to do so with Music Freedom and Binge On, which enables users to consume music and video without it counting against their monthly data allotments; every other major wireless operator in the U.S. has also brought zero-rated content to market in one form or another.

Some critics have said zero-rated data may run afoul of net neutrality principles because it can give some content providers an advantage over others. The controversial practice is becoming more heated as carriers such as Verizon and AT&T expand into digital media, because they can use the model to push their own content to their customers.

The FCC has yet to intervene in carriers' policies regarding zero-rated data, but has said it continues to monitor the issue. FCC Chairman Tom Wheeler has said zero-rated plans aren’t covered in the FCC’s net neutrality guidelines because the issue isn’t a “one-size-fits-all situation.”

Zero-rated proponents say the model enables customers to access content they may not be able to afford otherwise.

“Without question, (DirecTV Now) was about our customers. It was about our best customers,” AT&T’s Glenn Lurie told FierceWireless in September. “When you think about the folks that are going to be utilizing this, you’re talking about someone who is a current [AT&T] Mobility customer and a current linear TV customer in their home. So they are paying us hundreds of dollars a month. They are arguably some of our most valuable customers, and this is what they deserve. And we believe this is a fantastic offer and shows what AT&T can bring to the table.”