FCC blasts Verizon, AT&T over zero-rated data

Tom Wheeler, Chairman of the FCC
Outgoing FCC Commissioner Tom Wheeler. Image: Getty

The FCC and the wireless industry exchanged jabs over net neutrality, with the Commission saying zero-rated video offerings from Verizon and AT&T are unfair to other video providers.

But it isn’t likely to matter for very long.

The agency issued a report (PDF) saying that while zero-rated data services don’t necessarily run afoul of net neutrality rules “per se,” AT&T’s DirecTV and Verizon’s Go90 violate them because they allow the respective carriers to deliver their own content without having an impact on customers’ wireless data charges. That gives the carriers an edge over other video providers, because viewing their content takes a toll on users’ monthly data allotments.

The FCC questioned both Verizon and AT&T last month over their policies for zero-rated data, asking both companies to respond within two weeks. But AT&T’s reply didn’t sufficiently address concerns over net neutrality, the Commission wrote.

“AT&T’s responses do not enable us to compare the terms and conditions of AT&T’s Mobility’s offerings to Sponsored Data customers with the terms and conditions of its treatment of DirecTV; indeed, they do not even provide a complete picture of the terms of the Sponsored Data program standing alone,” the FCC wrote. “The limited information we have obtained to date, however, tends to support a conclusion opposite from AT&T’s contentions—namely, that AT&T offers Sponsored Data to third party content providers at terms and conditions that are effectively less favorable than those it offers to its affiliate, DirecTV.”

AT&T fired back in a blog post, with Senior Vice President of Federal Regulatory Joan Marsh claiming zero-rated data services have enabled “millions” of consumers to access content for no charge. “We hope the government continues to support a competitive marketplace that lowers costs and increases choice for consumers,” she wrote.

T-Mobile was the first U.S. carrier to try to leverage zero-rated data in a significant way, first with its Music Freedom offering in 2014 and then a year later with Binge On for video, which has seen significant success. While Binge On has also drawn criticism over net neutrality concerns, T-Mobile’s policy of accepting content from any provider who meets certain technical criteria helps alleviate those issues.

Zero-rated data became a key strategy for all four major U.S. carriers last year—to one degree or another, at least—and net neutrality has long been a top priority for Chairman Tom Wheeler as Democrats have enjoyed a 3-2 advantage over Republicans on the Commission. Wheeler will leave the agency Jan. 20 as President-elect Donald Trump is sworn in, though, and Republicans will surely regain a majority.

Telecom industry insiders agree that the FCC under Trump will demonstrate a significantly lighter touch than it has under Obama. All three members of the president-elect’s FCC landing team served as visiting fellows at the conservative think tank American Enterprise Institute, and all three have vocally criticized the net neutrality rules adopted by the FCC under the Obama administration.

The Trump White House will almost surely see the reversal of net neutrality and other of Wheeler’s top priorities. So while the battle between regulators and carriers over zero-rated data may continue for a little longer, it’s likely to fade into the background very soon.