Year in Review: Wireless carriers embrace zero-rated data

Global data network. Image: Pixabay

FierceWireless is wrapping up an eventful 2016 by taking a hard look at five of the most important trends and developments that emerged in the market this year. Today we examine at the emergence of zero-rated data policies among U.S. carriers.

The news: Zero-rated data became a key strategy for U.S. operators this year, as every one of the tier-one carriers launched – or continued to offer – ways to enable their customers to access content without incurring data charges.

During the year, Verizon brought zero-rated content to its homegrown Go90 mobile video service, then built on that model with streaming content in its NFL Mobile app. Sprint took a more modest tack, enabling its customers to watch every match of the summer’s Copa América Centenario soccer tournament on their phones data-free. And AT&T was perhaps the most aggressive of them all in 2016, extending zero-rated data from DirecTV to its wireless customers, then doing the same with DirecTV Now, the cross-platform OTT video service it launched in November. Smaller service providers got in on the action as well, with the MVNO FreedomPop – to name just one -- offering data-free WhatsApp service in the U.S.

What it means: 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. Like other offerings to follow in the industry, Binge On degraded the quality of video – or, as T-Mobile likes to put it, “optimized” it – for smaller screens, easing the load on the network but still providing an acceptable viewing experience for most customers. The service has proven tremendously popular with subscribers and likely won the carrier more than a few net customer additions. Binge On has become so compelling, in fact, that T-Mobile CTO Neville Ray boasted in September that less than 1 percent of the carrier’s customers have turned it off.

Carrier strategies with zero-rated data have differed, though. Binge On is clearly an effort to grow T-Mobile’s customer base by offering essentially unlimited mass-market video at a flat monthly rate. Verizon appears more interested in using Go90 to deliver highly targeted – and therefore highly lucrative – mobile ads to the prime demographic of young, male mobile users. AT&T is hoping attract wireless users as well but is also looking to increase the stickiness of its DirecTV (and DirecTV Now) services. It appears that Sprint’s strategy hasn’t yet been fully formed.

While network capacity could become a problem if zero-rated offerings truly take off, the biggest challenge to the model has been claims that it’s a threat to net neutrality rules. Such services have come under fire from net neutrality proponents who claim they allow deep-pocketed media companies to pay for access to mobile subscribers, giving them an unfair advantage over smaller players. That concern is only magnified when carriers make their own content available to wireless users data-free, as AT&T does with DirecTV Now, barring other content providers from leveraging the scheme. T-Mobile has consistently been accused of violating net neutrality rules, and the FCC recently began questioning both Verizon and AT&T over their policies.

It's likely those regulatory concerns will fade away under the incoming Trump administration, however. Telecom analysts generally expect regulators to display a far lighter regulatory touch after the president-elect takes office, and Trump’s first three FCC transition advisers have all been vocal critics of the net neutrality rules that were a top priority under Chairman Tom Wheeler during the Obama administration. Even if net neutrality rules aren’t rolled back entirely under Trump, zero-rated data services aren’t likely to face much regulatory opposition.

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