FCC Questions AT&T, Comcast, T-Mobile on Zero-Rating Plans

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By Lydia Beyoud

Dec. 17 — The FCC is taking a closer look at so-called zero-rating plans offered by AT&T Inc., Comcast Corp. and T-Mobile US Inc. that allow customers to stream data-hungry video applications and other content without counting it toward their monthly data usage.

“This is not an investigation, this is not an enforcement,” Federal Communications Commission Chairman Tom Wheeler said at a Dec. 17 press conference of letters sent to the three companies the previous day.

AT&T’s Sponsored Data and Data Perks programs, T-Mobile’s Binge On video offering and Comcast’s Stream TV services are the focus of the letters of inquiry. The companies were asked to meet with relevant technical and business personnel by Jan. 15.

The request for the businesses to speak with FCC officials about their offers is intended to help the commission stay informed of what thee practices actually are, “as we said we would do in the Open Internet order,” Wheeler said. The broadband providers have also been asked to comment on how the industry is developing as a whole, Wheeler indicated.

The FCC declined to regulate zero-rating offerings as part of its net neutrality proceeding, but Wheeler said in November the FCC would keep an eye on them. The chairman subsequently asked the Wireline Competition Bureau and the Wireless Telecommunications Bureau to collaborate on an informal review of the new offerings to keep the FCC informed about marketplace developments, an FCC spokeswoman said on background.

“We want to ensure that we have all the facts to understand how these services relate to the Commission's goal of maintaining a free and open Internet while incentivizing innovation and investment from all sources,” each letter said.

Comcast Model Viewed as Problematic

The letters noted various concerns raised with each of the offerings as potentially circumventing the FCC's prohibitions on paid prioritization, but Comcast's data use exemption is generally viewed as the more problematic of the three by public interest groups and video competitors.

Comcast has repeatedly said its service is not a zero-rated one, as it doesn't run across the public Internet and is only available to its customers at home. Data usage for Stream TV is exempt from Comcast XFINITY monthly data usage that otherwise applies to streaming video.

A Comcast spokeswoman said via e-mail the company looked forward to participating in the FCC's fact-gathering related to industry processes.

Other broadband providers will also be invited to meet with the commission, including commercial and public interest groups, the FCC spokeswoman said. Although Verizon Communications Inc. has previously expressed its own interest in sponsored data offerings, it did not receive such a letter. One could follow once the company officially rolls out the new service.

The commission may have reason to have more concerns with Comcast, said Harold Feld, senior vice president of Public Knowledge, a public interest advocacy group.

“There are a number of competitive concerns that are at play here, not simply net neutrality concerns, but straight-up traditional video competition concerns” that were the subject of the merger conditions between Comcast and NBC Universal, Feld said. These concerns are whether Comcast would leverage the combination of its position as the nation's primary wireline broadband provider with enhanced power in the programming world in order to disadvantage competitors, he said.

However, an Internet protocol (IP)-based television offering such as that described by Comcast doesn't necessarily implicate the same concerns that typical zero rating does, said Doug Brake, a telecom policy analyst with the Information Technology and Innovation Foundation in Washington.

The FCC has more reason to be concerned about anticompetitive behavior related to pure over-the-top video streaming, he said. “The real issue that is driving so much of this, that no one wants to talk about, is if we do see real cord cutters and a real transition away from cable video to over-the-top, we have to find a way to make the pricing work so we can support the broadband” infrastructure, he said.

“I think everyone recognizes these sponsored data programs can be good or bad, depending on how they're designed,” he said.

‘Calculated Signal.'

Feld called the letters a “calculated signal” by the FCC to encourage Internet service providers to innovate around data caps and zero-rated offerings, while at the same time warning that ISPs won't have free reign to turn them into loopholes in the Open Internet rules.

After the discussions, the FCC will be better positioned to provide guidance on zero rating that they weren't able to include in the Open Internet order about when data cap programs, sponsored data or zero rating offers cross the line into practices that are anticompetitive or anticonsumer, Feld said.

Additional clarity could come in the form of a policy statement from Wheeler stating that generally zero rating and similar practices are positive and desirable for a competitive marketplace, Brake said. “Hopefully this is not one of those cases” where the FCC creates gray areas for the Enforcement Bureau to step in and act, he added.

To contact the reporter on this story: Lydia Beyoud in Washington at lbeyoud@bna.com

To contact the editor responsible for this story: Keith Perine in Washington at kperine@bna.com

For More Information

Text of the letter to AT&T is at http://src.bna.com/bCh.

Text of the letter to Comcast is at http://src.bna.com/bCj.

Text of the letter to T-Mobile is at http://src.bna.com/bCi.