The FCC has asked U.S. wireless carriers AT&T and Verizon to respond to fresh concerns that their zero rating policies could “hinder competition and harm consumers.”
In letters sent to the two carriers on Thursday, FCC Wireless Telecommunications Bureau Chief Jon Wilkins indicated the commission believes the programs put unaffiliated edge providers at a competitive disadvantage when trying to offer competing video services.
“Our concern is not with zero-rating per se. In the 2015 Open Internet Order, the Commission acknowledged that some zero-rating programs may ‘increase choice and lower costs for consumers,’” Wilkins wrote in his letter to Verizon. “The position that the participation of Go90 in FreeBee Data 360 is the same as that of third parties, however, fails to take account of the notably different financial impact on unaffiliated edge providers … Under either option for competing with Verizon’ s Go90 or other affiliated edge services, unaffiliated edge providers appear to confront significant disadvantages when trying to compete with Verizon from the combined impact of Verizon’s FreeBee Data 360 fees and zero-rating of its own Go90 offerings. We are therefore concerned that this combination could present anti-competitive effects.”
The letters are the latest in a line of inquiry the FCC took up in November, when it grilled AT&T on the competitive merits of its new DirecTV Now mobile video service. Launched on Monday, DirecTV Now offers zero-rated data for AT&T customers who watch content on the platform. The FCC reportedly alleged the ultra-low-priced service might “obstruct competition” and questioned the legality of the zero-rating offer under the commission’s net neutrality rules.
In its response to the FCC’s initial inquiry, AT&T argued the zero-rating offer helped it better compete with cable incumbents and offered a form of market disruption that would benefit consumers. But the FCC on Thursday said AT&T’s reasoning only seemed to reaffirm its conclusion that “these practices inhibit competition, harm consumers, and interfere with the ‘virtuous cycle’ needed to assure the continuing benefits of the Open Internet.”
“Our concern is that AT&T’s Sponsored Data program – i.e., the terms and conditions on which AT&T makes its own network available to similarly situated unaffiliated providers denies unaffiliated third parties the same ability to compete over AT&T’s network on reasonable terms,” Wilkins wrote. “This concern arises not from AT&T’s retail rates, but from the different financial impact of the Sponsored Data program on unaffiliated providers versus on AT&T’s affiliates, such as DirecTV.”
The commission has given both AT&T and Verizon until December 15 to respond to its renewed concerns.
In a statement, AT&T said it would once again “provide the FCC with additional information on why the government should not take away a service that saves consumers money.”
Verizon on Friday said it would “review and respond to the inquiry as requested,” but noted “in the meantime, we remain quite confident that our practices are good for consumers, non-discriminatory and are consistent with current rules.”
On Friday, FCC Commissioner Ajit Pai – who is rumored to be on President-elect Donald Trump’s shortlist to replace Chairman Tom Wheeler – blasted the FCC’s decision to send the letters as a violation of precedent for an outgoing administration and an attack on free data for consumers.
“Two weeks ago, Congress called on the FCC to respect the tradition followed by Democrats and Republicans alike eight years ago during the last Presidential transition. Accordingly, a bipartisan majority of Commissioners at last month’s FCC meeting heeded Congress’s call to ‘avoid directing [our] attention and resources . . . to complex, partisan, or otherwise controversial items,’” Pai said. “And yet, last night, Chairman Wheeler launched yet another broadside against free data for consumers, notwithstanding the objections of Republican commissioners. This end-run around Congress’s clear instruction is sad—and pointless. For any unilateral action taken by the Wireless Telecommunications Bureau at the Chairman’s direction in the next 49 days can quickly be undone by that same bureau after January 20, 2017.”
Filed Under: Industry regulations