FCC Warns AT&T, Verizon They're Violating Net Neutrality With Zero Rating Schemes

Last month, we noted how the FCC had finally woken up from a deep slumber to realize that zero rating (an ISP exempting its own or a partner company's content from usage caps) can be anti-competitive. The FCC's net neutrality rules don't specifically ban zero rating, but the agency had said it would act on a "case by case basis" should the practice be used anti-competitively. But a year came and went, and the FCC consistently failed to act as ISPs from Comcast to Verizon began giving their own content an unfair leg up in the market.

That was until last month, when the FCC sent AT&T a letter warning it that exempting its DirecTV Now content from AT&T wireless usage caps raised "serious concerns" about the open internet. Apparently unfazed by AT&T's defense of its behavior, the FCC last week sent an additional letter to AT&T (pdf) saying it believes that AT&T's implementation of usage caps hurts competition:

"...Your submission tends to confirm our initial view that the Sponsored Data program strongly favors AT&T's own video offerings while unreasonably discriminating against unaffiliated edge providers and limiting their ability to offer competing video services to AT&T's broadband subscribers on a level playing field. We have therefore reached the preliminary conclusion that these practices inhibit competition, harm consumers, and interfere with the "virtuous cycle" needed to assure the continuing benefits of the Open Internet."

Again, why it took the FCC the better part of a year to realize this isn't clear, but the agency sent a similar letter to Verizon (pdf). In that letter, the FCC criticizes Verizon's "Free Bee" sponsored data service that lets competing content companies enjoy the same cap-exempt status Verizon's own content enjoys -- if companies are willing to pay a steep premium:

"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."

That's great, FCC, we're so glad you could join the rest of us in realizing the obvious. But while the FCC's letters urge both AT&T and Verizon to offer up further justifications before December 15, there's no indication any FCC enforcement or punishment for these violations will survive the Trump administration. We've noted how all of Trump's telecom advisors not only have deep ties to the broadband industry, but have actively stated they want to gut net neutrality rules entirely in addition to hamstringing and defunding the FCC.

In fact Ajit Pai, a current Commissioner in the running for new FCC boss issued a statement (pdf) reminding the FCC that whatever it does can (and likely will) be undone by the new administration:

"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."

So again, it's great that the FCC finally realized that using caps to give your own content an unfair market advantage is anti-competitive, but the enforcement (if you can call it that) comes too little too late for consumers, given the incoming administration has made every indication it intends to either refuse to enforce the existing rules, or work to scrap net neutrality protections entirely.

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