Zero-rating services allow a consumer to stream particular Internet content without affecting their overall data cap. These services are becoming increasingly popular as demonstrated last week by Sprint when it joined AT&T, Verizon and T-Mobile with its own zero-rating content. Sprint has partnered with FuboTV, a soccer streaming service, to give customers access to every match of the Copa America Centenario soccer tournament if they sign up for a 60-day trial. Data streamed from FuboTV will not count against a customer’s data cap during the tournament.

Internet service providers (ISPs) claim that zero-rating services such as this benefit consumers because it provides them with the opportunity to sample content that they would not choose to pay for and it spurs customer loyalty. Net neutrality advocates disagree, claiming that zero-rating gives an unfair advantage to edge services that don't count against data caps and allows ISPs to favor certain content over others.

Until now the FCC has treaded very carefully in determining whether regulation is needed for zero-rated product offerings. In its Open Internet Order in 2015, the agency originally stated:

On the one hand, evidence in the record suggests that these business models may in some instances provide benefits to consumers, with particular reference to their use in the provision of mobile services… On the other hand, some commenters strongly oppose sponsored data plans, arguing that “the power to exempt selective services from data caps seriously distorts competition, favors companies with the deepest pockets, and prevents consumers from exercising control over what they are able to access on the Internet (Open Internet Order, Docket 14-28, para. 151).

Since the Order became effective, the Commission has chosen to review these plans on a case-by-case basis. However, other than summoning ISPs to a meeting to discuss their zero-data plans, the Commission has yet to take further action.   

Now it may be that the Commission is honestly ambivalent about whether these plans are beneficial or whether they hurt the “open” Internet. The view here, however, is that the three Democrats on the Commission are itching to more actively regulate these plans but are constrained until the DC Circuit Court gives thumbs up or down to the net neutrality rules. After all, any FCC finding that a zero-rating service is unlawful would be made moot if the rules are found arbitrary and capricious by the Court.

While the Commission ponders the future of zero-rating plans, it might want to take the time to review the first actual study we’ve seen regarding the effects of these plans on consumers.  The study was performed by the Information Technology and Innovation Foundation (ITIF). Doug Brake, the ITIF telecommunications policy analyst and the report’s author stated:

Those who argue zero rating is a ‘sneak attack’ on net neutrality are capitalizing on rigid abstractions and demagoguery to sway the FCC. Doing so turns a blind eye to the numerous benefits of zero rating for consumers and competition alike. The FCC and its counterparts around the world should recognize these programs are in the public interest (May 23, 2016, ITIF Release).

Specifically, the study found that zero-rating services provide many benefits for consumers, content providers, and the Internet as a whole:

• Zero rating is an economically efficient way to support innovation
• Zero rating expands access to information, particularly in developing countries
• Zero rating is generally pro-competitive because it allows companies to differentiate offerings
• Zero rating provides consumers more of what they want
• Zero rating leads to more efficient use of networks without hurting quality
• Zero rating improves the efficiency of advertising

Consumer advocates, however, are unlikely to be swayed by this or any study, and they continue to strongly oppose zero-rating plans. This week a group of approximately 50 consumer organizations sent a letter to the FCC requesting a through transparent review of all zero-data plans:

Zero-rating profoundly affects Internet users' choices. Giving ISPs the power to favor some sites or services over others would let ISPs pick winners and losers online—precisely what the Open Internet rules exist to prevent. Because mobile networks are increasingly the way most Americans get online, mobile ISPs matter equally and polls show more than 80 percent of voters, from liberals to conservatives, are concerned about ISPs having the ability to pick and choose content. Given how many stakeholders participated in the process to make these rules, including nearly 4 million members of the public, it would be unacceptable not to seek and incorporate broad input and expertise at this critical stage.  For these reasons, we urge you to open a public process to inform your evaluation of existing zero-rating plans. The FCC’s process in this critical area would be immeasurably enriched by the participation of diverse stakeholders, many of whose input helped shape the Open Internet rules (Docket 14-28, May 24, 2016 ex parte letter from consumer groups, pp 1-2).

Unfortunately, if the Court finds the Open Internet rules are lawful, we may find that the future of zero-data plans is determined on a 3-2 partisan vote with the result being extensive restrictions and regulations. It would be nice if just once, the FCC used actual facts rather than emotion or instinct to make a crucial decision.

By Andy Regitsky, CCMI