Updated with AT&T statement: AT&T’s pricing arrangement for its upcoming DirecTV Now streaming service might “obstruct competition and harm consumers,” the head of the FCC’s Wireless Telecommunication Bureau says in a letter seeking information about the much ballyhooed plan.
The telco has stirred up interest by promising to offer more than 100 TV channels for $35 a month. That could make it a welcome alternative for viewers tired of paying about $90 a month for the typical expanded basic pay TV package.
But that may not be the whole story: The telco apparently plans to wave data charges for AT&T Mobility subscribers who also buy DirecTV Now.
Critics of the practice, known as zero rating, say that it violates the spirit of net neutrality rules: The FCC has said it will examine each case individually to see whether competition is harmed when an internet distributor favors its own service over competitors — in this case video providers such as Sling TV or an upcoming live streaming service from Hulu.
“Their potential subscribers would have to take into account the total cost they would incur,” the FCC’s Jon Wilkins wrote in the letter dated yesterday.
Data costs for rivals, he adds. could run so high that they would “render infeasible any third-party competitor’s attempt to compete with the $35 per month retail price that AT&T has announced for DirecTV Now.”
Wilkins asked AT&T to “address the concerns expressed in this letter” and clarify “if you believe that we have misunderstood relevant aspects of AT&T’s current and announced offerings.”
AT&T Senior EVP of External and Legislative Affairs Bob Quinn says that his company “and other broadband providers offer a service that lets consumers watch video without incurring any data charges. These are incredibly popular services that we hope regulators won’t take away from the millions of people who enjoy them today. It makes it easier for consumers to say goodbye to their cable company.”
He adds that AT&T welcomes “any video provider that wishes to sponsor its content in the same ‘data free’ way for AT&T Mobility customers and we’ll do so on equal terms at our lowest wholesale rates. Saving consumers money is something we all should support.”
Many analysts wonder how AT&T — which has agreed to pay $85 billion for Time Warner — can make a profit on DirecTV Now after absorbing the programming costs.
“If AT&T really does follow through with its proposed $35 price point as anything more than just a starting ‘base’ price — and count us as skeptics — then it is easy to imagine that there will be a very significant acceleration [in cord cutting] ahead,” MoffettNathanson Research’s Craig Moffett says. “AT&T is taking its content partners for a dance on the edge of a cliff.”