The FCC fears that AT&T — and perhaps Verizon as well — are running afoul of net neutrality rules when they waive data charges for their customers who use company-created video services, the agency told them in letters sent yesterday and disclosed today.
Under the policy, known as zero rating, AT&T’s wireless customers don’t incur data charges when they also subscribe to DirecTV Now, while Verizon customers are clear when they use Go90.
Based on information AT&T has provided, the FCC’s Wireless Telecommunications Bureau reached a “preliminary conclusion” that zero-rating plans for DirecTV Now “inhibit competition, harm consumers, and interfere with the ‘virtuous cycle’ needed to assure the continuing benefits of the Open Internet,” writes the unit’s Chief Jon Wilkins.
He asked AT&T to supply additional information about its zero-rating plan by December 15.
Wilkins notes that a competitor “would have to pay AT&T $16 a month to offer zero-rated service to a customer who uses just 10 minutes of LTE video per day, increasing to $47 for a customer using 30 minutes per day,” he says. “These costs alone would represent 46 percent to 134 percent of DirecTV Now’s $35 retail price, against which third parties will be competing for AT&T Mobility customers, and would be borne in addition to all other costs of providing service by the unaffiliated provider.”
That “would make it very difficult, if not infeasible, to offer a competitively-priced service,” he adds.
Wilkins has similar concerns about Verizon’s s FreeBee Data 360 plan that benefits the telco’s Go90 subscription-free video offering as well as its deal to be the exclusive distributor of NFL games to mobile phones.
Verizon would not incur a cash cost for providing the video without data charges. But a competitor would face “a significant competitive disadvantage” because “potential subscribers would have to take into account the total cost they would incur by using the unaffiliated provider’s service.”
Wilkins asked Verizon to respond to “the concerns expressed in this letter” by December 15.
AT&T has defended its zero-rating policy for DirecTV Now, saying that it helps the telco compete with cable — and provides a savings for customers.
The debate might become moot if President-elect Trump appoints FCC commissioners who oppose its net neutrality policy.