Zero Rating Here to Stay

Barack Obama famously said that “elections have consequences.” The axiom is proving true in the case of zero rating and likely soon will for the bigger, related subject of net neutrality.

Last week, the Federal Communications Commission’s new chairman, Ajit Pai, said that the investigation into zero rating is being closed down. This is significant in its own right and is being taken by insiders as a precursor of what will happen to net neutrality regulations.

Precise implementations differ, but zero rating basically refers to carriers offering content services from owned or affiliated entities without charging at all or fully for the data. The argument of critics is that this puts “edge” clients – companies that simply use their networks as a conduit for their content – at a disadvantage. This, they say, is the type of favoritism that net neutrality is aimed at preventing.

Inside Sources quotes Pai’s statement, which says that the programs are popular “particularly among low-income Americans.” This may be trying to put a populist gloss on the move and avoid the key area of contention. Does zero rating build unfairness into the system? That, of course, is the heart of the net neutrality debate.

Pai’s move came about three weeks after the FCC issued a report that examined four zero rating services. Two – AT&T’s Sponsored Data and Verizon’s FreeBee Data 360 – were found to possibly be discriminatory. The FCC, according to The Hill, was hardest on AT&T:

The report singled out AT&T’s zero rating of service from DirecTV, a subsidiary of the mobile company. It accuses AT&T of imposing higher costs to use its sponsored data program on unaffiliated companies than it does on DirecTV, inflicting “significant unreasonable disadvantages on edge providers and unreasonably [interfering] with their ability to compete against AT&T’s affiliate.”

Pai had not yet been named Chairman by President Trump when the report was released. He was critical. Pai’s statement on the end of the investigation carried on that line of thought. It was stunning for its brevity: 62 words. Anyone even vaguely familiar with documents that come from the FCC is certain to have a grudging respect for that, no matter what that person’s opinion is about the decision.

On a deeper level, however, the key is that Pai’s statement does not address the issue of discriminatory practices. It simply says that the public has benefited.

That leads to two interconnected questions, which may never be answered: If zero rating does indeed stifle innovation by reducing competition, does that neutralize at least to some extent the benefits of lower prices? And, secondly, does the government have at least some responsibility to maintain an even playing field, both to support the possibility of that innovation and to be fair to content producers not associated with the AT&Ts and Verizons of the world?

Carl Weinschenk covers telecom for IT Business Edge. He writes about wireless technology, disaster recovery/business continuity, cellular services, the Internet of Things, machine-to-machine communications and other emerging technologies and platforms. He also covers net neutrality and related regulatory issues. Weinschenk has written about the phone companies, cable operators and related companies for decades and is senior editor of Broadband Technology Report. He can be reached at cweinsch@optonline.net and via twitter at @DailyMusicBrk.