FCC Says AT&T Zero-Rating Likely Violates Net Neutrality

Verizon and AT&T introduced their own zero-rating services at the beginning of 2016. Both carriers charge the video providers to pay for the data instead of the customer, thus complying with the controversial rulings by the FCC over the past couple years.

The FCC hasn't made a final ruling on whether or not these zero-rating practices were a real issue. The communications agency estimates that a video service provider would have to pay the Dallas, Texas-based carrier firm $16 per month for a user who streamed 10 minutes per day without using data on the wireless network.

AT&T Inc. said the exempting apps like its new Direct TV Now online TV app from data caps saves customers money and the FCC shouldn't put a stop to that.

All other video services, by contrast, either have to pay AT&T or Verizon to provide their services to consumers in a zero-rated manner or force their customers to tap into their limited data allotments to access them.

First off, what is "zero-rating"?

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.

The FCC sent a similar letter to Verizon on the same day, criticizing its own zero rating program, which the agency argued may significantly disadvantage outside video providers, leading to "anti-competitive effects".

AT&T's strategy could also spark other Internet service providers to follow suit, creating a wireless market where customers would be forced to choose unlimited streaming for some programming while other content would count against their monthly data limits. In this week's letter, the FCC says that it has come to the "preliminary" conclusion that the Sponsored Data program inhibits competition, harms consumers, and violates Open Internet rules. In November, the FCC had sent a warning to AT&T about its practice, and AT&T's response back didn't ease their concerns.

AT&T bought DirecTV in 2014 for $48.5 billion and is in the process of acquiring Time Warner for $85 billion, whose lineup includes CNN, HBO and Warner Bros. AT&T has until December 15th to respond.

In a letter to AT&T's Robert W. Quinn, Jr., Wilkins said he was concerned that AT&T's Sponsored Data program "denies unaffiliated third parties the same ability to compete over AT&T's network on reasonable terms".

AT&T did not immediately respond to FORBES' request for comment.

While Verizon says "We remain quite confident that our practices are good for consumers, non-discriminatory and are consistent with current rules". Trump hasn't said much about net neutrality, but he's indicated he's not a fan of the regulation.

Ajit Pai, a Republican commissioner at the FCC who is seen as a candidate to be the next FCC chairman, underscored that point in a statement Friday.

Net neutrality rules - implemented by the FCC a year ago after intense lobbying against them by Internet service providers - were aimed at preventing ISPs from charging Web-based producers higher fees for faster connections, creating a two-tiered Web: a fast one for cash-flush content providers, like corporate and government websites, and a slower one for everyone else, like small nonprofit organizations and bloggers.

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