Updated: Feb 9, 2018

The Wireless Telecommunications Bureau released a Policy Review presenting the results of the Bureau’s staff review during 2016 of sponsored data and zero-rating practices in the mobile broadband market, which establishes a draft framework for evaluating mobile zero rated data offerings.  The Commission found that two plans offered by operators in 2016 present significant risks to consumers and competition in downstream industry sectors because of network operators’ potentially unreasonable discrimination in favor of their own affiliates.

The Bureau describes “zero-rated” content, applications, and services as those that end users can access without the data they consume counting towards their usage allowances or data caps imposed by their operator’s service plans.  The Commission notes that 2016 was “a year of significant creativity and experimentation,” specifically noting T-Mobile and Sprint’s newly introduced data plans and AT&T/DIRECTV services.  In 2015, the Commission stated that it would assess zero-rating and sponsored data practices under the General Conduct Rule and the three bright line rules established in the Open Internet Order.  While the Bureau used traditional principles for assessing zero-rating impacts, the Report also provides the following categories and considerations for evaluation:

  • Overall considerations underlying evaluations of how a practice effects Internet openness;
  • Do these practices amount to “blocking” or “throttling” or paid prioritization?
  • If the practice is not throttling or paid prioritization, does it violate the general conduct rule, either through:
    • Non Discrimination/Competitive Effects
    • Data Cap
    • Choice and End User Control
    • Transparency
    • Other (i.e. serving a civic engagement purpose, offering functionally-equivalent services to evade the rules)

The review focused specifically on four sponsored data offerings: T-Mobile Binge On; AT&T Data Perks; AT&T Sponsored Data; and Verizon FreeBee Data 360.  Using the General Conduct Rule and evaluating on a case-by-case basis, the major focus was on potential harm to consumers and competition in downstream industry sectors that could result from upstream network operators’ unreasonably discriminating in favor of select downstream providers that are affiliates.  The Bureau found it unlikely that either T-Mobile Binge On or AT&T Data Perks would unreasonably interfere or disadvantage edge providers’ or end users’ ability to access the Internet, or that either would violate the General Conduct Rule.  However, AT&T Sponsored Data and Verizon FreeBee raise significant questions that have not been answered in the Bureau’s requests for information, and certain practices in the data programs may violate the General Conduct Rule.  Specifically with the AT&T Sponsored Data plan, the Bureau is concerned that unaffiliated mobile video service providers must pay a significant amount of money for the data needed to offer programming to subscribers of the plan on a zero-rated basis.  In short, the costs both AT&T and Verizon will impose on third party providers will exceed the necessary costs in providing the service, which essentially is a violation of the General Conduct Rule.

Commissioner Pai released a statement noting his disappointment that he saw the report after it was released and it “does not reflect the views of the majority of Commissioners.”  He further notes that he is “confident that this latest regulatory spasm will not have any impact on the Commission’s policymaking or enforcement activities following next week’s inauguration.”

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