AT&T's Online Video Plans Could Harm Competitors, Watchdog Warns

Staff at the Federal Communications Commission reportedly are poised to recommend that the agency approve AT&T's $49 billion purchase of DirecTV.

But some key conditions remain up in the air, including whether AT&T will be able to use its broadband network to promote its own video offerings. The company has made clear that it wants the ability to exempt certain video offerings from subscribers' data caps.

AT&T says that those types of exemptions, also known as “zero ratings,” will be good for consumers. The company argued in an FCC filing late last month that sponsored data deals will enable it to provide consumers with “offerings tailored to fit their usage and their budget.”

AT&T also said in its filing that it has already forged deals that “make it easier” for its broadband customers to access streaming video. “AT&T will continue to have a strong incentive to implement any usage-based data policies in a way that accommodates its customers’ usage of [online video distributor] services,” the company wrote.

At first glance, deals to exempt video from data caps (or pay-per-byte billing plans) seem to benefit consumers by making it easier -- or at least potentially cheaper -- for people to access movies and TV shows online and via mobile.

But advocacy groups and online video distributors warn that exempting one company's video streams from data caps could harm all of that companies' competitors. In other words, if AT&T excludes its own video offerings from people's caps, they would have an incentive to eschew Netflix, Hulu or YouTube.

This week, advocacy group Public Knowledge filed new papers asking the FCC to prohibit AT&T from zero-rating video streams.

“By becoming a larger video provider, AT&T’s incentive to discriminate against competing video service by giving certain video services preferential treatment would increase,” the organization says. “A ban on zero-rating, to the extent that AT&T’s wired and wireless services have data caps, would partly counter this increased discriminatory incentive.”

The watchdog adds: “A tailored (and time-limited) prohibition on exempting video services from data caps or metering would alleviate a merger-specific harm and help maintain the competitive status quo with respect to online video.”

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