FCC Raises Concerns Over AT&T's Zero-Rating Practices

For at least two years, net neutrality advocates have pressed the Federal Communications Commission to crack down on broadband providers who use zero-rating schemes in ways that favor their own video offerings.

This week, the agency took its first significant step toward doing so. The FCC told AT&T that its decision to exempt video offered through DirecTV's app from subscribers' data caps may violate net neutrality principles.

The net neutrality rules prohibit broadband providers from blocking or degrading service and from creating online fast lanes. The regulations also broadly ban Internet service providers from engaging in conduct that interferes with people's ability to access Web content. Carriers could potentially violate that last prohibition by excluding certain material from data caps, but the FCC has said it will take a case-by-case approach to the question.

The agency told AT&T this week that zero-rating in itself isn't necessarily problematic. But the FCC added that AT&T's decision to exempt content of DirecTV, which it purchased last year, while also charging other companies to zero-rate their data, raises concerns.

"The terms and conditions under which Sponsored Data is offered to content providers unaffiliated with AT&T, combined with s current practice of zero-rating DirecTV video applications for AT&T Mobility subscribers, may obstruct competition and harm consumers by constraining their ability to access existing and future mobile video services not affiliated with AT&T," Jon Wilkins, chief of the Wireless Telecommunications Bureau, writes to AT&T Senior Executive Vice President Robert Quinn, Jr.

Wilkins adds that AT&T's zero-rating scheme appears to violate net neutrality principles, because the company is favoring its own content over video offered by competitors.

In practical terms, the decision to zero-rate DirecTV gives consumers a big incentive to use the DirecTV app, at the expense of unaffiliated competitors like Hulu, Netflix or Amazon, according to the FCC.

"Their potential subscribers would have to take into account the total cost they would incur by using the unaffiliated provider's service -- which would include not only the proportional monthly usage costs of their AT&T Mobility data plan, but also overage fees and/or reduced transmission speeds if their consumption of the third party's video content results in data usage in excess of the maximum allowed under their plan," the FCC writes. "AT&T Mobility customers subscribing to AT&T's own zero-rated DirecTV services would not encounter these costs or impacts."

The agency has asked AT&T for a response by Nov. 21.

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