• by Wendy Davis  @wendyndavis, November 22, 2016

The Federal Communications Commission recently told AT&T that its decision to exempt video offered through DirecTV's app from subscribers' data caps may violate net neutrality principles.

This week, AT&T countered that its zero-rating program is not only consistent with net neutrality, but also marks a "pro-consumer" challenge to the cable industry.

"Cable providers have built-in advantages as a result of which they still supply the majority of pay TV subscriptions and fully 85 percent of Internet connections that the Commission considers broadband," AT&T Senior Executive Vice President Robert Quinn says in a letter to the FCC. "Data Free TV allows DirecTV to better compete against the cable incumbents by ensuring that its subscribers receive the mobile video experience they increasingly demand in the most consumer-friendly manner possible."

Earlier this month, the FCC expressed concerns that AT&T's zero-rating program favored DirecTV's content at the expense of video offered by competing over-the-top services like Netflix or Hulu.

The FCC's 2015 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 current FCC has said it will take a case-by-case approach to the question.

It's not yet clear how regulators in the Trump administration will view questions about zero-rating. But two recent appointments to the transition team are on record as being opposed to net neutrality rules.

For its part, AT&T said this week that any content provider can participate in AT&T's zero-rating program, which the company calls its Sponsored Data program. "The sponsored data rate is as low as the market based rates AT&T currently offers even to wireless resellers who commit to significant purchase volumes," Quinn writes.

He adds that AT&T will incur costs as a result of zero-rating DirecTV. "Data Free TV is certainly not free to AT&T," he writes. "As more and more consumers discover the benefits of that service, AT&T will see escalating usage on its mobile network... AT&T will need to respond to those new usage demands by making capital-intensive investments."

In the four weeks since AT&T launched the zero-rating program, almost three million customers streamed video through DirecTV's app, Quinn says.