by Bill Snyder

New Verizon, AT&T streaming options threaten net neutrality

Sep 14, 2016
Consumer Electronics

Two new zero-rated services from Verizon and AT&T let subscribers stream premium content on their smartphones and tablets devices without eating into their monthly data quotas, but they also test net neutrality rules.

First T-Mobile, then AT&T and now Verizon. The rush by major wireless carriers to exempt content produced by their favored partners from data caps is an increasingly slippery slope.

That exemption is called “zero-rating,” and while the prospect of getting stuff for free is tempting, this gift horse is ultimately a threat to net neutrality and to competition on the Internet. If large content providers can pay for privileged access to consumers, smaller and arguably more innovative companies won’t be able to compete on an even playing field.

Verizon, AT&T and zero-rating

Verizon is the latest player in the zero-rating game. “Don’t miss a moment of the action by streaming live local and primetime games on CBS, NBC, ESPN, FOX and NFL Network, all without using any data,” the company proclaims on its website. Verizon customers can stream all of those football games over LTE by simply downloading the NFL Mobile app for Android or iOS. Anyone can download that free app, but live games and other premium features are available only to Verizon customers.

AT&T also unveiled a new zero-rating scheme last week, and wireless customers who also subscribe to its DIRECTV satellite service can now watch DIRECTV content on mobile devices without eating into their monthly data allotments.

Critics of zero-rating say the offer is bad for competition and for consumers. “AT&T seems intent on favoring its own video content under the DIRECTV brand,” said Matt Wood, the policy director of Free Press, a consumer advocacy group, in a press release. “That harms both diverse content creators and internet users who already pay so much for their wireless service.”

The potentially chilling effect on competition is obvious. If AT&T wireless subscribers can watch an unlimited amount of programming from DIRECTV they are less likely to watch programming from other providers, such as Netflix, because they might be worried about blowing through their data allotments. And if Verizon customers can watch football games via the NFL Mobile app without worrying about data, ESPN will become a more expensive choice.

Different zero-rating rules for wireless carriers and broadband providers

However, a zero-rating workaround exists for wireless carriers: Netflix and others can pay to be zero-rated. These scenarios seem to bump right up against the net neutrality rules that say ISPs need to treat all content equally, but the FCC has not decided that those rules apply to wireless carriers in the same way they apply to broadband providers. “Chairman Wheeler said the commission would keep an eye on new developments in this area, and we are continuing to do so,” an FCC spokeswoman said via email.

I don’t find that statement reassuring. The FCC has been looking at this matter since late 2015. The longer it waits, the more carriers will implement zero-rating, and the harder it will be to make them change course.

AT&T and Verizon say any provider that wants to be zero-rated can simply pay for the privilege. That might be okay for a rich company such as Netflix, but new competitors probably couldn’t afford it, and their potentially innovative services might disappear. That would be a loss for consumers.

Some of this sounds rather wonkish and hypothetical, but it really isn’t. The big carriers already have too much power, and zero-rating gives them even more.