Wireless Bureau Preliminarily Concludes AT&T Zero Rating Hurts Competition
The FCC Wireless Bureau preliminarily concluded AT&T's Data Free TV sponsored data service hurts competition and consumers and "interfere[s] with the 'virtuous cycle' needed to assure the continuing benefits of the Open Internet," it said in a letter to the company Thursday. A parallel letter to Verizon indicates the bureau has many of the same concerns about its FreeBee Data 360 zero-rating offering. The agency's two Republican commissioners lambasted the missives, with Commissioner Mike O'Rielly in a statement saying FCC Chairman Tom Wheeler "should direct the Bureau to halt this wild goose chase at once."
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AT&T's previous defense of its zero-rating offering (see 1611210034) "tends to confirm our initial view" that the Data Free TV plan favors AT&T's video offerings "while unreasonably discriminating against unaffiliated edge providers and limiting their ability to offer competing video services ... on a level playing field," Wireless Bureau Chief Jon Wilkins wrote AT&T Senior Executive Vice President-External and Legislative Affairs Robert Quinn in a letter dated Thursday. It also asked AT&T a series of questions and gave a Dec. 15 deadline to answer them. AT&T in a statement Friday said, "These are incredibly popular free services available to millions of customers. Once again, we will provide the FCC with additional information on why the government should not take away a service that saves consumers money.”
In the letter, Wilkins said the bureau's issue isn't with AT&T's end-user prices for its DirecTV Now streaming service or its use of bundled retail options. But it said the terms and conditions of the sponsored data program don't let unaffiliated third parties compete over AT&T's network "on reasonable terms." The bureau said it estimates an unaffiliated mobile video service provider would end up paying AT&T $16 a month to offer zero rating to a customer consuming 10 minutes of LTE video a day, with that price going up to $47 for someone watching 30 minutes a day. Meanwhile, the cheapest DirecTV Now tier is $35 a month.
"AT&T seems to present the unaffiliated provider with a choice that is unreasonable on its face: either pay a Sponsored Data rate" that would make its service uncompetitive price wise, or require its own customers pay "significant amounts for their own usage of data while AT&T's zero-rated DirecTV Now service offers customers the same usage for free," the letter said. The series of subsequent questions seek data on usage of the DirecTV app and on AT&T Mobility subscribers using streaming apps of unaffiliated mobile video services like Sling and Netflix, names of unaffiliated video content providers with which AT&T has talked or is talking about taking part in the sponsored data program, and information on how AT&T Mobility recoups costs from DirecTV for providing Data Free TV.
In the Dec. 1 letter to Verizon Deputy General Counsel Kathy Grillo, Wilkins also set a Dec. 15 deadline for responding to his concern that FreeBee Data 360 likewise has a different financial impact on unaffiliated edge providers.
Pointing to members of Congress having warned the FCC to avoid "complex, partisan or otherwise controversial items" during the transition to the Trump administration (see 1611150052), Commissioner Ajit Pai in a statement Friday said, "This end-run around Congress's clear instruction is sad -- and pointless." Calling the letter "yet another broadside against free data for consumers," he said any steps the Wireless Bureau takes at Wheeler's directions "can quickly be undone by that same bureau after January 20, 2017." O'Rielly said "it would be difficult to come up with a better example of a complex, controversial policy at the current Commission than this attempt to intimidate providers to shut down popular offerings to consumers. It just reaffirms my objection to this entire investigation process and the use of delegated authority in general."