New FCC report says AT&T and Verizon zero-rating violates net neutrality

Just a week and a half before he is set to leave office, FCC Chairman Tom Wheeler has issued a new report stating that the zero-rated video services offered by AT&T and Verizon may violate the FCC’s Open Internet Order.

Assembled by the FCC’s Wireless Telecommunications Bureau, the report focuses on sponsored data programs, which allow companies to pay carriers to exempt exempt their data from customers' data caps. The programs have always been controversial, but the issue has grown particularly urgent in recent years, as carriers have bought up media companies and launched aggressive new mobile video packages.

According to the report, many of those packages simply aren’t playing fair. “While observing that AT&T provided incomplete responses to staff inquires,” Wheeler wrote to Senators, “the report states that the limited information available supports a conclusion that AT&T offers Sponsored Data to third-party content providers at terms and conditions that are effectively less favorable than those it offers to its affiliate, DirecTV.”

In theory, sponsored data should be an even playing field, with providers bearing the costs and making the same charges regardless of who’s footing the bill. But according to the report, AT&T treats the DirectTV partnership very differently from an unaffiliated sponsored data system, giving the service a strong advantage over competitors. “AT&T appears to view the network cost of Sponsored Data for DIRECTV Now as effectively de minimis,” the report concludes. While AT&T still bears some cost for all that free traffic, it's small enough that the carrier doesn't seem to care.

The report raises similar concerns regarding Verizon’s Go90 program, although it concludes Verizon’s program may be less damaging. “Because Verizon’s go90 competes in a less developed segment of the marketplace than AT&T’s DIRECTV Now, the current magnitude of any anticompetitive effects of Verizon’s practices may be smaller than AT&T’s,” the report reads. “Nonetheless, as noted above, there is the same potential for discriminatory conduct in favor of affiliated services.”

Notably, the letter does not raise the same concerns about T-Mobile’s BingeOn video deal, since it “charges all edge providers the same zero rate for participating.” BingeOn did impose significant throttling when it was first introduced, which led a Stanford study to dub it “likely illegal” last year.

Ultimately, the FCC was ultimately swayed by the more than 100 partners that have successfully signed on to broadcast on T-Mobile’s service, a list ranging from established networks like NBC and Univision to web-based services like YouTube and Amazon Video. “Given these facts, we find it difficult to envision that Binge On in the form the Bureau reviewed in 2016 could ‘unreasonably interfere with edge providers’ ability to make lawful content, applications, services, or devices available to end users.’”

With only a week left before President-elect Trump takes office, the report is unlikely to have much immediate effect, and Wheeler’s opposing commissioners were quick to dismiss the findings. “I am confident that this latest regulatory spasm will not have any impact on the Commission’s policymaking or enforcement activities following next week’s inauguration,” Commissioner Ajit Pai said in a statement.