The FCC Should Decline Activists’ Call to Arms Against Zero Rating

This article first appeared on Tech Policy Daily.

Most American households spend considerable sums of money each month to access voice, video, and information services over the nation’s telecommunications networks. But some companies have figured out how to secure an advantage by sidestepping this traditional model. By negotiating deals to offer their content at zero cost to consumers, these companies have secured an unfair competitive advantage, attracting consumers because their content is free rather than because it is of good quality.

We call these companies “broadcasters.”

Free over-the-air broadcast, of course, has been a cornerstone of telecommunications policy for nearly a century. Although more than 80 percent of households subscribe to pay television, we recognize the benefit of providing some channels for free to all Americans. With an antenna, cost-conscious cord-cutters can purchase a smaller telecom bundle, adding free broadcast channels to a standalone broadband plan rather than purchasing a more expensive broadband/cable bundle. Virtually no one argues that HBO is at a competitive disadvantage in the video market because it is only on cable, while consumers can get CBS for free. Nor does anyone seriously complain that CBS offers only a limited “walled garden” of content chosen to suit advertisers’ preferences. Were someone to propose that the Federal Communications Commission (FCC) eliminate free broadcasting and force everyone into a single, comprehensive cable bundle, consumers’ rights groups would roundly criticize the proposal as anti-consumer. And rightfully so.

The illogical battle against a consumer-friendly business model

I was contemplating America’s original zero-rated content business model while reading the latest salvo in the ongoing war to regulate the Internet. On Tuesday, an unusual consortium of special-interest groups and Internet content providers sent a letter to all five FCC commissioners, demanding that they open a formal proceeding regarding zero-rating practices. The letter paints these practices with a broad brush, arguing that zero rating “let[s] ISPs choose winners and losers online” in violation of the spirit of the Open Internet order.

This letter fails to acknowledge the potential benefits of giving consumers access to additional content or services at no extra charge as part of their service plans. As the letter notes, the FCC’s Open Internet order declined to issue a bright-line rule against zero rating. In the months since, the industry had validated that decision by experimenting with a variety of zero-rated content bundles. The Information Technology and Innovation Foundation released a study earlier this week highlighting the benefits of this experimentation. Perhaps the highest-profile experiments are T-Mobile’s Music Freedom and Binge On promotions, which offer unlimited streaming audio and video, respectively, to T-Mobile customers. These plans have proved popular and have increased the planes of competition in wireless, helping the renegade company steal market share from Verizon, AT&T, and especially Sprint.

Of course, there is the possibility that a carrier may use zero-rating practices for anticompetitive ends. But the FCC has shown it is on the beat. Late last year, the agency requested that Comcast, T-Mobile, and others provide information about their zero-rating plans to make sure that no practice violates the agency’s “general conduct” standard for ISP behavior.

The letter from interest groups and content providers does not complain that the FCC is failing to monitor these practices. Rather, it complains that the agency is operating “behind closed doors,” denying the public any input in the process. Of course, this claim is patently false. Any consumer may file a complaint if he or she believes a specific carrier offering violates the Open Internet order — a fact that signatory Fight for the Future is well aware of, as it has created a form letter for activists to bombard the FCC with identical, generically worded zero-rating complaints.

The consequences of opening a formal zero-rating proceeding

The bigger issue is that the letter fails to offer a reason why the agency should open a formal proceeding on zero rating at this time. The signatories argue that all zero rating is inherently anti-consumer. But the Open Internet order rejected that conclusion in favor of a case-by-case determination of this innovative new field of competition. Absent some showing that individual practices are harming consumers, the agency should continue doing what it has been doing: quietly allowing in-house agency experts to monitor industry developments by analyzing what may be competitively sensitive data with an eye toward the effects on consumers.

The letter explicitly requests that the agency cease this carefully calibrated, detailed policymaking process and instead issue a general invitation for activists to letter bomb the agency about the issue. This, of course, was the same tactic that transformed the Open Internet debate from a rational discussion about network management practices to a shouting match between sloganeers — leading Chairman Wheeler to yield important questions of tech policy to a literal mob that blocked his driveway until he gave in to their demands.

These issues are too complicated to be reduced to Twitter hashtags or form letters (or even blog posts), and the FCC’s work is too important to be surrendered to mob tantrums. If the agency suspects a particular zero-rating practice harms consumers, it should investigate, and there is a role in that process for individuals to share their experiences and provide input. But until then, one hopes the commissioners will decline this invitation to open the floodgates to activist-driven rants against zero-rating practices.

– See more at: http://www.techpolicydaily.com/communications/fcc-decline-activists-call-arms-zero-rating/#sthash.hWsmDdiU.dpuf

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