A new report from the U.S. Federal Communications Commission states that AT&T and Verizon's zero-rated video services violate net neutrality.
Intriguingly enough, the report leaves out T-Mobile and its Binge On service, naming only AT&T and Verizon for potentially violating the FCC's Open Internet Order.
The new report comes less than two weeks before FCC Chairman Tom Wheeler leaves office. Written by the FCC's Wireless Telecommunications Bureau, the report mainly refers to sponsored data programs that allow companies to pay carriers for exempting their data from consumers' data caps.
Zero Rating vs. Net Neutrality
This practice of exempting specific services from counting against consumers' data caps is known as zero rating and has always sparked concerns, but it has become increasingly controversial in recent years. As carriers such as AT&T and Verizon acquired media companies such as Time Warner and AOL and unleashed aggressive mobile video packages, this practice has become more worrisome with respect to net neutrality.
The report argues that many such packages are simply not playing fair, stifling competition and favoring some over others. The FCC says that zero-rating doesn't raise concerns on its own, but AT&T's Sponsored Data program and Verizon's FreeBee Data 360 threaten to harm both competition and consumers by favoring providers owned by or affiliated with network providers, while discriminating others.
"The Commission has long been concerned about the ability and incentives of network owners to thwart their downstream competitors' ability to serve consumers," states the report.
AT&T reportedly offered incomplete responses to FCC's inquiries, but it seems that the carrier is playing favorites.
"[T]he 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."
T-Mobile Plays Fair, AT&T And Verizon Play Favorites
The report further highlights that while T-Mobile offers the same zero rating scheme to all edge providers willing to be part of Binge On, AT&T charges high rates per gigabyte for third parties interested in using Sponsored Data.
The FCC has concluded that the expenses AT&T faces in delivering the sponsored data service are far lower than what it's charging, which indicates that the carrier's practices create a substantial disadvantage on edge providers. At the same time, the practices also make it unreasonably tough for edge providers to compete against DirecTV.
Verizon's FreeBee Data 360 program scheme reportedly raises similar concerns and FCC says it's unaware of any safeguards that would prevent Big Red from charging edge providers with no affiliations significantly more or restricting their ability to offer services similar to its own affiliated content with zero rating.
Simply put, the problem is not that AT&T and Verizon exempt their own video services from their customers' mobile data caps. The problem is that they charge other content companies for participating in the programs and they don't offer the same terms to all companies.
To play fair with everyone, AT&T and Verizon should offer the same zero-rated scheme to all edge providers, like T-Mobile does.