#zero-rating

Reverse-Robin Hood Approach Helps Top 1%

WASHINGTON, D.C. —­­  A coalition of activist organizations that previously pushed the FCC to reclassify broadband service under Title II of the 1934 Communications Act has launched a new campaign urging its supporters to file complaints with the FCC against their ISPs over so-called “data caps” (basic data tiers) and zero-rating. The group claims that exempting certain websites and apps from data caps violates the rules laid out in the FCC’s Open Internet Order.

Battleforthenet.com also attacks wireless operators for either offering ‘sponsored data’ programs (Verizon and ATx&T) or reducing video quality to save on data use (T-Mobile).

“If you hate getting free data, then this is the campaign for you,” said Berin Szóka, president of TechFreedom. “It takes real chutzpah to attack data plans that help users avoid overage charges and ration their data. A recent Harris Poll found that 94% of millennials were more likely to use Internet services if they don’t count against their monthly data allowance, and 98% are more likely to stay with a provider that zero-rates such services. That’s why consumers are flocking to T-Mobile, where Binge On allows you to watch as much mobile video as you want.”

“Zero-rating is particularly crucial in helping to close the Digital Divide,” continued Szoka. “Wireless bandwidth is naturally more scarce than fixed broadband. Minority and low-income users disproportionately rely on mobile plans, as having both a fixed and wireless connection can be cost-prohibitive. As the Multicultural Media, Telecom and Internet Council notes, ‘Zero-rating is also poised to play a key role in helping to close the digital divide by addressing cost concerns and strengthening the value proposition offered to skeptical non-users, two key considerations for the millions of Americans who remain offline.’”

“This is really an attack on differentiated data plans in general,” continued Szoka. “So-called ‘consumer advocates’ are saying that the only data plan worth having is unlimited — as if paying for what you use is somehow unacceptable in Internet land.  Apparently it’s ‘progressive’ to want the top 1% of users who burn through fifty times more data than their neighbors to pay the same monthly rate for broadband. Even the FCC’s 2010 Open Internet Order recognized that ‘prohibiting tiered or usage-based pricing … would force lighter end users of the network to subsidize heavier end users.’ This is Robin Hood turned upside down.”

Comcast recently raised its basic data tier from 300 GB to 1,000 GB — a threshold so high that only the top 1% of power users will ever exceed it. Comcast charges a mere $10 for an extra 50 gb/month. So if a typical home pays $80/month but uses only 60 gb, they’re paying $1.33/gig, while a power user who uses 1000 gig pays just $.08/gig — sixteen times less.

Netflix estimates that standard video streaming consumes 1 GB/hour and high-definition streaming takes 3 GB/hour. So Comcast’s old ‘cap’ was enough for 10 hours/day of SD, or 3.33 of HD — and additional HD streaming would effectively cost $.60/hour. But a terabyte basic data tier means ten hours of HD/day (and 33 hours of SD).

“The claim that such high data tiers stop consumers from switching to Internet video services is preposterous,” concluded Szóka. “Is anyone really going to be deterred from abandoning their cable video subscription by such generous data plans? Usage-based pricing isn’t about blocking video competition, it’s simply about basic fairness in pricing for broadband: the heaviest users should pay more.”

The FCC recently coerced Charter and Time Warner Cable into offering unlimited data plans for seven years as a condition of their merger. Szóka concluded: “Given the close coordination between the FCC and these activist groups, there’s every reason to think that this campaign was encouraged by the FCC — to give Chairman Wheeler cover for backing off his tepid praise for zero-rating in 2014 and the FCC’s full-throated endorsement of usage-based pricing in 2010.”

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We can be reached for comment at [email protected]. See more of our work on net neutrality and Title II, including:

A statement explaining how net neutrality absolutism hampers efforts to connection the developing world

A blog post explaining how Netflix’s throttling controversy reveals the incoherence of the FCC’s net neutrality rules

A summary of our opening brief challenging the FCC’s Open Internet Order

Line is about to start its own MVNO (a rebranded mobile service piggy-backing on another operators network). It will exclude their own (and Facebooks) data from data caps (see TechInAsia).

This is a very similar case to the existing zero-rating debates raging in India and Latin America, the interesting deviation being that this time the “offender” against strict net neutrality is primarily a Messaging App Provider - precisely the kind of content and service provider strict net neutrality laws are aimed at protecting against discrimination.

Zero-rating, the net neutrality topic of 2015, continues to dominate the discussion in early 2016. The next chapter following controversies in Latin America is delivered by Indias National Regulatory Authority (TRAI), explicitly outlawing “Discriminatory Tariffs”, another blow to Facebook’s Free Basics offer and other supporters of zero-rating as acceptable net neutrality exception.

A BuzzFeed investigation on how Facebook's zero-rating Portal "Free Basics" is actually used in developing markets points to lack of the often cited benefit of bringing new people online:

Today, NCTA, CTIA, and ACA filed lawsuits against the FCC’s Open Internet Order, which was published in the Federal Register yesterday. The rules will go into effect on June 12, 2015.

“No one should have to ask the FCC for permission to give away products for free,” said Berin Szoka, president of TechFreedom. “America’s wireless sector is the envy of the world, offering not just faster speeds but also innovative services like T-Mobile’s free music streaming. But the FCC’s ‘Mother, May I?’ approach creates very real uncertainty that could end such pro-consumer experimentation. This will harm consumers and actually make it harder for smaller carriers and new entrants to the wireless market like Google to compete with Verizon and AT&T. While lawyers squabble, creative new offerings will be squashed.”

“Sponsored data plans have long been vital to driving adoption in underserved communities,” continued Szoka, “but that didn’t stop net neutrality absolutists from hounding upstart MetroPCS into abandoning its free-YouTube plan back in 2011 — a plan targeted to first-time adopters in urban areas, mostly minorities. The same quasi-religious zealotry is driving calls to ban ‘zero-rating’ around the world, despite its vital role in promoting adoption among the world’s poor. The FCC’s Title II regulations will only encourage such reverse-progressivism — which is why it’s a good thing the FCC is very likely to lose in court, especially on reclassifying mobile broadband.”

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Zero-rating is when network operators don’t charge customers for the data they consume when using specific applications or services. For example, maybe Facebook strikes a deal with AT&T to exepmt data used by the Facebook app from customer’s data caps.

This is a controversial issue and Susan Crawford has summed it up nicely.

Susan Crawford writing for Backchannel on Medium:

But zero rating is not just a competition issue. It’s also a human rights issue. Saying that walled gardens are “good enough” for poorer people is clearly destructive. As Josh Levy, the advocacy director of Access, puts it, “When the first billion people came online, and got access to the Internet, it wasn’t through zero-rated services. They got access to the full Internet. So I don’t see why we can’t continue to strategize about ways to get the second billion people online to using the full Internet.”