FCC Officially No Longer Cares If Zero-Rating Is A Problem

Image courtesy of FCC

It’s been a busy week over at the FCC, as new chair Ajit Pai continues on a streak of rapidly backing the Commission off of every Wheeler-era regulation he can. Earlier this week Pai ordered the FCC to stop defending its prison-calling rate caps in court; today, Pai’s taking on zero-rating and Lifeline — the former, a challenge to net neutrality, and the latter, a way to help low-income folks access the internet.

Remember the good old Open Internet Order of 2015, our friend net neutrality? That rule, which reclassified broadband as a Title II communications service, set down some bright lines about what internet service providers are and aren’t allowed to do with your data. They can’t slow it up or speed it down just because someone pays them more than someone else.

But one thing was left vague: Can ISPs legally mess around with data caps as a way of favoring one kind of internet traffic over another?

When your home or wireless internet provider does that now, it’s called “zero rating.” Most of the mobile carriers, and an increasing number of home providers, have some kind of service they exempt from counting against your data cap, which in turn encourages you to use that service instead of one that does hurt your bottom line.

The Commission took its own sweet time deciding whether those sponsored data agreements were in line with the net neutrality rule or not, saying only that it would consider each on a case by case basis.

In Dec. 2016, the Commission sent letters to AT&T and Verizon notifying them that some of their zero-rating programs did indeed appear to harm consumers, and asking for more clarification. A few weeks ago, in January of this year, the FCC did indeed conclude that AT&T zero-rating its own DirecTV Now Service probably is a net neutrality violation.

“[U]naffiliated mobile video service providers must pay a significant, clearly identifiable amount of money for the sponsored data needed to offer streaming video programming to AT&T Mobility’s subscribers on a zero-rated basis,” the report says.

“By comparison to AT&T, which need not incur a comparable out-of-pocket expenditure to offer DirecTV Now on a zero-rated basis. Rather, any imputed ‘charges’ that DirecTV ‘pays’ AT&T Mobility for sponsored data, even if formally recorded on the corporate books as internal transfer payments, would result in no net expenditure at the holding company level.”

“Such arrangements,” the report concluded, “likely obstruct competition for video programming services delivered over mobile Internet platforms and harm consumers by inhibiting unaffiliated edge providers’ ability to provide such service to AT&T’s wireless subscribers.”

New chair Ajit Pai, however, was and is a staunch opponent of net neutrality… so it is not wholly surprising that the FCC is suddenly backing away from that report.

The Wireless Bureau — the part of the FCC responsible for dealing with the mobile industry — formally rescinded the entire report today, “and any and all guidance, determinations, and conclusions contained therein, including the document’s draft framework.”

Effectively, it no longer exists: “The Policy Review Report will have no legal or other effect or meaning going forward,” the notice concludes. The Commission also sent letters to T-Mobile, AT&T, Verizon, and Comcast formally notifying them that the inquiry about zero-rating is closed.

Pai also took action today to scuttle the FCC’s Lifeline modernization actions — a hugely contentious topic at the FCC when the Commission voted on it in March, 2016.

MORE: What is Lifeline, and how does it work?

Lifeline is a subsidy program that gives consumers living below the poverty line $9.25 a month per household to pay for phone service — home or wireless. The 2016 rule update added broadband to that list of eligible services, so that a low-income consumer can apply it to, say, a wireless data plan.

Pai did not reverse the rule; doing so is outside of the scope of the chairman’s authority. He did, however, basically prevent any company from actually providing that subsidized broadband service.

As the Washington Post reports, Pai today told nine companies that they will not be allowed to participate in Lifeline as broadband providers. All nine had previously been given the go-ahead.

One company, Kajeet, described the sudden reversal to the Post as a significant blow.

“I’m most concerned about the children we serve,” Kajeet founder Daniel Neal told the Post. “We partner with school districts — 41 states and the District of Columbia — to provide educational broadband so that poor kids can do their homework.”

Pai’s FCC may choose to tackle Lifeline rules again in the future, but in the meantime, not having anyone authorized to provide the service is a pretty effective way of making sure it doesn’t exist.

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