FCC Could Clamp Down on Zero Rating Before Wheeler Leaves
The FCC under Tom Wheeler may yet clamp down on zero rating programs by AT&T and Verizon, before Wheeler leaves office Jan. 20, industry and FCC officials said. The FCC Wireless Bureau already sent a letter to AT&T drawing a preliminary conclusion that its Data Free TV sponsored data service hurts competition and consumers, and a similar letter to Verizon on its FreeBee Data 360 offering (see 1612020044). The follow up is most likely to be a bureau-level policy statement or additional guidance on what's allowed under the 2015 net neutrality rules, industry and FCC officials said.
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Zero rating is a big agenda item FCC Democrats thought they had time to deal with, but then lost the election, an FCC official said. Regardless of what the Trump FCC does, the bureau effectively created a “time capsule” document that a future FCC, under Democratic control, could then bring out as a starting point, officials said. Officials said the AT&T letter was ready to go the day after the election.
In a news conference after the Dec. 15 FCC commissioners' meeting, Wheeler defended the timing of the letters. “We had an ongoing process,” he said (see 1612150042). “Things percolated, worked their way through and we’re doing our jobs.”
Republican Commissioner Mike O’Rielly said in a Dec. 7 speech to the Free State Foundation that anything the bureau does on zero rating can be easily reversed. But, he warned, “the underlying document could still be out there, waiting to be dug up like a time capsule years from now and cited as some sort of precedent.” O’Rielly will be part of a 2-1 Republican majority starting Jan. 20 when Wheeler leaves the agency. The FCC, AT&T and Verizon didn't comment.
“At Tom Wheeler’s direction, the FCC has gotten ahead of itself in targeting popular zero rating programs in a way that necessarily dampens incentives on the part of ISPs for further experimentation,” said Randolph May, FSF president. “Now, given the reality of the election results, Wheeler should instruct the staff to stand down and await guidance from the about-to-be reconstituted commission.” May said he’s not saying there could never be a problem with some form of free data programs. “But the default position should be to wait and see how these business models and the overall marketplace continue to evolve,” he said. “Right now, you’d have to say that consumers value the additional choices the free data programs provide.”
But Matt Wood, policy director at Free Press, said AT&T, “the very same giant looking to keep people locked into expensive pay-TV services like DirecTV, now wants to buy up even more content at Time Warner.”
“Zero rating is the so-called solution to a problem that the phone and cable companies themselves impose on their paying customers,” Wood told us. “It makes sense that these carriers want to ration out capped data at inflated prices, and that they want to open up new revenue streams by holding competitors' websites and apps for ransom. But their mysterious fees and double charging do no favors for internet users, especially when they favor their own content.” The Trump administration likely will “look the other way when ISPs play these games,” he said. “Their moves to advantage incumbents and turn their backs on internet users will prove to be about as popular as the cable and phone companies are themselves.”
Daniel Lyons, associate professor at Boston College Law School, said he doesn’t expect the Wheeler FCC to do more on zero rating. Republican Commissioners Ajit Pai and O'Rielly “have made clear that they oppose any action at this time and will roll back any Parthian shots that the outgoing administration may try to take,” Lyons said. “Chairman Wheeler has already effectively said his goodbyes to the telecom community, so I would not expect anything monumental to come from the agency before inauguration day.”
Roger Entner, analyst at Recon Analytics, also doesn’t expect a clamp down. “The new Republican chairman of the FCC would roll everything back anyway,” Entner said. “If Democrats would go after zero rating in the next few weeks it would be like a Don Quixote's charge against windmills.” But other industry observers say the FCC may well act before the start of the Donald Trump presidency.
"It's common for outgoing FCC chairs to try to get a few legacy items out the door on delegated authority before the new White House party takes power,” said former Commissioner Robert McDowell, now at Cooley. “The Wheeler commission may choose to interpret congressional 'cease-and-desist' letters as only prohibiting the making of new policies, but not prohibiting the shaping or interpretation of previously voted items. At the end of the day, however, such actions could be -- and probably will be -- easily reversed by the incoming power structure. So their efforts could become irrelevant rather quickly."
“The failure of the Netroots to turn out on Election Day should have placed them on the chairman’s naughty list, but he may not be able to resist giving them one last present anyway,” emailed Richard Bennett, free market blogger and network architect. “Zero-rating is the key to competition, competition, competition for cable TV, so it won’t be dead for long.” Wheeler’s recurring comment as chairman has been that the FCC is encouraging “competition, competition, competition.”
"This is pure political posturing," said Berin Szoka, president of TechFreedom. "The next FCC chairman will nullify all such bureau action. But that won't stop Wheeler from doing it, just to raise the political cost for the next chairman of rolling this back."