Zero Rating an Emerging Issue for FCC, Legal Experts Say

Zero-rating Internet services could end up being one of the next big areas of inquiry for the FCC, Internet law experts told us. Comcast's Stream TV service has been getting criticism (see 1511100034) for supposedly violating the intent, if not the terms, of the net neutrality order. Public Knowledge in a blog said it's "a straightforward example of the anticompetitive problems zero-rating can raise, and provides little consumer benefit." The group has said consumers are complaining to the commission about the practice, and Communications Daily has filed a Freedom of Information Act request to the agency seeking information on such complaints.

As companies look to differentiate their products from the competition, more zero-rating offerings are undoubtedly coming, said Boston College Law School associate professor Daniel Lyons. And in Europe, zero rating has been a controversial issue (see 1511230016).

The FCC net neutrality order didn't lay down hard guidelines for zero-rating practices, said Barbara van Schewick, director of Stanford Law School’s Center for Internet and Society. The agency now isn't likely to initiate a rulemaking on zero rating -- the practice of not charging consumers for data used in accessing specified applications or services, though charging for data use by other, rival applications -- but likely will opt instead to take complaints and decide on a case-by-case basis, establishing guidelines that way, Lyons said. "It's a gradualist approach," he said. "You don't want to make rules that are over-inclusive and close off new development. You don't want to ignore potential problems, either."

When it issued net neutrality rules, the FCC "just wasn't ready, hadn't put enough thought into thinking about zero rating as a practice to be confident about coming up with a bright line rule," van Schewick said. But she said that the FCC hasn't made any public determinations doesn't mean it won't: "I'd want the FCC to take time looking at this practice before determining what to do."

T-Mobile's Binge On video service might not be the best test case for zero rating, which might be why "no one has tested the waters yet" by filing a complaint, Lyons said. "It's always difficult to say the number four player in the market is distorting the market." Comcast's Stream service, meanwhile, is "as bad as it gets" when it comes to economic distortion of the market and thus a violation of net neutrality, van Schewick told us. Currently, there are no new or pending formal net neutrality complaints, the FCC said.

In a statement, Comcast said Stream TV "is an in-home IP-cable service delivered over Comcast’s cable network, not over the public Internet. IP-cable is not an 'over-the-top' streaming video service. Stream enables customers to enjoy their cable TV service on mobile devices in the home delivered over the managed cable network, without the need for additional equipment, like a traditional set-top-box.” Comcast also pointed to FCC language indicating any IP service provided by a cable operator "over its facilities and within its footprint must be regulated as a cable service not only because it is compelled by the statutory definitions; it is also good policy, as it ensures that cable operators will continue to be subject to the pro-competitive, consumer-focused regulations that apply to cable even if they provide their services via IP."

In the Public Knowledge blog, Senior Staff Attorney John Bergmayer said that was "an absurd position that would permit Comcast to discriminate in favor of any of its own services, and flies in the face of the Open Internet rules." Meanwhile, he said, it's "hard to say" whether Stream TV would fit under the specialized services delivered over broadband exception to net neutrality rules: "The FCC has never formally defined the concept, and has no need to now."

T-Mobile didn't comment on zero-rating issues. But in a statement, it said customers "are incredibly excited about Binge On and the freedom it gives them to stream without worry. Innovations like Binge On put customers in control and create a more competitive wireless market." At the FCC's November meeting, Chairman Tom Wheeler said Binge On was both “highly competitive and highly innovative,” saying the agency will “keep an eye” on the service to make sure it doesn’t violate the order’s general conduct rule (see 1511190045).