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FCC Drops Pursuit of Wireless Firms for Offering Free Data Plans

Variety logo Variety 2/3/2017 Ted Johnson
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The FCC is dropping an inquiry into whether free data plans offered by AT&T and Verizon violated net neutrality rules, a signal that the agency under new chairman Ajit Pai will take a much friendlier view of such offerings than his predecessor.

In a statement, Pai said that the “plans have proven to be popular among consumers, particularly low-income Americans, and have enhanced competition in the wireless marketplace. Going forward, the Federal Communications Commission will not focus on denying Americans free data.”

Public interest groups have sounded the alarm over free data, or so-called “zero-rating” plans, offered by wireless firms in which subscribers can stream certain affiliated content without having it count against their data caps. Critics have said that such plans stand to violate the spirit of net neutrality rules, as it may give an unfair advantage to some video services over others.

The current rules are based on the idea that all internet traffic should be treated equally, and they prohibit internet providers from selling to content companies so-called “fast lanes” to give them speedier access to the consumer. But the question of whether a mobile firm’s offering of “zero rating” plans — now becoming more commonplace — was left to the FCC to consider on a case-by-case basis.

In the case of AT&T, its mobility service offers a “data free TV” feature that allows its subscribers to view unlimited DirecTV and DirecTV Now content with no impact to their monthly mobile data allotment. DirecTV is a subsidiary of AT&T.

But the acting chief of the FCC’s Wireless Bureau informed the companies on Friday that they were closing the inquires, and will take no further action.

They also are rescinding a policy review report that was made public on Jan. 11, just weeks before Pai’s predecessor, Tom Wheeler, departed the FCC.

That report concluded that AT&T’s DirecTV zero-rating offering had a “potentially anticompetitive impact.” The Wireless Bureau then cited the fact that unaffiliated companies  of AT&T’s conduct are based in part, but not entirely, on the fact that unaffiliated mobile video service providers must pay a “significant, clearly identifiable amount of money” to offer zero rated content on the mobile platform.

The Wireless Bureau didn’t have as much concern over Verizon’s offering of a data plan called FreeBee Data 360, but wrote that there was the “same potential for discriminatory conduct in favor of affiliated services, and its competitive impacts in the short-form portion of the market exist today.”

The report also concluded that “sponsored data offerings by vertically integrated mobile broadband providers may harm consumers and competition in downstream industry sectors by unreasonably discriminating in favor of select downstream providers, especially their own affiliates.”

The move to close the inquiry is not much of a surprise: Pai has been critical of Wheeler’s probe of zero rating services, and of the FCC’s approach to net neutrality in general.

Joan Marsh, AT&T’s senior vice president of federal regulatory, said in a statement that the FCC’s decision to close the matter “is a win for the millions of consumers who are reaping the benefits of services made available through free data programs. We’re pleased that these innovative products will be able to continue to flourish in the marketplace.”

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