FCC makes last net neutrality stand against AT&T & Verizon

The FCC has taken another swipe at AT&T over its zero-rated DirecTV Now service, as well as Verizon’s FreeBee Data 360, which it believes violates net neutrality.

In the ongoing battle of wills the FCC is screaming foul-play at the top of its lungs while the AT&T exec team seems to be holding its breath and covering its ears as January 20 looms closer and closer. Although the AT&T is toying with the definition of net neutrality, it may only have to hold out until the arrival of President-elect Trump (Jan 20 2017). Recent appointments, as well as opinions voiced on the campaign trail, indicate the new administration may not be a fan.

The initiative will see AT&T give DirecTV Now to customers as part of a zero-rated offering (i.e. using the service will not use any of the customer’s month data allowance), though the FCC initially wrote to AT&T General Counsel Robert Quinn last month citing concerns the offer is anti-competition. Quinn wrote back stating the data usage exemption was “precisely the kind of pro-consumer challenges to cable that the Commission heralded in approving AT&T’s acquisition of DirecTV”. In other words, we thought about whether it was an issue but decided to do it any way.

The latest letter, uncovered by ARS Technica, the FCC has explicitly stated it believes the move to be in violation of net neutrality principles:

“Your submission tends to confirm our initial view that the Sponsored Data program strongly favors AT&T’s own video offerings while unreasonably discriminating against unaffiliated edge providers and limiting their ability to offer competing video services to AT&T’s broadband subscribers on a level playing field. We have therefore reached the preliminary conclusion that these practices inhibit competition, harm consumers, and interfere with the “virtuous cycle” needed to assure the continuing benefits of the Open Internet.”

While the above statement is not ideal for the telco, there is room for manoeuvre. FCC rules don’t specifically ban zero-rating propositions, more the FCC reserves the right to decide whether zero-rating has a negative impact on competition. It such grey areas which lead to complications and contradictions in the industry, and this much room to wiggle should not be allowed for either the telcos or the regulators either. FCC has not been particularly consistent with its zero-rating decisions to date, so it can only blame itself for disagreement and challenges to its rulings.

AT&T now has until 15 December to respond to the allegations, though realistically it only has to hold out until Trump arrives in the Whitehouse. The change in administration will see a change in FCC Chairman, and most likely a change in policy with regard to net neutrality.

Should Mark Jamison, Trump’s man on the ground at the FCC to oversee the transition to a Trump-orientated administration, the FCC will be stripped back and net neutrality rules will be dismantled. The last couple of months have seen Jamison put out some seemingly anti-FCC and anti-net neutrality rhetoric, going as far as suggesting the FCC is nothing but a puppet of the Whitehouse and it should be stripped back, with many of its responsibilities dealt out to other agencies.

Alongside this on-going saga, the FCC has also decided to pick a fight with Verizon. The team has sent another letter to Verizon SVP Kathleen Grillo stating the FreeBee Data 360 could have a negative impact on competition and be harmful to consumers:

“Based on public reports as well as information you have orally provided to us, the Wireless Telecommunications Bureau believes that the FreeBee Data 360 offering to edge providers unaffiliated with Verizon, combined with Verizon’ s current practice of zero-rating its affiliated edge services for Verizon subscribers, has the potential to hinder competition and harm consumers.”

Both letters are making the same argument in that the telcos are acting in ways which contradicts the idea of an ‘Open Internet’. Verizon’s FreeBee Data 360 has been in play since January, and the fact it has taken the red-tapers in the FCC until December to voice its objections may play into the hands of the telco. As with AT&T, Verizon only has to wait until the Trump-army roles in and attempts to deregulate the US telco industry.

The next couple of weeks could see a competition between AT&T and Verizon, both seeing who can ignore the adults in the FCC for the longest, holding their breath until Uncle Trump arrives to check under the bed and scare away the net neutrality baddies.

On a side note, the fact these three organizations are still having to send letters to each other shows how backward, wayward and dated the regulatory environment in the telco industry is. Yes, sending a letter looks more official, but the focus on such cosmetic and pre-digital practices could be seen as one of the reasons critics of the FCC (and other similar regulatory bodies around the world) have ammunition. As with businesses, the FCC needs to modernize and adapt, otherwise it will fast become redundant.