Giving Priority to Certain Apps Seen as One of Toughest Net Neutrality Issues Facing FCC

The practice of carriers signing deals that give some apps advantages over others is called zero rating. One often-cited example is Sprint’s launch in July of a prepaid data plan for Virgin Mobile customers giving them unlimited access to Facebook, Instagram, Pinterest or Twitter for $12 per month. For an extra $10 a month, customers can get all four. T-Mobile, meanwhile, announced it will allow subscribers to stream music on iHeartRadio, iTunes Radio, Pandora, Rhapsody and a growing number of apps without the streaming counting against the monthly data cap, in what T-Mobile bills as “music freedom.”

An FCC official said the problem is drawing a line that gives subscribers access to low-cost services while protecting net neutrality. “If you’re giving away certain services in order to harm other services, then that is a problem,” the official said.

Michael Calabrese, director of the New America Foundation Open Technology Institute’s Wireless Future Project, said a key question is whether an edge provider pays for zero rating. “You can’t allow that,” he said. “That would just be backdoor paid prioritization.” But the T-Mobile example is a harder question, he said. If the edge providers aren’t paying for special treatment and the ISP is offering a service on its own to gain a competitive advantage, that's probably less clearly a problem, Calabrese said. “It’s a much harder question for the commission if no money changes hands,” he said. “It has the same harmful effects but it’s a little more difficult to characterize it as paid prioritization.”

The FCC should be concerned with zero rating, said Public Knowledge Senor Vice President Harold Feld. “If you are artificially constraining the bandwidth, then giving customers something zero rated is not a favor.” T-Mobile’s music service seems harmless enough, he said. “The harm is that this new scarcity exactly replicates the traditional media landscape with a few very popular winners and all the other possible voices -- especially those that are non-commercial, controversial, or from minority communities -- get excluded,” he said. “As T-Mobile itself acknowledges in its data roaming filing, and as justification for its Music Freedom program, when streaming counts against your bandwidth cap, people do it less or not at all. When streaming doesn't count against your bandwidth cap, people do it.”

The T-Mobile service recreates a world in which anyone who doesn't own a radio station isn't heard by the broader public, Feld said. “There is simply no way, however well intentioned, that zero-rating particular content or applications can avoid warping and undermining the very thing that makes the Internet so vital and inspirational for diversity and free expression and so open to innovation,” he said. “Even with the best intentions, it recreates the very scarcity of traditional media we wanted to escape in the first place.”

The Minority Media and Telecommunications Council hasn’t weighed in strongly on the issue, but believes “on balance” that zero rated sponsored data plans are in the public interest, said MMTC President Kim Keenan. “From the point of view of the consumer, zero rated means that the data use does not apply toward their monthly data consumption or cap,” she said. “Instead, businesses, in this instance, the edge provider, pay more so that the consumer can pay less, which in the broadband space is especially beneficial in light of the 20:1 racial wealth gap and the affordability challenge to universal adoption.” Keenan cited 1-800 numbers, which allow long distance calls to be zero rated for the consumer. “The cost is picked up by business,” she said. “It is difficult to think of any respect in which this arrangement harms anyone.”

Free State Foundation President Randolph May has written extensively about the zero rating issue. “The so-called zero-rated plans are likely attractive to a large segment of consumers, especially low-income consumers,” May told us. “I think that these consumers would find it odd that those aligned with President Obama urging Title II regulation want to ban these plans as inconsistent with an open Internet. I think President Obama himself might find it odd that these plans which are attractive to low-income consumers would likely be outlawed under the regime he is proposing if his Title II allies have their way.”

Former FCC Commissioner Robert McDowell, now at Wiley Rein, said the debate over zero rating is an example of the problem with the proposed net neutrality rules. "The FCC has put itself in the difficult position of having to decide these thorny 'mother-may-I' questions due to its pursuit of new net neutrality rules, a constantly morphing, expanding and politically shaped industrial policy,” McDowell said. “Unfortunately, these latest developments are a glimpse of things to come. Apparently, no part of the communications ecosphere will be left alone."

In a letter Friday to the FCC, regional wireless carriers Bluegrass Cellular, Carolina West Wireless, Cavalier Wireless, Cellcom and King Street Wireless said net neutrality rules could hamper their ability to compete. “As regional providers, it is critical that we have the ability to differentiate our services as we seek to compete against larger national mobile broadband providers,” the CTIA members said. “Our relationships with our customers are vital to our success, so we are strongly incented to seek out new and innovative pro-consumer offerings, and to examine alternative ways to deliver services that will be valuable to our consumers.”