FCC Said Close To Making Some Policy Calls on Zero Rating

The FCC appears to be close to making some decisions on zero rating. Several observers said they expect nothing until after the U.S. Court of Appeals for the D.C. Circuit rules on the net neutrality appeal. But industry lawyers also said Wireless Bureau Chief Jon Wilkins has made several calls to industry to say the FCC has concerns that zero rating can be construed to be a violation of last year’s net neutrality order. The FCC didn’t comment.

A broad group of public interest and consumer groups sent the FCC a letter Monday urging action (see 1603280026). Philip Verveer, senior counselor to FCC Chairman Tom Wheeler, reminded a Free State Foundation conference last week the agency has made no policy calls on zero rating (see 1603230049).

“We’ve received no signals,” said Michael Calabrese, director of the Wireless Future Program at New America, one of the signers of Monday’s letter. The FCC is still collecting information, he said. Consistent with the net neutrality order, Calabrese predicted the FCC would handle AT&T, Comcast, T-Mobile and Verizon cases separately. The FCC sent letters to each company asking about its zero-rated services (see 1512170030).

“With the D.C. Circuit decision on the open Internet order expected very soon, it seems most likely that the commission will hold off on enforcement until there is greater certainty about the scope of the rules,” Calabrese told us. “Even then, we expect the FCC to take up these very different zero-rating programs on a case-by-case basis. The commission no doubt understands the importance of establishing some early precedents that shed some light on legal gray areas involving the order’s general conduct rule, so that ISPs have more certainty and do not become overly invested in legally unsustainable practices.”

“We haven't heard anything -- just waiting for the FCC to take some action one way or another,” said Stephanie Chen, telecom and energy policy director at the Greenlining Institute, which also signed the letter.

Comcast in the Crosshairs?

Several lawyers who represent carriers said they’re not sure the FCC has made any decisions yet on zero rating. The lawyers said Comcast’s use of zero rating appears to be the most likely to get FCC attention because cable operators don’t face the same data limitations as wireless carriers. But other sources said that is by no means certain. Comcast argues (see 1512180001) its Stream TV video service "is not a zero-rated Internet service but a cable service that only works in the customer's home.”

Concerns were heightened last week with Wheeler’s comment to the House Communications Subcommittee that the commission must maintain its ability to regulate rates (see 1603220053), said a former FCC legal advisor who represents carriers and other clients.

Randy May, FSF president, said he sees the push for clamping down on zero rating as part of a “multistep program” that will lead to rate regulation of services offered by ISPs. “First step, at the same time the FCC proclaimed the open Internet order would create certainty, it deliberately created regulatory uncertainty through the general conduct standard,” May said. “Second step, after creating uncertainty regarding zero-rated plans, it then embarked on a period of stealth ‘regulation by meetings.’ By this I mean the commission staff, through its questions and comments in these private meetings, will telegraph changes it wants made in some plans in order for the ISP to avoid more overt regulation.”

The third step is going after usage charges and imposing rate caps, May said. “You just have to pay attention to what the pro-regulatory groups say about usage charges -- they are ‘too high’ and 'not cost-based' -- to know that rate regulation of ISP services is the end game of those who oppose the various zero-rated plans,” he said. “It’s time to call a spade a spade.”

“Many of us predicted early on that net neutrality would lead to metered pricing because it took all other means of managing network overload off the table, and this has come to pass,” said Richard Bennett, free-market blogger and network architect. The Internet has never treated all applications the same, nor should it, he said. “The FCC will have to wade through each zero-rating scenario separately because there are so many different fact patterns,” Bennett said. “This will test the agency’s Internet knowledge and probably show us that the open Internet regulations are too complex for the agency to enforce.”

Doug Brake, telecom policy analyst at the Information Technology and Innovation Foundation, said the FCC should refrain from clamping down on zero-rated services. “Zero rating helps give consumers more of what they want for less, and the commission likely recognizes exploration around these types of services should be encouraged,” he said. “Especially in the mobile arena, where carriers are fighting for market share, it is overwhelmingly likely a particular offering is a legitimate effort to meet consumer demand for streaming video while overcoming constrained spectrum resources.”

The zero-rated offerings generally encourage consumer discovery by highlighting little-known services, Brake said. “This is more like 1-800 numbers that allow for the growth of commerce on top of a platform for the benefit of all than some end-run around the open Internet rules.” Public interest advocates “continue to rely on their usual refrains without any substance backing them up,” he said. “Recycled abstractions run into actual data from existing programs showing consumers overwhelmingly like using these services.”

The FCC will likely treat each case separately​, said Free Press Policy Director Matt Wood. “I would imagine they’ll address them individually, but if they got a complaint, a petition for rulemaking, or a request for declaratory ruling that grouped them all together they could choose to go that way,” Wood said. “I don’t think that would be our approach.”