AT&T and Verizon Facing FCC Scrutiny After Exempting Their Own Apps From Data Caps

Both AT&T and Verizon offer apps and streaming services that don't count against the data cap they impose on customers, a practice that the United States Federal Communications Commission does not approve of.

The FCC this week sent letters (via The Verge) to both Verizon and AT&T, claiming that the data cap exemptions, called "zero rating," raise net neutrality concerns and could impact consumers and competition.

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AT&T and Verizon each offer programs that allow content providers to pay a fee to be exempted from customer data caps, programs that they themselves take advantage of with their own apps and services.

DirecTV Now, AT&T's recently introduced streaming television service, does not use data when streamed on the AT&T network, for example. DirecTV Now pays for the data, but as an AT&T subsidiary, AT&T is just paying itself. Verizon, meanwhile, exempts its own Go90 streaming service from using data on the Verizon network and does not pay fees to do so.

The FCC first sent a warning to AT&T in early November, but was not pleased with the response it received from the company. In this week's letter, the FCC says that it has come to the "preliminary" conclusion that the Sponsored Data program inhibits competition, harms consumers, and violates Open Internet rules. It asks AT&T to answer a series of questions about its Sponsored Data practices.

We find that those responses fail to alleviate the serious concerns expressed in our November 9 letter regarding the potential anti-competitive impacts of a wholesale Sponsored Data program for zero-rated mobile video services. Indeed, 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.

A similar letter sent to Verizon expresses concern over the "FreeBee Data 360" program and says it has the potential to "hinder competition and harm consumers" because Verizon does not need to pay to participate in the Sponsored Data program when it exempts its own app, but competing content providers do.

The position that the participation of Go90 in FreeBee Data 360 is the same as that of third parties, however, fails to take account of the notably different financial impact on unaffiliated edge providers. For example, while there is no cash cost on a consolidated basis for Verizon to zero-rate its own affiliated edge service, an unaffiliated edge provider's FreeBee Data 360 payment to Verizon is a true cash cost that could be significant.

AT&T and Verizon have responded to the letters sent by the FCC in statements given to the media. AT&T says the government should not take away a service that's saving customers money, while Verizon says its practices are good for consumers, non-discriminatory, and consistent with the rules.

The two carriers have been given a December 15 deadline to respond to the FCC's concerns.

Tags: AT&T, FCC, Verizon

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Top Rated Comments

mrbrown Avatar
98 months ago
So, lemme get this straight... the FCC, acting as "consumer protection" in theory, is telling AT&T and Verizon that NOT charging me for services hurts me.

Oooookayyyyyy...

Thanks FCC!
Not charging for their own services but charging for competitors does hurt you, whether you realize it or not.
Score: 66 Votes (Like | Disagree)
Born Again Avatar
98 months ago
So, lemme get this straight... the FCC, acting as "consumer protection" in theory, is telling AT&T and Verizon that NOT charging me for services hurts me.

Oooookayyyyyy...

Thanks FCC!
see you fell for it. it's deceptive.
Score: 39 Votes (Like | Disagree)
Doogh2004 Avatar
98 months ago
So, lemme get this straight... the FCC, acting as "consumer protection" in theory, is telling AT&T and Verizon that NOT charging me for services hurts me.

Oooookayyyyyy...

Thanks FCC!
See, here's the issue... They're spinning it to be positive.

Imagine if you had the choice between: A) Twice as much data
B) Free data through their services

Essentially, they're forcing you to sacrifice part of your data so that others that use DirectTV can have more data.

Now, imagine if they stop raising data caps... They're essentially forcing Netflix to be more expensive to use than DirectTV.

It's dangerous and anti-competitive.

If other utilities did this... Like water or electricity... The utility companies would be able to decide which businesses succeed and fail.
[doublepost=1480715361][/doublepost]
Today it's using apps without data caps and tomorrow it's "decency" and banning porn. The FCC should have zero jurisdiction over the internet. This is one thing where I really was bummed that Obama broke that seal by encouraging the FCC to claim jurisdiction. So their first act, getting rid of something customers actually like. Lol
No, you don't understand net neutrality.

It means ATT cannot make certain services cheaper than others. What if they make their news site cheap and other news sites super expensive? It prevents ATT from controlling competition. It doesn't give the FCC to regulate the contents of the internet.
Score: 23 Votes (Like | Disagree)
oneMadRssn Avatar
98 months ago
bundling cell phone, landline, cable, etc., would be illegal.
Bundling is bad for consumers. That's a good example you gave. When Comcast forces you to buy cable tv and a landline phone, when you only want an internet connection, you end up paying more for services you never use.

The UK has had unbundling regulations, which resulted in lower costs for consumers, and their cost of internet and cell phone service are significantly lower than in the US.

Just like cable companies bundle channels together, and consumers always want a-la-carte channels, aka unbundled.
Score: 21 Votes (Like | Disagree)
doasis23 Avatar
98 months ago
So, lemme get this straight... the FCC, acting as "consumer protection" in theory, is telling AT&T and Verizon that NOT charging me for services hurts me.

Oooookayyyyyy...

Thanks FCC!
If you don't understand why this is bad for consumers here's a good article explaining why by the Verge.
http://www.theverge.com/2016/11/29/13774648/fcc-att-zero-rating-directv-net-neutrality-vs-tmobile
Score: 16 Votes (Like | Disagree)
Mascots Avatar
98 months ago
Nope. Offering me a discount on one service has no direct effect on the costs of other services.

By this same logic, bundling cell phone, landline, cable, etc., would be illegal.
That's not how any of this works.
Score: 13 Votes (Like | Disagree)