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The FCC and 'Zero-Rating'

By Christopher Coble, Esq. on February 08, 2017 | Last updated on March 21, 2019

The phrase 'zero-rating' might sounds like the worst news a business can get from customers on Yelp. Instead, recent news coming out of the Federal Communications Commission might be the best that media companies offering sponsored data programs have heard recently.

Zero-rating actually refers to the practice of data carriers not counting certain data usage against their customers' caps, allowing some companies to pay those carriers to exempt their data. While net neutrality advocates and even the former FCC Chairman aren't fans of certain zero-rating plans, it looks like the new FCC won't mind.


Depending on who you talk to, zero-rating is either allowing ISPs to use sponsored content to pay for the costs of distributing and viewing data over their networks or allowing ISPs to discriminate against smaller content providers that can't afford to pay. As mobile carriers like AT&T and Verizon begun to buy up media companies package new data and media services, zero-rating has become more controversial.

In fact, former FCC Chairman Tom Wheeler, an Obama appointee, issued a report stating that AT&T's and Verizon's zero-rated video services may violate the FCC's Open Internet Order. As reported by the Verge:

In theory, sponsored data should be an even playing field, with providers bearing the costs and making the same charges regardless of who's footing the bill. But according to the report, AT&T treats the DirectTV [sic] partnership very differently from an unaffiliated sponsored data system, giving the service a strong advantage over competitors. "AT&T appears to view the network cost of Sponsored Data for DIRECTV Now as effectively de minimis," the report concludes. While AT&T still bears some cost for all that free traffic, it's small enough that the carrier doesn't seem to care.

Zero Problems?

Wheeler submitted the report to Congress just days before he left office, and it didn't take long for his Trump-tapped replacement to change course. New FCC Chairman Ajit Pai formally the report, saying the FCC "will not focus on denying Americans free data. Instead, we will concentrate on expanding broadband deployment and encouraging innovative service offerings." Pai also declared that the agency is closing the enforcement probes into the use of zero-rating packages by AT&T and Verizon.

While the new FCC may be focused on "free data," as the old saying goes, nothing in life is free. But now it might be hard to find out who is paying for your free data, or get content from those who aren't.

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