The FCC has sent a letter to AT&T expressing “serious concerns about the impact of AT&T Mobility's ‘Sponsored Data’ program on competition.” As Ars Technica notes, at issue is AT&T’s new program of providing free data for DirecTV video streams to its customers, a relatively easy thing for the company to do since it owns DirecTV. It’s an increasingly common industry practice called “zero-rating” and it has serious implications for net neutrality.
Basically, if some data is free and other data is not, it gives an unfair advantage to the company blessed to provide free data. The FCC is not against zero rating across the board, but is instead choosing to look at different programs on a case-by-case basis. AT&T is far from the only US carrier to zero rate data. T-Mobile has been ostentatiously offering free data for music and movies for a year now, and Verizon also zero rates video from its Go90 app. But in zero rating DirecTV, the FCC thinks AT&T may have gone too far.
“AT&T seems to be ‘acting in ways that may harm the open Internet, such as preferring [its] own or affiliated content.’”
AT&T’s argument is that any company that participates in its Sponsored Data program has to pay AT&T for it, and that includes DirecTV. Except, again, AT&T owns DirecTV, so even if one division is paying another, the overall company still ends up not paying any money. The situation for other companies is very different — and the FCC believes that the price they’d have to pay is “significant:”
Indeed, it is not difficult to calculate usage scenarios in which an unaffiliated provider's Sponsored Data charges alone could render infeasible any third-party competitor's attempt to compete with the $35 per month retail price that AT&T has announced for DirecTV Now.
The FCC asked AT&T to respond to the letter formally. In the meanwhile, The Wall Street Journal reports that AT&T’s head of external and legislative affairs, Robert Quinn, has pushed back on the FCC’s arguments. “We welcome any video provider that wishes to sponsor its content in the same ‘data free’ way,” Quinn reportedly said in his letter, adding “We’ll do so on equal terms at our lowest wholesale rates.”
But if you’re AT&T, the real response may just be to wait out the clock and see if the FCC under the Trump administration is more friendly to zero rating. Trump has signaled that he’s dubious about the FCC’s net neutrality stance. That’s the good news for AT&T, but the bad news is that he’s also signaled that he thinks the company’s proposed deal with Time Warner is bad.