FCC Raises Fresh Concerns Over 'Zero-Rating' by AT&T, Verizon
December 02 2016 - 12:00PM
Dow Jones News
Federal regulators raised new concerns about AT&T Inc.'s
practice of excluding its new DirecTV Now streaming service from
data charges and, for the first time, lobbed similar questions at
Verizon Communications Inc.
In a pair of letters sent Thursday, the Federal Communications
Commission warned that so called zero-rating, which makes the data
used by certain video services free for the carriers' wireless
customers, could harm competition and consumers.
The agency argues the practice could deter consumers from
accessing mobile-video services not affiliated with the carriers,
such as those from Netflix Inc. or Hulu, which is co-owned by Walt
Disney Co. and 21st Century Fox.
21st Century Fox and News Corp, parent company of The Wall
Street Journal, share common ownership.
Both AT&T and Verizon responded Friday that the practice
complies with existing rules and benefits consumers.
"We will provide the FCC with additional information on why the
government should not take away a service that saves consumers
money," AT&T said Friday.
The FCC's letters come on the heels of the launch of DirecTV Now
this week and after Republican congressional leaders last month
asked the agency to stop taking controversial regulatory actions
until the new presidential administration is on board.
The FCC first raised its concerns with AT&T last month, the
day after the presidential election. AT&T responded with a
detailed defense that hasn't satisfied the regulator.
Jon Wilkins, the head of the FCC's wireless division, in
Thursday's letter wrote that the agency has "reached the
preliminary conclusion that these practices inhibit competition,
harm consumers, and interfere with the 'virtuous cycle' needed to
assure the continuing benefits of the open internet."
The FCC's letter to Verizon notes that the carrier's actions
have "the potential to hinder competition and harm consumers."
Verizon excludes data charges to its wireless customers for its
National Football League games or its go90 mobile-video app.
"We remain quite confident that our practices are good for
consumers, non-discriminatory and are consistent with current
rules," Verizon said Friday.
The agency requested both companies respond by Dec. 15,
including a list of detailed questions for AT&T.
AT&T says other video providers can also pay to cover data
costs for their customers at the same rates as its DirecTV
subsidiary. Verizon offers a similar program.
The FCC estimates that an outside video provider would have to
pay AT&T $16 a month for each customer who used 10 minutes of
streaming video a day, rising to $47 a month for a customer using
30 minutes a day.
"That would make it very difficult, if not infeasible, to offer
a competitively priced service," the letter states.
The Dallas telecom firm, which agreed to buy Time Warner Inc.
for $85.4 billion in October, began zero-rating its DirecTV video
app in September as well as its new DirecTV Now over-the-top
service.
Ryan Knutson contributed to this article.
Write to Thomas Gryta at thomas.gryta@wsj.com
(END) Dow Jones Newswires
December 02, 2016 11:45 ET (16:45 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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