Last year we won the open internet back, but the new regulations had one big weakness: they didn’t explicitly ban a scheme called “zero rating.” Zero rating is a poison pill wrapped in a piece of cheese; it looks like a good thing for consumers (free video!), but ultimately has the capability to rot competition and the open internet. The FCC decided it would look at zero rating schemes on a case-by-case basis, which left the door open for wireless companies to play their usual games. AT&T just broke that door off its hinges.
Last night AT&T made a dim prophecy official by announcing that its new DirecTV Now streaming service would be zero rated: it won’t count against its customers’ data caps. Zero rating isn’t new — T-Mobile has been writing the manual on how to get away with it — but now it’s finally happening at a scale that matters. And AT&T’s version is much worse than T-Mobile’s.
AT&T is screwing it all up
T-Mobile’s model began with offering free music streaming to its wireless customers through select services. So, for example, if you were a Spotify or Google Play Music customer, T-Mobile would give you unlimited high-speed data for using those apps. Eventually T-Mobile expanded this idea to video with its “BingeOn” program that started by throttling video and ended up being an opt-in program video streaming companies could use to send video to T-Mobile customers with no impact on their data caps. T-Mobile nearly went crazy trying to defend this program against criticism, but so far it hasn’t been slapped by the FCC.
AT&T’s zero rating model is pretty much the nightmare scenario that internet advocates and pro-competition observers have been warning us about. That’s because AT&T owns DirecTV, and is now giving DirecTV Now privileged access to AT&T’s wireless internet customers. The corruption is so obvious here that it doesn’t need a fancy net neutrality metaphor — AT&T is clearly favoring a company it now owns over competitors.