For some time now we’ve warned how the FCC’s decision to not ban zero rating (exempting some content from usage caps) was going to come back and bite net neutrality on the posterior. Unlike India, Japan, The Netherlands, Norway, Chile, and other countries, the FCC crafted net neutrality rules that completely avoided tackling the issue of usage caps and zero rating. Then, despite ongoing promises that the agency was looking into the issue, the FCC did nothing as AT&T, Verizon and Comcast all began exempting their own content from usage caps while still penalizing competitors.
Fast forward to this week, and AT&T has delivered what may very well be the killing blow to net neutrality thanks predominantly to the FCC’s failure to see the writing on the wall.
AT&T this week is launching its new “DirecTV Now” streaming video service. According to the full AT&T announcement, the service offers various packages of streamed TV content ranging from $35 to $70 per month. Thanks to AT&T’s looming $100 billion acquisition of Time Warner, AT&T’s even throwing in HBO for an additional $5 per month, the lowest price point in the industry. Though a bit hamstrung to upsell you to traditional DirecTV (two stream limit, no 4K content, no NFL Sunday Ticket, no DVR functionality), all told it’s a fairly compelling package for cord cutters.
But somewhat buried in AT&T’s announcement is the long-expected confirmation that this new service won’t count against usage caps if you’re an AT&T wireless subscriber:
“And, if you’re an AT&T Mobility customer, DIRECTV will pick up the tab for data to help you achieve all your binge-worthy goals. Data Free TV means you won’t use your AT&T mobile data for watching DIRECTV NOW or FreeVIEW in the App. Fullscreen will also cover your data for streaming in the Fullscreen App on the AT&T mobile network.”
For consumers who have no idea what zero rating or net neutrality even is (read: most of them), this sounds like a great idea. Most don’t know that usage caps are an entirely-arbitrary construct completely untethered from network or financial necessity. As such, they believe they’re getting something for free. This collective illusion means fewer annoyed users, which means less political pressure on the FCC, which is why the FCC failed to act. The problem, as we’ve noted time and time again, is that AT&T is violently distorting the open market and giving its own content a distinct and decidedly unfair market advantage.
In addition to existing offerings by Dish (Sling TV) and Sony (Playstation Vue), the market is about to get flooded with an absolute torrent of live TV streaming competitors including Apple, YouTube, Hulu, and Amazon. Ideally, these services would all compete with DirecTV Now based on quality and pricing. But under AT&T’s new zero rating umbrella, all of those services will count against AT&T’s usage caps, while DirecTV Now won’t. Owning the pipe and the content will protect AT&T from the full brunt of increased competition in the space.
This is precisely the sort of “new normal” AT&T has spent the last decade trying to build, and exactly the sort of future net neutrality rules were supposed to help us avoid. And while the current Wheeler-led FCC recently finally acknowledged that it now understands this sort of behavior is anti-competitive, it’s too little, too late. There’s every indication that Trump’s new FCC intends to not only gut net neutrality, but the FCC entirely. Trump’s telecom transition team is filled to the brim with telecom-sector cronies who can’t even admit telecom monopolies are real. Large ISP executives and investors are thrilled.
With no (or unenforced) net neutrality rules and a toothless FCC, you can expect all of the incumbent broadband ISPs to follow AT&T’s lead, while folks like Trump telecom advisor Jeffrey Eisenach regurgitate telecom sector think tank pieces trying to claim that zero rating is a huge boon to consumers. These are men and economists for hire who’ll breathlessly inform you they adore “free markets” and open competition, while simultaneously working to thwart competition at every turn — whether it’s dismantling the level streaming playing field with zero rating, or letting telecom giants literally write abysmal telecom law.
Those who have actually paid attention to net neutrality realize this may very well be the beginning of the end for the idea — or at best a very long, dark and unfortunate detour off of the path — with the ultimate irony being that because zero rating is seen as little more than “free stuff” by many misinformed consumers, net neutrality’s death knell will arrive to thunderous public applause.