When Donald Trump takes office later in January, so will a new Federal Communications Commission (FCC) chair. Following protocol, current chair Tom Wheeler will cede his position on the day of Trump’s inauguration, and that might spell doom for net neutrality.
The FCC’s senior Republican commissioner, Ajit Pai, is the likely candidate to replace Wheeler. He’s one of two Republicans at the FCC in a position to take the role.
If Pai does nab the job, he will do so at a crucial moment in the battle over net neutrality, or the principle that all data on the Internet should be treated the same by carriers and providers. Right now, the FCC supports net neutrality. In a recent letter to senators regarding “the potential negative impact of zero-rating on consumers and competition,” for example, the FCC tackled AT&T’s ownership of DirecTV. (Zero-rating is when an Internet service provider (ISP) or mobile network operator (MNO) doesn’t charge customers for data used by specific applications or services; it can have a substantial effect on the customer’s bill in limited or metered data plans.)
In a nutshell, AT&T offers a “sponsored data” stream for customers who are also DirecTV subscribers. The issue is that sponsored data is ‘free’: it doesn’t count against the subscriber’s cap or throttling limit. It’s the same thing Verizon does with its 360 program, and it’s similar in many ways to T-Mobile’s BingeOn services. From the letter:
Unlike T-Mobile, which charges all edge providers the same zero rate for participating in BingeOn, AT&T imposes hefty per-gigabyte charges on third parties for use of Sponsored Data. All indications are that AT&T’s charges far exceed the costs AT&T incurs in providing the sponsored data service.
Thus, it would appear that AT&T’s practices inflict significant unreasonable disadvantages on edge providers and unreasonably interfere with their ability to compete against AT&T’s affiliate, DIRECTV, The structure of Verizon’s FreeBee Data 360 program raises similar concerns. We are aware of no safeguards that would prevent Verizon from offering substantially more costly or restrictive terms to enable unaffiliated edge providers to offer services comparable to Verizon’s affiliated content on a zero-rated basis.
As the FCC goes on to note: “Given the powerful economic incentives of network operators to employ these practices to advantage themselves and their affiliates in various edge service markets, staff is concerned that – absent effective oversight – these practices will become more widespread in the future.”
Net-neutrality advocates have a big problem with programs like that, which potentially put individual Websites or services at a disadvantage vis-a-vis their competitors. But a letter from Pai bashed the FCC’s current direction, and essentially vowed to allow zero-rated content:
It is disappointing that the FCC’s current leadership has yet again chosen to spend its last days in office the same way it spent the last few years—cutting corners on process, keeping fellow Commissioners in the dark, and pursuing partisan, political agendas that only harm investment and innovation.
This time the midnight regulations come in the form of a Bureau-level report casting doubt on the legality of free data offerings—offerings that are popular among consumers precisely because they allow more access to online music, videos, and other content free of charge. This report, which I only saw after the FCC released the document, does not reflect the views of the majority of Commissioners.
Fortunately, I am confident that this latest regulatory spasm will not have any impact on the Commission’s policymaking or enforcement activities following next week’s inauguration.
It was my hope—as I have consistently expressed to my colleagues—that we could spend the remaining days of this Administration working together with bipartisan comity to ensure a smooth transition. It is sad that the outgoing leadership of the agency has chosen a different path.
In its letter to senators, the FCC admitted to examining each zero-rating service individually, and that some of those programs may actually be beneficial to customers. It also stated there is now a formal protocol in place for evaluating zero-rated services.
If Pai takes the FCC chair, he may unravel the FCC’s previous net-neutrality work, just as Trump has promised to “repeal and replace” Obamacare. In a joint release last month, co-signed by Michael O’Reilly, the FCC’s other Republican commissioner, Pai said the FCC will “revisit” Title II Net Neutrality “as soon as possible.”
That could happen as soon as January 20, when Trump takes office and Pai (or possibly O’Reilly) takes over. It likely means zero-rated service will avoid the watchful eye of the FCC, which could lead to more “sponsored” streaming programs from carriers and others.
Another interesting footnote: Pai once worked in litigation for Verizon. Though the FCC is an independent agency, its commissioners are nominated by government officials. Pai was nominated by current President Barack Obama, who has taken a supportive stance on net neutrality.