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All Signs Point to Go for Zero-Rating

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Mobile carriers across the world have been rolling out what are called zero-rated or free data products, allowing consumer access to certain data traffic without it counting against their monthly cap. The motivations for these services are different in different markets, but at least in the United States mobile carriers are trying to differentiate their services in a competitive fight over who can best meet consumers’ ever-increasing demand for streaming video.

Zero-rating has run into opposition from some of net neutrality’s more puritanical followers. Susan Crawford offered one of the more eye-opening harangues, claiming that allowing some of the world’s poorest people the choice to access basic information online for free is a “malignant” “surrendering of the Internet” that should be outlawed immediately.

Thankfully, the Federal Communications Commission (FCC) is not quite so hostile to pragmatic solutions to expand access and use of the Internet. In the Open Internet Order, the FCC laid out a case-by-case approach for overseeing zero-rating programs. Later, in a speech discussing zero-rating at the Computer History Museum, Chairman Tom Wheeler explained that “the Open Internet Order did not discourage this type of two-sided market” and that zero-rating “enables increased competition and increased efficiency—both things that benefit consumers.” Wheeler has also called zero-rated offerings “highly innovative and highly competitive.”

But unfortunately, the FCC has since wavered from this initial vote of confidence, sending letters last December to various companies experimenting with zero-rating models. Given the state of competition in the mobile market, there should be a strong presumption that these practices are in the public interest. All of these companies are trying to differentiate their services to better attract market share—they are working to please end users. This is a well-functioning market working to best meet soaring consumer demand for mobile video despite constrained radio spectrum resources.

Moreover, the early experimentation with zero-rating already clearly shows this is the sort of innovation we should be encouraging. For example, earlier today T-Mobile announced that customers are watching twice as much video per day than before launch of their zero-rated program, “Binge On,” and that video providers are seeing numbers of viewers spike as much as 90 percent. While defining the exact scope of how these programs operate will be a dynamic process, this should be left to consumers and the market, not the elitist ideology of net neutrality purists. The FCC should give the green light to these services and let the innovators take over.

These programs are a win for “edge” video providers, who see more use of their products and services. They are also a win for network operators, who are working to gain market share and explore new business models to meet demand. And most importantly, they are a big win for consumers, who end up getting more for less. The only people who lose are the net neutrality purists. The success to date of zero-rating innovations make those who would hold back progress in the name of abstract neutrality principles look rather silly.

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About the author

Doug Brake is a telecommunications policy analyst at ITIF. He specializes in broadband policy, wireless enforcement, and spectrum-sharing mechanisms. He previously served as a research assistant at the Silicon Flatirons Center at the University of Colorado. Brake holds a law degree from the University of Colorado Law School and a bachelor’s degree in English literature and philosophy from Macalester College.