FCC: DirecTV Now Plan Appears to Violate Net Neutrality Order

Says Verizon sponsored data plan is also a potential competitive threat.

A new report out of the FCC's Wireless Bureau advises that AT&T's DirecTV Now sponsored data plan appears to violate the Open Internet order per its general conduct standard. But a new, Republican-led FCC, is unlikely to second that opinion.

The Wheeler FCC concluded its long-standing review of zero rating business plans Wednesday (Jan. 11) expressing "no concern with zero-rating per se," but plenty of concerns with AT&T's sponsored data plan and Verizon's FreeBee Data 360.

The Wireless Bureau report concluded that: "The limited information we have obtained to date...tends to support a conclusion opposite from AT&T’s contentions – namely, that AT&T offers Sponsored Data to third party content providers at terms and conditions that are effectively less favorable than those it offers to its affiliate," and said that "the structure of Verizon Wireless’s FreeBee Data 360 sponsored data program offering may pose concerns for the same reasons as AT&T’s Sponsored Data program."

"In light of the rates at which DIRECTV is offering its DIRECTV Now service to end users,  the information we have indicates that AT&T (including both the network operator and edge provider affiliates) does not consider zero-rating to be a real cost of business," " the report said. "Instead, AT&T appears to view the network cost of Sponsored Data for DIRECTV Now as effectively de minimis. Unlike T-Mobile, however, which charges all edge providers the same zero rate for participating in Binge On, AT&T imposes hefty per-gigabyte charges on unaffiliated 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, in violation of the General Conduct Rule."

It said that Verizon's go90 competes in a less competitive segment, it might be less of a competitive threat, but said there is the same potential for discriminatory conduct.

"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," FCC Chairman Tom Wheeler told Sen. Ed Markey (D-Mass.) in a letter about the report's conclusions.

Markey had also expressed concern about zero rating.

The FCC did not have trouble with T-Mobile's Binge On. "Binge On thus appears not to discriminate against or disadvantage (much less unreasonably discriminate or unreasonably disadvantage) any edge provider or end user," the report said. Ditto AT&T's Data Perks plan. "Based on information we have on Data Perks, we believe it is not likely that this program unreasonably interferes with or disadvantages any edge providers’ or end users’ ability to use the Internet to reach one another," the FCC said. 

“It remains unclear why the Wireless Bureau continues to question the value of giving consumers the ability to watch video without incurring any data charges, said AT&T SVP Joan Marsh. "This practice, which has been embraced by AT&T and other broadband providers, has enabled millions of consumers to enjoy the latest popular content and services – for free. We hope the government continues to support a competitive marketplace that lowers costs and increases choice for consumers.”

“The staff’s positions are duly noted," said Verizon SVP Will Johnson. "We don’t agree with their view on free data and we don’t think our customers do either.  Hopefully the next FCC will take into account the views of our customers who greatly benefit from watching professional football, soccer, basketball and other great content on go90 free of data charges.”

Also duly noting it was Republican Commissioner Ajit Pai, who is likely going to be the interim chairman of the FCC come Jan. 20 and will be in the majority in any event.

"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,: he said in a statement.

"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."