Senators Want FCC to Crack Down on ‘Harmful Zero-Rating Offerings’ | Hacker News Reader

Senators Want FCC to Crack Down on ‘Harmful Zero-Rating Offerings’

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86 pointsthesagan37 comments

Zero-rating was recently made illegal in Canada. Previously, Bell was giving away 10 hours of streaming video on their service with all plans, even when their reasonably priced plans only offered 500MB of data. The CRTC came back and told them that if they wanted to make their video service viable, they had to do it by making data in general actually reasonably priced rather than giving their own services giant discounts.

It was briefly unpopular as some people lost the zero-rated services they were used to, but it is a good policy to increase Internet bandwidth in general.

It seems that zero-rating of third-party services is considered different and is under review [1]. Zero-rating your own products is illegal.

Also somewhat fascinating to me is that the CRTC did a public consultation on reddit.

[1] http://crtc.gc.ca/eng/internet/diff.htm

Analogies can be more harmful than helpful for understanding issues like this but...

...this seems a lot like if a POTS/VOIP provider announced that instead of charging you the same rate per minute no matter who you called, they were going to start charging you less for some calls, and perhaps even make some phone numbers free to call.

Which now that I write it down like that actually does sound a bit dodgy! (And would sound even more so if you were viewing it from circa-1980, when phone calls were vastly more important, and AT&T has vastly more power and reach than any comparable ISP today.)

Except, of course, we've accepted that sort of price discrimination on phone calls forever, and with 1-800 and 1-900 numbers (or equivalents) we've long been of accepting of very explicit skewing of the costs of phone calls based on business deals worked out between the phone company and the content provider.

So I dunno. I see some arguments in favor of having the providers of networks be strictly neutral when it comes to content. But it also feels to me like this is not a principle we've adopted in other cases, and (for me at least) it's actually quite hard to discern the harm that "harmful zero-rating offerings" are causing.

In fact, I'm not even entirely sure who's meant to be harmed; are we trying to protect consumers or content creators? The article seems to suggest it's other content creators. Which brings up an interesting thought experiment: If zero-rating is fine, would it be okay for AT&T to charge some data at higher rates, and then split the profit with the content creators? :) Eg, "AT&T now offers Netflix as a premium service; all AT&T customers now have a full access to the Netflix service! (Note, higher premium data usage rates apply when viewing premium Netflix content)" Would that be okay? Would it be harmful? To whom would it be harmful? :)

(Note, incidentally, that I live in a country where for many years international data was charged at a higher rate than national data, for fairly obvious reasons involving undersea cables. There's no historical precedent that says all data must be charged the same, even if your personal experience has been that it has been for you.)

The difference here is that unlike 1800 calls the amounts charged by phone companies for extra data over the plan is extortionate vs. what I imagine Facebook etc. Are charged and it's not easy for John Smith as a small biz owner to get in on this action whereas getting a toll free number is feasible. So it's pushing people into the big walled gardens.

I suppose so. The linked article says:

> “We welcome any video provider that wishes to sponsor its content in the same ‘data free’ way for AT&T Mobility customers and we’ll do so on equal terms at our lowest wholesale rates,” Bob Quinn, senior executive vice president of external and legislative affairs at AT&T, said in the company’s Nov. 10 response to the FCC’s letter.

But it's hard to know how seriously to take that. At face value it suggests that they're willing to sell "data sponsorship" in much the same way phone companies sell 1-800 numbers. The reality may be different of course.

But 1-800 numbers are not cheaper, they just get charged to a different person

The "call" part of an 1-900 costs the same, but it's an added value charge

Yes, that was the point.

100 MB of DirectTV data costs AT&T the same as 100 MB of Netflix data; the difference is that it's being charged to a different person. Hence why I chose 1-800 numbers as an analogy. :)

> 100 MB of DirectTV data costs AT&T the same as 100 MB of Netflix data

Considering colocation with ISPs of service "black boxes", is this really true? Thinking of Netflix Open Connect and similar programs.

Ah now I see

1-800 was a bad example, but what about mobile-to-mobile calls on the same carrier, that some carriers have offered unlimited for free?

Interesting point. Perhaps the internet is complex enough that ISPs saying "We'll let you use <our preferred streaming service> for free" is materially different form phone companies saying "We'll let you make phone calls to <our preferred bank> for free"? Or is it? I don't think the telecoms tried or succeeded at capturing market share in this way back in the era of telephone.

The reason zero-rating is harmful is that it gives the ISP cover for monopoly abuse.

Suppose your ISP is owned by Facebook, so they zero-rate Facebook and charge high rates for all other data. Now those ISP customers are going to prefer Facebook over its competitors unless the competitors pay for zero-rating too. So Facebook gets to charge its competitors whatever they please for zero-rating, and they'll naturally want to charge a lot. They can even charge "themselves" the same amount because then it's just moving money from one pocket to another. So all they have to do is charge an amount that will put their competitors out of business and they'll have no more competitors.

> are we trying to protect consumers or content creators?

It's the same thing. Giving the ISP a monopoly on content harms consumers.

> If zero-rating is fine, would it be okay for AT&T to charge some data at higher rates, and then split the profit with the content creators? :) Eg, "AT&T now offers Netflix as a premium service; all AT&T customers now have a full access to the Netflix service! (Note, higher premium data usage rates apply when viewing premium Netflix content)" Would that be okay? Would it be harmful? To whom would it be harmful? :)

Let's consider why that might happen. If equal or less than the entire premium over the base data rate goes to Netflix then Netflix would just offer the service independent of AT&T, so it has to be that Netflix is receiving more than that. Let's consider why AT&T would do that. It's clearly not because AT&T has any interest in subsidizing Netflix.

But AT&T could set the base data rate higher than their own costs, so that any customer who uses any video service independent of AT&T is already paying AT&T a premium for that bandwidth. Then AT&T strikes deals with Netflix to charge an even slightly higher rate for Netflix bandwidth, and gives Netflix that increase plus a small percentage of the base rate. That forces Netflix to sign up for the deal with AT&T because it's the only way they can claw back even a part of the high base rate AT&T is charging to their customers.

And AT&T can decide who gets that deal, so AT&T gets to decide which video services are economically viable for AT&T ISP customers. Which harms competition and therefore consumers.

The reason this was traditionally less trouble with 1-800 numbers is that AT&T was never in competition with Zapatos to provide customer service to people who buy shoes, but they are in competition with Netflix et al to provide video service. And 1-800 numbers are available to everyone at the same published rates.

> So I dunno. I see some arguments in favor of having the providers of networks be strictly neutral when it comes to content.

What's the network, though?

Consider a cable company, such as Comcast. The physical cable that they own that runs from their nearest facility to your home can carry an analog waveform that can contain frequency components up to something like 2.something GHz.

The cable company divides that 2+ GHz into several hundred 6 MHz "channels". The channels are logically independent.

In the Before time, in the long long ago, those channels were used for analog television signals. One analog TV channel would fit in one cable channel.

Nowadays, the cable channels are used for digital data streams. The stream on a given cable channel often consists of multiple data streams multiplexed together. For example, a digital standard definition TV signal with good compression takes much less than 6 MHz bandwidth, so a cable company can put several such TV channels in one cable channel [1].

In addition to using these digital data streams over physical cable channels for TV channels, the cable company uses them for other services. Internet is one such service. Others could include telephone service and security alarm monitoring.

Let's take telephone service. There are at least three ways the cable provider could do this.

1. Run it directly on top of one of their digital data streams in one of their cable channels, using some reasonable protocol for telephone control and voice data.

2. Run an IP network over one or more of their digital data streams, completely separate from the IP network that is used for the home internet service that they provide for you. Use any common VOIP protocol on top of that.

3. Run a common VOIP protocol over the same IP network that is used to provide your home internet service.

Which of these would be subject to net neutrality? #1 and #2 do not involve the Internet, so it is hard to see how net neutrality would be applicable. #3 does use internet service (although if it is the cable company providing the telephone service, the packets probably never actually leave the cable company's network), so one might make a case for net neutrality there.

Both #1 and #2 do make it harder for a third-party internet VOIP provider to compete, because using a third-party VOIP provider will use some of your internet bandwidth, whereas #1 and #2 do not touch your internet bandwidth.

[1] This is why when some TV channels go out on a cable TV service, there is often no evident pattern to which are down and which are not. The mapping from user-visible TV channel numbers to actual channels on the cable can be arbitrary.

“We welcome any video provider that wishes to sponsor its content in the same ‘data free’ way for AT&T Mobility customers and we’ll do so on equal terms at our lowest wholesale rates”

So the 2x+ "wholesale" rates they currently overcharge for peering right now, then. Wonderful.

The eyeball ISPs gouge on both ends. They rip off their customers and they rip off the companies that need IP transit. They don't need to get rid of net neutrality to engage in anti competitive behavior, as they continue to demonstrate with stunts like this. Companies like Comcast could conceivably destroy Netflix margins in a day by increasing peering costs as much as they want and running their own video service that doesn't pay it. I'm actually surprised they haven't tried it yet.

I'm not sure if Net Neutrality covers this scenario - if they just raised peering costs for everybody, it that not still neutral?

User (who lives in an area with competition): "It says Netflix can't be served by my provider? Something about Comcast increasing the cost of data? I'll call Comcast"

Comcast (after a while): "Yes, we increased the cost of our data to Netflix's backbone provider to provide the highest value service and now they won't serve to you. But for only $99.99/month you can get our deluxe cable package that includes...."

User: "Cancel my account, I'm switching to my local internet provider as they provide free Netflix."

The solution to this problem is to encourage small local internet providers to pop up and provide much needed competition.

> User: "Cancel my account, I'm switching to my local internet provider as they provide free Netflix."

What local internet provider?

Where I live, the only lines into my home are classic phone (completely useless), DSL (ultimately controlled by the phone company, even if I think I'm buying it from somebody else), and cable (controlled by Comcast). The only good option is Comcast, because the phone company can't keep the DSL working.

>The solution to this problem is to encourage small local internet providers to pop up and provide much needed competition.

That involves invalidating the franchise agreements that Comcast and others have with major cities and allocating funds for municipal broadband programs. Unfortunately, that won't happen under Obama[0], or Trump[1]. Looks like it's about time for a third party to come forward in America.

[0]http://www.politico.com/blogs/media/2013/08/obama-golfs-with... [1]http://www.latimes.com/nation/politics/trailguide/la-na-trai...

Most folks only have a single operator in the US. I'm in NYC. The only fast internet I can get on my block is time Warner cable. No Verizon FiOS. No RCN. I could get slow overpriced unreliable DSL from Verizon, but the last time I tried DSL it was down for 10 days of my 30 day trial on my required one year contract due to a Verizon tech randomly unplugging the wrong wire at a nearby box.

Yea, that's nice, but under a Republican administration that's not going to happen.

Fascinating! Does it matter if the Zero-Rating is a choice the carrier is making as an offering to its customers without support from the content provider vs in a deal with the content provider?

I don't think T-Mobile receives money from YouTube for making YouTube unmetered on their network, but there are countless examples (including internet.org) of worldwide lobbying for zero-rating.

Can someone articulate the theory of harm here? How would consumers be worse off than in the counterfactual world where this practice is banned?

I thought the reasons in the article were good, but here's a concrete one: Comcast was counting data used for Netflix against your data cap, but they were not counting data used for their own streaming video. Keeping with the concept that an ISP is similar to an electric company, this would be like your power company charging you to use lamps from Company A but not lamps made by Company B (whom they've presumably partnered with). This is incredibly anticompetitive, and especially harms small businesses.

Antitrust is designed to protect consumers, not downstream firms. Restraints on trade are only illegal if they are 'unreasonable' in the sense that they are viewed as likely to lead to long-run harm for consumers.

To some extent, it is a company's job to 'harm' suppliers, sellers and competitors.

It may well be possible to tell a compelling story that this is an unreasonable constraint (I'm not an expert on US case law). I just find it interesting that so many complaints on the topic fail to directly articulate the theory of harm for consumers.

https://www.ftc.gov/tips-advice/competition-guidance/guide-a...

Protecting downstream firms (in aggregate), also protects consumers. From the site you linked to: "to protect the process of competition for the benefit of consumers, making sure there are strong incentives for businesses to operate efficiently, keep prices down, and keep quality up."

Ok so explain that process without hand waving then! There are plenty of cases of bundling that are 1) Allowed to operate under scrutiny of competition authorities 2) Can be theoretically/empirically justified on efficiency grounds. The emphasis is on you to demonstrate that this is not the case if you are arguing that the constraint is unreasonable. This is the basis of modern antitrust enforcement.

One possible efficiency justification for bundling. http://s3.amazonaws.com/academia.edu.documents/4170761/10.1....

Who are the core "tenants" of net neutrality?

Absolute rubbish. Let companies make their plans however they want. I cannot see a single benefit coming from this ban. More bureaucracy, less options, and nobody benefits.

I am strongly in favor of network neutrality, but this seems to me different in substance from the net neutrality issue. The ISP is not inhibiting or degrading packets from non-favored services. The ISP is not trying to surreptitiously steer the customer to the ISP's preferred content by inhibiting or degrading non-preferred packets. The only thing changing is who is paying for the delivery, and the consumer can still make a conscious choice about whether to avail themselves of that offering.

One might compare this to a new company "SeeAlltheFilms.com" sending out an offer such as, "We'll pay for your next month of internet service if you sign up for a one year contract". Same result: Customer still gets all packets delivered with the same priority; the only change is who pays for it.

Not really. Your example is a relationship between a content business and its customer. The conflict of interest that Net Neutrality is concerned with exists within the ISP. It's like SeeAlltheFilms.com getting a special deal with your ISP. Sure, it's still your choice to see it or not, but they'll probably get seen more now that they have that deal, and should making a deal with an ISP be the marketplace in which content providers compete, instead of creating great customer experiences?

> should making a deal with an ISP be the marketplace in which content providers compete

That's a business issue, not a packet delivery issue. I guess I don't see how this threatens net neutrality as long as the business deal does not degrade the experience of ISP customers who choose not to participate, and does not give preferential treatment to that content provider's packets.

> The conflict of interest that Net Neutrality is concerned with...

And that conflict is specifically one in which connectivity with non-preferred providers is degraded and/or connectivity with preferred providers is given preferential treatment. That becoming such a "preferred" content provider also involves a business deal does not necessarily mean any business deal between an ISP and a content provider impinges upon net neutrality.

But they are.

You're using $randomStartup until you reach your data cap of (let's say) 2GB/month, after that your bandwidth gets (actively) throttled to 64kb/s and becomes virtually unusable.

Usually this is normal because this happens for every website (ie "my internet is reduced"), but now imagine there's an elite of the major sites and services and users get used to that. How are you going to compete in a market where everybody else has zero rated traffic to their customers but you don't? For them everything else appears to be of low quality and broken. (ie "this service doesn't work right").

> Sure, it's still your choice to see it or not, but they'll probably get seen more now that they have that deal, and should making a deal with an ISP be the marketplace in which content providers compete, instead of creating great customer experiences?

What if SeeAlltheFilms.com doesn't make a deal directly with the ISP, but still pays for some of the customer's data? They offer customers as a sign-up bonus for buying a one year membership to send them a prepaid data card from that mobile customer's wireless ISP that is loaded with enough to cover a typical month of the average customer's video viewing.

They could pay for a month of your internet, or give you a gift card, or send you a physical gift, etc., and it wouldn't violate net neutrality, as long as there is no direct co-operation between the content provider and the ISP. So that month of internet would have to actually come out of SeeAllTheFilms.com's pocket, not be part of a deal with Rogers where Rogers swallows the loss when you subscribe to SeeAllTheFilms.com

>The only thing changing is who is paying for the delivery, and the consumer can still make a conscious choice about whether to avail themselves of that offering.

The customer is still paying for the delivery, even when it is zero-rated. It comes down to the fact that the ISP is incentivizing users to use the zero-rated service over its competitors.

> The customer is still paying for the delivery, even when it is zero-rated.

I don't think I understand what you mean. If it doesn't count against their data limit, they're effectively not paying for it.

> It comes down to the fact that the ISP is incentivizing users to use the zero-rated service over its competitors.

Which is no different from any other company providing financial incentives for their customers to continue using their products. Net neutrality is about addressing secretive and coercive disincentives to use competing products. Conflating the Zero-Rating issue with NN dilutes the argument for NN.

>If it doesn't count against their data limit, they're effectively not paying for it.

Not true. If I stop paying for my ISP bills, I will no longer have access to those zero-rated services.

>Conflating the Zero-Rating issue with NN dilutes the argument for NN.

Every single Net Neutrality organization agrees that zero-rated data violates the principles of NN. You can think everyone else is wrong to be against zero-rated data, but you cannot argue that zero-rated is not a violation of NN when the people that created the concept of NN say it is.

http://www.savetheinternet.com/blog/2016/03/01/how-wireless-...

https://www.eff.org/deeplinks/2016/02/zero-rating-what-it-is...

Right, but you are assuming a world where everyone has the choice to pick any ISP.

However, that's not the world we live in. Many people can only choose between one or two ISPs, which is partly what Net Neutrality is supposed to counter: it helps prevents this lack of competition from being exacerbated further.

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