Net neutrality versus zero rating: internet services free of charge are a zero sum game

There is no such thing as a free lunch.

And if, in an emerging trend, some internet services are being provided to customers free of charge, then the cost comes in the form of skewed competition – an issue that is catching the eye of regulators worldwide.

Different internet uses already carry different costs in many countries thanks to “zero rating”, the practice by wireless carriers and broadband providers of exempting certain applications from customers’ monthly usage caps.

There were at least 92 zero-rated mobile services in developed countries in 2014, according to Finland-based Digital Fuel Monitor.

Many of those were the carriers’ own video applications, but also included were third-party services such as YouTube, Spotify and HBO.

In the UAE, Etisalat and du offer packages with zero-rated access to social media services including Facebook, Twitter and WhatsApp. Everything else counts against data caps as usual.

In some cases, carriers are eating the costs of providing the data for the respective services to make themselves more attractive to subscribers. In others, it’s the reverse – the online services are seeking data-exemption deals with carriers so that they can be more desirable to users.

The rise of zero-rated offers comes as regulators have largely taken a wait-and-see approach. Policymakers aren’t yet sure whether zero rating is good or bad for consumers, competition and the internet in general.

The issue roared into headlines in the United States last week with the announcement by T-Mobile, the country’s third-largest wireless provider, of Binge On – a feature that will exempt video services such as Netflix and HBO from data caps.

Any video provider can sign on without having to pay T-Mobile for the privilege. The company says the feature is consumer-friendly because subscribers will no longer have to worry about hefty charges for going over their monthly caps by watching too much video.

But consumer advocates who support net neutrality, or the concept that internet access providers shouldn't unduly favour or discriminate against applications, say the entire concept is bogus. "We have to remember that T-Mobile imposed these caps in the first place," said the Free Press policy director Matt Wood.

“It’s a cheap sales trick: first you fabricate a problem for customers, then you make that problem go away and act like you’ve done them a huge favour.”

Regulators are thus being called on to enact rules that prohibit zero rating, but the US Federal Communications Commission has so far decided to study the issue on case by case.

A similar dispute is happening in Canada, where Quebec’s Videotron is offering unlimited usage of music services such as Spotify, Google Play and Rdio.

Canadian regulators this year banned carriers from exempting their own services, but left the door open to third-party applications.

The ensuing consumer advocates’ complaint has drawn surprising support from Rogers, the country’s largest wireless carrier, which also happens to own a number of radio stations across Canada.

“Videotron is, in effect, picking winners and losers by adopting a business model that would require an online audio service provider … to accept Videotron’s contractual requirements in order to receive the benefit of having its content zero-rated,” the company said in a regulatory filing.

European policymakers recently voted to allow zero rating, as well as so-called prioritised service where internet providers can charge application providers more for better speeds and bandwidth.

Critics say the European position on net neutrality is now at odds with North America, where regulators are at least wary of zero rating.

“This two-class internet will favour big providers from Silicon Valley like Google, Apple and Netflix over smaller competitors who are mainly based in the EU and need ease of access to the market,” said Jan Philipp Albrecht, a Green Party member of the European Parliament from Germany.

“Today’s a black day for Europe’s digital policy.”

On its face, zero rating indeed looks benevolent to consumers, which is why policymakers in many jurisdictions aren’t yet fully opposed to it – after all, who doesn’t want something for free?

But consumer groups are right in identifying this as a carrier-led solution to a problem they trumped up in the first place.

By the time regulators realise that, it may be too late to go back to an internet where every application was otherwise equal.

Peter Nowak is a veteran technology writer and the author of Humans 3.0: The Upgrading of the Species.

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