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Merger spree by phone carriers poses threat to net neutrality

In February, the FCC ruled that internet providers can’t use throttling, paid prioritization, or other tactics to favor some websites over others. The ruling affirmed the idea of “net neutrality,” but soon that principle could be tested as the result of a recent trend: phone carriers acquiring TV and content companies.

None of these proposed mergersspecifically AT&T(T)-DirectTV(DTV), Verizon(VZ)-AOL(AOL), and T-Mobile(TMUS)-Dish(DISH)are final for now. But if they go through, it likely won’t be long until the combined companies begin to explore internet plans that undercut net neutrality with offers of “free” data for certain types of web video.

Indeed, there’s already a precedent for such offers: T-Mobile’s “Music Freedom” plan lets subscribers stream songs without regard to their paid data caps. Will we soon see the same for TV? According to Harold Feld, an attorney with Public Knowledge, the carriers believe the mobile market is ripe for such a gambit.

“I think carriers have for a while been making no secret they want to get into the video game … Now, with cord-cutting, there’s an opportunity to treat streaming as a green field market,” said Feld in a phone interview. “They’ll say ‘T-Mobile has done Music Freedom, so we’re going to do Video Freedom.’”

In practice, this might mean AT&T offering mobile TV bundles based on content controlled by DirectTV. Or it could see Verizon drawing on AOL’s video prowess to package certain shows with a monthly phone data plan (note how AOL said “mobile” was a magic word for the deal).

The problem, from a regulatory standpoint, is that both music and video offers can amount to a violation of the “no paid prioritization” tenet of net neutrality. The violation is perhaps more subtle than paid “fast lanes” (a defunct proposal to let websites pay ISP’s for faster service), but could still amount to internet providers using financial incentives to favor some types of websites over others.

(Update: A T-Mobile spokesperson pointed out to me that the company’s “Music Freedom” is open to all streaming music services. This means that the plan favors music over other types of web traffic, but not one content owner over another).

The upshot is that “Video Freedom” offers could, when it comes to mobile, one day serve as a backdoor for the sort of behavior that net neutrality proponents pushed the FCC to halt in the first place. Using their sway over data pricing, carriers could prod subscribers into various video “walled gardens” and away from the open internet.

The real question is whether the carriers and the FCC see it this way too. At the agency’s epic February vote, chairman Tom Wheeler deflected questions about whether T-Mobile’s “Music Freedom” is a net neutrality violation, and suggested the question would be considered later under the agency’s “general conduct” rules.

AT&T and Verizon, meanwhile, have suggested the practices should be allowed, while also trying to frame the issue as one of “sponsored data” rather than free data (it’s unclear if the distinction would matter to the FCC or net neutrality advocates).