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The FCC just set these rules for AT&T’s acquistion of DirecTV

July 22, 2015, 12:13 AM UTC
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FCC Chairman Tom Wheeler’s announcement Tuesday that he would approve AT&T’s $49 billion bid for DirecTV came as no surprise. But the news did clear up an unresolved issue for observers of the rapidly consolidating TV and Internet industry: how would the FCC’s new net neutrality rules apply to the deal?

The answer turns out to be “quite a bit.” According to a statement from Wheeler’s office, the merger’s approval requires AT&T (T) to not favor DirecTV shows over other content when it comes to customers’ broadband data plans. It will also require AT&T to submit regular reports on so-called interconnection agreements that govern ISP’s relations with big content providers like Netflix.

Those obligations come from the net neutrality rules the FCC adopted in March, which forbid broadband providers – including AT&T – from giving special treatment to some types of traffic over others. AT&T and other big telecom companies have bitterly opposed those rules, and are challenging them in court.

While AT&T signaled in June that it would abide by the FCC’s over-arching net neutrality rules when it came to DirecTV, a number of questions remained. These included the issue of “zero rating,” whereby an Internet provider doesn’t count certain types of data, such as videos or music, against a customer’s monthly data plan. Technically, this amounts to a net neutrality violation since it treats some types of data differently than others.

In the case of AT&T and DirecTV (DTV) merger, Wheeler stated: in “order to prevent discrimination against online video competition, AT&T will not be permitted to exclude affiliated video services and content from data caps on its fixed broadband connections.”

While this amounts to a ban on zero rating, the language (particularly “fixed broadband”) suggests the prohibition only applies to home Internet service, not mobile phone plans.

As for the other significant condition, Wheeler expressed it this way: “in order to bring greater transparency to interconnection practices, the company will be required to submit all completed interconnection agreements to the Commission, along with regular reports on network performance.”

While AT&T competitors will be glad for this scrutiny, the proposed measure falls short of what some had demanded. Netflix (NFLX), along with consumer watchdog Public Knowledge and trade groups like COMPTEL, had urged the FCC to forbid AT&T from charging access fees to content providers that connect to its network.

The cable company Charter has made such a pledge as a condition of its proposed merger with Time Warner Cable (TWC), and Netflix recently argued that a practice of no interconnection fees should be an industry standard.

The deal, including Wheeler’s proposed conditions, will not be final until an upcoming vote before the FCC. It is expected to be approved.