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Why the FCC Is Blasting Verizon and AT&T Over Net Neutrality

December 2, 2016, 8:25 PM UTC
Federal Communications Commission commissioner Michael O'Rielly speaks at a FCC Net Neutrality hearing in Washington
Federal Communications Commission (FCC) commissioner Michael O'Rielly (R) speaks at a FCC Net Neutrality hearing in Washington February 26, 2015. The FCC is expected Thursday to approve Chairman Tom Wheeler's proposed "net neutrality" rules, regulating broadband providers more heavily than in the past and restricting their power to control download speeds on the web. REUTERS/Yuri Gripas (UNITED STATES - Tags: POLITICS SCIENCE TECHNOLOGY BUSINESS TELECOMS) - RTR4RB8X
Photograph by Yuri Gripas — Reuters

Federal regulators said Verizon and AT&T appear to be violating net neutrality rules by favoring their own streaming video services. But the incoming Trump administration isn’t likely to pursue the case.

Verizon allows its mobile customers to watch as much video as they’d like from its Go90 and NFL football apps without counting against their monthly data allowances. AT&T does the same for its DirecTV satellite customers using an accompanying app as well as customers of its new DirecTV Now service.

In dual letters dated December 1, the Federal Communications Commission, which adopted the net neutrality rules last year, said both carriers are hurting competition with the data exclusion strategies, also known as zero rating. The net neutrality rules, adopted last February and upheld in court in June, are intended to prevent Internet service providers from discriminating against any online content or services.

However, the incoming administration of President-elect Donald Trump appears hostile towards the net neutrality rules, which are also strongly opposed by Republicans in Congress. All three of Trump’s transition team members overseeing the FCC have spoken out against the net neutrality rules.

And on Friday, one of the two current Republican members of the FCC, Ajit Pai, blasted the new letters and the agency’s chairman, Tom Wheeler, appointed by President Obama. Republicans will get a majority of the five-member commission after Trump takes office, and Republicans in Congress have already warned Wheeler not to enact any controversial new policies in the meantime.

“Last night, Chairman Wheeler launched yet another broadside against free data for consumers, notwithstanding the objections of Republican commissioners,” Pai said in a statement. “This end-run around Congress’s clear instruction is sad-and pointless.”

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Verizon (VZ) said it would respond to the letter, which requested an explanation by December 15. “We will review and respond to the inquiry as requested,” a spokesman said. “In the meantime, we remain quite confident that our practices are good for consumers, non-discriminatory and are consistent with current rules.”

The FCC had warned AT&T in a November 9 letter about its concerns over the zero rating strategy. In the new letter, the agency said AT&T’s defense of zero rating was unconvincing.

AT&T (T) said it allows any other video service to give customers unlimited data as long as the service then picks up the tab for the data usage (Verizon does the same). But while AT&T has no cash cost for zero rating its customers because it owns the video service and the mobile network, competitors would face huge costs, the FCC said. For each customer who watched just 30 minutes of video a day, a video service provider would have to pay AT&T an estimated $47 per person per month.

Those terms make it “very difficult, if not infeasible, to offer a competitively-priced service,” the FCC wrote.