Donald Trump may end net neutrality and bring a rise in zero-rating

Donald Trump may end net neutrality and bring a rise in zero-rating

Donald TrumpDonald Trump.REUTERS/Mike Segar

Now that Donald Trump is the president-elect, the tech world is more closely examining what effect his policies might have.

In particular, some telecoms industry players believe a Trump administration could try to walk back the net neutrality rules that were instituted by the Federal Communications Commission under President Barack Obama.

Those rules, voted for in 2015, mandated that internet service providers and mobile carriers can’t provide so-called fast lanes to certain content – sometimes their own. Instead, they were required to treat all data that goes through their “pipes” equally. The idea is that if every internet business has the same level of access to the internet itself, it allows for a more equal playing field and enhanced competition.

As you can imagine, this has made internet-centric companies like Netflix and Alphabet happy, and network gatekeepers like Comcast and AT&T – who are increasingly becoming content companies themselves – upset.

That could all change under President Trump and a Republican-majority Congress.

fcc chairman tom wheelerFCC Chairman Tom Wheeler.Alex Wong/Getty Images

In a recent interview with The Wall Street Journal, Dish Network Chairman Charlie Ergen said that, under Trump, “you may see net neutrality be challenged or weakened going forward.”

Though Trump himself has not outlined a plan for how he would approach net neutrality, he has expressed a staunch opposition to government regulation in general. In November 2014, he posted a tweet that referred to Obama’s pro-net neutrality stance as an “attack on the internet” that “will target conservative media.”

Such sentiment falls in line with those of other Republicans in Washington – Texas Sen. Ted Cruz, for instance, once deemed net neutrality “Obamacare for the internet.”

(Trump didn’t explain why he thought net neutrality would specifically target conservative media, but it’s worth noting that, in principle, preventing ISPs from giving a leg up to any online source would seem to ensure that a conservative news outlet could deliver stories without technical handicaps.)

The big gray area: zero-rating

Even with the FCC’s rules in place, ISPs have found a way around the net neutrality order through a practice called zero-rating. As my colleague Nathan McAlone explains, zero-rating is when a wireless carrier or ISP allows certain services to stream on its network without them counting against a customer’s data cap.

T-Mobile’s “Binge On” program is a popular example: It lets certain T-Mobile users stream Netflix, YouTube, WatchESPN, and many other similar services over cellular data at no cost.

john legere t-mobileT-Mobile US CEO John Legere.Steve Marcus/Reuters

This is a gray area. The current net neutrality rules do not explicitly ban zero-rating; instead, the FCC has said it would consider each instance on a case-by-case basis. From a consumer standpoint, it also brings immediately apparent benefits. People like popular streaming services, and they love getting things for free. Put the two together, and it’s easy to see the appeal.

Internet providers have capitalized on this and rolled out varying zero-rating programs on their networks. Aside from Binge On:

These are typically pitched as special perks for customers.

They’ve also drawn fierce opposition from net neutrality proponents and consumer advocacy groups, many of whom have called on FCC Chairman Tom Wheeler to stop the practice. They argue that zero-rating violates the “spirit” of net neutrality since it gives ISPs the power to decide which services can and cannot receive a technical advantage over everyone else, thus putting them beyond the status of “dumb” pipe providers.

AT&T President and CEO Randall StephensonAT&T President and CEO Randall Stephenson.Alex Wong/Getty Images

Critics also argue that zero-rating stifles the potential for new services to sprout. The logic is that since making popular services data-free is more likely to attract new customers, those are more likely to be zero-rated by ISPs. When a smaller service comes along, it’ll enter a field where incumbent services not only are used more, but also have been given an added boost.

Essentially, they say, it gives the powerful more power. This is seen as especially concerning since internet service in America is a field with relatively little competition as it is.

One possible compromise is to make it so any company can join a zero-rating program at no extra cost beyond a few technical modifications. T-Mobile says this is what it has done with its programs. However, the likes of AT&T and Verizon have taken a more aggressive step and charged content providers for the ability to be zero-rated on their networks.

Complicating this is the fact that more and more internet providers are getting into the content game themselves. Comcast owns NBCUniversal, and AT&T might soon own Time Warner. Though neither firm does so today, the current trend of ISPs zero-rating their own services suggests they might also exempt content from the companies they bought, giving their streams an inherent advantage in separate silos.

net neutralityPeople at a pro-net neutrality rally in Los Angeles.Jonathan Alcorn/Reuters

That said, Trump did rally against mega-mergers like the AT&T-Time Warner buyout during his campaign, saying in October that it’d result in “too much concentration of power in the hands of too few.” This may not affect his administration’s stance on net neutrality, zero-rating, and federal regulation, but it could present some pushback to the desires of certain ISPs.

In any case, AT&T defends its zero-rating plans with DirecTV by saying the satellite provider is paying AT&T for the privilege. But given that it owns the company, that’s the equivalent of shifting money from its left pocket to its right.

So how might President Trump fit into this?

To see how the Trump administration would approach zero rating, you might want to consider the name Jeffrey Eisenach. He’s an economist, consultant, and longtime advocate of deregulating the telecoms industry – in other words, he’s adamantly opposed to the current net neutrality rules.

In October, Politico reported that he was advising the Trump campaign on its strategy toward net neutrality and other FCC-related issues.

The Trump campaign did not respond to a request for comment.

If Eisenach does play a role in shaping the Trump administration’s telecoms policy, it’s worth looking at a paper he wrote in March 2015 titled “The Economics of Zero Rating.” In it, Eisenach defends the concept, writing that “broad-based bans or restrictions on zero-rating plans are likely to be counterproductive and harm consumer welfare.”

jeffrey eisenachJeffrey Eisenach.Getty

His reasons are common of those on that side of the fence. He says:

  • Zero-rating is a way for wireless firms to separate themselves from competitors, and thus increase competition among wireless operators.
  • Zero-rating provides an easy expansion of internet access, which in turn benefits society and allows network providers to invest more in advancing their products.
  • Zero-rating particularly helps “those with lower willingness (or ability) to pay.”
  • Zero-rating benefits content providers by boosting their chances at gaining subscribers.

And so on. Eisenach closes the paper by saying that “concerns about zero-rating are misplaced.”

An aside: In the paper, Eisenach says the policy can’t be seen as anticompetitive since most zero-rating programs do not require content companies to pay ISPs. However, as noted above, both AT&T and Verizon are currently doing just that. The FCC on Thursday said it had “serious concerns” about the former’s policy.

What’s also notable is that the paper was sponsored by, the internet-access initiative headed by Facebook, which has faced a multitude of complaints over perceived violations of net neutrality. Its “Free Basics” app was effectively blocked in India in February for allowing users to access certain Facebook-approved sites for free, but not others.

Donald TrumpREUTERS/Carlo Allegri

Eisenach makes the sponsorship clear toward the beginning of his paper. Still, it’s not the only time his work has been sponsored by companies that likely share his positions.

In August, The New York Times reported that he has been a paid consultant for Verizon and the GSM Association, a trade group that says it “represents the interests of mobile operators worldwide.” Eisenach himself has said he has consulted for a number of firms in the mobile wireless, broadcast, and related industries.

Does all of this mean that an Eisenach-approved policy would end net neutrality and allow zero-rating to go unchecked? Not necessarily – Wheeler is a former cable lobbyist who was widely seen as a terrible choice for open-internet interests at first, but turned out to be one of the more progressive chairs in recent memory. And there’s no guarantee a President Hillary Clinton would have been a champion of net neutrality.

Nevertheless, if past papers and reports are any indication, those who favor stricter regulation of internet providers might be in for a long four years.

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