Commercial practices of Internet Services Providers (ISPs) to exclude certain applications and services from being counted against customers’ data caps, a practice known as Zero-Rating, are arguably creating an economic incentive for users to prefer zero-rated apps and services. These commercial behaviors are under scrutiny on both sides of the Atlantic, but the way regulators are actually tackling the issue differs. While in the U.S., California’s net neutrality law prohibits ISPs from engaging in discriminatory Zero-Rating, the European Union’s net neutrality law only sets up a general obligation of equal traffic treatment.  AT&T’s recent decision to end its Zero-Rating program across the U.S. shows that U.S. ISPs are ready to adapt their commercial strategies to strict net neutrality rules.

The European Union (EU) is dealing with Zero-Rating through the prism of the first court case from the Court of Justice of the European Union (CJEU) on the topic.

Continue Reading How to Achieve Net Neutrality? Cornering Zero Rating Has No Geo Cap

The following originally appeared in the January 2021 issue of the CPI Antitrust Chronicle. 

The communications industries range from plain old telephone service, through broadband access, whether fixed or mobile, to cable and satellite video distribution. These industries are not exactly passé compared to the online platforms such as the search engine “market” that Google has so admirably revolutionized and may (or may not) dominate today. After all, Google search queries need a pipe to travel from us, the hopeful searchers toiling on our computers, tablets or smartphones, to Google servers. Even more important, the pipe is necessary for the return trip back to us, bringing a cornucopia of audio and video that condenses real and imaginary worlds on one small screen in ways that would have been incredible to time travelers visiting us from the twentieth century.

And so, the communications industries and online platforms need each other: the first needs the second’s content. The second needs the first’s pipes. In that sense, they are contemporaries and codependents. But the communications industries have a history longer than that of the online platforms — after all, they go back to 1876, when Alexander Graham Bell summoned Mr. Watson on the phone. With the longer history comes longer experience with analyzing and resolving competitive issues. And the communications industries afford many useful teachings for a way forward in the Google search engine case, including a way past and around the impasses and conundrums presented by the complaint filed against Google by the Department of Justice (“DOJ”).

Here are two of these lessons: be careful not to throw out the baby of the competition you want with the bathwater of the exclusivity arrangements you do not like. And, to promote competition, nurture a competitor: find a white knight or two; and give them the resources to compete.

But first, a few words about what links legacy communications and online platforms together from the perspective of competition analysis. There is a lot that does. First, they are both networks prone to market power and its exercise: each additional user of the network does not merely add a proportionate unit to a provider’s market share; it takes out disproportionate quantities of oxygen away from would-be competing networks. Second, both industries are chains of intricately connected links. In the communications industry, we have electromagnetic spectrum, wireless towers, cable or satellite platforms, broadband access pipes, and online video products or cable networks that pass through these pipes. In the online platform space, we have search engines, browsers, and operating systems. And, of course, as mentioned, each industry is a link to the other’s chain in its own right: online platforms provide increasing amounts of content for the communications conduits, which in turn provide all of the transmission capacity for that content. Vertical integration over many links of the chain also gives companies with market power over one of them one more chance to leverage that power. At the same time, a presence in one link of the chain may endow a company with the wherewithal to become a credible competitor over another link. Continue Reading Mr. Watson, Come Here. I Want To See You: A Message From the Communications Industries on How to Promote Competition in the Online Platform Space

Italian historian Giambattista Vico pioneered the notion of the circles of history. In the history of net neutrality, the circles have been short, predictable and avoidable: the leitmotif has been that of Internet Service Providers (“ISPs”) inflicting injury upon themselves, through a succession of court defeats, half-defeats and half-victories, where the half-victories have been more damaging than the defeats. Even King Pyrrhus would have blanched at the devastation.

The upshot is that today ISPs may not be able to engage in any zero rating—the practice of exempting online video from their customers’ data caps—even though certain zero rating arrangements may have been acceptable under the 2014 net neutrality rules, enacted under the supposedly dreaded Title II—the ISPs’ boogeyman. Suppose you are on your commuter train, and you really want to catch the final moments of Nicole Kidman’s superb acting in The Undoing. If you have reached your data cap, you will miss them, be greeted with a strangely distorted version of Ms. Kidman’s face, or perhaps have to pay extra to upgrade your plan.

Boy, I bet Verizon regrets having taken the net neutrality rules to court. So joked then Chairman Tom Wheeler at the 2015 FCBA Chairman’s dinner. It was a safe bet. Here are the cliff notes of the net neutrality litigation history: in 2010, the FCC enacts a ban on blocking, throttling, and discrimination, without classifying broadband access as a telecommunications service. Verizon appeals, challenging, first and foremost, the Commission’s authority to make any net neutrality rules, and second, the rules themselves. Verizon loses on authority, but wins on the rules—they look too much like telecommunications service rules, the court says. The consequence, unintended by Verizon, is not that unpredictable: in 2015, the FCC uses the authority affirmed by the Court, and also goes ahead and classifies the service as a telecommunications service, leaving it free to impose telecommunications-service-like rules. It enacts bans on blocking, throttling, and pay-to-play, as well as a general conduct rule. Crucially, under the general conduct rule, the practice of zero rating is not per se unlawful. Rather, it is subject to a case-by-case analysis. The ISPs appeal again, and lose resoundingly in 2016.

In comes the Trump administration, with abolition of the substantive net neutrality rules at the top of the new FCC’s agenda. The FCC does so. A wide coalition of pro-net neutrality parties sues, and the DC Circuit rules on October 1, 2019. The ISPs trumpet a win. Well, not quite. The court remands part of the FCC’s action, including on the ground that the FCC failed to do justice to the paramount factor of public safety. As for the rest of the FCC’s action, the court does not like it either: two of the three judges believe it to be wrong, too, but they do not throw it out only because they believe their hands are tied by the Supreme Court’s decision in Brand X.

In comes California, one of a number of states to step into the void left by the federal abolition of net neutrality. California makes its own net neutrality rules. They look like the abolished 2015 rules with one important difference: zero rating is no longer subject to a case-by-case evaluation. It is restricted more heavily.

A federal district court (for the Eastern District of California) denies the ISPs’ motion for a stay. And so we come to AT&T’s decision to end zero rating across the country.

Continue Reading From Supposed Frying Pans to Ever Hotter Fires: AT&T’s Termination of Its Zero Rating Program, and the Many Own-Goals Scored by the Internet Service Providers’ Anti-Net Neutrality Strategy