The borderless Internet + a Bad CA State Law = Harm to AT&T Consumers Nationwide

Earlier this week, in a Perspectives from FSF Scholars addressing the flurry of legislative activity on data privacy at the state level, I once again made the case for a preemptive federal law. One of the arguments I put forth was based on the fact that, "[b]y design, Internet traffic recognizes no political boundaries, national or international."

Yesterday's news that AT&T, in light of California's so-called "net neutrality" law (SB 822), no longer will "zero rate" access to HBO Max and its other streaming video services for all U.S. customers underscores this point in an unfortunate and anti-consumer fashion.

California hasn't just adopted SB 822, it also was the first state to pass comprehensive data privacy legislation, the California Consumer Privacy Act (CCPA). As I explained in "Inconsistent State Data Privacy Laws Increase Confusion and Costs," when the CCPA went into effect at the beginning of 2020, many businesses – 60 percent, according to one survey – made the rational decision "to comply with its provisions nationally rather than take on the risk associated with attempts to identify which of their customers are and are not California residents."

AT&T is taking a similar approach with respect to the data used by its customers to access its video streaming services, including HBO Max and AT&T TV.

Prior to the recent decision by a federal district court denying plaintiffs' request to stay the effectiveness of SB 822, AT&T did not count access to its video apps toward the data caps that apply to some of its service packages. This feature, which AT&T markets as "Data Free TV," clearly is pro-consumer.

SB 822, however, prohibits fixed and mobile broadband providers from (1) "[e]ngaging in zero-rating in exchange for consideration, monetary or otherwise, from a third party" and (2) "[z]ero-rating some Internet content, applications, services, or devices in a category of Internet content, applications, services, or devices, but not the entire category."

According to a press report, on Wednesday AT&T communicated to its customers that, because "the Internet does not recognize state borders," its new policy will apply nationwide. AT&T stated further that "[a] state-by-state approach to 'net neutrality' is unworkable" and "[a] patchwork of state regulations, many of them overly restrictive, creates roadblocks to creative and pro-consumer solutions."

Free State Foundation Director of Policy Studies and Senior Fellow Seth L. Cooper posted yesterday to highlight tweets that he and FSF President Randolph J. May authored regarding the consumer harm that will result from SB 822's zero-rating ban. Mr. May also co-wrote a Perspectives from FSF Scholars criticizing SB 822 shortly after it was passed by the California state legislature in 2018, making the point that:

Zero-rated services, or "free data plans," are popular, consumer-friendly offerings that allow consumers to have unlimited access to specific websites or applications without such access counting towards monthly data caps or thresholds. Consumers, and particularly low-income consumers, benefit from accessing "free data" without paying a monetary fee.