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.

California Governor Jerry Brown Should Veto Net Neutrality Bill

California Governor Jerry Brown has until September 30^th to sign or veto SB 822, the “California Internet Consumer Protection and Net Neutrality Act,” which would impose even more burdensome net neutrality regulations on broadband ISPs than the FCC’s 2015 Title II Order. If he does not sign or veto SB 822 by September 30^th, the legislation becomes law.

As Randolph May and I stated in a recent Perspectives from FSF Scholars titled “California Net Neutrality Bill Would Stifle Network Investment,” SB 822 would prohibit or heavily restrict consumer-friendly innovations, like paid prioritization and zero-rated services. SB 822 also would contribute to the creation of a "patchwork" of differing state net neutrality regulations, hindering the delivery of interstate communications services for broadband providers and discouraging network investment throughout California.

In summary, Governor Brown should veto SB 822.

Kudos to Commissioner Clyburn!

As regular readers know, I don't always -- or even mostly -- agree with FCC Commissioner Mignon Clyburn's positions. But I respect her good faith in arriving at those positions, and I've always been pleased to have Commissioner Clyburn participate at Free State Foundation conferences to explain and advocate her views.

But the point here is to commend Commissioner Clyburn for her statement this week, speaking before the FCC's Consumer Advisory Committee, that she would refuse to vote to ban or eliminate so-called "sponsored data" plans. She stated that they offer “an affordable way for people to stream and connect with content” and because they could inhibit valuable product differentiation.

According to the report in the October 14 TR Daily, Commissioner Clyburn said she favored the FCC taking "a case-by-case approach” on sponsored-data offerings.  She also said , correctly in my view, that such offerings “could be the way for the next creative content provider that can’t get on the legacy platforms to do so.”

I've expressed views similar to these for years now, perhaps going further than Commissioner Clyburn, in explaining why T-Mobile's, Sprint's, and AT&T's various "zero-rated" or "sponsored data" plans, and others like Facebook's Free Basics program, are popular and, more importantly, pro-consumer. And, as Commissioner Clyburn no doubt appreciates, these plans are especially appealing to low-income persons who otherwise might not be able to get -- or stay -- online.

So, kudos to Commissioner Clyburn for her statement that she would refuse to ban or vote to eliminate pro-consumer sponsored data plans.  

AT&T Exempts DirecTV and U-verse Content from Data Caps

On September 7, 2016, AT&T announced that its mobile consumers could access content from the DirecTV application and the U-verse application without the data counting towards consumers' monthly data caps. Zero-rated programs, also known as free data programs, are very popular among consumers. In dynamically competitive markets, such as the video and mobile broadband markets, these innovative offerings give consumers additional choices and often provide low-cost options for low-income consumers.

Zero-Rating Is Not A Human Rights Violation

Zero-Rating Could Be Human Rights Violation in Some Cases, Experts Say.

So read the headline for a story in the October 16, 2015, edition of Communications Daily [subscription required].

This one really caught my eye.

The story reported on a panel discussion last week at George Washington University Law School. According to the report, Josh Levy, Access advocacy director, stated zero-rating can lead to human rights violations.

If you have been more concerned with widespread, notorious abuses of human rights around the world such as, for example, beheadings of innocents by religious extremists, jailing of journalists and peaceful protesters by ruthless dictators, harsh subjugation or trafficking of women, or merciless persecution of religious minorities, then perhaps you might not even know what “zero-rating” means.

In short, “zero-rating” refers to certain plans by broadband providers that allow consumers to choose to access selected websites on a free or discounted basis. For example, here in the United States, T-Mobile and Sprint currently offer plans that provide wireless customers access to designated music streaming websites without incurring data charges or access to a limited number of popular websites, such as Facebook or Twitter, at deeply discounted rates.

Or in developing countries in Africa, for example, Facebook offers its now rebranded “Free Basics by Facebook” application that allows consumers – the vast majority of whom previously lacked any access to the Internet at all – to access designated sites, including Facebook, of course, without data charges.

In a January 7, 2015, piece on the Medium website, Professor Susan Crawford, a leading apostle of the most stringent version of net neutrality regulation, called zero-rating plans “pernicious,” “dangerous,” and “malignant.” She acknowledged that while some countries have prohibited the practice, most OECD countries “have some flavor of zero rating in place.”

Perhaps it should not be surprising that, with Professor Crawford calling zero-rating pernicious, dangerous, and malignant, some “experts” at last week’s GWU panel discussion would follow suit. But with all due respect to all concerned, in my view, suggesting that zero-rating may constitute a human rights violation diminishes the cause of human rights. And it diminishes the honor, and in the case of death, the memory, of those who are subjected to, and who endure, real violations of human rights such as those listed above.

To me, a private Internet service provider restricting access to the entire Internet in exchange for free or reduced price service is not denial of a fundamental human right. A government’s denial of a woman’s right to an education simply because she is a woman, or a denial of a man’s right to speak freely without being thrown in jail or shot, well, those are true human rights violations.

I understand that Professor Crawford and those that would call zero-rating a human rights violation assert that all broadband providers should be required to provide access to all subscribers to all websites at all times. Well, if we lived in an ideal world – a world in which all goods and services magically were made available without regard to costs – then I would too. But that is not the real world in which we live.

I’ve written often in the past about why zero-rating plans should not be prohibited, in fact, why they generally are pro-consumer, certainly when consumers have a choice of broadband providers as they do in the U.S. And, of course, it goes without saying that such plans may be most attractive to low-income consumers who otherwise would find Internet access unaffordable or less affordable.

I responded to Professor Crawford in this January 13, 2015, piece entitled, “It’s the Consumer, Stupid – Part III”, which itself contains links to many earlier pieces addressing zero-rated plans.  In the January 2015 piece I wrote: “Professor Crawford’s opposition to any form of ‘zero-rating’ serves to illustrate how, in her view, the absolutist objective of total access uniformity must prevail over any other business model that consumers might find attractive, however slightly such model may diverge from Professor Crawford’s notion of total access uniformity.”

Such ideal-world absolutism with regard to “net neutrality” regulation leads to a zealousness that makes it easy to disregard such real-world matters as the costs of constructing and operating networks, the demand that may (or may not) exists at various price points for different service offerings, the extent of competition and consumer choice available in particular markets, and so forth.

And, more to the point for now, such absolutism makes it easy to inhabit a world in which it is suggested that zero-rating plans may constitute human rights violations, even though, for so many, they may offer a more affordable means to gain Internet access.