Evaluating the Consequences of Zero-Rating: Guidance for Regulators and Adjudicators
35 Pages Posted: 2 Apr 2016 Last revised: 18 Aug 2016
Date Written: August 2016
In February 2015, the Federal Communications Commission’s Open Internet Order reclassified broadband Internet access service (BIAS) under Title II of the Communications Act. The Order calls for case-by-case analysis by the Commission of alleged breaches of a general conduct standard in respect of usage-based pricing and “zero-rating” in agreements between BIAS operators and end consumers. These provisions enable to Commission to investigate cases such as T-Mobile’s zero-rating of traffic to and from its Binge On video streaming platform.
The granting of discretionary powers of inquiry on a case-by-case basis raises the question of what evidence of real or potential harm would be sufficient to justify the commitment of scarce regulatory or judicial resources to the investigation of any specific example? The question is not limited to the US context. Similar provisions in exist in the European Commission’s Net Neutrality Regulation. Furthermore, the answers are potentially important for competition law authorities in assessing cases of alleged harm and potential future abuses that might become more relevant as merger activity between BIAS operators and applications providers, specifically Content Distribution Networks (CDNs), increases.
This paper contributes towards the formulation of a principled economics-based approach under which to assess the potential harms and enhancements to be considered in evaluating the economic effects of any given example of zero-rating. Its primary contribution is five questions, derived from a combined economic and strategic analysis of the potential trade-offs that emerge from theoretical modelling of interactions in a complex internet ecosystem characterised by multiple two-sided platforms. Asking these questions will assist regulators and adjudicators to identify key elements in the case facts that indicate the need for different trade-offs and strategic motivations to be taken into account when making decisions. The questions posed here augment existing guidelines, such as BEREC’s (2016) advice to regulators, which focus predominantly upon compliance with legal provisions rather than facilitating analysis if the economic trade-offs involved in any individual case of zero-rating.
Keywords: Telecommunications, Regulation, Antitrust, Net Neutrality, Zero-rating
JEL Classification: L13, L43, L96; L98
Suggested Citation: Suggested Citation