Zero Rating: Evil or Savior? Data Access and Competition Aspects

Posted: 23 Oct 2016

See all articles by Nathalia Foditsch

Nathalia Foditsch

American University, Students; FGV

Date Written: June 22, 2016

Abstract

Zero rating programs enable mobile Internet users to download and upload online content without being charged for it or having their usage counted towards their data allowances. Such programs have become increasingly popular as they are regarded as a possible solution for closing the digital divide, especially in developing countries. The public and private sectors as well as civil society organizations have been trying to work on the universal access issue for a long time, but the largest part of the population still remains unconnected. Whereas zero rating programs might be helping to close the digital divide, there is a concern that they might pose serious harms, especially in the medium-long run. In fact, countries like Chile, Slovenia and the Netherlands have already banned some forms of the zero rating on net neutrality and freedom of expression grounds. Scholars vary in their interpretation of the issue, but many of them agree on that some of the questions to be raised by zero rating programs are hard to be anticipated. Before allowing or preventing operators to offer zero rating programs, regulators need to understand the implications of such business models. Most of the policy research is currently focusing on freedom of expression issues, whereas other important aspects such as privacy and competition have been less discussed. Privacy implications of zero rating are various. The amount of data collected by the companies offering zero rated deals is enormous. One of the many questions raised by big data is whether companies will use the information they retain to more efficiently discriminate prices. Moreover, Zero rating programs route all browsing through a proxy, which does not allow for encryption. There is also a debate on whether social networks do or do not violate competition laws when they do not provide or support data portability tools. Furthermore, some services are offered under a “real identity” policy, meaning that users are prohibited to use different names or in some cases other types of identification in order to make use of such services. Moreover, as zero rating programs ultimately mean that only a few services are accessed, not only users are more easily tracked but the issue of surveillance also appears as most of the largest Internet companies already share such information with governments. Zero rating programs have implications related to competition. One example is the ability of companies to have exclusionary effects while implementing zero rating programs. Exclusionary conducts are not exhaustively catalogued, but are different ways through which a firm might try to gain market power by excluding its rivals. As pointed out by Gavil, Kovacic and Baker (2008), such improper behavior depends not only on the substantial market power of companies but also if the conduct is anticompetitive. In the case of zero rating programs, this means that, through an antitrust perspective, the mere fact that the companies entering in such agreements are companies with a prevalence in their markets does not mean that such are agreements cannot be held as a problem per se. The proposed research aims at exploring “Free Basics”, a major project by Facebook and an effort to make affordable basic internet services available to everyone in the world. More specifically, the proposed research will look into the control of user personal data of zero rating programs and the likelihood of Free Basics to exert exclusionary power over their competitors in Latin American and the Caribbean countries. Through this analysis it will be possible to have a better understanding of whether there is a need for banning such programs as well as if alternative solutions to banning could be used instead.

Keywords: Zero Rating, Internet access, Net Neutrality

JEL Classification: L86

Suggested Citation

Foditsch, Nathalia, Zero Rating: Evil or Savior? Data Access and Competition Aspects (June 22, 2016). CPR LATAM - Communication Policy Research Conference 2016. Available at SSRN: https://ssrn.com/abstract=2856003 or http://dx.doi.org/10.2139/ssrn.2856003

Nathalia Foditsch (Contact Author)

American University, Students ( email )

4400 Massachusetts Ave, NW
Washington, DC 20016
United States

FGV ( email )

Praia de Botafogo, 190, 13 floor
Botafogo
Rio de Janeiro
Brazil

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