Image: AP

One of the features of AT&T’s new DirecTV Now streaming TV service is that using the service won’t count against AT&T wireless users’ data caps. AT&T also exempts mobile app usage for regular DirecTV customers on its wireless network. Now, the FCC says that feature violates net neutrality rules.

Allowing certain services to not count against data caps on mobile or wired internet connections is known as zero-rating, and it’s controversial amongst internet advocates who argue that the plans violate net neutrality laws. The FCC said it would look into zero-rating a few months ago in order to figure out if that is indeed the case. In some cases, the difference between network and content types mean that an operator isn’t violating net neutrality rules as they exist now.

The problem for AT&T isn’t just that it offers data exemptions for DirecTV and DirecTV Now users, it’s that it does this while also offering “Sponsored Data” packages to other video and media companies. If those companies pay those “Sponsored Data” fees, customers won’t be charged for using those apps or services on AT&T’s network.

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The FCC first brought up the issue to AT&T last month, and AT&T responded. Now that the FCC has had more time to look into the issue, it says that its “preliminary conclusion” is that AT&T’s practices “inhibit competition, harm consumers, and interfere with the ‘virtuous cycle’ needed to assure the continuing benefits of the Open Internet.”

In a letter obtained by Ars Technica, the FCC says:

Using the reference example from your white paper stating that your Sponsored Data rates are similar to the discounted wholesale rates paid by major wireless resellers, we estimate for purposes of illustrating our concerns that an unaffiliated mobile video service provider would have to pay AT&T $16 a month to offer zero-rated service to a customer who uses just 10 minutes of LTE video per day, increasing to $47 for a customer using 30 minutes per day. These costs alone would represent 46 percent to 134 percent of DIRECTV Now’s $35 retail price, against which third parties will be competing for AT&T Mobility customers, and would be borne in addition to all other costs of providing service by the unaffiliated provider.

In other words, DirecTV Now gets a huge incentive over competing mobile video services such as Sling TV or PlayStation Vue. The FCC goes on to ask that AT&T ask some follow-up questions that were not in its original response.

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On the surface, this sort of preliminary decision could mean that AT&T would have to scrap the zero-rating practices for its DirecTV. In practice, however, it might not matter. President-elect Donald Trump famously hates net neutrality and has just appointed two anti-net neutrality advisers to oversee the FCC transition. Once Trump takes office, his FCC chair could just decide to drop the investigation altogether.

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[Ars Technica]