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FCC Takes Aim at DirecTV Now

The FCC has fired a warning shot at AT&T's free data service for mobile customers, saying the combination of DirecTV Now and AT&T Mobility sponsored data plans "appears to present significant anti-competitive effects."

On the same day that Donald Trump was elected, signaling a likely far more deregulatory FCC—Trump wants two regs jettisoned whenever one is added—Jon Wilkins, chief of the Wireless Telecommunications Bureau, wrote to AT&T senior VP Bob Quinn to say the bureau thinks their sponsored data mobile broadband plan combined with zero rating DirecTV video apps for AT&T Mobility subs "may" obstructs competition.

He "invited" AT&T to explain why the bureau was not right to be concerned. AT&T suggested its plans were pro-competitive because it makes it easier for subs to cut the cords to their cable plans. AT&T also said it was ready to allow any other content provider to offer sponsored content in the same "free data" model.

The FCC has been vetting usage-based pricing and zero rating under its Open Internet general conduct standard but with an incoming Republican administration, FCC chairman Tom Wheeler will have to hit the accelerator on any planned actions.

The letter cites AT&T's Sept. 7 announcement of the Data Free TV DirecTV app, which allows Mobility subs who also get DirecTV to stream that content on a zero-rated basis—without the use counting against data allowances—and the upcoming DirecTV Now, which would zero rate DirecTV for AT&T Mobility subs even if they don't subscribe to DirecTV satellite service.

Wilkins said it is not zero rating, in general, that troubles the bureau, which the FCC has said may be pro-consumer and pro-competition, but the "specific impact of AT&T's zero rating practice on competition and the specific terms."

"It is not difficult to calculate usage scenarios in which an unaffiliated provider's Sponsored Data charges alone could render infeasible any third-party competitor's attempt to compete with the $35 per month retail price that AT&T has announced for DIRECTV Now," said Wilkins. "Unaffiliated video providers not purchasing Sponsored Data would likewise face a significant competitive disadvantage in trying to serve AT&T Mobility's customer base without zero-rating."

"AT&T and other broadband providers offer a service that lets consumers watch video without incurring any data charges," Quinn told B&C in an emailed statement. "These are incredibly popular services that we hope regulators won't take away from the millions of people who enjoy them today.

"It makes it easier for consumers to say goodbye to their cable company. With our Data Free TV offer, DIRECTV picks up the tab for our Mobility customers’ data use when they’re streaming content. For example, consumers can watch DIRECTV content—such as NBC, Fox News, CBS, CNN, ESPN—all on their AT&T mobile devices without incurring any data changes. In addition, many companies like insurance firms have provided free well-care and other videos that provide consumers with useful and essential information.

"While we welcome additional questions, we hope the FCC will consider the enormous value consumers find in obtaining free data or free streaming where someone else is footing the bill for their data," Quinn said, adding that AT&T would give others the same chance. "We welcome any video provider that wishes to sponsor its content in the same 'data free' way for AT&T Mobility customers and we’ll do so on equal terms at our lowest wholesale rates. Saving consumers money is something we all should support."

Sen. Brian Schatz (D-Hawaii), ranking member of the Communications Subcommittee, backed the FCC move.

“I support the FCC’s approach to reviewing each of these zero rating practices on a case-by-case basis because in many instances they provide benefits to consumers," he said in a statement. "The expert agency is best positioned to examine these practices to determine if they empower consumers or jeopardize a free and open internet for all.”