Extensively citing the work of Professor Daniel Lyons, the European Union on June 14 released a 200-page report that establishes a legal framework for assessing “zero-rating” practices by Internet and mobile phone providers.
“The report is significant because zero-rating has been a controversial topic on both sides of the Atlantic, but both American and European regulators have approached the issue from the wrong perspective,” Lyons said. “The report recognizes that zero-rating is primarily a competition law issue, and as I have argued, should be evaluated through an antitrust lens. And when you view it through this lens, you recognize that most zero-rating practices are a boon for consumers.”
Zero-rating is the practice of exempting certain Internet-based content or apps from a customer’s monthly data allowance. In the United States, perhaps the most prominent example is T-Mobile’s Music Freedom program, which allowed customers unlimited music streaming along with any data plan. As the EU report documents, the practice is much more common in Europe, where numerous cell phone companies (and at least one home broadband provider) have partnered with content providers such as Facebook, Spotify, or Pokemon Go to offer subscribers additional content at no extra charge.
Net neutrality advocates fear that zero-rating can distort markets for Internet-based content. By discounting zero-rated content, carriers make that content more attractive to consumers, thus disadvantaging competitors whose content counts against a monthly data allowance. But the report, which was issued by the European Commission Directorate-General for Competition, correctly recognized that this concern only arises when a company has market power and uses it to foreclose competitors, which is rare.
Moreover, citing Professor Lyons’s work, the report recognizes that zero-rating can create significant benefits to consumers and to competition. For example, smaller wireless carriers can offer zero-rated content as a way to differentiate their product and attract customers dissatisfied by traditional plans from incumbent carriers. And start-up Internet services can seek zero-rating deals to get traction against established competitors.
The report recommends that zero-rating be treated as an antitrust issue and notes little reason to be concerned about the practice at present, though it highlights the factors that competition authorities should consider when evaluating the practice going forward.
Professor Lyons has participated in rulemaking proceedings before both the Federal Communications Commission and the California Public Utilities Commission and has represented clients in federal and state litigation involving numerous regulatory issues. He has also spoken at workshops nationwide on the effects of technology convergence on telecommunications regulation.