AT&T this week signaled a major retreat on net neutrality, as California’s new net neutrality law forces the company to stop playing favorites with its own content.
In a blog post, the company announced that thanks to California’s new law, the company will no longer engage in “zero rating,” or the exemption of some content from the company’s broadband usage caps.
Currently, AT&T DSL and fiber broadband customers face arbitrary usage caps that range from as little as 250 gigabytes to one terabyte per month. Use more than this allotment, and you’ll face penalties of $10 for each additional 50 gigabytes consumed.
Experts, executives, and researchers have long warned these restrictions serve no technical purpose, and exist solely to raise rates on captive customers. Worse, AT&T has historically exempted its own streaming TV services—like HBO Max—only hitting customers with usage surcharges if they use a competing streaming service like Netflix.
Not only does this let AT&T give its own services an unfair advantage in the market, the approach lets deep pocketed companies pay AT&T to be exempt from usage caps. Consumer groups say this creates an unfair marketplace where bigger, wealthier companies can buy an advantage over their smaller, cash-strapped competitors—once AT&T gets its cut.
But because California’s new net neutrality law puts an end to such preferential treatment, AT&T now says it’s discontinuing “zero rating” nationwide, a move applauded by consumer advocates.
“Let’s be clear: This is a win for an open and free internet, including for competing video services and internet users,” Stanford Law Professor Barbara van Schewick said of the shift. “People should be free to choose which videos they want to watch—whether that’s Netflix, Twitch or their local church’s Sunday service, without the company they pay to get online trying to influence their choices.”
In its blog post, AT&T misleadingly tries to claim that California’s new law prevented the company from offering “free data services.”
“We regret the inconvenience to customers caused by California’s new ‘net neutrality’ law,” AT&T said. “Given that the Internet does not recognize state borders, the new law not only ends our ability to offer California customers such free data services but also similarly impacts our customers in states beyond California.”
While AT&T has long tried to frame zero rating as something akin to “free shipping,” experts say that’s never been accurate. In large part because once you realize that usage caps and overage fees are artificial cash grabs in the first place, handing out exemptions becomes meaningless.
AT&T and industry-friendly regulators like Ajit Pai have also tried to claim that “zero rating” helps make broadband more affordable. But van Schewick said data has clearly shown that consumers pay notably more for broadband access in countries that embrace the practice.
“For example, in the European Union, ISPs that don’t zero-rate video give subscribers 8 times more data for the same price than ISPs that zero-rate video,” van Schewick said. “In announcing this shutdown, AT&T is trying to score political points against state net neutrality protections by lying to the public about the law and its effects.”
After the telecom industry successfully lobbied the Trump FCC to kill net neutrality, California stepped in with its own, slightly tougher state law. With the help of the Trump DOJ the broadband industry attempted to kill California’s law as well. But those efforts are falling apart in court, opening the door to California finally being able to enforce its new law.
Despite the telecom industry’s best efforts, California, Oregon, and Washington have all passed state level protections since the federal repeal, something AT&T isn’t too pleased about.
“A state-by-state approach to ‘net neutrality’ is unworkable,” AT&T claimed in its blog post. “A patchwork of state regulations, many of them overly restrictive, creates roadblocks to creative and pro-consumer solutions.”
But experts like van Schewick say AT&T created this problem by spending 15 years assaulting federal net neutrality rules that had broad, bipartisan public support. The rise in numerous state level net neutrality protections is a direct result of AT&T’s own actions, and the telecom giant is clearly upset the gambit didn’t quite work out as planned.