Lame Duck FCC Claims Free Data Harms Consumers?

Posted by | November 11, 2016 | Broadband Internet, Video, Wireless | No Comments

Free data plans like T-Mobile’s Binge On let consumers stream internet video without counting their data usage toward monthly caps. The Federal Communications Commission has recognized these plans can benefit consumers and competition. What’s not to like about free data?

According to the lame duck FCC, the answer depends on who’s offering it. The FCC’s outgoing chairman said T-Mobile’s Binge On service is pro-competitive and pro-innovation. According to a recent FCC letter, however, it’s “anticompetitive” when AT&T gives free data to its mobile customers who subscribe to DirecTV’s streaming video service. That’s par for the course with the current FCC, which is more interested in picking industry’s winners and losers than protecting consumers.

That appears to be what the FCC is doing in this case. The agency’s letter acknowledges that AT&T offers the same payment terms to all companies that want to take advantage of free data services. AT&T doesn’t treat DirecTV any differently than it treats Netflix, Hulu, or any other video streaming provider.

The FCC claims AT&T’s neutral and non-discriminatory treatment of all comers still violates net “neutrality” because AT&T owns DirecTV.

That claim has no foundation in FCC precedent or sound economics. Even in the era of the monopoly telephone network, the FCC allowed the Bell System to offer its own edge provider services so long as its underlying telecommunications facilities were available to others on the same terms — just like AT&T’s mobile network is in today’s competitive environment. Since its famous Computer II decision, the FCC’s “starting point” has been that “vertical integration normally represents a benign, efficient producing method of organizing production.”

Yesterday’s FCC letter starts from a very different point — that vertical integration is always harmful because the efficiencies it produces aren’t available to competitors. Erasing those efficiencies might benefit competitors, but only at the cost of harming consumers.

That’s like throwing the baby out with the bathwater. As the FCC said in its 15th video competition report, “The structural and behavioral characteristics of a competitive market are desirable not as ends in themselves, but rather as a means of bringing tangible benefits to consumers.”

So why is the current FCC working harder to protect the interests of AT&T’s competitors than its subscribers? A recent Wall Street Journal article offers some insight. It appears attacking AT&T’s free data service is a predicate for its rivals to ask the government to place conditions on the AT&T-Time Warner merger, and the current FCC chairman decided to lend them a hand on his way out the door.