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Verizon’s Free Video Deal: Will It Cost Us in the Long Run?


(Image: Rob Pegoraro/Yahoo Tech)

Verizon Wireless is streaming all over the idea of net neutrality.

Of course, that’s not how the nation’s largest wireless carrier — which just began exempting video streamed via its own go90 video app from the data quotas of its service plans— would describe it. Instead, Verizon says it’s doing its wireless subscribers a favor: Go90 pays for your data so you don’t have to.

The industry term for this type of subsidized access is “zero rating.” Advocates say it’s the logical successor to Ma Bell letting companies pay the phone charges when you dial their toll-free numbers.

We’ve also seen this kind of thing from other mobile carriers, most notably T-Mobile and its moves to exempt many music and (more controversially) video services from its data caps. But while T-Mobile neither charges those services for the privilege nor runs a competitor to them, Verizon does both.

FreeBee meets go90

Verizon paved the way for this when it introduced a “sponsored-data” option called FreeBee in January. FreeBee lets third parties cover the tab for a Verizon subscriber’s use of their sites or apps. In doing so, Verizon seemed to be following AT&T’s lead; the second-biggest wireless carrier had rolled out its own sponsored-data offering months earlier.

But now that its own Go90 benefits from Verizon’s zero rating (which was “announced” in release notes for go90’s Android app), that carrier stands far ahead of the rest of the industry in testing the Federal Communications Commission’s net-neutrality rules.

On Monday, Verizon spokesman David Young called go90’s zero rating an innovative, consumer-friendly offering. He did not answer questions about how much go90 pays its parent company; the rate structure is not documented on Verizon’s no-prices-listed pricing page.

What is clear is that if a Verizon subscriber is down to his last 200 megabytes of data in a month and needs a video fix to get through the wait at the DMV, he will probably be happy to use the data-free service rather than pay a $15 overage fee the moment he exceeds his plan’s cap.

That’s a powerful advantage that Verizon’s video app is paying Verizon to get.

Tom Wheeler, call your office

At first, the “Open Internet” net-neutrality rules enacted by the Federal Communications Commission last year seem to ban this kind of self-dealing conduct.

One provision explicitly forbids an Internet provider from favoring one kind of lawful content over another. A vaguer general-conduct clause says a provider may not “unreasonably interfere with or unreasonably disadvantage” its customers’ Internet access.

But Verizon can fairly state that it’s not making any competing video services slower; “unreasonably” is an elastic word that keeps lawyers in business; and there are the precedents of toll-free calling and the FCC’s acceptance of T-Mobile’s zero rating.

(Plus, there’s one zero rating of which everybody approves: free calls to 911, which carriers must place even if they come from a phone with no paid service.)

So far, the FCC has asked carriers with zero-rating options only to explain how those programs work. At a press conference in January, FCC chairman Tom Wheeler confirmed that Verizon is on the commission’s list for “gathering information” but left his options open: “We’ll see what happens from there.”

Free data doesn’t have to be unfair

Other regulators have taken a much harder line on zero rating. In India, the government just banned Facebook’s “Free Basics,” an initiative in which the social network provided free mobile access to sites that met technical requirements for bandwidth efficiency.

That doesn’t mean that zero-rating opponents want to take away free bandwidth. They just don’t want to see Internet providers anointing winners, even if they do so by open and transparent rules.

“If Free Basics allowed users to access any site or service of their choosing, without discrimination, it would not have been a Net Neutrality problem,” wrote Josh Levy, advocacy manager for Access Now. For example, Facebook could instead hand out data vouchers or pay for unlimited slow service.

Lest the latter seem like an implausible proposition, that’s exactly how the earliest adopter of zero rating in the U.S. works: Instead of charging overages, T-Mobile just slows data of subscribers who’ve used up their data allocations to 2G speeds — enough for basic online tasks, from navigation to getting your e-mail.

By these non-discrimination standards, a video service that wanted to promote itself could still give customers free bandwidth — but it would have to be general-purpose data, not fenced off for its own apps.

I don’t know if the FCC will go that far; I won’t be surprised if it doesn’t.

But if the commission does let Verizon proceed, I can certainly imagine it and AT&T innovating us into a situation in which they can charge twice for every data-intensive application, in which only incumbent competitors can afford to play along, and in which Internet access begins to bear a frightening resemblance to cable TV.

Email Rob at rob@robpegoraro.com; follow him on Twitter at @robpegoraro.