AT&T & Trump Tangle Net Neutrality's Web
Oftentimes major news events have the fortunate or maybe unfortunate consequence of pushing issues front and center that were previously relegated to the background. Such is the case now as the FCC faces a near-term shift in power at the same time it is tasked with reviewing a new telecom megamerger.
The timing of Donald Trump's rise to power has clear implications for AT&T Inc. (NYSE: T)'s proposed acquisition of Time Warner Inc. (NYSE: TWX) given that the president-elect has stated his opposition to the deal. (See Trump Win Will Reshape FCC .)
However, far beyond that immediate consequence, the transition in government administration (which will trickle down to the FCC) and the proposed AT&T merger are combining to shine a light on the complicated intersection of vertical industry integration and the practice of zero rating for mobile video services.
Here's how it breaks down.
The Federal Communications Commission (FCC) has allowed zero rating, the practice by which mobile video providers exempt their own video services from mobile data caps. After passing the Open Internet Order (a.k.a. net neutrality) in 2015, the FCC said it would keep an eye on zero rating for signs of consumer harm, but the Commission effectively approved the practice by not stepping in as AT&T and Verizon Communications Inc. (NYSE: VZ) implemented it with their DirecTV and Go90 video apps respectively.
Then came the proposed acquisition of Time Warner by AT&T. That deal has thrown the issue of zero rating back into debate because of fears that AT&T is amassing too much competitive power through its control of both premium content and the pipes (or wireless spectrum) used to deliver it. According to The Wall Street Journal, the FCC has sent a letter to AT&T saying it's concerned that telco's practice of zero rating may obstruct competition.
But wait, there's more.
While the FCC has raised zero rating as a concern, and opponents of the AT&T deal might have used the issue as a point of leverage either to block the transaction or impose limits on it, that argument only works when net neutrality is the law of the land.
And Donald Trump wants to overturn net neutrality when he takes over the White House in January.
On one side, the FCC has so far pragmatically suggested that vertical integration (a la Comcast's acquisition of NBCUniversal) and the practice of zero rating mobile services both more or less pass regulatory muster. By combining the two, however, AT&T may have pushed its luck.
On the other side, President-elect Trump has bluntly opposed vertical media integration, but is willing to give telecom providers like AT&T leeway to exempt their own services from Internet data caps.
The contradictory positions of the current FCC and the president-elect both ironically aim at some kind of balance in telecom and media power. Yet the two different stances also threaten to stir up a hornet's nest that has been carefully if precariously contained as of late. Both vertical media integration and zero rating have been pushed to the back burner of telecom regulatory debate.
It doesn't appear that will be the case for much longer.
— Mari Silbey, Senior Editor, Cable/Video, Light Reading