California’s net neutrality bill, S.B. 822, is often referred to as the “gold standard” of state-based net neutrality laws. The bill tackles the full array of issues the FCC had addressed right up until the end of 2016 before it began repealing net neutrality. One such issue is the discriminatory use of zero rating, where ISPs could choose to give users access to certain content for “free”—that is, without digging into their data plans. ISPs can use zero rating to drive users to their own content and services to the detriment of competitors.
The FCC found that both AT&T’s and Verizon’s use of zero rating appeared to be in violation of the 2015 Open Internet Order, only to have those findings and investigations terminated as one of the first acts of President Trump’s FCC Chairman Ajit Pai. The core issue is the fact that companies like AT&T were simply exempting their own affiliated services from their datacaps in a blatant effort to drive wireless Internet users to their preferred products. Undoubtedly, AT&T’s recent victory over the Department of Justice’s antitrust lawsuit that sought to prevent the giant telecom company from becoming even bigger with Time-Warner content will result in even greater levels of self-dealing through discriminatory zero rating policies.
California’s legislature has so far opted to ban discriminatory users of zero rating and prevent the major wireless players from picking winners and losers online. But new and increased resistance by the ISP lobby (led by AT&T and their representative organization CALinnovates) unfortunately has legislators contemplating whether discriminatory zero rating practices should remain lawful despite their harms for low-income Internet users. In fact, AT&T and their representatives are even going so far as to argue that their discriminatory self-dealing practices that violate net neutrality are actually good for low income Internet users.
S.B. 822’s Zero Rating Provisions Ensure Low-Income Internet Users Get the Same Internet as All Other Internet Users
Studies by the Pew Research Center show that when an Internet user has limited income to purchase Internet access, they opt to get their entire Internet usage from a wireless device. As a result, the zero rating policies of wireless ISPs have a profound impact on shaping users’ Internet experience. Users who depend on their wireless device for Internet access are highly likely to pay overage fees when they try to take advantage of the full, open web. These overage fees are part of a scheme to force wireless Internet users to only use products and services that the wireless ISP has exempted from their own arbitrary data caps—and to punish users when they stray from those products and services. The CTIA’s own study confirms that if they can drive Internet users to their chosen zero rated products to the detriment of potentially superior services.
This is why California organizations that promote the digital civil rights of communities of color—such as the Center for Media Justice and Color of Change as well as experts who represent low income Californians such as the Western Center on Law and Poverty—have all come out in strong support for S.B. 822’s zero rating provisions.
S.B. 822 bans the practice of self-dealing and discriminatory gatekeeping by ISPs outright, which is why those same ISPs will fight to take it out of the legislation before it becomes law. It is why they are actively attempting to mislead legislators in Sacramento with bogus superficial studies from groups that represent ISP interests like CALinnovates that ignore the fact that the data cap is an artificial construct that is designed to raise rates on wireless users and zero rating is how they exploit that structure. There is no benefit to Internet users by simply saying the ISP’s selected services do not have additional fees associated with them and nothing about the current structure is “free” because we have all compensated companies like AT&T and Verizon to the tune of $26 billion in profits in just 2016 alone.
Without the ability to profit from discriminatory conduct, the wireless carriers will lose the financial incentive to use zero rating to create an inferior wireless Internet for those with limited income and will no longer be able to exploit their gatekeeper power.
Do Not Forget That the FCC Found That AT&T’s Zero Rating Practices Violated Net Neutrality Right Up Until It Began Repealing Net Neutrality
The FCC’s core issue with AT&T’s zero rating practices was that AT&T explicitly exempted its own products, such as DirecTV, while capping products that would compete with DirecTV. In effect, using something that was not owned by AT&T was more expensive for their wireless users forcing users with limited income to only use what AT&T had blessed. Even the Trump Administration’s Department of Justice, in its antitrust lawsuit against AT&T, cited concerns with the company weaponizing its ownership of content (in this instance HBO) against online video competitors. The only federal entity that did not seem concerned with AT&T’s discriminatory practices was the current FCC, which intentionally abandoned oversight over the industry and is even contemplating a new proposal by AT&T to impair private competition to the incumbents today.
Upholding S.B. 822 means upholding a free, open Internet for all Californians. Without it, ISPs may have free rein to create two Internets that will be premised on how much income you have to the benefit of their own services and partners. With AT&T's recent victory in the courts over the Department of Justice and the expiration of federal net neutrality rules, S.B. 822's net neutrality protections have become more important than ever.