Where is the line in the sand for zero rating?

It’s a trend which has been growing steadily in the UK, but the line has not been found yet; when are zero rating offerings going to irk the bureaucrats of the telco world?

Jamie Davies

September 1, 2017

4 Min Read
Where is the line in the sand for zero rating?

It’s a trend which has been growing steadily in the UK, but the line has not been found yet; when are zero rating offerings going to irk the bureaucrats of the telco world?

Vodafone has just unveiled VOXI, a young-orientated mobile service which provides zero rating on Facebook, Facebook Messenger, Instagram, WhatsApp, Pinterest, Snapchat, Twitter and Viber. Three has Go Binge, which offers free streaming on Netflix, SoundCloud, Dave and other channels. EE offers Apple Music streaming for free. Virgin Media offers zero rating for Twitter, Facebook Messenger and WhatsApp. It’s become endemic.

But when will competition authorities decide the practise is not fair? Over in the US, AT&T and Verizon have been bickering with the FCC over the legalities of zero rating offers, but such arguments don’t seem to have crossed the pond in any substantial manner to date. This in itself seems odd; usually the European Commission usually can’t wait to get it’s hands on a competition challenge, but it doesn’t seem to be bothered yet.

Maybe it is preoccupied, maybe it’s because its holiday time, or maybe the telcos haven’t crossed the invisible line yet. As regulation usually lags behind technological developments, there is often a testing of the boundaries. Like toddlers, the tech giants will push the limits until they upset the overseers and get sent to the naughty step.

That seems to be where the zero rating offers are at the moment. The line hasn’t been found and the lumbering giant in Brussels remains snoozing, working off a gluttony of lunch time chocolate smothered waffles. But this does seem to right in the Brussels ballpark, after all, zero rating offers do nudge users towards preferential services.

Data is a precious commodity for millennials; you wouldn’t want to run out in the middle of a cat video. Therefore, users will naturally lean towards applications which don’t run down the data allocation. It’s irrelevant as to whether most of these applications (excluding the video ones) use marginal amounts of data, when you are told something is free the natural inclination is to use it.

In this light it discourages competition. The operators are favouring the established and larger scale platforms, making it much more difficult for competitors to break into the space. It doesn’t matter that there is unlikely to be a Facebook usurper, with zero rating offerings favouring Zuckerberg and his cronies, user preferences will naturally lean that way.

Of course, operators will state they are open to new partners, but there has to be something in return. The operators will be sending a steady flow of users towards the platform, so there will naturally have to be some sort of reward; these are businesses not charities after all. The financials behind the zero rating offers have not been unveiled, but you can imagine there will be a kick back.

Maybe there is some sort of discount on Facebook advertising or free promotional activity on Twitter? These are platforms which have millions (if not billions) of users, there is an incentive for the cash-conscious operators. But what is the leverage for the challenger businesses? It will be unlikely they have the user base or the footprint to attract interest. So it is an uneven playing field which is growing steeper.

On the other side of the coin, some might argue this is just sensible business. It is a contra agreement between two organizations who are making best use of the assets which they have. It’s a relationship which benefits both, which possibly does not involve any cash transactions. In this light, it might be sensible to say fair enough, but this hasn’t usually stopped boresome bureaucrats in the past.

The European Commission is currently in an antitrust battle with Google over its Android software, though this is a different slant; Google is being accused of favouring its own services. That is seen as a no-no, but with the operators favouring the big boys and not getting involved with any challengers, you can just imagine this is the sort of competition debate the beer-swilling Belgium’s usually love.

Maybe zero rating is okay, maybe it will be viewed as a fair business exchange or maybe the operators will start looking for smaller fish to fry. Or maybe when the lethargic legislators are awoken from the summertime slumber in September, there will a new round of antitrust arguments.

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