Is zero rating a net neutrality issue? Europe’s outgoing digital chief doesn’t think so

Last week Andrus Ansip, Europe’s incoming digital chief, used an “#AskAnsip” Twitter session to signal a commitment to net neutrality. However, he stayed quiet on the issue of so-called “zero rating,” a term that refers to the practice of carriers exempting certain services — like favored apps or certain music-streaming services — from counting towards their data caps.

While many see zero rating as a net neutrality matter, Ansip’s predecessor, Neelie Kroes, has avoided giving any public opinions on the subject. However, that’s not to say Kroes has no opinion on the matter. Indeed, she appears to think zero rating isn’t a net neutrality issue at all.

“Commercial promotion”

I’ve seen a letter sent by Kroes’s office to Antonios Drossos, of management consultancy Rewheel, in May. As he wrote in a contribution to Gigaom in April, Drossos is a proponent of the idea that zero rating is a violation of net neutrality, because it favors carriers’ own apps or those of commercial partners over rival apps, “placing competing apps at a disadvantage.”

Drossos had written to Kroes, arguing that the carriers’ zero-rating of Joyn messages was “a gross violation of net neutrality and potentially anti-competitive.” Kroes’s office disagreed, writing:

We consider that such commercial practices do not pose a direct obstacle to end-user access to any online service or application on the basis of his/her internet subscription and as such would not be a violation of net neutrality. We must of course remain vigilant about potential anti-competitive practices, and it would be necessary to examine whether any consumer harm arises from such pricing practices.

When asked about this letter, Kroes spokesman Ryan Heath told me that Kroes’s office regarded Joyn as a non-specialized service (upcoming net neutrality legislation says carriers can only give special treatment to “specialized services”) so Joyn is subject to standard net neutrality rules.

However, he added:

But as long as no other equivalent (competing) service is being blocked or degraded, and as long as there is strict transparency about the offer, then this is a commercial promotion no different to many others that we accept as part of the free market.

But that commercial service is subject to the same legal constraints as others. Which is why it is correct that Vice President Kroes has not explicitly addressed the issue of zero rating publicly — for the very reason that it depends on the individual case involved.

Joyn, of course, is pretty lightweight stuff, so even if it violates the principle of net neutrality, it’s unlikely to harm anyone greatly. Principles aside, the real problem with zero rating arises when we’re talking about high-volume services like video.

If one video service is zero-rated and the carrier has a low data cap, then the user is clearly being steered towards the zero-rated service and discouraged from using a rival service. An hour of non-zero-rated, high-definition Netflix, for example, could wipe out an entire month’s data allowance if you only get 3GB a month, as many mobile users do.

However, Heath wrote:

If the service involved were to be a data-hungry one (such as your example of video) then the regulatory issue is not one of Net Neutrality but whether the bundling amounts to abuse of a dominant position or below-cost selling, which are competition law issues.

Traditionally, anti-net neutrality behavior includes the blocking or throttling of rival services by the carrier, or the establishment of a “fast lane” where certain services get better treatment than others. I would argue that zero rating has the same effect as setting up a fast lane. The only real difference is that services shut out of a fast lane will become less attractive to users because they’re less reliable to use, while services shut out of the zero-rating framework become less attractive because they eat into the data cap.

Net neutrality means different things to different people (which is one reason I believe the term should be abandoned in favor of something less mutable), but the end goal generally comes down to preserving a level playing field – making sure that carriers cannot disadvantage rivals to their own apps or to those of commercial partners. The aim is to ensure that a startup can offer a service without having it blocked due to entrenched interests.

That makes net neutrality in general a competition issue of sorts – not just in the case of zero rating.

Who’s watching?

However, the European Commission’s competition department told Drossos that, if zero rating were to be tackled as a competition issue, it would have to be proven that the “operator has a dominant position or that collective dominance exists.”

In Europe, hardly any carriers have market share of more than 50 percent, which is the bare minimum for establishing dominance. And, as Drossos suggested to me, “collective dominance” is practically impossible to prove. In other words, Kroes’s digital agenda department sees zero rating as a competition issue, but the competition department would set a very high bar for seriously looking at potential abuses — making it much harder to deal with the issue there than it would be in the context of net neutrality.

There’s plenty of precedent for framing zero rating in net neutrality terms. German authorities freaked out at the net neutrality implications of Deutsche Telekom imposing caps on its home broadband while exempting its own IPTV services, and killed DT’s plans. Organizations like Access and the EFF have also argued that the zero rating of mobile services is a threat to the future of the open internet (even though it can also be used to introduce people to online services for the first time.) Chile bans zero rating under its strict net neutrality laws.

That’s not to say it’s a clear-cut issue. Not everyone sees zero rating as a problematic trend, though even those who argue against preventative regulation, such as Disruptive Analysis’s Dean Bubley, expect the practice to become commonplace. Indeed, it is already fairly widespread in Europe – Rewheel reckons there are already 75 zero-rated mobile services on offer by European carriers, ranging from cloud storage to TV and movie streaming.

The ill effects of zero rating are yet to be conclusively proven (Bubley pointed out to me that a lot depends on how much people actually take up these offers), but it would be nice to know that the European Commission really has its eye on the situation. To that end, it’s probably a good thing that Ansip (unlike Kroes) will have dominion over digital matters in both the European Commission’s digital economy and competition departments. That’s the sort of joined-up authority that Europe needs for complex matters such as this, as it will make it much harder to pass the buck between departments.

It would still be nice to know what Ansip’s own take on zero rating is, though, and what course of action he would take if the practice is shown to cause harm to consumers and non-zero-rated services. After all, someone needs to be monitoring this situation, and one way or another that someone will be Ansip.