Why I Encouraged the FCC to Investigate AT&T’s Practices

Since AT&T acquired DirecTV, the company’s been heavily pushing consumers to “bundle” their services. Every time I log in to my AT&T online portal, I am annoyed to be greeted with pop-ups offering discounts if I sign up for unwanted services. After six months of ongoing, irritating technical difficulties with my Comcast services, I decided to give DirecTV a serious consideration as an alternative.

Anyone who knows me well can assume I’m a hefty mobile user, so it’s no surprise AT&T’s prominent unlimited mobile data promotion caught my attention. I was puzzled and intrigued to learn why AT&T re-introduced the unlimited mobile data plan since they’ve sent years intimidating grandfathered unlimited data plan owners to switch to a data-capped plan with hostile, and some illegal, tactics.

With the rise of forced arbitration clauses in company’s terms of services, I pay special attention to all terms of services agreements. After reading AT&T’s conditions for the unlimited data plan, it appeared AT&T re-introduced the plan for the sole purpose of “paid prioritization,” using their latest proprietary and promised discounts to hinder consumers in solely using AT&T and DirecTV’s streaming services. I was convinced their policy violated the Federal Communication Commission’s Open Internet rule (commonly known as net neutrality), defined as “the principle that Internet service providers should enable access to all content and applications regardless of the source, and without favoring or blocking particular products or websites”.

I felt other customers would become victim of AT&T’s unlawful actions, and took matters into my own hands by raising my concerns with the FCC.

AT&T is violating FCC’s Open Internet Order, specifically two of the three Bright Line Rules: no throttling and no paid prioritization.
AT&T Wireless’ standard data plans are capped to a limited amount of 4G LTE connectivity. Once you reach the allocated amount, your Internet speeds will be reduced to 2G connection speed. The company’s latest “unlimited data” plan is available with the requirement of subscribing to higher-priced DirecTV and AT&T Wireless services. The unlimited data terms of service are: ‘AT&T UNLIMITED PLAN: Select locations. Consumer and Individual Responsibility Users only. Eligibility: To be eligible, you must remain active and in good standing on residential DIRECTV or U-verse TV service (“TV”) (not available in the U.S. Virgin Islands) and the AT&T Unlimited Plan. New TV customers must meet TV service eligibility requirements within 60 days of wireless plan activation. Puerto Rico customers must agree to sharing of account information between DIRECTV and AT&T. Customers must meet all eligibility requirements within 60 days of wireless activation. Lost Eligibility: You will be removed automatically from the Unlimited Plan and switched to another plan if all eligibility requirements are not met. Current AT&T postpaid customers who have not added any new devices to the Unlimited Plan will be moved back to their old plan, if available. Customers who cannot be moved to their previous plan will be moved to a plan with 10GB of shareable data and overage charges of $15 per GB. Once moved, you can move to another currently available plan at any time. Data Restrictions: A!er 22GB of data usage on a line in a bill cycle, AT&T may slow the data on that line during periods of network congestion for the remainder of that cycle.’
Not only the “unlimited data” plan is limited to 22GB of 4G LTE speed, AT&T o”ers a “bundle” feature exclusive for customers of both AT&T and DirecTV: data-free streaming for DirecTV content. The company’s terms state the following: ‘DATA FREE TV: Residential DIRECTV customers and select wireless customers only. Available only in the U.S. (excludes Puerto Rico and U.S. Virgin Islands). App download may incur data usage/charged. Streaming does not count against your data allotments…. Eligible Wireless: Requires postpaid data service on eligible device. Must not have data block on line. AT&T wireless usage subject to AT&T’s service terms, conditions, restrictions, and network management practices, including speed reduction. Streaming may not work at reduced speeds. Eligible DIRECTV: Content may vary by TV package and, viewing location. All functions and programming subject to change at any time.’
I find both services by AT&T creates a throttling and paid prioritization experience. To not be restricted by either plan, users with both the unlimited data and data-free DirecTV can use more than the standard allocated 22GB limit of 4G LTE speed as long as users are exclusively streaming video content from AT&T’s DirecTV on specific AT&T Wireless plans.

The FCC published their letter to AT&T Wireless seeking answers:

Dear Mr. Quinn:
I am writing to express serious concerns about the impact of AT&T Mobility’s “Sponsored Data” program on competition for mobile video services. Based on public reports as well as information you have provided to us, the Wireless Telecommunications Bureau believes that the terms and conditions under which Sponsored Data is offered to content providers unaffihiated with AT&T, combined with AT&T’s current practice of zero-rating DIRECTV video applications for AT&T Mobility subscribers, may obstruct competition and harm consumers by constraining their ability to access existing and future mobile video services not affiliated with AT&T. We request that you respond to address these concerns by no later than November 21, 2016.
On September 7, AT&T announced the “Data Free TV” feature of its DIRECTV App. The feature allows AT&T Mobility customers who also subscribe to DIRECTV’s satellite TV service to stream DIRECTV content through the App on a zero-rated basis, i.e., without such usage counting against subscribers’ monthly data allowances under their mobile service plans. AT&T has also announced plans to launch another broadband-delivered video offering — DIRECTV Now — in the near future, which will be zero-rated for AT&T Mobility subscribers who choose to use it, regardless of whether they subscribe to DIRECTV’s satellite TV service.
Our concern is not with zero-rating per se. To the contrary, the Commission acknowledged in the 2015 Open Internet Order that zero-rating-based business models may, in some instances, provide consumer and competitive benefits. The Commission explained that it would “look at and assess such practices under the no-unreasonable interference/disadvantage standard, based on the facts of each individual case, and take action as necessary.” Consistent with this guidance, the focus of this letter is the specific impact of AT&T’s zero-rating practice on competition, as implemented through the terms and conditions of AT&T’s Sponsored Data program.
As we understand it, Sponsored Data is an integral element of the Data Free TV and DIRECTV Now offerings. Press reports have described the AT&T position as “[o]ther content providers can do the same thing [zero-rate their offers] through our Sponsored Data program.” According to AT&T, DIRECTV’s internal transfer payment is made at the same rate charged to other, unaffiliated, Sponsored Data participants. Based on these statements, we understand that AT&T views DIRECTV’ s participation in Sponsored Data as nondiscriminatory because it is on equal footing with that of third parties who elect to participate in the program.
The position that the participation of DIRECTV in Sponsored Data is the same as that of third parties, however, fails to take account of the notably different financial impact on unaffiliated providers. For example, while there is no cash cost on a consolidated basis for AT&T to zero-rate its own affiliate’s mobile video service (since DIRECTV’s “cost” of Sponsored Data is equal to AT&T Mobility’s Sponsored Data “revenue”), an unaffiliated provider’s Sponsored Data payment to AT&T Mobility is a true cash cost. Moreover, based on the information you have provided, it appears that, at foreseeable usage levels of zero-rated mobile video services, the Sponsored Data charge to a third-party video competitor could be significant. Indeed, it is not difficult to calculate usage scenarios in which an unaffiliated provider’s Sponsored Data charges alone could render infeasible any third-party competitor’s attempt to compete with the $35 per month retail price that AT&T has announced for DIRECTV Now.
Unaffiliated video providers not purchasing Sponsored Data would likewise face a significant competitive disadvantage in trying to serve AT&T Mobility’s customer base without zero-rating. Their potential subscribers would have to take into account the total cost they would incur by using the unaffiliated provider’s service — which would include not only the proportional monthly usage costs of their AT&T Mobility data plan, but also overage fees and/or reduced transmission speeds if their consumption of the third party’s video content results in data usage in excess of the maximum allowed under their plan. AT&T Mobility customers subscribing to AT&T’s own zero-rated DIRECTV services would not encounter these costs or impacts.
Under either option for competing with AT&T’s video services, unaffiliated video content providers appear to confront significant disadvantages from the combined impact of AT&T Mobility’s Sponsored Data fees and zero-rating of its own DIRECTV offerings. We are therefore concerned that this combination appears to present significant anti-competitive effects.
Charges and practices by telecommunications carriers that risk such harms have long been the subject of review by the Commission to determine whether they are unjust, unreasonable, or unreasonably discriminatory. Specifically, with respect to zero-rating, the Commission has noted mobile broadband providers’ zero-rated plans as having “the potential to distort competition.” Section 8.11 of the Commission’s rules prohibits broadband providers from engaging in practices that “unreasonably interfere with or unreasonably disadvantage end users’ ability to select, access, and use broadband Internet access service or the lawful Internet content, applications, services, or devices of their choice, or edge providers’ ability to make lawful content, applications, services, or devices available to end users.” When applying this standard, one of the specifically identified factors in the analysis is the effect of a provider’s practices on competition. As the Commission explained:
Practices that have anti-competitive effects in the market for applications, services, content, or devices would likely unreasonably interfere with or unreasonably disadvantage edge providers’ ability to reach consumers in ways that would have a dampening effect on innovation, interrupting the virtuous cycle. As such, these anticompetitive practices are likely to harm consumers’ and edge providers’ ability to use broadband Internet access service to reach one another.
The Commission anticipated that broadband providers’ “incentives to interfere with and disadvantage the operation of third-party Internet-based services that compete with the providers’ own services” would lead them to seek to “gain economic advantages by favoring their own or affiliated content over [content from] third-party sources.” Accordingly, the Commission cautioned that it would “review the extent of an entity’s vertical integration as well as its relationships with affiliated entities” when assessing whether a practice harms competition.’
AT&T’s practices appear to mirror these harmful scenarios, in that AT&T seems to be “acting in ways that may harm the open Internet, such as preferring [its] own or affiliated content [and] demanding fees from edge providers.” The Sponsored Data charges imposed on unaffiliated edge providers appear to “target competitors, including competitors to their own video services,” which the 2015 <em>Open Internet Order</em> characterized as being of particular concern for potentially disrupting the virtuous cycle of competition and innovation in Internet services.
We therefore request that AT&T address the concerns expressed in this letter, including providing additional information or clarification if you believe that we have misunderstood relevant aspects of AT&T’ s current and announced offerings. If AT&T believes that its arrangements do not unreasonably interfere with or disadvantage unaffiliated edge providers’ ability to provide video content and services to AT&T’s mobile broadband subscribers, or that they do not improperly restrict or skew end-users’ choices among mobile streaming video services, we invite you to explain why.
I look forward to your response. Please contact me with any questions.
Sincerely,
Jon Wilkins
Chief, Wireless Telecommunication Bureau
Federal Communications Commission

Since my complaint, a FCC representative responded after the letter was delivered to AT&T: “Hi Steven, Your Ticket №1284975 was served on your carrier for its review and response. Your carrier has provided the FCC with a response to your complaint. You should receive a copy of the response from the carrier within 7–10 days via postal mail. As such, no further action is required. Your complaint is closed. We appreciate your submission and help in furthering the FCC’s mission on behalf of consumers.”

I will update this post when I receive more information.

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Copies of the original documents can be viewed here:
FCC complaint: http://steventsujisaka.com/wp-content/uploads/2016/11/FCC-Complaints.pdf
FCC Letter to AT&T Wireless: http://steventsujisaka.com/wp-content/uploads/2016/11/Letter-to-R-Quinn-11-9-2016.pdf