Lessons from Global Practices on “Zero-rating”

A new report on how regulators have picked ‘good’ from ‘bad’

I’m excited to announce my latest report on how regulators, globally, have assessed “zero-rating” offers and decided whether or not they violate net-neutrality rules. Read the full report

Full report here

Zero-rating, for the uninitiated, is a term of art that refers to charging discounted rates for internet access based on the content being accessed. It initially described content that had “zero” data charges but this discount now comes in a variety of ways — generous, or no data limits applicable to accessing particular content (this could be for a particular service, say “Facebook Free” in Nepal, or a class of services, say for music streaming like the “Music Freedom” offer in the US). It could also mean buying internet access plans restricted to certain sites, like social media internet packs. Most familiar to users in large parts of Asia and Africa was the model that provided entirely free access to a selection of web content — like, “Facebook Free Basics”.

Facebook Free Basics became particularly controversial in India, and eventually, all forms of zero-rating were banned by the telecom regulatory authority (TRAI). Advocates argued that zero-rating offers violated net-neutrality principles by allowing telecom operators to form partnerships with select large content services — allowing these services to reach newer audiences out of reach to smaller, nascent services. This distortion of the level-playing field by creating a cheaper vs. a more expensive tier of internet access based on content was an interference with net neutrality in much the same way that creating fast v. slow lanes, through technical practices throttling or prioritization of traffic, was. Facebook Free Basics, in particular, was purportedly directed at first time internet users, who couldn’t afford using data. But many questioned if this would this lead to the “next billion” equating the internet to a handful of companies rather than the potentially limitless and exploratory internet that was accessible to large parts of the developed world. I did some qualitative research on this subject too — read here, and blogged about here.

By opting for a ban on all such data plans, TRAI stood apart from its European, American and Canadian telecom regulatory counterparts that adopted a case-by-case approach. Under the case-by-case approach the plans were generally allowed, but the regulator would evaluate each zero-rating offer to check if it violated the net-neutrality rule. A relatively new business model, zero-rated plans were considered a deviation from the net-neutrality principle, but one that required further evidence and analysis before any regulatory action could be initiated against them. In contrast, the regulatory bodies in these countries were not hesitant before prohibiting practices such as throttling or blocking of traffic by ISPs, which they considered more straightforward violations of the principles of net neutrality. In the case of zero-rating practices, even some of the staunchest net-neutrality advocates argued that not all forms of zero rating would be harmful to net-neutrality objectives such as user choice and a level playing field.

TRAI emphatically rejected this approach for India, “Once such practices are allowed, it may not be possible to quantify, measure or remedy the consequences in the short to medium term.” It noted that while the case-by-case approach had “intuitive appeal,” the absence of a clear rule would hamper certainty for consumers, curtail innovative new services and expose ISPs to the continual risk that regulators would find their plans illegal. On a practical note, TRAI noted that a case-by-case approach also meant a greater financial and administrative burden.

So how has the case-by-case approach held up in practice? Regulatory authorities in Europe, the US and Canada have, to varying degrees, evaluated the zero-rating plans offered in their markets. They’ve also published detailed reports on how they’ve made these assessments.

It seemed like the right time to reflect on this approach, and whether it has been an effective check on the net-neutrality concerns emanating from zero-rating. In this report, I ask, and attempt to answer:

1. What are the legal standards applied to assess zero-rating offers in these countries?
2. What factors featured most prominently in the case-by-case assessments by regulators?
3. Are there gaps in the regulators analysis?
4. How can these be bridged?

To the third question, I identified gaps in regulatory analysis that applied to the regulators’ analysis as they reviewed, and responded to zero-rating offers in the market. (In the report I identify which countries’ approach reflects these gaps, and where others set models to emulate.)

• Although several zero-rated plans were formally open to content services to apply to join, there was inadequate and often superficial investigation into the practical impact on content services seeking to be zero rated. Specifically, are content services aware of the process to apply? What are the search and negotiation costs for content services to actually reach an agreement with telecom operator? How long does this entire process take?
• Lack of transparency for terms, and relatedly, lack of analysis of terms that may disadvantage certain kinds of content services. For example, are the technical terms overly burdensome? Are encrypted services de facto barred from applying (due to a requirement that techniques of Deep Packet Inspection (DPI) will be applied to differentiate the zero-rated data traffic)?
• The need for a more stringent approach to affiliated content services directly affiliated with telecom operators. Are these affiliated content services given more favourable terms? For example, when content services have to pay to be part of a zero-rated offer, do affiliated services get a more favourable rate, or not have to pay at all?
• Inadequate scrutiny on the level of data caps in a particular market — a very low data cap could strengthen the incentive to use zero-rated content exclusively.
• Rather than a purely conceptual analysis of how the user’s freedom to choose has been impacted by zero-rated offers, the Canadian model of identifying particular demographics that are benefited by certain kinds of offers (and those that may be disadvantaged) is a valuable approach to emulate.