The regulatory body is trying to ascertain whether these operators' free data plans violate the government's net neutrality regulations.
What's the Fuss About?
Comcast's zero-rating plan for its newly launched Stream TV service has drawn a lot of speculation. The zero-rating plan, as the name suggests, allows a customer to use the streaming service without affecting the 300 GB monthly data cap of the company's Internet service.
Notably, Comcast's new app is similar to T-Mobile's Binge On and Music Freedom plans, whereby customers can use the service in an unlimited manner without exhausting the data allowance provided by the Internet service provider.
AT&T also offers a sponsored data plan that allows content providers to subsidize customers' wireless data charges so that users can browse or stream content without affecting their data allowances. Further, other cable and telecom companies are planning to come up with similar services.
This raises concern for rival streaming service providers like Netflix Inc. NFLX and Hulu, as the data consumption of their service is counted in the consumer's data cap. This renders them uncompetitive in comparison. Proponents of net neutrality thus view this as a violation of the FCC-enacted net neutrality rules.
Notably, the idea of preventing Internet service providers from throttling certain services while skewing in favor of others is referred to as net neutrality. However, as of now, the FCC has not framed any particular net neutrality rule for the zero-rating scheme and addresses these on a case-by-case basis.
Comcast categorizes its Stream service as a 'Home IP Cable' service delivered over its cable network, and insists that it has nothing to do with its public Internet service. The company thus holds that net neutrality rules do not apply to its Stream TV service. However, advocates of net neutrality have negated the view, stating that the service is not out of the confines of the Internet when it is being availed across multiple devices using Wi-Fi hotspot.
Meanwhile, T-Mobile claims that its Binge On streaming service is open to any provider that fulfills its requirements and believes it to be completely in line with the net neutrality rules. Also, the carrier is of the view that the program provides great choice for customers and being an industry innovation drives competition as well.
The Bottom Line
It is evident that the cable industry is facing chord cutting, and the pay-TV industry is facing serious threat from Over-the-Top (OTT) services like Verizon Communications Inc.'s VZ ) Go90 and Amazon.com Inc.'s AMZN Fire TV.
As the telecom space faces transition, drawing customers through lucrative free-data plans or the zero-rated data services seems to be the latest fad among the top players.
However, an FCC intervention into its legitimacy may jeopardize the future prospects of the free data plans, potentially affecting these companies.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.