Zero rating pricing increases innovation and competition

WASHINGTON (March 9, 2017) – Though opposed by many net-neutrality advocates, allowing certain types of data usage to be priced differently could be a positive step that leads to increased innovation and competition, according to a new R Street policy study by Associate Fellow Steven Titch.

“With zero rating, or toll-free data, an internet service provider does not count downloads from certain content providers against the pre-set data cap in a consumer’s plan,” explains Titch. “For example, if a consumer’s monthly plan included 1 gigabyte of data, he or she would be able to stream about 340 tracks on Spotify, 68 video plays on YouTube or 60 minutes of video on Netflix. However, should these content providers have zero-rating agreements with the service provider, consumers would be able to access the services as much as they want without worrying about being charged for data overages.”

Attempts to implement forms of zero rating by companies like T-Mobile and AT&T have drawn both the ire of those who support net neutrality and the attention of regulators, like former Federal Communications Commission Chairman Thomas Wheeler, who opened an investigation into AT&T’s pricing plans, citing net-neutrality concerns. But such opposition is misguided and could reduce competition, contrary to net-neutrality advocates’ ultimate goals.

“While network neutrality remains a contentious issue, zero rating should not be viewed as market exploitation, nor as a violation of the nondiscrimination principle,” Titch writes. “Instead, it is a marketplace solution that stands to meet many of the internet policy objectives the FCC and regulatory agencies around the world desire: cheaper rates, greater access, greater customer choice and a wider array of applications and a la carte choices in multichannel TV programming. The incoming FCC chairman should put past regulatory actions aside and embrace zero rating as the kind of consumer-friendly pricing innovation that healthy, functional and competitive markets produce.”

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