U.S. Internet advocates have called on the Federal Communications Commission to regulate zero-rating under its net neutrality rules. The practice, they argue, risks tilting the online marketplace to benefit large, established firms, or the corporate partners of those firms.
“Zero-rating is pernicious, unfair and unnecessary,” said Susan Crawford, a law professor at Harvard who has advocated for strong regulation of the broadband industry. Permitting the practice would simply enable “the gameplaying of companies who have a strong interest in maintaining the status quo.”
The agency has not decided whether to take action. Earlier this year, FCC officials met with Internet providers including Comcast, T-Mobile and Verizon to study the issue. The agency's chairman, Tom Wheeler, told reporters last month that he is still “trying to make sure we understand” the full implications of the practice, despite months of deliberation.
“Things move at the pace that is appropriate,” he said. “I think we're doing a good job.”
Facebook has not attempted to strike a deal with national wireless carriers such as T-Mobile or AT&T, said the people familiar with the matter, over concerns that regulators may perceive the move as anti-competitive. Instead, it has pursued relationships with lesser-known carriers.
While Free Basics may give these wireless companies a new way to reach consumers, some analysts say Facebook's pitch could give those businesses pause. FCC scrutiny over zero-rating could raise legal and regulatory costs for these carriers as they seek to explain their role in the program in Washington, said Craig Moffett, a telecom analyst at MoffettNathanson. He added that carriers mulling a relationship with Facebook must also consider how the terms of that relationship might change in the future.
“There's a bigger question of opening a Pandora's box,” Moffett said. “You'd have to be concerned that Facebook might ultimately usurp the customer relationship and, at renewal time, demand to be paid rather than just carried [by the wireless company]."
Still, other policy advocates say that Free Basics could help close a persistent economic divide in the United States when it comes to connectivity. By making it easier for underserved populations to access civic and social services online, more Americans could join the ranks of those who benefit from high-speed Internet, said Nicol Turner-Lee, a vice president at the Multicultural Media, Telecom and Internet Council.
“It wouldn't be a bad idea to bring that here, because we face many of the same challenges in historically disadvantaged communities” as developing countries do, said Turner-Lee.
