AT&T-Time Warner Deal Could Be a Net Neutrality Nightmare, Senator Warns

An influential US senator says the merger could lead to “zero-rating” abuses.

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Nov 1 2016, 7:26pm

Sen Ron Wyden (D-OR) speaking in June 2016. Image: New America/Flickr

AT&T's proposed $85 billion buyout of Time Warner could make a mockery of US open internet protections if the combined company decides to exploit a loophole in federal regulations in order to favor its own content at the expense of rivals.

That was the blunt warning issued Tuesday by Sen. Ron Wyden, the influential Oregon Democrat and longtime consumer champion, in a letter to Federal Communications Commission Chairman Tom Wheeler.

Wyden is particularly concerned that AT&T could use the controversial practice of "zero-rating" to favor Time Warner programming, thereby undermining the FCC's policy protecting net neutrality, the principle that all content on the internet should be equally accessible.

Zero-rating refers to a variety of practices that broadband companies use to exempt certain internet content and services from data caps, effectively favoring those services by providing consumers with an economic rationale to use them instead of rival offerings.

"I am deeply concerned that if AT&T acquires Time Warner's content, the new mega-company will have incentives to prioritize its own content over content created by small business, independent artists or by its rivals," Wyden wrote.

In its landmark 2015 net neutrality policy, the FCC did not explicitly ban zero-rating, but rather indicated it would address the issue on a case-by-case basis. The agency is currently conducting a review of such practices across the broadband industry.

Open internet advocates say zero-rating risks creating a "bastardized version of the internet."

If AT&T's buyout bid is successful, the telecom giant would gain control over Time Warner's rich stable of content brands, including HBO, CNN, and the Warner Bros. television and movie studios. The combined company would have an obvious economic interest in exempting such programming from monthly data caps for AT&T subscribers, much as it plans to do with video content from its recently acquired DirecTV satellite business.

"Should AT&T decide to zero-rate data associated with streaming HBO, one can easily foresee a quick uptick in Game of Thrones streaming, instead of Mr. Robot, which is owned and produced by a rival network," Wyden wrote. (Game of Thrones, of course, is one of HBO's flagship programs, while breakout hit Mr. Robot airs on USA Network, which is owned by Time Warner rival NBCUniversal, a subsidiary of Comcast.)

Wyden is not the only influential politician to raise objections to AT&T's proposed Time Warner buyout. Sen. Al Franken, the Minnesota Democrat, has also expressed concern about the merger, and Sen. Bernie Sanders, the Vermont Democrat, has urged federal regulators to block the deal outright. Both cited the risk of anti-competitive harm and warned of out-of-control media consolidation.

In addition to raising red flags about the AT&T-Time Warner tie-up, Wyden's letter appears designed to increase the pressure on the FCC to crack down on zero-rating more broadly. Open internet advocates are pushing the FCC to take a strong stance against zero-rating, and soon, because such plans are proliferating like weeds, as broadband companies experiment with ways to evade and undermine the agency's net neutrality protections.

AT&T, Verizon, and T-Mobile are among the telecom titans that offer consumers some version of zero-rated plans, and Silicon Valley giant Facebook reportedly wants to partner with wireless carriers to offer US consumers access to its controversial "Free Basics" mobile service, in which users gain free access to a limited number of websites selected by the social networking giant.

Broadband companies often frame zero-rating as a "gift" to consumers that allows them to use certain services without exceeding data caps. But open internet advocates say such plans undercut the core principle of non-discrimination at the heart of net neutrality, and risk creating a "bastardized version of the internet" that disproportionately affects lower-income users who are less willing to incur larger monthly fees by exceeding data limits.

In a recent interview with New York Times media columnist Jim Rutenberg, AT&T general counsel David R. McAtee II asserted that the telecom giant has "always stood behind the core principles of net neutrality."

That's an eyebrow-raising contention, considering that AT&T is currently part of a coalition of broadband industry interests that is pursuing a high-profile legal challenge against the FCC net neutrality rules.

Earlier this year, a federal appeals court upheld the agency's policy, but broadband giants like AT&T have hinted strongly that they intend to pursue the case all the way to the US Supreme Court. (McAtee told Rutenberg that the case primarily involves what AT&T and other companies view as "government overreach" by the FCC.)

A FCC spokesperson told Motherboard that the agency has received and is reviewing Wyden's letter. The spokesperson declined to comment on the merger and the status of the FCC's ongoing zero-rating review.