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Wireless

Zero-rated data tests EU stance on net neutrality

Monday 12 December 2016 | 15:12 CET | Market Commentary
The first test cases of the EU net neutrality legislation have reached the news in the past week, and the focus is on whether zero-rated mobile data for specific apps can be allowed. As in many things in the EU, the various countries are far from united, with some regulators saying zero-rating is not allowed and others allowing such offers to go ahead. While the interpretation of net neutrality in the EU clearly needs some time yet, operators are pushing ahead with a concept they already perfected in the postpaid market: getting consumers to pay for more than they need.

Guidelines in place

The EU net neutrality regulation took effect on 30 April, but guidelines on how to enforce it were issued only at the end of August by Berec, the assembly of EU telecom regulators. Berec has left a significant amount of room for interpretation, saying national regulators can take into account a range of factors, such as competitive relations, market shares and other market conditions, when considering if an ISP violates net neutrality.

In terms of zero rating, where customers are not charged for data used for a specific app or service, Berec offered only one example of when this should be forbidden: if an operator continues to offer free data for an app even if the customer has used up his data bundle for that billing period. Only a customer service app should be allowed free data, or it is positive discrimination in favour of that app over others, according to Berec.

First operators blocked

Swedish regulator PTS has already told Telia and 3 to stop such offers. Telia offers since April customers on certain price plans access to a number of popular messaging apps, such as WhatsApp, Twitter and Facebook, even after they’ve used up their monthly data bundle. Offers for free data for music streaming from Telia and 3 were also rejected by the PTS as a violation of net neutrality. 3 said it would talk with the regulator on how to adapt its offer, which included up to 70 GB free per month for music. Telia took a more defiant stance, saying its offer reflects the changing habits of consumers and it will challenge the regulator’s order.

T-Mobile Hungary was also ordered to halt a free-data offer. The plan provided unlimited access for 24 hours to its TV Go service and HBO Go without the traffic being deducted from the customer's plan or any slowdown in speed after using a certain amount of traffic. The regulator NMHH said this was unlawful discrimination against other internet video services, which did not benefit from the same treatment, and as this is a service delivered over the open internet, and not a managed video service, Magyar Telekom was in violation of the net neutrality rules.

Neither the Swedish nor Hungarian regulators imposed any sanctions on the operators, only issuing orders to halt the services in their current form. Regulators in other countries have announced investigations of similar services, such as Proximus’ offer of free access to an app of choice for customers taking its converged fixed-mobile plans and T-Mobile Netherlands providing free data for music streaming on its bigger data plans.

Others still trying

Other operators have so far escaped regulatory scrutiny. T-Mobile Poland introduced in September a new range of plans called ‘Supernet’, which come with zero-rated data to a growing number of popular apps and music streaming services. Virgin Media, the largest MVNO in the UK, followed in November with new plans including free access to WhatsApp and Facebook Messenger.

Several of the operators note that their zero-rated offers are open to all apps that want to join, although the commercial terms of this are unclear. This level of openness appears to have spared T-Mobile US regulatory intervention for its similar offer of free data for music and video streaming apps. Others in the US, such as AT&T, have favoured their own content apps, and are attracting more attention from net neutrality hawks. A group of Austrian newspapers came under fire also for favouring their own publications in mobile data offers, and Italy’s Wind may be the next with its offer of free data for its own OTT messaging app Veon.

'Free' and 'unlimited'

From a commercial perspective, what unites most of these zero-rated offers is that they are offered only for customers on higher-spend postpaid plans. Operators are using the lure of 'free' social media or music streaming to try and tempt customers to take a bigger data plan, or in Proximus’ case, even to switch to a quad-play. With apps like WhatsApp and Facebook already used by 80 or even 90 percent of mobile users in some countries, it’s clearly not a bad way to try and win over a large number of customers.

The problem for consumers is that these offers lack transparency. Few know how much data they use for Facebook or Viber, but ‘unlimited’ always sounds good. Furthermore, as Virgin Media points out in its fine print, consumers who have used up their data bundle but continue to WhatsApp may find they end up paying for other apps still consuming data in the background, at out-of-bundle rates. Operators may be able to selectively bill data per app, but consumers do not have the same choice when it comes to paying.

It is consumer protection issues like this that provide the best rationale for regulators to act. EU operators are clearly looking to test the principle of net neutrality, and national regulators will need to time to evaluate all the offers on the market and lay down the limits. While there is no doubt that the rules of net neutrality will evolve further, zero-rating is unlikely to go away soon. Convincing customers to overpay for basic services is a strategy operators have been trying since postpaid bundles were first invented. ‘Free’ access to apps is just another service alongside voice, SMS and data added to the ‘all-in’ monthly bundle, helping to drive ARPU higher.



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