Why Zero Rating Actually Sucks

16 January 2017

Everyone loves zero-rating, which is when certain services don’t count against your data limit. Depending on your provider, anything from NFL games to Pokémon Go might be free to use without using up your data. There are two ways carriers do this: by having the company behind the zero-rated service pay for the data use, or by simply not counting it for promotional reasons. For us as users, it seems pretty good. Unfortunately, zero-rating brings a number of serious problems that hurt users in the longer term. It hurts competition between online services, limits and disincentivizes users from freely accessing the Internet, and costs more. It turns out that as great as it seems, the problems zero-rating has are big.

Zero-rating can be anti-competitive because it gives large advantages to the services that zero-rate their own apps. This can be particularly problematic when service providers zero-rate their in-house services, especially where there are few choices. Zero-rating a service, even for a short time, has been shown to cause huge spikes in the usage of that service. That means that where services are zero-rated, people are more likely to use the zero-rated services over other alternatives. It’s understandable because data plans tend to be expensive. Unfortunately, that makes it much more difficult for competition to grow, so there’s little reason for the zero-rated services to offer better prices (or service). A new competitor would need to make the case for why someone should use their limited data on them, versus using the other service that doesn’t count towards their data. In the end, the user loses to potentially worse service and higher prices.

Services that are zero-rated because of agreements with a carrier usually pay for data used to access their service on behalf of their users. This means that if you have a data plan that allows you to stream sports for free and you stream NFL games, for example, the NFL may need to pay for the data you’re using. Carriers and service providers still want the data paid for so if you’re not paying for it, then the service you’re using data-free is. In response, those services still need to make their own money, which could mean raising their own prices in response. This means that users can end up paying more - first for the data subscription package with zero-rating, and then again for the data they’re (invisibly) paying for via the subscription fees for the zero-rated service. Service providers explain that they don’t “double-dip”, which is likely true, but that doesn’t mean it isn’t a good deal for them.

Due to zero-rating, users can be artificially limited to a small portion of the Internet, and are discouraged from using anything outside of that because it would cost them data. This has been used as one of the biggest arguments against Facebook Free Basics, which provides free Internet access (limited to Facebook and some other sites Facebook chooses) to people who couldn’t otherwise afford Internet access. This effectively makes Facebook the gatekeeper to the Internet - only allowing Free Basics users to see what Facebook wants them to be able to see. On a larger scale - not just with Free Basics but with all Internet providers - this means not everyone can hear everyone, or make themselves heard. An open, neutral and non zero-rated Internet makes it possible for anyone to publish a website or an app. With zero-rating on a large-scale, that is no longer the case because users are less likely to visit new places that will count against their data. Service providers already zero-rate their own services, which can include news networks, which means users can be less likely to seek out a wider world view.

What’s nefarious about zero-rating is how hard it is to get past the “free stuff” part of it. Encouraging people to use more of (or only) certain services by zero-rating them is bad for consumers and in the end, even costs them more. Some countries have even banned services like Facebook Free Basics because of their zero-rating aspects. Even in the U.S., the FCC has taken notice of zero-rating practices. Without rules protecting a non zero-rated Internet, the future of the Internet (and our ability to be informed) might be sold to us as a collection of services that don’t use up our data.

Interested in net neutrality? Check out my book, Please Upgrade for Access, at book.thenaterhood.com.

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