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Federal Internet Law & Policy
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Tiers / Data Caps / Zero Rating
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Bandwidth Caps

Derived From: FCC Annual Video Competition Report 2013

"Some ISPs, including MVPDs and wireless providers, have initiated bandwidth caps or usage-based price tiers, using a variety of business models. During the first half of 2012, most major MSOs formalized bandwidth caps or usage-based/metered pricing. They generally adopted thresholds that exceed typical traffic and chose either to cap usage or to implement overage charges for customers who exceed the limits.

Zero Rating

Derived From: Wireless Telecommunications Bureau Report: Policy Review of Mobile Broadband Operators' Sponsored Data Offerings for Zero-Rated Content and Services (Jan. 2017) Retracted

The Commission acknowledged in its 2015 Open Internet Order that zero-rating-based business models may, in some instances, provide consumer and competitive benefits. [OI 2015 para 151] These benefits may include increased video competition by facilitating the availability of over-the-top (OTT) offerings. Rather than a per se approach, the Commission explained that it would “look at and assess such practices under the no-unreasonable interference/disadvantage standard, based on the facts of each individual case, and take action as necessary.”  [OI 2015 para 133-153]...

“Zero-rated” content, applications, and services are those that end users can access without the data consumed being counted toward the usage allowances or data caps imposed by an operator’s service plans. Thus, for example, if a consumer has subscribed to a broadband service plan that allows usage of 10 gigabytes of data per month, but then uses more than 10 gigabytes of cellular data5 in a given month, the provider may impose surcharges for excess data usage or may reduce the consumer’s data usage to a slower speed for the remainder of that monthly billing cycle. That consumer’s use of data to access zero-rated edge services, however, does not count toward her monthly data usage allowance under her mobile broadband service plan. A zero-rated edge service therefore becomes inherently more attractive to the consumer as compared to a non-zero-rated service, other factors held constant, because it costs less.

Some mobile broadband providers offer “sponsored data” arrangements to edge providers that seek to provide their services on a zero-rated basis. Under these arrangements, edge providers offer their services to consumers on a zero-rated basis by arranging to “buy down,” or “sponsor,” the data these consumers use. This enables consumers to utilize those edge services without worrying that such usage could cause them to exceed the applicable data allowances under their broadband providers’ service plans.

Zero Rating Reference

 

Throttling

Degrading or impairing access to lawful content, applications, services, and non harmful devices. 2015 Open Internet Order, 30 FCC Rcd. at 5648 ¶ 112, 5651 ¶ 119.

 

Carriers

AT&T

Data Caps

imposed a monthly broadband data cap in May 2011, limiting legacy DSL subscribers to 150 GB and U-Verse customers to 250 GB.

  • Merger Conditions
    • AT&T / DirecTV 2014: "Recognizing that AT&T is the only major ISP that applies “data caps” across the board to all of its fixed broadband customers and that this merger increases the incentive of AT&T-DIRECTV to use strategies that limit consumers’ access to online video distribution services in order to favor its own video services, the Commission requires AT&T-DIRECTV, as a condition of this merger, to refrain from imposing discriminatory usage-based allowances or other discriminatory retail terms and conditions on its broadband Internet service."
  • Application of AT&T Inc. and DIRECTV For Consent to Assign or Transfer Control of Licenses and Authorizations, Dkt 14-90, Memorandum Opinion and Order (2015), para. 205 (discussing applicants incentive to use data caps, and merger conditions) Para 210 (We note that today AT&T imposes usage-based data caps on its wireline broadband customers and is alone among the major ISPs in imposing such data allowances for all subscribers.)
  • FTC v ATT Mobility, 9th Cir. Aug. 29, 2016 ("Through a practice referred to by the Federal Trade Commission as “data throttling,” AT&T Mobility LLC intentionally reduces the data speed of its customers with unlimited mobile data plans.1 A throttled customer receives data at a substantially reduced speed during a given billing cycle once the customer’s data usage during that billing cycle exceeds a threshold determined by AT&T. Unlimited data plan customers are throttled without regard to real-time network congestion.")
  • Netflix Data: AT&T Caps Not That Generous After All, Gigaom 5/20/2011
  • Want Better AT&T Cell Service? Now You Can Buy It, NYT 3/26/2010
  • AT&T Again Hints At Bandwidth Crackdown - Peak, off-peak broadband minutes?, dslreports 9/16/2008
  • Is AT&T Doing Bait & Switch On Broadband Caps?, Techdirt 4/21/2009
  • AT&T's New 18Mbps U-Verse Tier - New tier likely 18Mbps/1.5Mbps for around $65?, dslreports 10/15/2008
  • AT&T Jumps Into The Metered Broadband Game, Techdirt 11/5/2008
  • AT&T Tries On Data Cap, Ecommerce Times 11/5/2008
  • AT&T tests limits on subscribers' Web use, CNET 11/5/2008
  • AT&T, An Update for Our Smartphone Customers With Unlimited Data Plans (press release), July 29, 2011 (announcing reduction in speeds for smartphone customers with unlimited data plans who exceed certain bandwidth thresholds);
  • Julianne Pepitone, AT&T Raises Limit for Smartphone Data Slowdown, CNNMONEY, Mar. 1, 2012, (visited Dec. 21, 2012)
  • AT&T, AT&T Gives Customers More Choice With New Shared Wireless Data Plans (press release), July 18, 2012
  • "We note that today AT&T imposes usage-based data caps on its wireline broadband customers and is alone among themajor ISPs in imposing such data allowances for all subscribers." AT&T / DirecTV Merger Order, at 210 (2015)
  • " AT&T imposed a monthly broadband data cap in May 2011, limiting legacy DSL subscribers to 150 GB and U-Verse customers to 250 GB." FCC Annual Video Competition Report 2013
  • "in July 2012, both AT&T and Verizon Wireless announced plans to facilitate customers' sharing of data across smartphones, tablets, and other devices.936 The new shared data plans charge a monthly fee for each device and then charge for a shared pool of monthly data transfer ranging from 1 GB to 20 GB.937 Early evidence suggests that consumers materially increase their data consumption when upgrading to Long Term Evolution ("LTE") devices" FCC Annual Video Competition Report 2013

Zero Rating

Derived From: Wireless Telecommunications Bureau Report: Policy Review of Mobile Broadband Operators' Sponsored Data Offerings for Zero-Rated Content and Services (Jan. 2017) Retracted

"At this time, AT&T’s Data Perks appears to be designed for use primarily by marketing firms and advertisers seeking to entice consumers to view their online ads or interact with their marketing apps by offering “free” data to those consumers for use with any content of the consumer’s choosing. Data Perks also can be used to enable marketers to deliver content or applications to consumers effectively on a zero-rated basis – i.e., to let consumers view their ads or download their games, surveys, or other apps, without affecting their monthly data usage allowances.

"Based on information we have on Data Perks, we believe it is not likely that this program unreasonably interferes with or disadvantages any edge providers’ or end users’ ability to use the Internet to reach one another. As an initial matter, Data Perks benefits consumers by allowing them to get additional data to use for whatever purpose they choose. Additionally, based on the information we have, it appears that most Data Perks participants are not marketing services that run over BIAS. Also, providers have other avenues through which to advertise to consumers. Moreover, we are not aware of any Data Perks participants who use the Data Perks app to provide services that compete with AT&T or AT&T affiliates at this time. Importantly, Data Perks, as a marketing device, seems to be designed for zero-rating small amounts of data. 

"AT&T’s Sponsored Data program is designed to enable third party edge providers to deliver streaming edge content on a zero-rated basis to AT&T’s mobile broadband subscribers. [The FCC has] serious concerns that AT&T Mobility’s Sponsored Data program presents competitive problems and, to date, nothing in AT&T responses to the Bureau’s requests for information has addressed our concerns. Based on the information gathered to date, we believe there is a substantial possibility that some of AT&T’s practices may violate the General Conduct Rule.

.....

Our concerns about the potentially anticompetitive impact of AT&T’s conduct are based in part, but not entirely, on the fact that unaffiliated mobile video service providers must pay a significant, clearly identifiable amount of money for the sponsored data needed to offer streaming video programming to AT&T Mobility’s subscribers on a zero-rated basis – by comparison to AT&T, which need not incur a comparable out-of-pocket expenditure to offer DIRECTV Now on a zero-rated basis. Rather, any imputed “charges” that DIRECTV “pays” AT&T Mobility for sponsored data, even if formally recorded on the corporate books as internal transfer payments, would result in no net expenditure at the holding company level.

AT&T Mobility’s treatment of unaffiliated edge providers is therefore materially different in its effect from its treatment of its corporate affiliate; but that difference is not necessarily unreasonable if it does not “unreasonably disadvantage” those unaffiliated parties. For instance, the overall arrangement could comply with the General Conduct Rule if the unaffiliated edge providers’ out-of-pocket expenditure per gigabyte of sponsored data was consistent with the economic cost, expressed on a per-gigabyte basis, of supplying the AT&T Mobility data used to offer DIRECTV Now service on a zero-rated basis. That cost of course is not zero; as the 2015 Open Internet Order recognized, broadband providers must make necessary returns on their substantial capital investments to construct, maintain, and improve their networks, as well as incurring significant operating expenses.65 We lack the information at this time, however, needed to assess whether AT&T’s current sponsored data price to third party providers – which we have estimated could be $5/GB based on AT&T’s reference to wholesale market pricing as an appropriate benchmark – is reasonable under this standard.66 Given that vast quantities of data are transmitted over AT&T’s network and that the incremental cost of data transmitted under its network’s peak capacity is close to zero, we would expect that per-gigabyte amount, though non-zero, to be quite low – and in all likelihood lower than the wholesale rates AT&T currently charges to wireless resellers.

In light of the rates at which DIRECTV is offering its DIRECTV Now service to end users, the information we have indicates that AT&T (including both the network operator and edge provider affiliates) does not consider zero-rating to be a real cost of business. Instead, AT&T appears to view the network cost of Sponsored Data for DIRECTV Now as effectively de minimis. Unlike T-Mobile, however, which charges all edge providers the same zero rate for participating in Binge On, AT&T imposes hefty per-gigabyte charges on unaffiliated third parties for use of Sponsored Data. All indications are that AT&T’s charges far exceed the costs AT&T incurs in providing the sponsored data service. Thus, it would appear that AT&T’s practices inflict significant unreasonable disadvantages on edge providers and unreasonably interfere with their ability to compete against AT&T’s affiliate, in violation of the General Conduct Rule. 

Throttling

AT&T Mobility, LLC, Notice of Apparently Liability, File No. EB-IHD-14-00017504 (June 17, 2015) (fining AT&T Mobility for failure to disclose throttling of "unlimited" data plans); AT&T Mobility Faces $100M Fine for Misleading Consumers, FCC Press Release, Jun 17, 2015.

Authority: Open Internet Transparency Rule 2010

Finding: "we find that AT&T apparently willfully and repeatedly violated Section 8.3 of the Commission’s Rules by: (1) using the term “unlimited” in a misleading and inaccurate way to label a data plan that was in fact subject to prolonged speed reductions after a customer used a set amount of data; and (2) failing to disclose the data throughput speed caps it imposed on customers under the MBR policy. Para. 17.

Enforcement: Forfeiture $100,000,000

Facts: "In 2007, AT&T began offering unlimited data plans, which allowed customers to use unrestricted amounts of data, with no high-speed data caps or automatic speed restrictions. AT&T ceased offering these unlimited plans to new customers in 2010, but continues to allow “grandfathered” customers on unlimited data plans to renew their plans on a month-to-month or term basis. Para. 7

In 2011, AT&T implemented its Maximum Bit Rate (MBR) policy, under which the Company capped the maximum speed throughput that unlimited data plan customers experienced once they used a set amount of data in a billing cycle. Para. 8. According to AT&T, unlimited data plan customers were notified about the MBR policy through various means, including [a press release (archived copy), a 2011 bill insert, a webpage (archived Feb. 10, 2012), point of sale information, and provisions of AT&T’s service contract]. Para. 14.

Analysis: The imposition of set data thresholds and speed reductions is antithetical to the term “unlimited.” AT&T was aware that its continued use of the word unlimited to describe its data plans was likely to mislead consumers. Para. 19. Consumers entered into contracts for these “unlimited” plans with the mistaken belief that they had unlimited amounts of high speed data sufficient to use any website or application. Para 20.

Under the 2010 Transparency Rule, broadband providers are expected to disclose the “expected and actual access speed” of their services. AT&T's notice to customers was insufficient. Information about these specific limitations was never available on AT&T’s Broadband Information Disclosure webpage. AT&T also did not disclose any information about the magnitude of the speed reductions. Para. 22. A 2011 press release did not provide notice to subsequent customers. Email and text notices were sent only to the heaviest users and sent once. AT&T's link to its "broadband information webpage" gave no indication why a customer would want to visit the webpage and provides no information about the MBR policy. The language in the service contract is vague and insufficient. Vague disclosures are not an adequate substitute for fully explaining the MBR policy. Paras. 27-29.

FTC v. AT&T Mobility

FTC Proceeding Tracker

See FTC v. AT&T Mobility 9th Cir. (holding FTC has jurisdiction over AT&T Mobility)

FTC v ATT Mobility, 87 F. Supp. 3d 1087 NDCA March 31, 2015

The Federal Trade Commission filed suit against AT&T Mobility LLC, asserting that AT&T engaged in acts or practices, in connection with the marketing of mobile data services, that violate 15 U.S.C. § 45(a). In 2007, AT&T was the exclusive mobile data provider for the Apple iPhone. Initially, AT&T offered iPhone customers an “unlimited” mobile data plan. In 2010, AT&T stopped offering the unlimited mobile data plan to new smartphone customers… Old customers, however, were grandfathered – in essence, to ensure that they would not switch mobile data providers. In July 2011, AT&T decided to begin reducing the data speed for unlimited mobile data plan customers, a practice commonly known as “data throttling.” . Disclosures about the throttling program have been limited… and not adequate… the FTC has brought two claims pursuant to 15 U.S.C. § 45(a) which prohibits, inter alia, “unfair or deceptive acts or practices in or affecting commerce.” … the gravamen of the FTC’s complaint is not AT&T’s practice of throttling per se, but AT&T’s deceptive conduct in failing to disclose its throttling to certain customers.

News

  • Jon Brodkin, AT&T Wants to Settle with FTC to Avoid Unlimited Data Throttling Lawsuit, Ars Technica May 31, 2018 ("Just weeks ago, AT&T said it intended to appeal its loss in the case to the US Supreme Court before a deadline of May 29. But today, AT&T informed court officials that it has decided not to file a petition to the Supreme Court and did not ask for a deadline extension")
  • Jon Brodkin, AT&T Suffers Another Blow in Court Over Throttling of Unlimited Data, Ars Technica March 21, 2018 ("The state Supreme Court "held that an arbitration agreement that waives the right to seek the statutory remedy of public injunctive relief in any forum is contrary to California public policy and therefore unenforceable," Chen wrote.")

Cablevision

as of 2012 had not established formal limits.

CenturyLink

imposed tier-based usage caps. Verizon, which relies on fiber-to-the-home architecture, does not impose bandwidth caps or usage-based-pricing.

Charter

offer data tiers, tying caps to the speed of Internet service that consumers purchase.

Jon Brodkin, Charter Launches Mobile Service, Throttles All Video to 480p, Ars Technica July 5, 2018

Time Warner Cable (TWC acquired by Charter in 2015)

offers voluntary opt-in limits in exchange for a $5 discount on monthly charges across its Texas footprint, and

Comcast

In May 2012,announced that it is experimenting with different approaches to data caps and usage pricing through trials in some markets but for all markets raised the existing data cap from 250 GB to 300 GB per month.932 In the markets where Comcast is not experimenting with usage based pricing, it has suspended enforcement of its data caps.

Cox

Frontier

Sprint

has also introduced unlimited data through its Unlimited Freedom and Unlimited Freedom Premium plans, and experimented with zero-rating of the 2016 Copa America soccer tournament.8

Suddenlink / Altice

offer data tiers, tying caps to the speed of Internet service that consumers purchase.

T Mobile

Data Caps

Zero Rating

Derived From: Wireless Telecommunications Bureau Report: Policy Review of Mobile Broadband Operators' Sponsored Data Offerings for Zero-Rated Content and Services (Jan. 2017) Retracted

First introduced in November 2015, T-Mobile’s “Binge On” is a zero-rated service for streaming video services that meet certain technical standards. Participating edge providers can offer to T-Mobile’s mobile broadband subscribers zero- rated video programming at 1.5 Mbps or 480p+/DVD quality – comparable to standard definition (SD), not high definition (HD), television format. During the course of the FCC's review of Binge On, T-Mobile did not compel edge providers or consumers to participate in Binge On, and did not charge them anything if they opt to do so...

From the consumer’s side, T-Mobile subscribers can easily enable or disable Binge On from their user settings and opt-out or opt-in to zero-rating as they choose.47 Although T-Mobile does establish technical standards governing video transmissions for edge providers who wish to participate in Binge On, it appears that many edge providers have been able to meet these technical criteria, with T-Mobile announcing that over 100 edge providers were participating in Binge On as of July 26, 2016.48 Given these facts, we find it difficult to envision that Binge On in the form the Bureau reviewed in 2016 could “unreasonably interfere with edge providers’ ability to make lawful content, applications, services, or devices available to end users.”

Moreover, T-Mobile provides little streaming video programming of its own at present, and while it (or affiliated entities) might seek to more fully establish affiliated content arrangements in the future, for now T-Mobile does not compete substantially with downstream edge providers that supply video programming using Binge On (such as, for example, DIRECTV Now).50 Accordingly, T-Mobile is not likely to have strong incentives to “unreasonably disadvantage” unaffiliated edge providers, and we are not aware of any evidence that it is doing so. Finally, T-Mobile charges all edge provider participants an identical zero price and, so far as we are aware, has uniform technical requirements for all interested edge providers that numerous providers have been able to meet. Binge On thus appears not to discriminate against or disadvantage (much less unreasonably discriminate or unreasonably disadvantage) any edge provider or end user. 

Verizon

Data Caps

Zero Rating

Derived From: Wireless Telecommunications Bureau Report: Policy Review of Mobile Broadband Operators' Sponsored Data Offerings for Zero-Rated Content and Services (Jan. 2017) Retracted

"The structure of Verizon Wireless’s FreeBee Data 360 sponsored data program offering may pose concerns for the same reasons as AT&T’s Sponsored Data program discussed above, given the contrast between the manner in which it supplies the platform for the zero-rating activities of third-parties as compared with the manner in which it offers its own zero-rated go90 service. [The FCC is] aware of no safeguards that would prevent Verizon from offering substantially more costly or restrictive terms to enable unaffiliated edge providers to offer services comparable to Verizon’s go90 on a zero-rated basis. And we have no data to confirm Verizon’s unsupported assertion, submitted as part of its response to our request for information, that the FreeBee Data 360 sponsored data program offers third parties prices and terms equivalent to the economic net cost by Verizon to zero-rate its affiliated go90 video service. 

Major wireless providers also have begun to impose data caps.935 For example, in July 2012, both AT&T and Verizon Wireless announced plans to facilitate customers' sharing of data across smartphones, tablets, and other devices.936 The new shared data plans charge a monthly fee for each device and then charge for a shared pool of monthly data transfer ranging from 1 GB to 20 GB.937 Early evidence suggests that consumers materially increase their data consumption when upgrading to Long Term Evolution ("LTE") devices.938

930 See Stacy Higginbotham, Which ISPs are Capping Your Broadband and Why?, GIGAOM, Oct. 1, 2012, (visited July 5, 2013). 

931 Ian Olgeirson and Mari Rondeli, HSD Subs Tilt Toward Premium Tiers; Usage Constraints Gain Broader Foothold, SNL KAGAN, July 19, 2012. See also Netflix Comments at 7-8. Public Knowledge states that by some estimates, more than half of the United States' 75 million fixed broadband subscribers are already subject to some kind of usage cap. Letter from Michael Weinberg, Vice President for Emerging Innovation, Public Knowledge, to Marlene H. Dortch, Secretary, FCC, (Aug. 9, 2012) ("Public Knowledge Aug. 9, 2012 Ex Parte") at Attach. 1, Andrew Odlyzko et al., Know Your Limits: Considering the Role of Data Caps and Usage Based Billing in Internet Access Service, Public Knowledge, May 2012, at 4-5 ("Public Knowledge UPB White Paper"). Google states that in contrast to some broadband service plans criticized by Netflix in its comments, Google Fiber's service plans are not subject to data caps. Google Reply at 4, n.16.

933 Ian Olgeirson and Mari Rondeli, HSD Subs Tilt Toward Premium Tiers; Usage Constraints Gain Broader Foothold, SNL KAGAN, July 19, 2012.

934 Id.

937 John Fletcher, Bring on the Expensive Dumb Pipes, SNL KAGAN, Aug. 14, 2012.

938 William Densmore and Michael Weaver, U.S. and Canada Second-Quarter 2012 Wireless Metrics: Data Strategies Diverge, FitchRatings, Sept. 27, 2012, at 2.

Throttling

Jon Brodkin, Fire Dept Rejects Verizon's "Customer Support Mistake" Excuse for Throttling, Ars Technica Aug. 22, 2018 ("Verizon yesterday acknowledged that it shouldn't have continued throttling Santa Clara County Fire Department's "unlimited" data service while the department was battling the Mendocino Complex Fire. Verizon said the department had chosen an unlimited data plan that gets throttled to speeds of 200kbps or 600kbps after using 25GB a month but that Verizon failed to follow its policy of "remov[ing] data speed restrictions when contacted in emergency situations."")

 

Data Consumption Rates

"Light users subsidize heavy users"

Peak / Non Peak Rates the solution

See also

Statistics

Papers

News

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