Net Neutrality and the AT&T, Time Warner Merger

By Kyla Eastling (CMC ’18)

In late October, telecommunication companies AT&T and Time Warner announced agreement on a deal for AT&T to buy Time Warner for $85 billion. The immediate public reaction has not been positive, with many concerned that the merger will create a media company so large that it will distort market competition and violate anti-trust law. Significantly, this deal also raises new questions in the debate over net neutrality.

Put into effect in 2015, the FCC’s Open Internet Rules were the first enforceable rules concerning online content specifically. The rules work to ensure that consumers have access to open internet, meaning internet access providers cannot “block, impair, or establish fast/slow lanes to lawful content.” These rules played a large role in the 2011 Comcast and NBCUniversal merger, which many are comparing to the AT&T deal. Mergers between large telecommunications companies threaten to restrict the consumers’ access to online content since the internet provider (AT&T) could control the distribution of content from the content provider (Time Warner). For example, before the merger, NBC would pay Comcast to stream their show “30 Rock” online. After the announcement of the merger, however, there were questions as to whether or not Comcast could prevent NBC from making external streaming deals with other internet providers. The FCC ruled that Comcast could not restrict NBC’s content distribution, and if they did it would be in violation of net neutrality law.

The AT&T and Time Warner deal poses a new challenge to net neutrality law and the FCC due to the use of zero-rating. Zero-rating is a practice in which wireless providers allow users to stream selected content without contributing to their monthly data limits. Though the FCC made it clear in Comcast NBC deal that companies cannot restrict content distribution, zero rating is a way for companies to encourage consumption of selective content. Many see a potential conflict of interest for AT&T as a wireless provider since they would now own a major content provider (Time Warner). Some argue that Time Warner could have an unfair advantage in gaining access to AT&T’s zero rating service by nature of being owned by AT&T. The FCC already has their eyes on AT&T’s concrete plans to implement zero-rating with another content provider it recently acquired: DirectTV. Its upcoming introduction of DirecTV Now would offer a service where customers can stream unlimited shows through the DirecTV app without worrying about their data caps. It seems likely that AT&T would extend this trend to incorporate zero-rating services into the Time Warner deal.

As of now, zero-rating is not subject to any specific government regulations or laws. The FCC’s Open Internet Rules do not specifically address zero-rating, but the organization has promised to keep an eye on it. The AT&T and Time Warner case might be the time to argue that zero-rating violates the Open Internet Rules clause of no paid prioritization. This rule asserts that “broadband providers may not favor some lawful Internet traffic over other lawful traffic in exchange for consideration of any kind.” Today, this rule’s scope is limited to when wireless providers throttle the speeds of certain content to disadvantage it over other non-throttled content. However, there is a chance that AT&T and Time Warner’s plans to expand further into streaming services may give the FCC cause to broaden the rule’s application to zero-rating as well. If so, its decision would affect not only this merger, but the future of content streaming in general.

 

 

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