The practice of using data cap exemptions (also known as zero-rating data) is becoming increasingly prevalent among North American ISPs.
It’s a significant development for you, the end user. The exemptions have the potential to both enhance and diminish your internet experience.
But what exactly are data cap exemptions? And what are their advantages and disadvantages? Is it ultimately a good thing or is it something to fight against? Keep reading to learn what you need to know.
What Are Data Cap Exemptions?
Before I delve into the good and the bad parts of the practice, it’s important to understand what data cap exemptions actually are and how they work.
In short, a data cap exemption means that your internet provider won’t count the data used by certain apps and services against your total data allowance. Which apps or services are included in this are completely decided upon by the ISP, and these exemptions can apply to apps on mobile devices or apps used on your home’s internet connection.
Sometimes, instead of exempting on an app-by-app basis, certain ISPs may choose to exempt entire classes of data (such as video content or music streaming).
What’s the Story So Far?
Despite the recent surge in news stories about data cap exemptions, it’s not quite a new concept.
If you’re old enough, cast your mind back to the early days of cell phones. Every mobile carrier used to charge for SMS messages: $0.10 per message wasn’t uncommon. Fast-forward 15 years and you’d be hard-pressed to find a carrier that doesn’t offer unlimited SMS messages for free. The data used for those messages is “exempt” from your data allowance.
In more recent times, lots of carriers now offer unlimited access to services like WhatsApp and Facebook. Again, the data used by those apps is not deducted from your allowance.
Sounds good, right? Seems like a big win for heavy data users, doesn’t it? So why is there so much backlash against it? Where did all of the recent controversy come from?
In short, ISPs and mobile phone operators have started to wise up to its benefits. In an age where cable subscriptions are on a downwards trend and competition between ISPs is at an all-time high, providers are desperate to retain their customers any way they can.
Unfortunately, the ways in which ISPs are using these exemptions are not always in the best interests of customers like you and me.
AT&T and DirecTV
For example, AT&T has been widely criticized for its decision to give zero-data status to DirecTV content. AT&T bought the internet TV service back in 2015, and by giving DirecTV an exemption, other internet TV services find it harder to compete. This means that customers find it harder to justify switching to different (non-exempted) services.
The Federal Communications Commission (FCC) :
The FCC has reached the preliminary conclusion that these practices inhibit competition, harm consumers, and interfere with the “virtuous cycle” needed to assure the continuing benefits of the Open internet.
AT&T seems to present the unaffiliated provider with a choice that is unreasonable on its face. [It must] either pay a Sponsored Data rate that would make it very difficult to offer a competitively-priced service, or require its customers to pay significant amounts for their own usage of data while AT&T’s zero-rated DirecTV Now service offers the same usage for free.
However, the practice appears to be working for the providers. Reports suggest that T-Mobile won two million subscribers from AT&T and Verizon in 2016 thanks to its Binge On service. It seems zero-rated data is effective and here to stay.
What Does the Law Say?
The laws on this vary from country to country.
In the United States, FCC evaluates zero-rating data offers on a case-by-case basis. The aim is to protect consumers and competition, but it has approved the vast majority of cases.
Some countries have taken a tougher stance. Zero-rating is explicitly illegal in Norway and Japan, and EU-based companies are subject to the Body of European Regulators for Electronic Communications (BEREC). BEREC assesses cases against five key questions:
- Does it circumvent the safeguarding of equal and non-discriminatory treatment of traffic?
- What is the market position of the ISP and Content and Application Provider (CAP)?
- What are the effects on the end-user rights of consumers and businesses?
- Are there effects on the end-user rights of other CAPs?
- Do consumers have access to alternative offers and/or ISPs?
But things are still fluid and nothing is set in stone yet, so to speak. The internet is still a relatively new mode of communications and it wouldn’t be wrong to expect changes in the years to come.
What Are the Advantages of Data Cap Exemptions?
Now that you know what data caps are and how providers are using them, what does it all mean for you? Unsurprisingly, there are both advantages and disadvantages. Let’s take a look at the advantages first.
High roaming charges are the fastest way to ruin the memory of a great holiday abroad. Thankfully, governments around the world are taking steps to lessen the chances of this happening.
But at the time of writing, there have been no significant moves to apply these same principles to data costs.
With services like Netflix and Spotify now offering downloadable content, the risks of being caught out by an excessive data bill have grown. And how many people do you see glued to YouTube on trains and in cafes on an average day?
Zero-data offers you a safety net. AT&T subscribers can watch as much DirecTV content they want without worrying about their monthly bill while T-Mobile users can watch as much Netflix, Hulu, HBO, and more without any concerns.
Zero-rating data and cord-cutting are both double-edged swords.
On the one hand, cord-cutters get almost all their content over the internet so data cap exemptions lead to a smoother experience and fewer usage concerns. On the other hand, you could find yourself limited by the services exempted by your ISP.
For example, if you’re an AT&T subscriber but your favorite shows aren’t available on DirecTV, you’ll have to pay more to access the content.
What Are the Disadvantages?
I’ve already touched on some of the drawbacks. All of the arguments revolve around competition and net-neutrality.
Zero-rating data for SMS messages is fine because SMS is a ubiquitous protocol that’s used by everyone and not restricted to a single carrier or service. But when zero-rating strays into the world of music and video streaming, it becomes a lot more dangerous.
Increasingly, ISPs and mobile carriers are offering “pay-to-play” deals to content providers: pay us and we’ll exempt your data. Large providers can afford to pay these costs, but this practice locks out start-ups, non-profits, and other niche products.
Clearly, a company whose data has been exempted has a massive competitive advantage over its rivals: the rest of the market is restricted. Zero-rating data entrenches market leaders in their positions and hinders innovation.
For a few years, ISPs have been desperate to break free of net neutrality rules. The list of which entities are against equal treatment of web traffic reads like a who’s who of the most hated companies in the United States.
Governments and courts around the world have mostly stood firm, refusing to buckle in the face of extreme lobbying. But zero-rating data opens the war on a new front.
It’s ignoring net neutrality by the back door. Instead of throttling data speeds, they’re throttling data allowances. The ISPs can set arbitrary low volume caps for regular internet traffic, or make the data artificially expensive.
Make no mistake: right now, this is the cutting edge of the net neutrality argument.
Reduced Freedom of Choice
Studies have shown consumers gravitate towards zero-rated services. Data cap exemptions, therefore, are creating a walled garden.
You become increasingly unlikely to use services that providers don’t include in your packages. Why would you use an alternative if it’s going to cost you more data and therefore more money? Even if you don’t realize it, you’re being funneled into a limited number of apps and services, restricting your freedom of choice.
It’s the reason why there was such a backlash against Facebook Free Basics in some developing countries. Lots of users in markets where Facebook offered the service weren’t even aware they were using the internet, suggesting many would never move beyond the ubiquitous app. The idea might have sounded good on paper, but in practice it was more of a hindrance than a help.
Where Do You Stand?
Where do you stand in the battle over zero-rated data? It’s clearly a nuanced topic and it’s difficult to make a conclusive argument either for or against the practice.
Does the effect of zero-rating make you worry for the future of the web? Or will the imminent arrival of high-speed 5G networks ultimately render the debate moot?
I’d love to know what you think. You can get in touch with your thoughts and opinions in the comments below.
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