T-Mobile has announced a plan called “Binge On” that allows its subscribers to stream for free videos from certain content providers. According to the company’s website:
“Starting November 15th, Simple Choice users on a qualifying plan are FREE to stream unlimited video on your favorite services like Netflix, HBO NOW, Hulu, and many more without using a drop of your data. Nothing to configure – all automatically applied to your plan. Streamers, go ahead and Binge On™.”
This type of plan, known as “zero rating”, can be likened to dialing 1-800 to reach businesses of your choice. The discount in pricing, if you will, comes from the subscriber not having the streaming count against their data plan.
Based on what I’ve read in The New York Times, proponents of net neutrality, the concept that calls for equal treatment of traffic from all providers, are up in arms about what they believe could amount to larger content providers like Netflix obtaining an advantage where T-Mobile subscribers decide to play in video streaming heaven by downloading movies and TV shows from the biggest driver of traffic in North America.
But while proponents warn of a possible tsunami of other wireless providers following suit, Wall Street didn’t appear too concerned about the plan as reflected in T-Mobile’s share performance since 10 November.
Should investors in the “Uncarrier” have anything to worry about from the Federal Communications Commission? It all depends on how they apply their net neutrality rules. According to 47 CFR 8.7:
“A person engaged in the provision of fixed broadband Internet access service, insofar as such person is so engaged, shall not unreasonably discriminate in transmitting lawful network traffic over a consumer’s broadband Internet access service. Reasonable network management shall not constitute unreasonable discrimination.”
47 CFR 8.11(d) defines reasonable network management as:
“A network management practice is reasonable if it is appropriate and tailored to achieving a legitimate network management purpose, taking into account the particular network architecture and technology of the broadband Internet access service.”
The Commission will be forced to apply 47 CFR 8.11(d) which from public administration 101 is always problematic and case-by-case. The Commission will have to reconcile Chairman Tom Wheeler’s flowery rhetoric about virtuous cycle of innovation and democratizing voices on the Internet with the hard cold realities of business. That reality is that the legitimate network management purpose of a carrier is to leverage its technology to generate the greatest amount of profit. This is maximized when a carrier provides its subscribers with the best service.
T-Mobile should argue that it generates at this time the best customer value by providing a discount on access to the best content available and right now that includes Netflix and Hulu and a few others. T-Mobile is stopping its subscribers from accessing content of their choice. It is using the best content to retain current subscribers while trying to obtain new ones. Binge On is an appropriate profit generating strategy.
If the Commission is serious about AT&T and Verizon facing true competition, it will have to let the smaller players use innovative marketing to compete. The Commission shouldn’t speak out of both sides of its mouth.