A Framework for Assessing Zero Rating Arrangements

The debate over the potential benefits and risks of zero rating are growing louder and divisions increasingly stark. Opponents maintain that it violates net neutrality’s core tenet of content and application agnosticism; proponents hold that zero rating benefits network operators, edge providers, and users by lowering costs and providing incentives to “get online.” To help advance the conversations around zero rating in a manner that can be applied to a diversity of zero-rating arrangements and broadband markets, CDT has published a new paper on the topic, “Zero Rating: A Framework for Assessing Benefits and Harms”.

The primary purpose of the paper is to provide a framework for policy-makers, advocates and others who are reviewing or considering the merits of zero-rating arrangements in the context of mobile broadband service. Originally submitted in response to the Telecom Regulatory Authority of India’s Consultation on Differential Pricing for Data Services, the paper puts forth a framework for assessing zero-rating arrangements popping up in multiple markets around the globe.

Such arrangements – whether in developing or developed economies – are attracting increased attention as both a business practice and a matter of regulatory interest. A more in-depth discussion and review of the benefits and harms of such arrangements is desirable and warranted. Our paper contributes to that discussion in a way that is not moored to a particular legal or regulatory framework, or a referendum on a specific zero-rated offering.

Zero rating deviates from a strict understanding of net neutrality, under which all traffic is treated equally. But whether zero rating can coexist with an open Internet is a context-specific question that forces us to explore the particulars of zero-rating arrangements and the markets in which they occur. The report identifies a number of arrangement-specific factors such as exclusivity and transparency, and external factors such as market conditions, that should be helpful in that exploration.

The report suggests that the more “open” a zero-rating arrangement is in terms of provider participation and customer access, the less likely it is to distort specific markets, interfere with user choice, or harm Internet openness generally. At the same time, it acknowledges the paradox that the more content available via zero-rating arrangements, the less likely users may be to seek out metered alternatives. It also identifies external factors that can help determine the potential benefits and harms of zero rating. Where broadband adoption rates are low, zero rating may play a greater role in spurring broadband deployment, adoption, and use, but where there is little facilities-based competition, the potential harms to consumer choice and innovation are greater. These are important factors in assessing the merits of zero-rated services in the broader and critical discussion on connecting individuals and communities around the globe.

The paper does not specify “desirable” or “undesirable” zero-rating arrangements or particular ways of insulating such arrangements against scrutiny. Indeed, such scrutiny is necessary. To that end, the framework is provided to encourage a deliberative, consistent approach to the range of services that are typically associated with the term “zero rating” and other exemptions from usage-based pricing for mobile broadband service.  The paper should contribute to stakeholder understanding of zero rating’s relationship to net neutrality and broadband adoption, and more fully inform the policy choices that flow from it.

Finally, the paper recognizes that one of the main challenges to this discussion is the dearth of information on the impact of such services on adoption, user behavior, and metered substitutes. We need more information and hard data about zero-rating arrangements already in place to be able to assess current and future harms and benefits. A chief goal of this paper is to spur further data gathering. Although a number of academic institutions and non-governmental organizations are working with what information we have, network operators and some edge providers have better access to data that will lead to better-informed decisions about zero rating generally, and the potential benefits and harms of particular zero-rating arrangements.