Zero-rating

Zero-rating (also called toll-free data or sponsored data) is the practice of mobile network operators (MNO) and mobile virtual network operators (MVNO) not to charge end customers for data used by specific applications or internet services through the MNO's mobile network, in limited or metered data plans.^[1] It allows customers to use data services like video streaming, without worrying about bill shocks, which could otherwise occur if the same data was normally charged according to their data plans. This has especially become an option to market 4G networks, but has also been used in the past for SMS or other content services.

In combination with zero-rating some services, MNOs are typically setting relatively low volume caps for open internet traffic or conversely, over-pricing open internet data volumes.^[2] Choosing to zero-rate existing third-party services trending among an attractive audience for the mobile network operator allows to increase or defend market share for the target segment.^[3] This price discrimination works also in favour of the chosen third party service.

Building their own services and delivering them at a zero-rate if bundled with their mobile contracts has also been a common practice among mobile operators. In this scenario, network operators can optimize their service together with their network to deliver an optimal service. Together with the existing billing relationship, this can be an important factor to compete with third party services or take control over volume-heavy services.^[4]

Existing programs

Internet services like Facebook, Wikipedia and Google have built special programs to use zero-rating as means to provide their service more broadly into developing markets. The benefit for these new customer, who will mostly have to rely on mobile networks to connect to the Internet, would be a subsidised access to services from these service providers. The results of these efforts have been mixed, with adoption in a number of markets, sometimes overestimated expectations and perceived lack of benefits for mobile network operators.^[5] In Chile the Subsecretaria de Telecomunicaciones of Chile ruled that this practice violated net neutrality laws and had to end by June 1, 2014.^[6][7]

Similarly mobile network operators are also able to use the underlying classification technology like Deep packet inspection to redirect enterprise related data charges for employees using their private tablets or smart phones to their employer.^[1] This has the benefit of allowing employees to participate in Bring your own device (BYOD) programs.

Toll-Free Applications

Another proposed method of providing subsidized data (partially or completely free) is to have the app itself track the data it consumes on the subject device (e.g. mobile phone, laptop) and report back to the carrier and the app provider the bandwidth consumed for purposes of effecting the zero-rating. An advantage of this approach is that the bandwidth management logic (the operational rules) can be easily deployed, amended, and updated via well-established app stores (e.g. iOS, Google Play) without significantly burdening the carrier network operations (e.g. BSS/OSS).

The apps themselves can be configured to be autonomous and enforce their own rules in real-time without seeking pre-download permissions from a third party, network control device, or analogous external element. This means that the app itself can turn on or off the data subsidy, change its physical appearance to transparently convey the level of subsidy to the end-user, or take other actions as the circumstances of time, place, use case, or otherwise dictate. These are all as set forth by the bandwidth subsidizer (the app provider) at the time the app is created and deployed.

The resulting "swarm" of constantly evolving toll-free apps can naturally (via free market response to dynamically changing demand levels) encourage bandwidth use at optimal times (e.g. off-peak vs. peak), which not only lowers the bandwidth cost to consumers and content providers, but also improves the performance of the carrier network's existing infrastructure (lower power, faster speeds during peak times, reduced errors).

Lastly, the app-centric solution likely obviates the need for DPI (avoiding privacy concerns) and is well-suited to being deployed across various carrier networks simultaneously (a shared "carrier-agnostic" platform) which eases the adoption of toll-free activities by bandwidth subsidy providers (e.g. the app providers, who are either content providers, merchants, service providers, or government agencies). For technical descriptions of the method, see related PCT & U.S. patent filings (e.g. Application Activity System USPTO 20120036051 & 20140337114).^[8]

Reception and impact

Zero-rating certain services, fast lanes and sponsored data clearly have their benefits for users of the subsidized services, but have also been criticised as anti-competitive and limiting open markets.^[4] As many new internet and content services are launched targeting primarily mobile usage, and further adoption of internet connectivity globally (including broadband in rural areas of developed countries) relies heavily on mobile, zero-rating has also been regarded as a threat to the open internet, which is typically available via fixed line networks with unlimited usage tariffs or flat rates.^[9] The Wikimedia Foundation and Facebook have been specifically criticized for their zero-rating programs, to further strengthen incumbent mobile network operators and limit consumer rights to an open internet.^[10]

See also

• Zero-rated supply (economics)
• Facebook Zero
• Wikipedia Zero
• Google Free Zone
• Deep packet inspection (DPI)
• Multichannel video programming distributor (MVPD)

References