Will ‘Zero-Rating’ be AT&T’s Achilles heel in buying Time Warner?
As AT&T Inc. and Time Warner Inc. seek government approval for their $85 billion megadeal, regulatory scrutiny may impede this merger. AT&T plans to offer customers to stream as much content as they want through its own online TV service, namely DirecTV Now, without it counting toward their monthly data limits—a billing practice often referred to as “zero-rating”. But some Federal Communications Commission (FCC) staffers consider AT&T’s DirecTV Now exemption to be improper, because it disadvantages AT&T’s streaming rivals, such as Netflix. Competitors like Netflix worry AT&T could extend zero-rating to HBO Now which is owned by Time Warner, giving it a leg up. However, AT&T argues that zero-rating benefits customers by protecting them from surcharges and bolsters competition. It says it offers any company that wants to be zero-rated the same payment terms available to its DirecTV subsidiary. Based on historical record, such scrutiny focused on zero-rating is likely to result in conditions on the deal. “We’re convinced that these type of issues can be handled with conditions,” said AT&T CEO Randall Stephenson.