
Countries With Zero Rating Have More Expensive Wireless - J253
https://www.eff.org/deeplinks/2019/02/countries-zero-rating-have-more-expensive-wireless-broadband-countries-without-it
======
wyldfire
"What is zero rating?" you might ask. (I did). This is the process of ISPs
offering free carriage of exclusively particular traffic. e.g. T-Mobile's
"unlimited [downsampled] youtube" offering, Facebook's free internet (offered
in India IIRC), Amazon's whispernet for Kindle.

~~~
shmerl
It's an ugly anti-competitive symptom of the actual disease - data caps.
Curing the symptom helps marginally. What needs fixing is the disease.

~~~
rayiner
What exactly is “anti-competitive” about data caps? They’re just a form of
congestion pricing. Congestion pricing is now widely considered desirable for
things like roads. Now, ideally, we would have fine grained congestion pricing
with fees kicking in based on tower occupancy level. But customers would
probably find that too unpredictable.

Moreover, congestion isn’t the only cost to account for. Take the total number
of dollars of capital and maintenance costs of the network over it’s useful
life and divide by the total number of bits sent during that useful life. That
produces a cost per bit that seems quite reasonable to apply to customers
based on how many bits they send.

~~~
bb88
If an ISP is the only game in town, and they zero rate their streaming service
but put a cap on Netflix it is anti competitive.

The problem with your roads analogy is that there's more than one road to
take. Not all roads are tolled.

And the cure isn't getting rid of data caps, the cure is increasing
competition on a local level.

~~~
toomuchtodo
The physical RF spectrum is the local road. There are no more roads to take.
No amount of economic policy supporting competition is going to bend the laws
of physics, unless you're willing to shovel herculean amounts of resources
into microcells (even smaller than 5G cell sites) to reduce contention
(essentially replacing fiber and wifi).

~~~
dzhiurgis
National network + eSIM. Retailers compete on providing better internwtional
traffic (pretty much as it is now with broadband in many countries).

~~~
toomuchtodo
Your suggested solution does not address the local cell network contention
issue zero rating attempts to mitigate.

~~~
Firadeoclus
How does zero rating "attempt to mitigate" local contention issues? Zero
rating does not reduce local network traffic.

~~~
toomuchtodo
Forcing lower bandwidth versions of video and audio streams reduces local
spectrum use. Do I really need anything above 480p on my iPhone? Probably not,
so the carrier incentivizes me with zero rating.

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LarryDarrell
Step 1: Convince everyone that the goals of anti-trust are low prices, not
breaking up the consolidation of corporate power.

Step 2: Cripple the regulatory powers of the government by convincing everyone
that government is the problem.

Step 3: Soak your now captive customers in a regulatory friendly / competion-
free environment.

~~~
shmerl
What's wrong with low prices though? Those who are fighting anti-trust try to
claim that it restricts free market, while in fact these liars are themselves
restricting it through monopolization.

~~~
Vinnl
Because step 3 involves _higher_ prices.

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tzs
How much of this is due to in places with cheap wireless offering zero rating
won't be as effective at attracting customers as it would be in a place with
expensive wireless, hence you are more likely to see it offered in places with
expensive wireless?

For instance, T-Mobile's "Music Freedom" zero-rates a whole bunch of music
streaming services. In the US, where data is expensive, that could easily
cause someone to pick T-Mobile over one of the other providers, if they listen
to a lot of music. With "Music Choice" I can get by on the smallest data plan.
Without it, I'd have to step up, maybe even to unlimited.

In a country where data is cheap, something like "Music Freedom" wouldn't make
much difference, and so I could see less ISPs bothering with the technical and
administrative overhead of having such a program.

~~~
proofofconcept
This is putting the cart before the horse. Competition is what drives down
prices. When companies aren't allowed to zero rate content then they're all
offering more or less the same product so they have to compete with each other
on price.

Also keep in mind that zero rating is itself an explicit admission that
network capacity and overhead aren't factors in the price. The whole deal is
that the wireless company lets customers on those plans use unlimited data at
no extra charge as long as it's for zero rated content. Allowing customers at
that same price point to use that same unlimited data without arbitrary
restrictions would ultimately be just as profitable.

~~~
hueving
>Also keep in mind that zero rating is itself an explicit admission that
network capacity and overhead aren't factors in the price.

No, that's not what that means. You can easily take special means to get
direct peering to zero rated partners or install CDNs so that zero rated
traffic does have any impact on peering links. Congestion at the last mile is
only a small part of what an ISP deals with.

~~~
scarface74
For wireless carriers it’s all about the last mile. You can only get a certain
amount of data within a certain amount of spectrum. Yeah I know I’m butchering
the explanation. It’s been over 20 years since I studied it.

[https://en.wikipedia.org/wiki/Shannon%E2%80%93Hartley_theore...](https://en.wikipedia.org/wiki/Shannon%E2%80%93Hartley_theorem)

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resters
While it is interesting to read this, there are a lot of confounding
variables. Chances are countries which would allow zero ratings in the first
place would also be more tolerant of other incarnations of excessive market
power.

Note, that in spite of my opposition to net neutrality, I strongly support
using traditional antitrust mechanisms to prevent firms' excessive market
power and last mile monopolies from leading to unfair prices.

~~~
gnicholas
I had the same thought. The first paragraph concludes: _And the evidence is in
that it conclusively makes broadband more expensive_ , but this seems a bit
much given the confounding variables you mention.

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makomk
I get the feeling that the authors of this report are not entirely honest. For
example, part-way through they make this claim about Portuguese operator MEO's
plans:

"Using applications participating in the DPP is two up to 77-fold cheaper
compared to using applications via general data volume. This strong incentive
for customers to use participating applications infringes on the rights of
consumers to use applications of their choice and the rights of CAPs to
provide services independent of the origin of their users."

Up to 77 times more for neutral data than data to their partners - sounds
scary, but how do they get that figure? Well, they take MEO's smallest month-
to-month contract which offers 250 minutes + SMS + 500 MB of data + free in-
network calls, divide the amount of data by the total cost, and compare this
with the nominally 10 GB Smart Net addon which _only_ offers data to the
included services. That is, they're treating the phone and SMS part of the
all-internet plan as though it costs nothing when it definitely does not.

I think the two-fold cheaper figure on the lower end is wrong too - on paper
the non-neutral Smart Net is more like three times cheaper than comparable
prepaid data, at least for people who make good use of the Smart Net data
limit. Bear in mind that as I understand it each Smart Net plan is for access
to _one_ of Messaging, Social, Video, or Music, which includes a handful of
the main sites in that category. I imagine most people will have usage that is
relatively low and spread across multiple categories plus some outside-of-
package usage, in which case a general internet access plan will work out
cheaper.

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illumin8
Does anyone know who regulates Comcast/Xfinity in California? I'm a cord
cutter and with 4K video becoming more popular, I've almost hit my 1TB data
cap twice in the last year. Comcast/Xfinity is illegally promoting their video
services by delivering it over the same network, but zero rating their
content, while charging customers overage fees for using 3rd party video
services like Netflix, Hulu, and Amazon Prime Video.

I filed a complaint with the California PUC and they told me they don't
regulate Comcast/Xfinity because they are not a landline telephone service.

It seems horrible that there might not be any regulator that is keeping
Comcast/Xfinity from harming consumers like myself.

~~~
andrewla
Do they offer a higher data cap plan?

It seems like the problem as you're phrasing it is that they are deliberately
harming consumers -- it costs them the same to deliver the content whether via
Netflix/Hulu or their own services, but they are choosing to overcharge
customers to force them into their own service.

An alternative way of looking at it is that their own service is offering a
subsidy -- bumping you up implicitly to a higher tier in exchange for using
their service.

In the latter case, it's not really abusive; they're offering an enhancement;
the "actual" price is the next tier up, but you're getting a "discount" in
exchange for preferring their own video service.

Which is to say that this is awful behavior, and nothing is more frustrating
than the fact that (the lack of) competition makes it so that it is nearly
impossible to switch to another internet provider that does not engage in this
kind of monkey business. The other problem is that I think many customers
prefer this model -- they're willing to make the sacrifice and get the
subsidized package rather than shell out the extra money. I'm certainly guilty
of this; avoiding paying minuscule subscription fees for websites even though
I hate the ads. The value of my hatred is still lower than the cost of the
subscription.

~~~
gowld
Comcast "charges" its media arm wholesale less than retail price it charges
users to download Netflix content.

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nroets
IMHO net neutrality and zero rating are just the tip of the regulatory
iceberg.

The really hard work of the regulator is to ensure that telcos don't abuse
their access to spectrum and other resources. IMHO the best way to do this is
to force telcos to give each other access to their infrastructure at a
reasonable price. For example, when margins* are high enough, new virtual
telcos must be able to start up with minimal infrastructure.

The consumer side does not need a lot of regulation. If there is enough
competition, consumers will vote with their money.

Edit: Changed "prices" to "margins".

~~~
rayiner
That is not the best way. Defining “reasonable price” is extremely difficult
and that’s one thing the market does much better than the government. The
history of regulation in the 20th century, not just in the US but all over the
world, is a pattern of governments ditching the idea that they can calculate
the “reasonable price” and impose price controls, and moving to more market-
oriented mechanisms for regulation.

In the case of wireless, where there is no natural monopoly, the best approach
is to simply open up lots of spectrum and ensure there are a sufficient number
of competing carriers. There is a ton of spectrum being wasted for things like
television that could be used for broadband instead.

~~~
nroets
It just seems to me quite wasteful that there are so much telco infrastructure
is duplicated (redundant): For example digging along the same street more than
once to lay fiber. Or have cellular towers from different companies next to
each other.

On my last visit to the US, I used both "Straight Talk" and "Trac Phone".
These are virtual telcos that use Verizon/AT&T and T Mobile infrastructure.
New customers can choose a SIM card before activating the service.

Surely the prices paid by these virtual telcos are set by the regulator.

Here is South Africa, the third and fourth mobile operators roam on the first
and second mobile networks. AFAIK, the regulator force these roaming
agreements apon the operators. (Here I can get 50 GB of prepaid data for only
R500 = $38. Much cheaper than the US!)

So there are ways to set prices.

~~~
rayiner
> It just seems to me quite wasteful that there are so much telco
> infrastructure is duplicated (redundant): For example digging along the same
> street more than once to lay fiber. Or have cellular towers from different
> companies next to each other.

That was the basis of a lot of early 20th century regulatory thinking. That
was thoroughly discredited because it turns out that government price controls
are worse than duplicated infrastructure.

Governments only have an incentive to keep prices low, which is not the same
as the economically efficient price. From the government’s point of view, it’s
better to have cheap 3G networks forever than to have prices that lead to
investment into 4G and 5G networks. Low prices kill innovation, which is why
all the innovation is happening in IPhones and Macs and Surface tablets and
not cut-rate Acer and HP products.

MVNO pricing is not set by regulators. The FCC’s last major foray into rate
regulation, in connection with DSL loop unbundling, ended up killing DSL as a
viable competitor to cable because wholesale prices were set so low there was
no incentive to upgrade DSL networks.

~~~
qotgalaxy
> That was the basis of a lot of early 20th century regulatory thinking. That
> was thoroughly discredited because it turns out that government price
> controls are worse than duplicated infrastructure.

I'm sorry, I don't buy it.

~~~
rayiner
You don’t have to take my word for it. Read up on the history of the
Interstate Commerce Commission and the insane things it used to do (regulate
rates for air and truck freight). Read how companies like UPS came into
existence after those things were deregulated. Read how most of the western
world followed suit in the 1980s and 1990s.

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luka-birsa
Reading the comments bellow its really funny to hear all this bull about caps
being there to protect the providers and their lack of capacity.

I have 300 mbit link for 50 USD and no caps. I have full lte and 2TB downlink
cap for 25 USD.

But we do have strong competition and it seems it was never about capacity.
Its about who offers more. Its obvious that they can afford this since nobody
is loosing money, and all of this on a very small and marginal market where
isps purchsing power is small.

You are being bullshited to, dear Americans.

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julienfr112
What about country with more expensive wireless have zero rating ? If wireless
is cheap, you can afford to pay it so zero rating would have no 'client'.

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buboard
This report is particularly suspect. First of all zero-rating is not banned in
the EU, and it's not clear which countries are included in the "has zero-
rating" basket. The more likely interpretation of their data is that "in
countries with shitty internet, providers tend to offer a lot of zero-rating
offers". E.g the internet is vastly better in romania than in greece yet they
both have a lot of "differentially rated" offers

Then they only show two years , 2015 vs 2016, where there is a slight increase
of 2% in prices , without error bars. Then there is this:

> we repeated our analysis for zero-rating oﬀers introduced in 2016 or 2017.
> However, initially this did not produce statistically signifcant results in
> any category. Closer examination of the data however revealed Finland to be
> an outlier market, in which the replacement of a single oﬀer signifcantly
> changed the prices in almost all data volume aaskets. This is likely due to
> the fact that unlimited data plans, which do not sensibly admit a price per
> gigaayte calculation, are prevalent in Finland. We therefore repeated the
> analysis but excluded Finland from our dataset. In this case, we found a
> statistically signifcant result (p=0.04) for markets in which zero-rating
> was introduced between 2015 and 2016. These markets showed a 1% price
> increase between 2016 and 2017, whereas markets without zero-rating in both
> cases showed a 10% price decrease.

I think they are stretching it with p=0.04 on a cherrypicked sample of n=30,
and present a rather peculiar conclusion about their data. Zero rating is
obviously marketing garbage, but i am very unconvinced that it is the reason
why ISPs are not investing in their networks.

(It also took 10 minutes to download their 5MB pdf - talk about bad internet
;) )

~~~
Reason077
> _The more likely interpretation of their data is that "in countries with
> shitty internet, providers tend to offer a lot of zero-rating offers"._

I agree. They even seem to admit it's a pretty suspect analysis:

 _" However, since zero-rating offers are now prevalent in almost all EU
countries this analysis cannot be extended into the future."_

~~~
tapland
It's been slow but Telia (first proper zero rating court case in the EU afaik)
lost in the national courts in September, with the courts referring to EU
regulation from 2015.

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HillaryBriss
after reading this article, i have come to view zero-rating as a form of
branding. basically, the internet providers are trying to take a step away
from the forces of commoditization. once i viewed it that way, it's pretty
predictable that the price for the same exact service will be higher than if
zero-rating were disallowed.

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exabrial
I have my doubts whether or not this an apples-apples comparison. EU tends to
have extreme regulation and also lofty subsidies. Nevertheless, I agree with
the assertion that zero-rating is an anticompetitive practice. Actually rating
in general just kind of stinks. Billing this way has lead to the current
situation.

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ikeboy
Be cautious of getting causality claims from studies like this that don't try
to control for anything

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olivil
Highly anecdotal but while visiting Lithuania I had a prepaid SIM card with
200 local call minutes and 6GB of (quite fast) LTE data + unlimited Facebook
(including Messenger) and Spotify for 3 Euros for 30 days, SIM card included.

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ummonk
Obviously in countries with poorer wireless infrastructure there is more
reason to use zero rating to expand coverage...

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k__
I pay 35€ a month for 16GB LTE.

Is this expensive?

~~~
Strom
It can certainly be much cheaper. I pay 17€/month for "unlimited" LTE
(includes 9GB EU roaming) and this at ~75 Mbit/s up/down speeds in most cases.
Now it's hard to say what "unlimited" actually means in numbers, as it's just
defined as _reasonable usage_ in the terms of service. However as another data
point, the next cheapest plan is 100GB LTE for 15€/month, so I assume
unlimited is at the very least above 100GB.

