Layton

certain data does not count against a mobile plan. About half of the world’s operators have used
zero rating for more than a decade, and it has been helpful to increase internet adoption
particularly in developing countries.
Facebook’s Free Basics, which offers users free access for essential services in developing
countries has encouraged millions to get online without any charge for data. Facebook reports
that about half of Free Basics’ users become Internet adopters in 30 days as a result of the
program. 52 Facebook has suffered an undeserved backlash from net neutrality advocates who
capriciously conflate principles of Internet openness with anything that does not meet their
unrealistic and undesirable standard. It would seem that Internet activists would support efforts
from mobile operators and Internet companies to facilitate people of low-income to get online,
particularly those in developing countries. Such programs should be celebrated by activists as
valuable demonstrations of corporate social responsibility.
My paper on zero rating is one of the few empirical investigations to test the assertions that zero
rating practices are harmful. In general zero rating is used by small and entrant mobile operators
as a way to differentiate from incumbents. The entities that take advantage of zero rating tend to
be small and emerging content providers and applications. But even in cases where established
services such as WhatsApp and Instagram enjoy zero rating, I do not find that they do not crowd
out competing services. In fact even where WhatsApp is zero rated, those countries enjoy a
multitude of messaging apps.
The amount of zero rating activity is less than 1% of all contracts and traffic in the markets studied.
Thus the impact of zero rating is negligible but not negative. My research finds the opposite to
advocates’ claims; it turns out that bans on zero rating harm competition and consumers.
However bans negatively and disproportionately impacted smaller telecom providers and their
customers.
The research was set up to test the purported harms as suggested by critics of zero rating
The operator that offers zero rating will win market share.
The zero rated service will win market share.
The presence of zero rating will preclude the emergence of new applications and services.
Users don’t go to non-zero rated content. If Facebook is free, they don’t venture beyond it.
Operators that zero rate their own content foreclose other content.
I looked at countries with hard net neutrality rules that imposed bans on zero rating: Chile,
Netherlands, and Slovenia. In Chile and Slovenia, there was no record of consumer complaints
about zero rating. Bans were implemented as the result of a single complaint by a net neutrality
activist organization. In Netherlands the ban was implemented to effect a policy desired by the
Ministry of Economic Affairs, not the telecom regulator.
There are a number of compelling studies and reasons to allow differential pricing including
52 https://developers.facebook.com/docs/internet-org
16 | 7 January 2016 | Differential Pricing for Data Services