This paper will examine current disputes whether national regulatory authorities (“NRAs”) should permit broadband carriers and content providers, such as Facebook, to subsidize broadband access to a limited, “walled garden” of content. The subsidy also can sponsored access to selected sites without debiting a monthly data allowance. The paper concludes that even though carriers and content providers serve profit maximizing goals in zero rating and sponsored data arrangements, the practice can have positive spillover effects including more access by impoverished users.
Internet content providers and carriers currently consider whether to offer subsidized access as a way to “groom” tentative, subsidized users into paying ones. During the subsidized term, individuals least able to afford even extremely low cost access options have opportunities to access content, albeit a curated selection. The paper examines zero rating without the inclination to pass judgment using an absolute either/or basis, as often occurs on issues collectively framed as network neutrality, or open Internet.
A more nuanced view identifies both costs and benefits in allowing zero rating. On balance, welfare enhancing benefits appear to exceed costs, including harm to competition and some consumers. The paper suggests that carriers should offer zero rating opportunities on a conditional and promotional basis thereby making it more difficult for existing subscribers simply to avoid paying surcharges for exceeding data caps. While NRAs should not micro-manage carriers’ service pricing, establishing qualification rules fits with other universal service initiatives that rely on well calibrated and targeted subsidies to simulate broadband service demand and supply.