The Real Question Behind Zero-Rating: Who Should Pay?

[Commentary] Transmitting data through wireless networks is costly, as the agency has admitted countless times. Traditionally, costs have been recovered via consumer data plans. Content producers, on the other hand, haven’t had to bear the consequences of network upkeep. If however, edge providers were forced to bear some of these costs, then they would find themselves pressured to push for technological advances to economize on bandwidth. Economists call these costs externalities, and a long line of work suggests that they lead to inefficient markets. The report and the letters showed that the investigation rested on the belief that all content, whether it is zero-rated or not, conforms to an ideal of perfect competition. But, in the real world, there are search costs, barriers to entry exist, content has market power and there are significant transaction costs.

[Will Rinehart is Director of Technology and Innovation Policy at the American Action Forum.]