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Friday, September 8 • 5:30pm - 6:30pm
Zero Rating and the Adoption of Virtual and Augmented Reality

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By exempting the charges of using particular apps or websites from a user’s mobile bill, zero rating frees up resources (and, where applicable, data under a user’s data cap) enabling users to, among other things, experiment with and adopt new or less-widely used apps and content. Evidenced by its explosive adoption among mobile operators, zero rating is positioning itself as a business model for users’ early stage experimentation with and adoption of augmented reality, virtual reality and other cutting edge technologies that represent the internet’s next wave — but that also use vast amounts of data.

Currently, proponents of zero rating assert that it is a tool to increase internet usage in areas where mobile coverage exists, but the number of mobile internet users remains comparatively low, generally because of budget constraints or lack of familiarity with the internet. But in reality it may be even more significant: given the data demands of the newest interfaces and platforms, zero rating may be essential to ensuring that large segments of the population aren't completely excluded from the internet’s next iteration. Opponents, meanwhile, argue that it unduly discriminates against non-zero rated apps and content, which subscribers may consume only by paying for data. Whether couched in antitrust terms or not, the fundamental argument is one of anticompetitive foreclosure.

Characterized by activists as the “bleeding edge of net neutrality,” regulators around the world are grappling with whether to prohibit the practice, allow it, or allow it with various restrictions. The EU’s 2016 net neutrality guidelines, for example, created an uncertain patchwork of net neutrality regulations in the region. Some regulators have banned zero rating practices - Hungary, Sweden, and the Netherlands - while others that have not - Denmark, Germany, Spain, Poland, the United Kingdom, and Ukraine. And whether or not they allow the practice, regulators (e.g., Norway’s Nkom) have lamented the lack of regulatory certainty surrounding zero rating, a fact that is compounded by a lack of data on the subject.

The objective of this paper is to paint a clearer picture for regulators of the costs and benefits associated with zero rating so that they can better tailor regulations to the particular realities faced by both consumers and providers in their countries. We plan to accomplish this by:
• Providing more precise data points to regulators. We will identify different dynamics of zero rating offers depending on factors such as economic conditions, mobile internet penetration, market share of operators, and the type of app(s) or content zero-rated. At the same time we will clarify how the practice is currently being regulated in commonly misunderstood frameworks, including India, Brazil, and Chile; and
• Outlining an ex post, effects-based analysis of zero rating consistent with modern antitrust law and economics. Instead of foreclosing or mandating specific conduct, our aim is to provide an evidence-based approach that permits and fosters experimentation, innovation, and technological development, intervening only where actual competitive harms arise.

The goal of any well-designed zero rating regulatory regime is to preserve technical and commercial flexibility in order to ensure that the opportunity costs imposed by regulation do not outweigh the benefits of zero rating. Zero rating can be a tool for digital inclusion and experimentation to promote the adoption of both basic and innovative apps or content, such as data hungry virtual reality and augmented reality apps consumed over the mobile network. Our goal is to provide a detailed, flexible and readily applicable framework in order to help ensure that regulatory decisions regarding zero rating are undertaken in a manner that confers maximum consumer welfare around the world.


Allen Gibby

International Center for Law & Economics

avatar for Geoffrey A. Manne

Geoffrey A. Manne

President, ICLE

Friday September 8, 2017 5:30pm - 6:30pm EDT
Founders Hall - Multipurpose Room