“Zero tariff” products, different countries have different regulatory attitudes

In the past two years, China's three major telecom operators have cooperated with Internet companies such as BAT and other major Internet users to launch “traffic discount cards”, which has been widely welcomed by users. In fact, such businesses have long appeared in the world. Telecom companies in major countries such as Europe and the United States have launched “zero-cost” products in cooperation with Internet companies in the early years. Internet companies are paying for their own services. The traffic expenditure coming.

In foreign countries, such businesses have become the focus of debate because of the network neutrality concerns, and the regulatory trend is also full of twists and turns. In the Chinese market, will the introduction of such “zero-cost” products interfere with fair competition, and how is regulation regulated?

China's "zero tariff" business background

In recent years, with the rapid development of mobile Internet, various types of mobile app applications have emerged. Users' Internet traffic has soared, spending has continued to grow, and spending has become an urgent need for users. According to the statistics of the Ministry of Industry and Information Technology, in December 2017, China’s monthly mobile Internet access traffic reached 2,753M, and the average mobile phone traffic expenditure per household reached 38.7 yuan. From the perspective of content providers, popular apps have a wide penetration rate and large user stickiness, and the traffic consumption is very considerable. Products with low tariffs are urgently needed to attract new users to use their services and enhance user stickiness. From the perspective of network operators, through the cooperation with content providers, the innovation of business model can not only cultivate user traffic consumption habits, but also attract more new users to the network, and also consolidate users with the influence of large Internet companies. Basis to expand new market share. The two sides hit it off and collaborated to launch a number of "traffic offers" for specific App or specific content providers. Such products are generally popular among users because of lower expenditures.

At present, the attitudes and market strategy choices of the three telecom operators in China to cooperate with content providers such as BAT to launch “traffic discount” products are different. China Unicom is the earliest product promoter. China Telecom followed up. Both companies have cooperated with BAT companies to launch various targeted traffic discount cards, as well as large traffic such as video, banking, ordering platforms, logistics companies, and shared travel. Content providers have partnered to launch targeted traffic discount cards. China Mobile has only launched a small number of similar businesses for its own products, and has not yet conducted large-scale cooperation with content providers.

Same as "zero tariff", there are differences between China and foreign countries.

The “zero-cost” service launched by telecom operators first appeared in 2010 and was sponsored by social media Facebook. The purpose is to enable users in underdeveloped areas in Asia and Africa to use their business to achieve international expansion. Later, companies such as Twitter also operate with telecommunications. The business has carried out such cooperation. Since 2014, large telecom operators in Europe and the United States such as AT&T, T-Mobile, Sprint, Verizon, etc. have begun to provide such services. There are three main forms. The first is to exempt users from all traffic charges on content provider websites and apps. For example, Verizon's "FreeBee Data 360" allows businesses to pay for traffic generated by users accessing their mobile websites or apps. The second is to only exempt users from the traffic charges for specific access actions that occur on content provider websites or apps, such as T-Mobile's "Binge On" service, which no longer watches users watching Netflix and other streaming media sites. Video content is counted in their data plan, but the video clarity played on "Binge On" will drop to 480p in non-HD. The third is that operators provide traffic fee reductions to users for their own operations. For example, AT&T Wireless introduces traffic-free TVs on its own apps, exempting users from spending beyond the package traffic pack.

From the background of the new traffic tariff scheme, foreign countries are the active cooperation between content providers and telecom operators. Content providers actively cooperate with each other to attract users to use their services, and reduce the traffic charges for users. China's "zero-tariff" similar business is a helpless innovation of telecom operators in a weak market position. China Unicom faces difficulties in development and hopes to use this cooperation opportunity to bring new revenue growth points and reverse the trend of continued decline in profits.

From the perspective of the operation mode of the new traffic tariff scheme, there are also differences at home and abroad. The foreign “zero tariff” is “post-paid”, and the content provider pays the traffic expenditure of the user using its business. In China, it is mainly “forward payment”, which is still paid by users themselves, and is rarely “post-paid”. In particular, China's telecom operators are in a prominent disadvantage in cooperation negotiations. Content providers not only do not pay for this, but also hope that telecom operators can compensate for this. The telecom operator "pays".

Supervision: Time to change the world

The launch of the “zero tariff” business has changed the rules of market competition and brought about a multi-interest game, which has attracted the attention of national regulatory agencies. On the whole, it has shown a “threefold” trend, but the general principle has not changed, that is, to maintain the market. Healthy development, safeguarding user interests and encouraging innovation.

——From the beginning of 2013 to 2015: Regulators began to pay attention and investigation, but the regulatory attitude is not clear.

In the early days of the launch of the “zero tariff” business, the United States, the European Union and other regulatory agencies mainly treated it as a new thing on a case-by-case basis. The investigation was mainly based on the fact that the parties did not understand each other and the regulatory attitude was in a chaotic period.

The US Federal Communications Commission (FCC) initiated an investigation into “zero tariffs” based on the “net neutrality” principle. In the 2015 Network Open Act, the FCC established the US network neutrality rule and also defined the basis for the regulator's handling of the “zero tariff” bill. The FCC believes that “zero tariffs” may represent a form of discrimination that undermines competition. In accordance with this principle, in December 2015, the FCC conducted an investigation into the “zero tariff” business of operators such as Comcast, T-Mobile and AT&T, requesting more information about the business description. At the same time, however, the FCC noted that the “zero tariff” cooperation between telecom operators and OTT is beneficial to users and can also promote competition in the investment and video industries.

In the EU, countries have different regulatory attitudes. In December 2015, the European Parliament passed the principle of network neutrality, requiring telecom operators to treat all types of content service providers equally, but did not mention the issue of “zero tariffs”. However, a few countries in the European Union have a banned attitude. For example, the Dutch government issued an explanatory memorandum in May 2015 stating that the country’s principle of net neutrality does not allow “zero tariffs”; Norwegian regulator NPT issued a statement in November 2014 stating any The “zero tariff” plan will violate the country’s principle of net neutrality.

Chile issued a ban on “zero tariffs” but it was not enforced. The Chilean regulator issued a statement in May 2014 requiring mobile operators to stop selling “zero tariffs”. However, it is reported that this statement was not enforced and some operators still provide “zero tariff” business, in part because regulators acknowledge that “zero tariff” is popular with users.

——After 2015, the positions of the regulatory authorities have been clear, and it is required to ban zero-tariff products.

India has completed the formulation of “net neutrality rules” and explicitly prohibits “zero tariffs”. On February 8, 2016, the Indian regulator trAI completed the network neutrality rule and finally decided to ban the practice of zero tariffs. Previously, when trAI was undecided on the rules of network neutrality, “zero tariff” was one of the key points of discussion and controversy. Brazil passed the “zero tariff” ban. In January 2016, the Brazilian government held a consultation to discuss the adjustment of the “cyber-civil framework” adopted in 2014, including the principle of network neutrality, which stated that the agreement between telecom operators and application providers must remain “open and unrestricted”. It is forbidden to sign any agreement including discriminatory priority data packets, and the agreement between the telecom operator and the application provider must be submitted for prior approval. The Netherlands rejected the appeal of telecommunications companies not to accept the "zero tariff" fine. On February 4, 2016, a court in the Dutch city of Rotterdam dismissed Vodafone’s appeal against ACM’s decision to provide a zero-cost plan for the video platform HBO and a fine of 200 million euros, setting a precedent and reminding others Telecom operators do not offer similar services.

—— At the beginning of 2017, after Trump took office, the United States withdrew its investigation of “zero tariffs”, and the reversal of regulatory attitudes caught the attention of the industry.

Shortly after US President Trump took office, the FCC announced the termination of the investigation of the “zero tariff” business. In January 2017, Trump was sworn in as President of the United States and immediately nominated former FCC member Ajit Pai (who served as legal counsel for telecom operator Verizon) as FCC chairman. On February 3, 2017, Ajit Pai announced the termination of the investigation of the “zero tariff” program for Comcast, AT&T, Verizon and T-Mobile. Pai stated that these “zero-cost” programs have been welcomed by consumers, telecommunications companies, especially low-income groups, and have increased competition in the mobile market. In the future, the FCC will not prohibit operators from providing free traffic to users, but instead focus on expanding broadband deployments and encouraging innovative telecommunications services.

——In December 2017, the EU established the regulatory principles for the “zero tariff” business.

In December 2017, the European Union's Electronic Communications Regulations (BEREC) released a report on the progress of its network neutral enforcement in its 30 member states. The 5th and 6th questions answered the supervision of the “zero tariff” business.

The report shows that 4 out of 30 countries do not have a “zero tariff” business. They are Estonia, Finland, Slovakia and Slovenia. The other 26 countries have one or more “zero tariff” businesses. From the type of “zero tariff” business, music streaming services are the most common (19 countries offer this type of business), followed by social media, video streaming, voice short messages and other types. From the assessment, the regulatory agencies of 11 countries have evaluated the “zero tariff” business, including Austria, Belgium, Germany, Croatia, Cyprus, Hungary, Italy, Luxembourg, Malta, Norway and the Netherlands. Other countries such as Portugal and Luxembourg are Conduct evaluation activities.

In general, there are two points in the EU's assessment of whether the “zero tariff” business is in compliance with the regulatory principles: one is to see if there are discriminatory barriers to other content and service providers, and the other is to see if it will harm the end user's choice. Regulators such as Austria, Italy, Croatia, Hungary, and Sweden believe that companies that allow users to access the “zero tariff” business when the “traffic package” is exhausted are clearly discriminatory. In the “zero tariff” service where no rate limit is set, the regulatory principle is to see whether the telecom operator remains open to all content and application providers, providing fair access conditions. There have been similar cases in the regulatory bodies in the Netherlands and Norway. In the “zero tariff” service with rate limiting set, the regulatory principle also includes whether the telecom operator provides equal rates for all content and application providers. For example, the Croatian regulator HAKOM has officially reviewed some of its application providers for a rate limit of 2 Mbits/s due to the video “zero tariff” service launched by the operator Hrvatski Telekom.

Implications for China and next policy recommendations

The international twists and turns on the "zero tariff" supervision attitude fully demonstrate that "zero tariff" is a complex business behavior and needs to weigh a lot of interests. The background and pricing model of the launch of such products by China's telecom enterprises are different from those of foreign countries. Drawing on the experience of international supervision and combining with the current situation of the Chinese market, it is recommended to encourage the business to reduce costs and benefit the public, but to interfere with fair competition and threats. Potential problems such as user privacy strengthen monitoring and analysis, and promote the continuous improvement of corporate service quality.

First, support telecommunications companies to carry out business innovations similar to “zero tariffs”. Foreign "zero tariffs" or similar "preferential traffic card" services launched by China's telecom enterprises are a new mode of cooperation between basic telecom companies and Internet companies. They have accelerated the popularization of broadband users, promoted competition in Internet applications, and reduced users' Internet expenditures. positive effects. At present, China's “zero-cost” similar business is still in the exploratory stage. The similar business package market share is low, and the regulatory agencies can maintain a wait-and-see attitude and leave enough space for the follow-up cooperation between telecom companies and Internet companies.

Second, improve the competition rules for cooperation between telecommunications companies and Internet companies. After the launch of the domestic “concession flow card” business, the traffic charges for users accessing large Internet-related applications are more favorable, which benefits the majority of users, but it further invisibly sticks to users. Other small and medium-sized Internet companies may not be able to cooperate with telecom companies to launch similar preferential activities because of lack of financial resources or market influence. This has contributed to the fact that “the stronger the stronger and the weaker the weaker”, it is not conducive to the formation of a competitive market structure. It is recommended to strengthen the tracking analysis, be alert to the destruction of the innovation environment by similar cooperation, improve the upstream and downstream cooperation competition rules of the industry chain, and maintain a dynamic market environment.

Third, optimize the market structure and promote enterprises to improve service quality. China's telecom enterprises have launched the "concessionary flow card" business, which not only has the innovative factors to actively adapt to the industrial integration, but also the weak operators are forced to overcome the operational difficulties. It is recommended to pay more attention to the imbalance of the competition in the basic telecommunications market and enhance the endogenous enterprises. Develop vitality. At the same time, telecommunications companies are encouraged to provide a variety of “non-zero tariffs” in addition to the “zero tariff” similar services, to provide users with better service experience and more favorable packages, as well as information on potential personal privacy and security. The protection issue is given enough attention to ensure effective intervention or remediation in the first place.