A recent decision by India’s telecom regulator to prohibit differential charges for Internet content – which effectively blocked Facebook from offering its Free Basics service in the country – highlights how regulators around the globe continue to work through whether and how “zero-rating” data services may be permissible under their country’s net neutrality framework.  Zero-rating services allow consumers to access certain content without being charged for that data.  For example, Facebook’s Free Basics program offers users no-fee access to a text-only mobile version of the Facebook social network, as well as to certain news, health, job and other services.

Proponents of zero-rating and sponsored data services argue that such services give consumers an affordable option to access content on the Internet where they may not otherwise be able to afford broadband Internet service.  Facebook argues that its Free Basics program “provides people with access to useful services on their mobile phones in markets where internet access may be less affordable.”

Critics counter that zero-rating or other forms of sponsored data plans violate basic net neutrality principles by creating walled Web gardens that prevent low-income consumers from accessing the “full” Internet.  Additionally, critics contend that ISPs have an incentive to favor their own content or well-resourced incumbents under sponsored data plans, inhibiting open competition between Web services and platforms.

The Organisation for Economic Co-operation and Development (OECD) takes a more nuanced position, arguing that zero-rating can be “pro-competitive and may have beneficial aspects for economic and social development,” but that regulators need to be vigilant because zero-rating could be used to “impede new or innovative firms from entering the market.”

The Telecom Regulatory Authority of India’s (TRAI) decision prohibits Internet service providers (ISPs) from offering or charging “discriminatory tariffs for data services on the basis of content,” or entering into any arrangement or agreement “that has the effect of discriminatory tariffs for data services being offered or charged to the consumer on the basis of content.”  Until that decision, Facebook had been planning to launch its Free Basics service in India in an attempt to serve the over 800 million without mobile Internet access.

In the U.S., the Federal Communications Commission (FCC) adopted Open Internet rules last year that prohibit broadband ISPs from blocking or throttling content, or engaging in “paid prioritization,” where Internet content providers could pay ISPs for prioritized delivery of their content.  The FCC declined to specifically address the permissibility of zero-rating or sponsored data services as a general matter, enabling the agency to address these types of services on a case-by-case basis. These Open internet rules are still working their way through the courts and it remains unclear whether the FCC would seek to challenge zero-rating and sponsored data services under its Open Internet framework.

Several mobile broadband ISPs in the U.S. have announced sponsored data or zero-rating offerings.  For example, Verizon and AT&T have announced sponsored data programs that allow third parties to pay to exempt the data used for their services from counting against consumers’ data plan limits.

Although in India concerns about unequal access to the Web prevailed over arguments that zero-rating could bring Internet access to those who cannot afford it otherwise, there may be further efforts to deliver low cost Internet access to India’s unserved millions.  Meanwhile, ISPs are likely to continue to look for new ways to differentiate their mobile services through zero-rating and sponsored data promotions around the globe.