FCC Cracks Down on AT&T

The Federal Communications Commission sent a letter to AT&T Inc. to express concerns over the telecom company's practice of exempting its own streaming video services from data-usage caps for its wireless customers.

The Dallas telecom giant, which agreed to buy Time Warner Inc. for $85.4 billion last month, began the practice known as "zero-rating" with its own DirecTV's video app in September. AT&T has said it plans to do the same for its over-the-top service DirecTV Now when it launches later this month.

AT&T's practice "may obstruct competition and harm consumers by constraining their ability to access existing and future mobile video services not affiliated with AT&T," Jon Wilkins, the head of the FCC's wireless division, wrote in a letter to Robert Quinn, AT&T's head of external and legislative affairs.

In a statement responding to the letter, Mr. Quinn argued that consumers benefit from the program because it lets others pay for data use. "We welcome any video provider that wishes to sponsor its content in the same 'data free' way," he said. "We'll do so on equal terms at our lowest wholesale rates."

AT&T says zero-rating promotes competition. It says it offers any company that wants to be zero-rated the same payment terms available to its DirecTV subsidiary. But the FCC is arguing that the in-house payments made by DirecTV don't require any net outlays by the parent company, and so can't be compared with AT&T's rivals paying for the same privilege.