Consumer advocacy group Public Knowledge recently filed a petition with the Federal Communications Commission (“FCC”) challenging a multi-system operator’s (“MSO”) online video service as violative of conditions imposed as part of a 2011 merger and the agency’s Open Internet rules. The service allows the MSO’s customers to stream its licensed video content to computers, tablets, and mobile devices without incurring additional data usage charges. The MSO maintains the content of this service does not touch the public Internet – and thus is not subject to the Open Internet rules – because it is delivered on the same private, managed network as its cable services.

Public Knowledges’s main criticism of this arrangement is that the service is not subject to the data cap that the MSO imposes on some of its residential broadband internet access subscribers.  The conditions that the FCC and DOJ imposed on the MSO when approving a prior merger prohibit it from treating “affiliated” content differently from unaffiliated content in packages that include data caps.

But even apart from any merger conditions, Public Knowledge is targeting the propriety of “zero rating” – exempting certain content from data usage limits – under the framework of the Open Internet rules.  Although the Open Internet rules contemplated zero-rated content offerings, the FCC adopted a “wait and see” approach, committing to review such offerings on a case-by-case basis under the Internet Conduct rule, which requires consideration of a host of factors, including the level of end-user control, competitive effects, consumer protection, and impact on innovation.  Public Knowledge asserts these factors weigh against the reasonableness of the service, arguing that it represents the kind of behavior that the FCC sought to prohibit with the Internet Conduct rule.

Public Knowledge’s challenge reflects the regulatory uncertainty surrounding zero-rated offerings. Although the FCC recently acknowledged that it is gathering information on zero-rated offerings (from the wireless carriers offering such packages) the absence of bright-line rules in the Open Internet order, as well as the DC Circuit’s anticipated ruling on the legality of the Open Internet Order, complicates any enforcement action brought under the Internet Conduct rule.

Aside from this specific complaint the Public Knowledge petition highlights two important issues that the FCC may inevitably have to address. First, Public Knowledge’s request that the FCC require an MSO to lift its data caps suggests that its real target is not zero-rated offerings per se – which are generally well-received by consumers – but data caps themselves. Second, the petition also touches on issues the FCC is currently considering in a pending rulemaking revisiting the definition of an MVPD.