What Does It Cost to Binge-Watch 'Friends'? That Might Depend on What a Judge Says

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HBO Max costs $14.99 a month. It says so on the website. But those saying it costs more might not be wrong. For customers who don't use AT&T mobile service and consume a lot of data — by binge-watching Friends, for example — those HBO Max users are likely paying extra for exceeding their data allowances. As for AT&T customers, well, they too may be in for sticker shock — a possibility recognized in a declaration from one of AT&T's executives submitted in a California federal court on Wednesday.

"Customers who relied on AT&T’s Data Free TV feature for years, as well as those who only recently started enjoying the benefit of sponsored data when using the HBO Max service that launched in May of this year, will be upset that AT&T is no longer offering a service and may blame AT&T for their frustrated expectations," states Barbara Roden, vice president of mobile broadband network services. "Some may abandon AT&T’s mobile service, the relevant AT&T video service, or both, in favor of competitive alternatives."

It's not yet a given that AT&T will no longer be able to practice "zero rating," referring to how a telecom data provider can incentivize sign-ups by exempting the consumption of its owned content against an individual subscriber's data plan. That could depend on the outcome of a pair of cases examining SB-822, California's tough net neutrality law. Yesterday, after nearly two years of no action in either case, the U.S. Department of Justice along with much of the telecom industry renewed a call for a preliminary injunction.

In Oct. 2018, California agreed to hold off on enforcing its net neutrality rules until there was some clarity on the FCC's attempt to rollback federal rules. The following October, the D.C. Circuit Court of Appeals blessed the FCC's repeal with the foreshadowing caveat that the agency's attempt to preempt states was problematic. "[T]he Commission lacked the legal authority to categorically abolish all fifty States’ statutorily conferred authority to regulate intrastate communications," stated the D.C. Circuit opinion.

There won't be any attempted trip to the Supreme Court over the repeal of rules against blocking and throttling of digital traffic. Last month, those challenging the FCC's deregulation opted against a petition for review. The conservative makeup of the high court likely influenced the decision. Instead, the hot activity now returns to California and Vermont, another state getting sued over its attempt to fill the net neutrality void. 

There, the telecom companies frame last year's D.C. Circuit opinion as best they can.

"Notably, the court did not hold that States could regulate interstate broadband or address the Communications Act’s preemption of any state efforts to do so," states a memorandum from various industry groups in favor of an order enjoining SB-822. "The D.C. Circuit also did not decide whether the [FCC's net neutrality rollback] preempted any particular state law, 'because no particular state law was at issue in that case' and so 'it would be wholly premature to pass on the preemptive effect...'"

The telecom industry believes now it's time to do so, which basically means taking a look at SB-822 and deciding whether it should be preempted as undermining and conflicting with federal law. And that depends on what SB-822 is doing. According to the Justice Department's own brief (read here), it does nothing less than "regulate the entirety of the Internet."

"California’s nullification of federal law—with the concomitant regulatory uncertainty and resulting instability of the Internet marketplace it creates—is not in the public’s interest, not otherwise justified, and thus should be enjoined," continues the DOJ.

The question will soon become whether U.S. District Court Judge John Mandez agrees with the assessment that California is regulating communications across state lines. In deciding, the judge will look closely at the particulars of SB-822 such as the ban on "zero rating," which not even the Obama-era FCC decided to stop.

Many net neutrality advocates believe that when a company like AT&T allows its mobile customers to consume as much Friends as their heart desires without respect to data caps, it creates unfair advantages for vertically aligned corporations while making it tougher for independent content producers to access a market. Power gets centralized and pricing is distorted in favor of the gatekeepers.

That's the view that California AG Xavier Becerra will likely expand upon when attempting to justify SB-822 as a means of intrastate regulation in accordance with the state's unfair competition laws. For now, his office says it is studying the just filed court papers while AT&T speaks about what this wonky net neutrality debate will mean to its bottom line.

"Because it may be difficult or impossible to win many of these consumers back within the foreseeable future, SB-822 would likely cost AT&T substantial revenues," continues Roden. "In addition, aggrieved customers will express their dissatisfaction to their friends and acquaintances. Their dissatisfaction will likely also attract widespread, negative media attention. This reputational damage could reduce the ability of AT&T to attract and retain wireless or video (or both) customers for many years."