Classroom Companion: Business

21.5 · Zero-Rating

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Twitter has also initiated a zero-rating program—Twitter Zero—which is avail-
able for subscribers of selected ISPs in more than six countries.
Zero-rating gives the ISPs the power to select winners in the digital markets 
motivated by how much they are willing to pay for zero-rating access of their ser-
vice. Even though zero-rating means free services for the users, the cost of provid-
ing this service is in many cases paid by the ASP. Consumers, when everything else 
is equal, prefer services that have zero-rated access compared to paid access. 
Therefore, starting a zero-rating program for a service may be a way to circumvent 
competition, thereby creating a virtual monopoly for this service.
One issue concerning zero-rated content is that ASPs may offer access to their 
websites or services for free also in cases where these services are not the best ser-
vices for the consumers. For instance, a bank with high interest rates for loans may 
pay an ISP to offer free access to its website to attract customers. This will have an 
undesirable effect on the free market for loans. A particularly vulnerable target 
group for such practices is poor people with few other opportunities to access the 
Internet than through a zero-rated service.
21.6
 Conclusions
Net neutrality has transformed the Internet into a formidable arena for innovation 
of new services and applications. The technology has also created entirely new 
business concepts. This includes concepts such as sharing economies, social media, 
e-commerce, streaming of music and films, multiplayer online games, distance 
learning, telemedicine, and much more. The main reasons have been that:
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The extremely simple Internet technology itself does not discriminate between 
the different content the data packets may contain—the Internet itself is com-
pletely neutral.
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The evolution of the information and communication technology is character-
ized by steady progression toward higher data rates, wider range of mobile 
applications, more storage capacity, and increased processing speed. Hence, the 
arena for experimentation and innovation is expanding, steadily allowing new 
opportunities to be explored.
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The Internet protocol is such that the ISPs, in most cases, cannot identify the 
type of content the data packets contain and for what purpose they are sent. In 
democracies, regulations also oblige them to treat all users equally. The same 
applies to services except in cases where differentiation is necessary for technical 
reasons, e.g., real-time streaming versus downloading of webpages. This also 
leads to flat price structures independent of application and, to a large extent, 
also to the volume of data exchanged.
Net neutrality obviously restricts the business opportunities of the ISP. Therefore, 
the strongest opponents against net neutrality are the ISPs. They claim, among 
others, that net neutrality reduces the willingness to invest in advanced fiber-optic 
technologies and broadband networks. Proponents argue that this is, by fare, coun-