Yes, because it's clearly the same thing, and it has the same problem.
Suppose the ISP owns or has some "unrelated" partnership with Pandora. Now the money Pandora is "paying" is just money the ISP is passing back to them under the table through the other relationship, and the ISP is really only disadvantaging Pandora's competitors because the ISP stands to collect some of the rents from thwarting competition.
I track each of my customer's usage, figure out from IP addresses how much of their usage was on their T-Mobile connection, and rebate them my estimate of what T-Mobile will charge them for that usage.
Is there a problem with this? If so, how would you address it?
2. Similar to #1, except now my subscription service includes a bandwidth limit. A given subscription plan is allowed a specified amount of music data per month from my servers. Again, I have no relationship with T-Mobile or any other carrier other than some of my customers using those carriers to access my servers.
Each month I buy each customer a prepaid data card for their carrier with sufficient bandwidth to cover one month of their subscription to my service.
Is there a problem? If so, how would you address it?
But let's just put the final nail in the coffin here. Does the music service want to pay their customers $1 for every gigabyte of music their customers listen to? Fine, pay it regardless of what the customer's ISP charges for bandwidth, the same amount to any customer on any ISP. If doing that is profitable then it's profitable regardless of what the ISP charges the customer, it's better for the music service because it doesn't give the ISP any pricing leverage on bandwidth charges, and if paying the customer money to encourage them to use the service works for customers with per-byte billing then it should work just as well for customers with unlimited plans, so the proposal will earn them even more customers.
Netflix has a program where they will place servers inside an ISP's network. This allows them to deliver video without paying a third party for transit. If this lowers their costs, they could theoretically pass those savings on to the customers of that ISP (Google Fiber customers, for example). I wonder if Netflix offering their service to those customers for $5 / month and other ISP customers for $10 / month would be a net neutrality violation?
The same goes for movies on YouTube. Because Google doesn't have to pay for transit, they could undercut Amazon and Apple. Is charging less because their costs are less anti-competitive?
It might be the same problem, but it isn't the same thing. Who would the FCC fine?
Also, you're trying to have it both ways. You're also asking what the difference is between if the music service does it and if the ISP does it. The difference is that while both are bad the FCC can fine the ISP for doing it.
As for the hypothetical where a service will reimburse for fees (like my bank does when I use out-of-network ATMs), I have a hard time seeing any FTC issue.
Why are you assuming that? Zero-rating raises barriers to entry which reduces competition. Less competition harms consumers.
> As for the hypothetical where a service will reimburse for fees (like my bank does when I use out-of-network ATMs), I have a hard time seeing any FTC issue.
Let's fit the analogy and see if you can spot it then. The ATMs are the ISPs and the ISPs have regional monopolies, so suppose there is one company that owns every ATM in California. Furthermore the government prohibits anyone else from constructing any ATMs in California.
The ATM company is also a bank. The ATM company is prohibited from favoring its own bank and charging its customers lower ATM fees, so instead the ATM company charges the same fees but the ATM company's bank offers to refund them. Do you see the trouble now? It's just a sham transaction to skirt the rule. And then the ATM company can raise its ATM fees to a hundred dollars because its bank's customers aren't paying them and it wants the other banks to go out of business.
I'm having a hard time seeing that. If I have two kids and I reward one with some candy, that's not the same as punishing the other one.
Harm to competition comes from imbalance, which doesn't require punishment. Reinforcement works just as well.
Is there a problem if Pandora were to offer an overage-fee rebate benefit to T-Mobile customers? It's effectively the same thing, except they are paying end users rather than the middle-man. I personally don't see a problem with that and that makes me think that the simpler option of just paying the middle-man (T-Mobile) for zero-rating should be okay as well.