What is "zero-rating"

Zero-rating (also called toll-free data or sponsored data) is the practice of mobile network operators (MNO), mobile virtual network operators (MVNO), and Internet service providers (ISP) not to charge end customers for data used by specific applications or internet services through their network, in limited or metered data plans. It allows customers to use provider-selected content sources or data services like an app store, without worrying about bill shocks, which could otherwise occur if the same data was normally charged according to their data plans and volume caps. This has especially become an option to market 4G networks, but has also been used in the past for SMS or other content services.

In combination with zero-rating some services, MNOs are typically setting relatively low volume caps for open internet traffic or conversely, over-pricing open internet data volumes. Choosing to zero-rate existing third-party services trending among an attractive audience for the mobile network operator allows the MNO to increase or defend its market share for the target segment. This price discrimination works also in favour of the chosen third party service.

Building their own services and delivering them at a zero-rate if bundled with their mobile contracts has also been a common practice among mobile operators. In this scenario, network operators can optimize their service together with their network to deliver an optimal service. Together with the existing billing relationship, this can be an important factor to compete with third party services or take control over volume-heavy services.