In its latest study, the Competition Bureau has found that some forms of differential pricing can harm competition and stifle innovation.
Differential pricing refers to one internet service provider (ISP) charging consumers one price for one kind of content and another price for a different kind of content. The Competition Bureau reports that differential pricing influences the choices consumers.
Furthermore, the Competition Bureau states that some forms of differential pricing, including those where the ISP receives financial benefit from content providers, should be prohibited. The report argues that this pricing model harms innovation, increases prices for consumers and stifles competition.
The report specifically describes partnerships between content providers and ISPs that allow consumers to download specific services without incurring additional charges, stating that the consumer’s product choice is influenced by this partnership rather than the superiority of one application over another.
According to the Bureau’s analysis, this kind of favouritism can both prevent the launch of new and innovative services and distort competition in the market, ultimately resulting in higher prices and less variety for consumers.
However, the Competition Bureau doesn’t reject all forms of differential pricing, stating that when ISPs do not receive a financial benefit, this pricing model is unlikely to harm competition.
In addition, the study found that several factors other than differential pricing were likely to influence consumer choice. Some of these factors, such as quality, service and innovation, should be more deeply considered by ISPs in addition to the bottom line.