Net neutrality vs. differential pricing: CRTC hearing discusses mobile internet in Canada

Competition in Canada has migrated from the physical product to the digital product. Today, the same economic organism that determines who comes out on top in the corporate world dictates which kinds of content are king on the internet.

At least, that’s what the CRTC’s recent differential pricing hearing explored. While the commission has yet to reach any firm decision on the matter, the hearing provided an important platform for many voices to be heard.

The Canadian Wireless landscape


A few months ago, a report was released by the CRTC that confirmed what Canadians have suspected for a long time: Canada pays some of the highest wireless bills in the world. This knowledge, coupled with the lack of competition in the Canadian wireless market, elevated the story to national news.

In Canada, Rogers, Bell and Telus occupy approximately a third of the market share each. In addition, there’s very little price variation between the packages offered by the different carriers. There are a few exceptions to these circumstances, especially when it comes to regional carriers like SaskTel and Videotron.

While some might assume the hearing hosted by the CRTC last week to discuss the policies around differential pricing in the Canadian wireless market stemmed solely from the many years of vitriol emanating from the country’s data-users, the story actually begins in 2013, with the launch of Videotron’s video streaming service, Club illico.

Is content really king?


Club illico is a subscription, on-demand video service that offers the largest selection of French-language content for $9.99 per month. This platform was the first Netflix competitor released by a Canadian carrier, though it was followed shortly after by the now defunct Shomi and CraveTV.

Rogers was also chastised in 2014 for the payment structure of Anyplace TV app. According to the CRTC, charging users by the hour instead of by the megabyte to use the service prioritized the carriers’ Anyplace TV app over other video services, creating an unfair incentive for Rogers customers to use the app. Rogers then reverted back to charging users standard data usage rates for accessing the app.

This case played out as well in 2015 as Bell exempted its own mobile TV add-on from data caps.

Two years later in 2015, Videotron launched its unlimited music streaming service, which allows users unlimited access to music streaming apps that apply to participate in the platform. By paying a subscription fee, this usage doesn’t count against the customer’s monthly data cap.

This quickly became a topic of debate as carriers argued that this service allowed Videotron to promote certain kinds of music content, or services, over others based on those accepted on the platform, which was seen as contrary to the principles of net neutrality.On the basis of net neutrality, the CRTC deemed that Videotron’s streaming service must count against its customers’ monthly data allotments. Net neutrality dictates that content on the internet should have to compete only with other content, rather than the selective pricing of said content by its distributors.

When it came to light that no money exchanged hands between any party, neither Videotron nor the music streaming apps on the platform, the practice was allowed to continue until a public hearing could be conducted.

The integrity of the net


In May of 2016, the CRTC announced that it would hold an open hearing on differential pricing — a practice that sees different kinds of content priced differently and according to the discretion of the carrier — to determine the fairness of the practice and the impact of potentially eliminating the practice.

A wide variety of interested parties emerged as potential interveners on the case, including both advocacy groups such as OpenMedia and corporate titans like Facebook. These two groups in particular represent the two spectrums within which the discussion on differential pricing is often housed.

OpenMedia is a digital rights non-profit organization that participated in the CRTC hearing to speak on the benefits of eliminating data caps altogether. As Katy Anderson, a journalist-turned-digital-rights-advocate with OpenMedia, stated in an interview, if there were no data caps, there would be no need for differential pricing.

“If you have to pick and choose what you can do on the internet, you’re not going to do as much,” she stated.

Anderson was part of the group that represented OpenMedia in Ottawa, where the hearing was held, this past week. She also went on to say that data caps affect lower income Canadians even more.

Anderson believes that the only reason Canadians don’t have access to unlimited data plans is because “the carriers have gotten away with it.” In the view of OpenMedia, consumers are trapped.

“Hopefully, what it’s going to do is level the playing field… We’ve already seen 45 thousand Canadians endorse our letter as well as 5,000 Canadians write their own comments. Their mandate is to listen to Canadians. The CRTC isn’t handcuffed to the industry,” she exclaimed.

On the other side of the argument, differential pricing enthusiasts like Facebook argue that the practice, also known as zero-rating, does not encroach on the principles of net neutrality. According to Facebook, carriers like Videotron who give customers discounted access to certain kinds of content are simply using it as an opportunity to build their own core competencies and improve customer purchase motivation.

Is there another way?


All the while, American carriers T-Mobile and Sprint both released unlimited data plans over the summer, which have served to fuel the frustration felt by countless Canadians. Their question remains: if other countries can do it, why can’t we?

While both extremes were presented, the debate actually took place somewhere in the middle. The question on the minds of Canadian carriers is, when is differential pricing justified, and when isn’t it?

While the majority of Canadian carriers, including Bell, Shaw and Telus, presented in favour of differential pricing, Rogers was a notable exception. Canada’s largest telco argues that carriers shouldn’t have a hand in content selection.

Rogers representative David Watt speaks to the droves of internet content startups across Canada when claiming that differential pricing practices are inconsistent with the principles of net neutrality and non-discrimination.

Coupled with being counted more heavily against user’s data caps, startups with no brand recognition would have no viable way to compete with lifestyle content giants like Facebook and Spotify, who could spend more to gain preferential treatment. In the past, this practice has been seen as stifling innovation.

The Internet as a Utility


At the heart of this issue is the changing definition of the internet itself. Currently, use of the internet is classified under the Information and Cultural Industries section in the North American Industries Classification System along with telecommunications, internet publishing and broadcasting.

Eliminating data caps entirely, or at least freeing Canadians to use greater quantities of data with fewer restrictions, suggests that the internet has become a utility in Canada rather than a cultural asset. A necessity rather than a privilege.

Hypothetically, upgrading the status of data to that of a utility would equate the role of the internet to the role of utilities such as water and gas in Canadians’ everyday lives. Like hydro, electric and gas utilities, the internet would be deemed a necessary component to the quality of life in Canada.

The world has entered a pivotal period where digital products are no longer niche or hard to come by. In fact, many would argue that digital products are just as relevant to life in the modern world as physical products. In terms of content giants like Facebook, Netflix and Snapchat, perhaps even more so.

Every aspect of the digital era is moving ahead at lightning speed, unlike regulation which is notoriously slower than innovation. This period will therefore be defined by how governments react to the immense influence of the digital world on the physical one.

“We have to be vigilant in protecting the integrity of the net,” insists Anderson. The future of data in Canada will be determined by whether Canadian regulators believe it’s reasonable to dictate the monthly data usage and content preferences of Canadians.

The question to be asked isn’t whether limiting data stifles innovation, regulation, big business or even consumers, it’s whether or not limiting data stifles Canada.

“Anytime you have the opportunity to change the nature of the internet,” continues Anderson, “it is a very important moment in history.”

RelatedCRTC hearing on differential pricing for Canadian data plans begins this week