Agency supports exempting internet services from data caps as long as no money changes hands.
Competition Bureau Doesn’t Understand Net Neutrality:
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Canada’s Competition Bureau is a lot of things, but broad-thinking is not one of them.
The government agency on Wednesday released its official position on the CRTC’s ongoing review of differential pricing in telecom services, and boy is it ever self-contradictory and dumb.
In plain English, the CRTC is wondering whether internet providers and wireless carriers should be allowed to exempt some uses of the internet from monthly data caps, but not others. It’s basically a question of whether Netflix will or won’t count against your caps, and whether Netflix can pay your ISP to get its service exempted.
In its submission, the Competition Bureau got it half right. It says that arrangements where content providers pay ISPs to exempt their services from caps should be prohibited, since that would harm competition, stifle innovation and raise prices for consumers:
“An example is where a partner company pays an ISP to allow customers to download the company’s services without having the download count toward the customer’s data limit. This could harm competition when the customer’s product choice is caused by the favourable partnership between the company and the ISP, rather than the superiority of the application. With the incentive removed for competing content providers to offer a superior product, product quality may decrease, and price may increase.”
An example of this sort of thing would be when Bell tried to exempt its own video services from customers’ caps in exchange for $5 a month. Bell was obviously benefiting in several ways at the expense of competing services, which is why both the CRTC and a federal court shut it down.
Where the bureau steers wrong is in supporting differential pricing where money doesn’t change hands between content providers and ISPs. “The Bureau found that competition is not likely to be harmed when ISPs do not receive a financial benefit from content providers for differential pricing.”
An example in this case is what Videotron has been doing with its Unlimited Music service, where any music streaming service doesn’t count against user caps, so long as it has been approved by the carrier. As far as anyone knows, Videotron isn’t getting paid to exempt any such services.
Telecom industry executives quickly applauded the Competition Bureau for “getting it:”
— Craig McTaggart (@CJMcTri) June 29, 2016
In point of fact, the bureau doesn’t get it. Differential pricing – otherwise known as zero rating – may appear on the surface to be beneficial to consumers, but you don’t have to dig much deeper to realize it has the potential and even likelihood of being harmful.
Numerous commentators have criticized Videotron’s zero-rating music, for example, for only including streaming services such as Spotify and Songza.
The data-free option does not extend to online radio stations or any other form of audio streaming, which seems to have anti-competitiveness written all over it. In other words, it’s more expensive to use online radio than a streaming app, solely because of an arbitrary decision by Videotron. It’s shocking the Competition Bureau doesn’t see that.
Moreover, allowing ISPs and wireless carriers to choose which services to exempt from data caps – even without any financial considerations – inevitably makes it harder for non-chosen services to arise and compete.
Netflix may get exempted, for example, but what about an as-yet unformed competitor to Netflix that aims to offer the same service, but better in some way?
Without similar data usage exemptions, such a service will be more expensive for consumers to use – a definite competitive advantage for established players.
How is that anybody – especially an agency whose sole purpose is to ostensibly safeguard competitive marketplaces – doesn’t get this?
The best competitive option is to ban zero rating entirely, because that will force ISPs and carriers to compete on how much overall data usage they offer customers, which will inevitably nudge caps upward.
Allowing them to reinforce their artificially imposed limits, as the Competition Bureau suggests, is utter folly.