Yay for net neutrality, now get ready for price hikes

De facto ban on zero rating of data a win for consumers, but such victories are always pyrrhic.

net neutrality, net neutrality rules, net neutrality battles, zero rating

Net Neutrality and Price Hikes:

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Here’s the too-long-don’t-read (TL;DR) version of what the CRTC announced regarding net neutrality on Thursday: Zero rating is basically banned, consumers win, internet providers lose! But not really, because consumers never win when it comes to telecom in Canada.

And now, for the longer version.

The Canadian Radio-television and Telecommunications Commission has announced the results of its long-awaited review of differential pricing, which is basically where internet providers charge differently for connecting different apps or websites.

Zero rating, where a particular app or website is exempted from consumers’ monthly usage caps, is one form of differential pricing.

The regulator rejected arguments by big telecom companies that differential pricing is beneficial for consumers and in fact adopted the opposite stance – that it can harm innovation and limit choice. As consumer groups argued, the CRTC believes the far more consumer-friendly thing for internet providers to do is to simply increase the size of data caps.

(It’s worth noting that Rogers stood apart from the usual cohort in supporting a zero rating ban.)

The CRTC is often quite cagey with its bans – it often prevents certain practices and activities without overtly doing so – and that’s definitely the case here.

Internet providers and wireless carriers are still free to engage in differential pricing or zero rating provided they meet four criteria. As per the decision:

The agnostic treatment of data. The Commission will consider the extent to which data traffic is priced or rated equally or agnostically by an ISP with regard to its customers’ retail Internet access services, while having regard to the amount of data involved. Offerings that rate or price data non-agnostically, such as by zero-rating data traffic from certain content providers (including affiliated entities), are likely to raise concerns under subsection 27(2) [of the Telecommunications Act]. Differential pricing practices that treat data traffic agnostically (e.g. time-of-day offerings) are not likely to raise the same level of concern.

The exclusiveness of the offering. The Commission will consider the extent to which a differential pricing practice is exclusive to a particular class or group of subscribers, or to a particular content provider or class or group of content providers, while also having regard to the number of subscribers or content providers affected. For example, differential pricing practices that are exclusive to subscribers to a particular data plan are likely to raise concerns under subsection 27(2).

The impact on Internet openness and innovation. The Commission will consider the extent to which a differential pricing practice inhibits or compromises the openness of the Internet for Canadians and the choices available to Canadians. In particular, this analysis will consider (a) whether a differential pricing practice affects the ability of content providers or innovators to enter the market by creating barriers to entry, and (b) the extent to which a differential pricing practice affects innovation. For example, differential pricing practices that require content providers to conform to administrative and technical requirements that are burdensome, costly, or time-consuming to meet are likely to raise concerns under subsection 27(2). Differential pricing practices that favour large, established content providers over smaller ones and new entrants are also likely to raise concerns.

Whether there is financial compensation involved. The Commission will consider whether a differential pricing practice results in financial compensation or other financial benefits between a content provider and an ISP or third-party sponsor (including affiliated entities), having regard to the amount of compensation involved and the extent of the financial interest with any affiliated entity. For example, sponsored data arrangements, where an ISP receives payment from a content provider in exchange for zero-rating the data traffic to and from that provider, are likely to raise concerns under subsection 27(2).

So, in other words, the CRTC has removed the underlying reason for why ISPs and wireless carriers might engage in differential pricing: namely, profit and trying to shape user behaviour.

Along with existing Internet Traffic Management Practices guidelines and several side zero rating decisions on Bell and Videotron, the CRTC says it now has a comprehensive set of net neutrality rules. And indeed it does – it’s fair to say that Canada now has among the strongest net neutrality protection in the world, and that is unequivocally a good thing.

Consumer advocates, from the Public Interest Advocacy Centre and Open Media to University of Ottawa internet law professor Michael Geist are calling this a major win for consumers.

Moreover, Canada is taking the direct opposite approach of its closest trading partner, and that’s also a good thing. The United States, under the auspices of the Federal Communications Commission, is moving to gut its net neutrality rules.

Donald Trump-appointed chairman Ajit Pai in February dropped the FCC’s zero rating investigation and is expected to next month introduce a plan that aims to reverse existing net neutrality protection.

Pai, a long-time critic of the previous FCC’s net neutrality efforts, believes competition and market forces can protect consumers from harmful practices. There is a mountain of reasons why that’s a specious belief based on alternative facts, which has been covered in depth elsewhere.

So, in a nutshell: yay for Canada.

Now for the bad news: expect prices to go up.

That’s simply what happens in Canada when regulations go against the wishes of big telecom companies.

Several intervenors in the differential pricing hearings asked the CRTC to impose some form of unlimited data usage or even ban data caps, but the regulator has opted to stay away from doing so for the time being.

Instead, it says it is going to closely monitor the situation which, as everyone knows by now, is like saying, “Stop! Or I’ll say stop again!”

The CRTC believes usage caps in home internet service are likely to continue going up, and that’s probably right since there is more competition in the space in the form of smaller independent service providers.

But in wireless, not so much. With Bell, Rogers and Telus essentially having full control of the market, meaningfully better offerings are simply not likely.

If history is any indicator, new regulations – or rather, new prohibitions on doing really crappy things to consumers – generally results in wireless price hikes.

Now that the carriers aren’t allowed to extort music or video streaming services for more money to transmit their data faster, or pick which ones win and lose, it’s ultimately consumers who are going to have to pay that freight.

The solution is so painfully obvious and staring everyone in the face. If the CRTC believes data caps will continue going up for home internet services thanks to the wholesale regime that enables competitive indie ISPs, shouldn’t the same system exist in wireless?

Oh, and one other bit of cold water on this whole thing – the new comprehensive net neutrality rules sure are great, but they may also be temporary. With the federal Liberal government promising a complete review and possible overhaul of existing telecom rules, all of this could be soon be up for renegotiation.

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1 Comment on Yay for net neutrality, now get ready for price hikes

  1. Oh Peter, so cynical! However, you are right that the ruling will put the level of competition (esp. wireless) and internet pricing clearly and squarely in the limelight, and it may not be pretty. But until consumers can clearly confront this there is no hope at all. Zero-rating hid the true cost in an increasingly cable-tv like pricing structure. At least now people can judge clearly the value for money (if any) they are getting for internet service. If this means we need policy change (spectrum, Canadian ownership, wholesale rules) and political commitment to the importance of broadband, that is all to the good. Hang in there!

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  1. Dispelling the net neutrality and zero rating FUD - AlphaBeatic

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