No, Canada won’t have an explosion of startups thanks to new CRTC rules.
Zero Rating FUD:
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Predictably, telecom industry supporters – what some call the Industry Defense League – are spreading a lot of FUD (fear, uncertainty and doubt) over the CRTC’s new net neutrality ruling.
In a previous post, I wrote about how the new rules – which basically make it undesirable for telecom companies to charge differently for connecting different apps and websites – will result in higher prices for consumers.
That shouldn’t be construed as a direct link between net neutrality and prices, but rather an unfortunate side effect of how the Canadian telecom market works. Simply put, any regulations here inevitably translate into higher prices because there’s little competitive pressure keeping service providers from not raising them. Net neutrality will just be the latest such catalyst.
That said, industry supporters are putting forward some really obtuse arguments:
Look at the rate of startups in Canada vs the rate in the US. In the next 5 years, the rate should improve in Canada relative to US. Agree? https://t.co/pBrXlwllpg
— Ken Engelhart (@KenEngelhart) April 21, 2017
— Mark Goldberg (@Mark_Goldberg) April 21, 2017
— Mark Goldberg (@Mark_Goldberg) April 20, 2017
Let’s take those in order. The first, from Rogers’ former regulatory vice-president Ken Engelhart, asks whether Canada will see more startups than the United States thanks to our new protections. Net neutrality does, after all, put them on the same footing as the bigger companies they may be trying to disrupt so they should theoretically now have a leg up.
Well, no. Canada outpacing the U.S. in startups thanks to net neutrality is an absurd suggestion given that there are many factors that go into success or failure. The dramatic difference in capital availability is the biggest, the huge ecosystem of Silicon Valley is another, and so and so on.
Net neutrality is but one element. Last week I wrote about how Canada, and especially Toronto, is doing just many things right in terms of aligning all those other factors. So over time – but certainly not the next five years – who knows?
Eliminating the ability of big telecom companies to kill said startups is very much a good move, but more on that shortly.
Ironically, Engelhart was at Rogers during some of the company’s more spirited forays into net neutrality violations. Remember that time it throttled gamers? Again, more on this shortly.
Also funny is the fact that Rogers has had a change of heart in recent years. The company has become a net neutrality supporter and in fact stood with consumer groups in opposing zero rating during the CRTC’s hearings on the matter.
Turning to the other FUD comments, Roslyn Layton’s statement about Canada being an “outlier” among developed nations for its pro-net neutrality stance is kind of funny. As a professor based in Denmark, Layton should be well aware that Europe is in much the same boat as Canada.
In fact, the Body of European Regulators of Electronic Communications last year placed restrictions on zero rating, which is having other positive effects for consumers.
“Zero-rated services have lost some of their shine due to BEREC’s guideline (i.e. zero-rated services must be throttled as well if the general data cap is reached) and of course from the increasing adoption of unlimited mobile plans,” says Antonios Drossos, managing partner of Finland-based analysis firm Rewheel.
If anyone is the outlier, it’s the United States for pulling back on net neutrality. Again, as an official Donald Trump advisor, Layton should know this.
Lastly, there’s the FUD from Scotia Capital of the CRTC taking away unlimited music streaming from Quebeckers. The CRTC has done no such thing. Videotron, the carrier in question, is free to continuing offering it – if it chooses to give consumers unlimited data. But it probably won’t do that because of the two issues that are truly at the heart of net neutrality and zero rating.
More on that in a second. And yes, I realize I’m promising a lot more, but hey, it’s a complex issue and the FUD is hot and heavy.
Going back to the startups point, net neutrality in Canada isn’t as much about enabling opportunities as it is about preventing misdeeds by telecom companies. And unlike the majestic unicorn, these misdeeds aren’t mythical creatures – they really do exist.
There have been numerous net neutrality violations in Canada, all in the name of telecom companies protecting their bottom lines. Aside from Rogers throttling gamers, there was:
- Bell throttling BitTorrent because file-sharing was eating into its TV business.
- Telus blocking a website because the union behind it was seeking better terms for workers.
- Xplornet slowing internet telephony to protect its own phone business.
- And many more.
Canada’s existing net neutrality rules, enacted in 2011, aimed to put a stop to blocking and throttling. For the most part, they’ve worked.
Zero rating, where certain sites or apps are exempted from monthly data caps, are simply a clever inversion of blocking and throttling. Zero rating doesn’t block users from accessing any services, but it sure does make exempted ones more appealing to use.
Let’s go back in time. We know now that Netflix is wildly popular in Canada, with somewhere around six million subscribers. It’s inevitably costing big telecom companies lots of lost revenue, potentially in the billions, as Canadians cancel their TV services in favour of streaming.
But is it inconceivable that telecom companies could have used zero rating, if they had that particular weapon in their arsenal a few years ago, to slow or perhaps even prevent Netflix from getting a foothold in Canada when it first entered? Or might the very presence of zero rating have discouraged the company from expanding?
What if Rogers, Shaw and Bell had quickly launched Shomi and CraveTV and exempted those services – but not Netflix – from users’ data caps? Would that have helped their popularity and negatively affected Netflix’s uptake? It’s obviously speculative to say so, but probably.
The same possibility applies when looking forward. Suppose a new startup arises to cater to the fledgling virtual reality market… let’s call it VRFlix. And suppose VRFlix somehow threatens telecom companies’ revenues.
Couldn’t those same companies then cobble together a competitor, exempt it from data caps and make VRFlix less appealing to consumers?
Or, if VRFlix succeeded despite such an obstacle, couldn’t the companies then extort it for money in order to remove said obstacle? Or how about applying some version of this to its competitors?
All of that, in a nutshell, is what zero rating and net neutrality are all about. They’re about preventing misdeeds and abuses, both real and theoretical.
It’s therefore hard to predict what kinds of tangible results Canada’s strong net neutrality rules will deliver in five years time, but it’s equally easy to say what they’ll prevent.
Online efforts will succeed or fail based on many different factors, but to the CRTC’s credit, interference from telecom companies won’t be one of them.