CRTC ruling against zero-rating a boon for businesses, experts say

Last week’s decision by the Canadian Radio-television and Telecommunications Commission (CRTC) to forbid the practice of “zero-rating” – exempting certain types of online content such as streaming or social media from a subscriber’s data usage – has leveled the playing field for businesses that rely on the Internet to deliver their services, consumer advocates say, though at least one expert fears it will have the opposite effect.

According to University of Ottawa professor and Internet law expert Michael Geist, the CRTC’s April 20 ruling, which declared that Internet service providers (ISPs) must treat data traffic equally regardless of its point of origin, represents “a big step forward” for net neutrality in Canada.

“The previous rulings that we had, particularly the 2009 ruling that was described as reviewing Internet traffic management practices, came at a time when a lot of concerns were around traffic throttling,” he said. “Today, of course, it’s zero-rating, and while I think there had been some hints about where the CRTC might go, in a sense this removes any doubt about its strong affirmation of net neutrality.”

The ruling stemmed from a complaint filed by the Public Interest Advocacy Centre (PIAC) against Quebec wireless carrier Vidéotron, which launched an “Unlimited Music” feature in August 2015 that allowed users to stream music from services such as Spotify and Google Play Music without having it count towards their monthly data caps.

In an April 20 statement, PIAC executive director and general counsel John Lawford called the CRTC’s decision “a clear win for Canadian consumers that future-proofs their internet access from arbitrary control by their internet provider.”

“Gone are the days of unjust preference of certain services and extra costs for consumers that are not on higher cost plans,” he said.

How the decision clarifies the CRTC’s position on net neutrality

If net neutrality advocates thought the April 20 decision sounded familiar, that’s because the CRTC had previously ruled against Vidéotron and Bell Mobility in a January 2015 case that saw the two telecom giants become the target of a complaint that they were giving their Bell Mobile TV and services unfair preferential treatment.

OpenMedia external counsel Cynthia Khoo could still see ISPs attempting to break the CRTC’s new net neutrality regulations.

“We thought that was a pretty clear-cut decision too, no zero-rated content,” Cynthia Khoo, a Toronto lawyer who served as the legal counsel for Vancouver-based consumer advocacy organization OpenMedia on the Vidéotron case, told “But [Vidéotron] later said no, it’s ‘no zero-rating your own content’ – they never said anything about other peoples’ content.”

Khoo said that while the CRTC’s decision is unquestionably a win from a net neutrality perspective, if an ISP was particularly brazen it could once again try to flout the rules, which would depend on another complaint being brought before the commission.

“If you look at the decision itself, there are exceptions,” she said. “In defining its criteria, the commission gave a lot of room for people to argue.”

Geist believes that despite the similarities between the two decisions, at least two factors are different: One, the CRTC’s acknowledgment of the role that innovation and competition must play in providing consumers with a “free and open Internet” in its April 20 decision; and two, the comprehensive zero-rating analysis it released that same day articulating its reasons for opposing the practice.

University of Ottawa Internet law professor Michael Geist believes the CRTC’s latest ruling is more binding than previous decisions.

“In a sense, I think the CRTC, based on both the record and the likely reaction, anticipated some of the potential concerns about its ruling and, I thought, in a very effective fashion tried articulating why differential pricing could raise concerns,” he said. “Its policy framework isn’t leaving everybody thrilled, but I think it provides the market with a bit of flexibility, while recognizing that innovation is best served through service and pricing and quality of network, not by allowing ISPs to become gatekeepers.”

Both experts say that businesses which rely on the Internet to deliver their services should be cheering the news especially loudly, with Geist noting that even the ISP community was not united against net neutrality, with Rogers Communications Inc. arguing the practice would inherently favour certain types of internet activity while unfairly discriminating against others.

“I think the CRTC understood that once you start moving into a zero-rated world, it’s the large players – not only the large Internet and wireless providers but also the larger Internet services – that take advantage,” he said. “And that has a real negative effect not just on consumer choice, but also on emerging Internet players that simply aren’t able to tailor their services for every particular wireless provider and their particular zero-rated format.”

Khoo echoes Geist’s sentiment, arguing that it’s ensuring a level playing field that has made the Internet what it is today.

“When all data is treated equally, it doesn’t matter how deep your pockets are, or how much power you have,” she said. “You can still reach the same audiences if your content resonates with them.”

But could it backfire on consumers?

In its analysis, the CRTC listed arguments in favour of zero-rating from such proponents as Telus Communications and Shaw Communications Inc., who argued that what they called differential pricing presented an opportunity for ISPs looking to gain a competitive edge in the market; would exert downward pressure on prices while offering consumers a greater range of choices; and spur innovation.

Telecommunications analyst Mark Goldberg, who agrees with Telus and Shaw’s assessment, told he has trouble with any characterization of the CRTC’s zero-rating decision being in consumers’ favour.

Telecommunications industry analyst Mark Goldberg believes the CRTC’s decision hinders consumers more than helping them.

“By removing choice, we’ve increased costs for consumers who decided to subscribe to [Vidéotron’s] service, while lowering costs for nobody,” he said. “How is it anything but Orwellian to characterize that as ‘consumer-friendly’?”

Vidéotron, Goldberg said, had simply developed a unique service that helped it stand out in the market, and which consumers were free to ignore.

“Instead we have a group of bureaucrats who decided that consumers shouldn’t have that option, and that in the long run it’s apparently better for consumers,” he said. “I disagree.”

Nor is Goldberg convinced the CRTC’s decision is consistent with its stated intent to rely on market forces to the maximum extent possible, since Rogers’ opposition to zero-rating implied at least one large wireless carrier would not be participating and that consumers would still be free to choose an ISP committed to net neutrality.

“That would be indicative of a working marketplace,” he said. “And the greatest power that a regulator has is to forbear from regulation and let the marketplace work.”

“Between its suite of net neutrality laws – or regulations, as the CRTC has characterized them – and anti-spam legislation, Canada now has some of the most restrictive Internet services regulations in the world, and that should not be a source of pride in a country that is looking to transform itself to be an innovation economy,” Goldberg continued. “The Internet has thrived enough in a world without such oversight that a little more regulatory humility might have been called for, and that’s something that I think the federal government should be concerned about.”

The University of Ottawa’s Geist said that while there may be short-term costs, particularly for Vidéotron, which now has 90 days to ensure its unlimited music service complies with the new rules, data from Europe, where net neutrality has long been the norm, suggests that in the longer term ISPs will simply provide smaller volumes of data at price points lower than their zero-rated predecessors.

“Most of the zero-rated plans that we see out there tend to be higher-tier, and so… the CRTC’s view is that doesn’t really solve the issue,” Geist said. “We need to emphasize competition through better services, better pricing, more data, better speeds, and that’s what the decision is designed to foster.”

“I think many providers will be supportive of the decision,” he continued. “Some of them have welcomed it with a shrug of their shoulders, saying it’s largely consistent with what they were doing anyway.”

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Eric Emin Wood
Eric Emin Wood
Former editor of turned consultant with public relations firm Porter Novelli. When not writing for the tech industry enjoys photography, movies, travelling, the Oxford comma, and will talk your ear off about animation if you give him an opening.

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