David Wins Against Goliath: CRTC Bolsters “Net Neutrality”, Limits “Zero-Rating” & Strengthens Local TV

Today’s trilogy of CRTC decisions on “network neutrality”, local TV and simultaneous substitution are a huge win for Canadian citizens. They reinforce Canada’s network neutrality regime while backstopping local, over-the-air TV as a viable alternative to cable and satellite and as an important source of news and information.

Of the three decisions, the most important is probably the Mobile TV ruling. The decision responds to a complaint filed by Ben Klass with the Commission in late 2013 about Bell’s Mobile TV offering that allows Bell Mobility subscribers to access 10 hours of television programs for $5 per month while watching the same amount of TV on your wireless device from the CBC, YouTube or Netflix, for example, would cost up to $40 – an 800% difference. Klass’s complaint expanded in early 2014 after the Public Interest Advocacy Centre raised concerns about Rogers and Videotron’s Mobile TV services on much the same grounds. The CRTC then wrapped them into one proceeding. Today’s major decision supports Klass and PIAC’s claims.

In each case, watching television programs delivered over the internet on your mobile device from sources outside one of the carriers’ TV packages counted towards your data caps, while those inside their Mobile TV offerings did not.

Recognizing that they were likely fighting a losing battle, Rogers folded on the case last summer and Videotron began to phase out its preferentially priced Mobile TV service at the end of 2014. Bell soldiered on, however, claiming that despite being delivered over the internet and the same wireless networks as any other data, video, voice or internet services that subscribers might use, it’s Mobile TV service was not a telecom or internet service at all.

According to Bell, its Mobile TV service is a broadcasting service, and thus outside the reach of the charges that Klass and PIAC raised. Moreover, far from this being a bad thing, its Mobile TV service is making substantial contributions to the policy aims of the Broadcasting Act, Bell argued.

The CRTC’s decision resolutely rejects that claim. While the decision refers to Bell and Videotron’s Mobile TV services, since the latter has been phasing out the version of its service in question since the beginning of the year, the biggest impact of the decision will fall on Bell.

With respect to whether Mobile TV services are telecommunications or broadcast services, the Commission was crystal clear:

Bell Mobility and Videotron are . . . providing telecommunications services in regard to the transport of their mobile TV services to subscribers’ mobile devices, and are therefore subject to the Telecommunications Act (para 35).

In addition, the Commission is clear that far from being a good thing for Canadians and the aims of the Broadcasting Act, the services work a:

 . . . disadvantage to consumers in accessing other Canadian programs on their mobile devices, and . . . could not be said to further these [the Broadcasting Act] objectives (para 60).

Furthermore, Bell and Videotron’s claims about their Mobile TV services being good for Canadians lacked “quantifiable evidence to back the magnitude of those claims” (para 39).

Having found that the key issues revolved around telecommunications, the CRTC than turned to the heart of the matter: were the carriers giving their own Mobile TV services an advantage and, if so, was that advantage unreasonable? Again, the Commission is unequivocal. By charging one rate and exempting their own services from their data caps while charging much higher rates and applying data caps to all others, Bell and Videotron are giving themselves an unfair advantage.

Here’s the centerpiece of the decision in this regard:

Bell Mobility and Videotron, in providing the data connectivity and transport required for consumers to access the mobile TV services at substantially lower costs to those consumers relative to other audiovisual content services, have conferred upon consumers of their services, as well as upon their services, an undue and unreasonable preference, in violation of subsection 27(2) of the Telecommunications Act. In addition, they have subjected their subscribers who consume other audiovisual content services that are subject to data charges, and these other services, to an undue and unreasonable disadvantage, in violation of subsection 27(2) of the Telecommunications Act(Para 61).

Crucially, in making this decision, the CRTC saw the issues being raised by Klass and PIAC as something of a litmus test case, a test whose resolution would hold much in store for the evolution of the internet and the converging media ecology in the future. Again, as it says,

the preference given in relation to the transport of Bell Mobility’s and Videotron’s mobile TV services to subscribers’ mobile devices, and the corresponding disadvantage in relation to . . . other audiovisual content services available over the Internet, will grow and will have a material impact on consumers, and other audiovisual content services in particular. . . . [I]t may end up inhibiting the introduction and growth of other mobile TV services accessed over the Internet, which reduces innovation and consumer choice (para 58).

In short, the decision responds to current realities while looking to the future. It took the opportunity delivered up to it by a hard-working and careful student, Klass, and the additional effort by PIAC, to nip a problem in the bud. The fact that the issues raised complex issues today as well as for the years, even decades, ahead, also helps explain why this decision was more than a year in the making rather than the usual four months or so.

The Mobile TV decision effectively limits zero-rating in Canada, a practice where some internet content services pay to obtain fast lanes and exemption from carriers’ data caps. Doing so reinforces Canada’s strong “network neutrality” rules and places it shoulder-to-shoulder with other countries where zero-rating has been banned (e.g. Netherlands, Sweden, Chile) or discouraged and not practiced by wireless companies (e.g. Norway, Finland, Sweden, Estonia, Lithuania, Latvia, Malta and Iceland).

The upshot is an unambiguous win for strong “Network Neutrality/open internet” rules, including their unambiguous application to wireless internet access. As Blais put it, “the Mobile TV decision is all about Canadians having fair & equal access to content of their choice on internet. There will be no fast lanes & slow lanes”. It is about keeping control over what people access through the internet in their hands, not under the editorial control of ISPs and telecoms companies.

Three other things about the Mobile TV decision stand out.

First, it’s a message that Canada can send, with love, to the United States as the FCC gets set to decide in the next month on many of the same issues to replace its relatively weak ‘Open Internet’ principles that were tossed out by the courts in last year’s Verizon decision. With strong encouragement from Obama, the FCC is widely seen as leaning toward reinstating Title II common carrier classification for all broadband internet access providers – wireline, cable, wireless – and restricting zero-rating practices. This will reverse decisions taken in 2002, 2005 and 2007 under the Republican controlled FCC that redefined high speed internet access by cable, DSL and wireless as ‘information services’ and, thus, beyond the reach of the regulator.

Second, the CRTC decision rests entirely on the common carriage principle at the heart of the Telecommunications Act (namely sections 27 and, less so, 28) rather than its so-called network neutrality rules. This is a good thing because it returns the politics of the internet to sturdier ground, i.e. the centuries old and battle-tested grounds of common carriage versus the woollier notion of network neutrality.

Third, the concurring opinion of CRTC Commissioner Raj Shoan at the end of the decision is a must read. His ruminations on the ‘cone of silence’ around the issues raised by the Mobile TV proceeding reminds us that in an industry dominated by a handful of massive vertically-integrated companies who control access to distribution networks, content and audiences, a pervasive fear seems to have settled in amongst independent TV broadcasters, creators and others that appears to have kept them from stepping forward. It reminds us that the Canadian media industry is a tight and closed, if not so cozy, community where independent voices step forward at their own peril.

As Shoan observes, when “students, not-for-profits and charities have to contend against the deep pockets of large, national, vertically integrated entities in order to bring to light relevant issues of public interest without the support of affected parties (i.e. Canadian broadcasters)”, we are in trouble. The CRTC looked at that reality today squarely in the face and made three bold decisions that go someway to addressing the issues. We can be thankful to smart and interested citizens such as Ben Klass and public interest groups like PIAC for lighting the spark and all the hard work that led to today’s decision, and for groups such as Open Media for keeping these issues in the public eye. For all those who have stood as defenders of the status quo, indeed, often as their mouthpieces, it should be a message.

A few quick words on the other two decisions regarding keeping local television alive and simultaneous substitution.

First, Blais made it clear that maintaining local, over-the-air television is important to Canadians, as citizens, not just consumers. Why? Because that is where many of us still get a great deal of our news and information from. Blais did not mince words: the major TV companies have obtained enormous privileges, and it is time to meet their obligations. “An informed citizenry cannot be sacrificed on alter of corporate profits & debt reduction”, he intoned, in an implied reference to the steady flow of cut-backs and journalist lay-offs in an industry that has been allowed to bulk up through mergers and acquisitions on the promise that synergies would deliver benefits, not just to the corporate bottom line but to all Canadians. It’s time to deliver.

Local TV also needs to be kept alive because it provides a realistic alternative to cable, satellite and IPTV providers who have consistently raised prices far in excess of the rate of inflation. This is especially so because, as Greg Taylor, Steven May and others from Ryerson University, have made clear, Canada has recently completed the switch over to digital over-the-air television. The benefits of this now need to be nurtured rather than given a still birth by those whose loyalties are, at best, split between seeing things through versus protecting their cable, satellite and IPTV distribution networks, i.e. the same entities that own most of the local TV stations and the biggest cable, satellite and IPTV companies in Canada are one and the same: Bell, Shaw, Rogers and Quebecor. Brandishing updated bunny-ears as a prop, Blais encouraged Canadians to think about them as a viable option that was both free and of higher quality in terms of picture clarity.

There will be no new revenue stream from fee for carriage of local TV stations, a cornerstone of Bell’s submission to the Talk TV hearings. However, neither will one of the cornerstones that have supported the commercial viability of local TV since the 1970s be taken away: simultaneous substitution that allows Canadian broadcasters to substitute their commercials on US signals airing the same programs and carried by cable and satellite companies in Canada. The policy is a massive gift that delivers about a quarter-of-a billion dollars a year to the industry. This was a “big ask” for Bell, Shaw, Rogers and other television companies and, for all intents and purposes, they got it today from the CRTC, with the exception for the SuperBowl starting in 2016.

In sum, today’s CRTC decisions are bold. They send a clear message in support of an open internet, broadly interpreted to cover mobile wireless, cable and wireline networks. TV is not dead, and in fact, the evolution of the two are fundamentally intertwined, and need to be thought of as such. The CRTC’s decisions go a long way to doing just that. The decisions, in particular the open internet, Mobile TV and future of local TV parts, underscore the decisive role of independent voices, and the importance of listening to them, rather than just to incumbents and far too many scribes (but certainly not all) who think that relaying the views of rival media giants on a particular issue, and a financial analyst or two, to the Canadian public constitutes ‘balanced’ reporting.