Posts Tagged ‘Bandwidth Caps’

Comcast versus Common Sense: New Frontiers for Net Neutrality?

A new brouhaha has broken out in the U.S. over actions taken by Comcast that give its television and video services delivered via Microsoft’s Xbox a free pass, while still applying bandwidth caps to rival over-the-top television services such as Netflix, Apple TV, HBO Go, etc. It’s the latest frontier in the network neutrality disputes in the US.

The act may not breach the formal rules of network neutrality set out by the FCC in 2010, states Stacey Higginbotham, but it certainly seems to breach the spirit of network neutrality, she implies. Others such as Public Knowledge and the Free Press are much more forthright in the condemnation of the move, but are still holding fire while building a legal and regulatory case.

Higginbotham argues that, technically speaking, the FCC’s 2010 Network Neutrality rules allow Comcast to set aside portions of its networks for managed services, and therefore Comcast’s deal with Microsoft to stream tv and video to the Xbox without caps while applying them to everybody else is probably just fine.  She may be right.

The argument is not unusual. It is part of the incumbents’ arsenal. It is exactly the argument that Mirko Bibic, Bell’s chief regulatory pitbull, used last year when justifying why Bell’s IPTV services won’t count to the infinitely more tight-fisted bandwidth caps in Canada while for everybody else distributing video online it would.

But to get back to the Comcast/Microsoft Xbox case presently at issue, I wonder if the governing set of rules is not the 2010 Open Internet order, as some seem to be fixing on, but rather the “Comcast Network Neutrality Rules” that were fleshed out with much greater precision and sense of specificity when the FCC approved the Comcast-NBC Universal take-over last year?

While many, including then commissioner Michael Copps, have argued that the deal was a travesty and a sop to the new integrated corporate media titan, looked at from a Canadian and international comparative vantage point, the Comcast NBC-Universal deal was actually quite a big thing. The FCC (2011a) and Department of Justice asked for, and got, quite a lot.

The regulator made it crystal clear that it thought that “the harms that could result [from the take-over] are substantial” (p. 3). Among the conditions of approval, Comcast accepted several fairly tough demands that are directly relevant to the case at hand.

According to the “Comcast rules”, any Comcast service involving “caps, tiers, metering, or other usage-based pricing shall . . .”:
1. “. . . not treat affiliated network traffic differently from unaffiliated network traffic” (p. 38).

2. offer the same facilities and capabilities to others on commercially equivalent terms(p. 38);

3. insure that even its set-top boxes adhere to the “broadband Internet access service rules” (pp. 38-40).

Arguments over whether or not ‘managed services’ can be usefully and fairly segregated from the rest of an integrated broadband network media ecology can be a bottomless pit of contention and strategic manipulation, and it is indeed true that the FCC’s Open Internet rules of two years ago side stepped the quagmier.

The Comcast decision, however, was dealing with the specifics of a monumental corporate transaction and in that more circumscribed context, the specifics of network neutrality rules were brought more sharply into focus. Thus, even if having been battered in the courts for the past decade and the FCC’s own prevarication, the network neutrality rules are not dead.

Tales from New Zealand — the Ultrafast Broadband Internet: Digital Public Works for the 21st Century vs. Incumbent Interests?

Last month I visited Auckland, New Zealand to give a talk at the The Future with High Speed Broadband Conference organized by the Competition Commission (full paper here).

The aim was to assess the factors that might encourage or hobble the country’s plan to make ultrafast, broadband internet service available to all. The Ultrafast Broadband Initiative, and its counterpart for rural areas, looks like a digital public works project for the 21st century, with the government forcing a restructuring of the country’s backwards incumbent telecoms players and investing nearly $2 billion in rolling out a combination of fibre-optic and wireless connections to over 90 percent of New Zealanders in the next six- to eight years. However, as I discovered, there are several factors that significantly stand in the way of such ambitions.

New Zealand shares several things in common with Canada that could turn this project into a big ‘white elephant’. The most important similarities are (1) extremely high levels of media concentration (higher in NZ than Canada); (2) powerful and recalcitrant incumbents; and (3) being two of just four countries worldwide where bandwidth caps are nearly universal and set at exceeding low levels (Iceland and Australia are the other two, see OECD).

As luck would have it, the British comedian and actor Steven Fry was in New Zealand working on Peter Jackson’s new film The Hobbit at the same time I was in town. He set things up perfectly a day before my talk by lambasting the pathetic state of New Zealand’s internet service after his attempts to upload recently completed film footage were throttled and thwarted by the ridiculously low bandwidth caps of between 2 to 5 GB per month that come standard with most telecom-ISP plans.

New Zealand has “probably the worst broadband I’ve ever encountered”, Fry railed on Twitter. Turns itself off, slows to a crawl. Pathetic!”

Media, ministers, Telecom NZ spokespeople and the island was abuzz with a basic fact of life in the country that everybody knows, but which takes an outsider to cast a bright light on in none-too-polite terms: the country’s internet service sucks. That was my role too: the outsider who can say things that local industry-regulatory-political insiders cannot.

With attention on high alert, the attendance at my talk was likely higher than it might have been. Media coverage was good from day one, too, with ComputerWorld catching the gist of my talk as follows: “Get real on data caps, peering and Sky TV dominance, says Canadian professor”. A video of the talk is below.

The Minister responded the next day by trying to squelch any idea that things were as bad as I painted, or that new approaches to regulation are needed. The New Zealand Herald and ComputerWorld, however, have drawn directly on my paper since then to counter such a do nothing attitude.  We’ll know better next month how all this will play out when the Competition Commission publishes its much anticipated final report on the matter.

The New Zealand situation is interesting and important beyond its own inhabitants for several reasons. For one, for much of the last quarter-of-a-century, it has been the outpost of a ‘free market fantasy’. To supporters of such a view, deregulation would liberate telcos from the heavy hand of government intervention and competition, innovation and lower prices for better service would flourish for all as a result.

That never happened. The “free market fantasy” years were nothing short of a disaster.

More recently, however, the country has embarked on a series of seemingly forceful steps that would leave the free market fantasy years behind in favour of something altogether different. The four key steps in this process include the development of telecoms specific regulation and functional separation at Telecom NZ in 2006, followed by the launch of the Ultrafast Broadband (UFB) initiative by the right-of-centre, conservative National government after its election in 2008, and finally what some call the ‘nuclear option’ in telecoms regulation — structural separation — earlier this year.

According to many observers, such steps and a strong regulator are necessary to counter incumbents intent on thwarting the rise of real competition and open networks. The UK regulatory, Ofcom, for instance, argues that only once it stiffened its spine and required British Telecom to break itself into two parts —  one for wholesale, and one for retail — under the Openreach framework did telecoms and Internet development significantly improve in that country.

The new regime led to a huge influx of service-based competition, new investment, cheaper broadband prices and more internet providers, while broadband use increased significantly as a result. Prices for residential broadband services fell 16% per year between 2005 and 2007.

With an eye on the UK experience, New Zealand followed suit in 2006. The results to many observers have been impressive. As the Berkman study (2010) concludes, “in the two earliest instances where functional separation was introduced [UK and New Zealand], it had rapid effects on competitive entry, penetration, prices, and/or speeds” (Benkler, et. al, 2010, p. 84).

New Zealand’s Ultrafast Broadband (UFB) initiative charts new ground as well, both as a way out of a legacy of a muddling market and as a forceful response to the financial crisis of 2007-8. The scale and hefty investment in commercial and state-owned companies involved is unique, but several other countries have also begun to follow suit, not just for legacy networks, but for ‘next generation access’ (NGA) networks based on a combination of fibre optics and wireless, too, including: Australia, Italy and Sweden (see the OECD’s study on Next Generation Access Networks).

The state of telecom and internet development in New Zealand has indeed improved since these changes were implemented. There is a modest increase in competition in some telecom markets and an improved regulatory environment.

Nonetheless, the country still sits at the bottom of the pack when it comes to broadband internet development. Moreover, its rank has actually fallen relative to other countries. Thus, where the Berkman study ranked New Zealand 22nd out of 30 countries based on 2008 data, my ranking puts it at 28th out of 34 OECD countries based on 2010 data. The following table shows the results.

Table 1: Country Ranks Based on Weighted Averages for Broadband Penetration, Price and Speed (2010 Data)





Overall Weighted Avg Rank

1 Sweden





2 Japan





3 Finland





4 Korea





5 Denmark





6 France





7 Netherlands





8 Norway





9 UK





10 Estonia





11 Slovak Rep





12 Australia





13 Iceland





14 Austria





15 Italy





16 Germany





17 Switz.





18 Belgium





19 Portugal





20 Slovenia





21 Czech Rep.





22 Poland





23 US





24 Hungary





25 Canada





26 Greece





27 Israel





28 New Zealand





29 Lux





30 Ireland





31 Spain





32 Turkey





33 Chile





34 Mexico





Note: Prices in USD PPP and include line charges (where applicable). Penetration is a composite of fixed broadband subs/100, households and mobile broadband; Speed is based on average advertised download speed plus fastest speed; Price on low, mid and high-end offerings. Source: OECD (2011). Broadband Portal.

The significant decline in New Zealand’s broadband conditions relative to other countries, slipping from 22nd to 28th, reflects the fact that other countries are also pushing similar initiatives, too, seemingly faster than New Zealand.

Ultimately, the UFB could be the great national digital public works project of the 21stcentury, but if New Zealanders are to realize its full benefits, they must confront several realities head on: (1) high levels of media concentration; (2) restrictive bandwidth caps, (3) low levels of media and internet use, (4) a regulator that is not yet accepted as an essential element in an open, competitive and pluralistic media environment, and (5) strong incumbents intent on bending new technologies and possibilities to their ends.

The last point is particularly important because whilst all the policies and indeed the UFB initiative itself is based on an open Internet model that places as much of the capabilities and resources of these networks at the ends of the network and on to the desktops and into the hands of as many online service providers and users as possible (Saltzer, Reed, & Clark, 1981; Isenberg, 1996; Benkler, 2006), New Zealand’s telecom and broadcasting industry incumbents are hell-bent on creating a supplier-driven walled garden model, circa 1999, where power and resources reside in the core of the network, owned and controlled by network operators and their business partners.

A series of unregulated deals struck between Sky TV — the local monopoly provider of pay-tv services delivered by satellite and local arm of the global behemoth, News Corp. — and all of the key telecom and ISP players (except Orcon) since late-2009 reveal a full-court press by the incumbents to simply graft the ultrafast broadband Internet now being built out mostly at government expense onto their current business models. If they succeed, the media economy will not expand as much as it could; nor will it be as pluralistic. Media and internet use will also likely remain low, because uninspired. Competition, diversity and an open Internet, in short, will be crushed in the name of preserving incumbent interests.

For those who are fans of structural separation, the New Zealand case shows how even that form of regulation can be subverted. It also shows that strong measures are needed to enhance not just network neutrality but also to deter alignments between network and content providers alike designed to throttle competitors and to maintain their own position at the centre of the network media universe.

This is particularly problematic in the context of the UFB because, left unaddressed, one gets the impression that the government is financing the roll-out of a state-of-the-art broadband Internet for incumbents in the telecoms and media industries. Perhaps that’s how we can square the  decidedly right-of-centre government’s decision to publicly-fund such a project to begin with?

Will Bill C-51 turn ISPS into Internet Gatekeepers?

My most recent column for the online technology section of Globe &Mail came out Tuesday. It is available here.

The article builds on some recent posts that I have done considering the mounting pressures being put on Internet Service Providers to act more like gatekeepers rather than gateways to the Internet. Four such forces, I suggest, are pushing in this direction:

  • a strong push from the ‘copryight’ industries, especially the music industries, to make ISPs and search engines extensions of the copyright enforcement regime. This has become especially strong since 2008, when the International Federation of Phonographic Industries (IFPI) and the Recording Industry Association of America (RIAA) turned to such measures more forcefully, while backing off somewhat from Digital Rights Management (DRM) (see page 3 of the IFPI’s Digital Music Report, 2008);
  • the near universal adoption of usage based billing and bandwidth caps by Canada’s ‘big six’ ISPs — Bell, Rogers, Shaw, Quebecor, Telus and Cogeco — and now the mid-sized Atlantic region player, Bragg/Eastlink (although with some recent significant developments from Shaw).
  • the fact that all of the major ISPs, except Telus, are vertically integrated and appear to be using usage based billing and bandwidth caps as a kind of ‘television business protection plan’ for their interests in the television industry.
  • and finally, the focus of yesterday’s column in the Globe and Mail, the push from national security and law enforcement agencies to build in increasing monitoring and surveillance capacities into their networks, and to conduct ‘warrantless searches’ if proposed new legislation is passed.
A fuller treatment of the issues covered in Tuesday’s column can be found in my earlier post here, and another that places things in a larger, global context here.

Shaw’s ‘New New’ Internet Pricing Regime — Raising the Bar?

Whew, I’m just coming back from blogosphere, and sheesh can things sometimes get tough out there. I’ve been thinking the last few days about an idea based on these forays into blogs, columns for newspapers, and stuff like that: Blogoslama, or what happens when the trolls of cyberspace get nasty.

That’s the title I have for people like Know Your Facts, RightTruth, TheFactCorrector, TheCorrectOpinion, SeektheTruth and, well, you get the picture, that run around blustering and puffing up their chest in umbrage over something or other that you’ve wrote.

Now don’t get me wrong, and sometimes these strange combinations yield fruit. I enjoy the to and fro of online conversations and generally think highly of them, for reasons that I’ve attributed in previous posts to scholars like Yochai Benkler, Nancy Baym, and others who see these activities of valuable forms of ‘sociality’ and public communication.

I also like the interesting characters like Strunk&White and UseYourSpellCheck who politely remind people how important a tidy sentence is to a civil conversation. And there’s others like Grumpy Scientist, TvWorker, and Old Green who speak wisely, although maybe somewhat slower than others in these sometimes rough and tumble places do. Amidst these different voices are some that really make you think, and sometimes to do a rethink.

Sometimes, though, I must admit, I can feel my skin growing thicker. In some wierd way, the old ‘blender theory of truth’ espoused by great liberals is alive and well. This is the theory that if we throw enough ideas into the mix, the truth, or at least the possibility of understanding, will rise to the top. Some say the Internet, and the blogosphere in particular, functions as a giant ‘echo chamber’, hardening opinions and throwing a monkey-wrench in the ‘blender theory of understanding’. In broad brush terms, I disagree.

So there I was just checking in on my recent contribution to The Mark, a piece that takes a blog entry I did on May 27th about cable media conglomerate Shaw’s new Internet pricing polices. A reworked, shorter and much polished version of that appeared this week as “We”ll Lift Your Internet Cap — If you Buy Our Cable TV” on The Mark. Between now and then, little did I know, Shaw had replaced its first new plan with a new, new one — each a ‘better response’ to ‘public consultation’ than the one before.

The story was a response to Shaw’s announcement last month that it would be doubling the bandwidth of its High Speed Internet services, while maintaining the same price and speeds for these services. Even more importantly, it announced that it would be offering two new tiers of High Speed Internet Services that offered even higher speeds and more voluminous bandwidth caps, up to 1TB in some cases and in others no caps at all. Shaw made a big deal of this, splashing about the news that it had made these ‘radical’ changes in light of recently held consultations with its subscribers.

This is and was a pretty big deal, especially in Canada where the user-centric and open Internet has been transformed step by step into a pay model where bandwidth caps are nearly universal and costs out of line with relevant global comparative standards. We have been drifting steadily toward the pay per Internet model, with Usage Based Billing and Bandwidth Caps leading the way.  I am opposed generally and strongly to the direction of events.

One fly in the ointment, however, with the big splashy announcement was that the you can only get the high end Internet capabilities by purchasing one of two of Shaw’s television services . . . as they become available over the next 16 months.
As a quote from Shaw’s official site stated: “These broadband packages will come bundled with TV and will roll out in two phases.”

In other words, this was ‘tied selling’, which is a big problem with vertically integrated media conglomerates. It also looked like a Business Protection Plan for Shaws vast television interests, from cables, to DTH satellite service, the Global network and a vast stable of television and radio broadcast stations.  And in this regard, Shaw is symptomatic of a broader problem in Canada: the extent that such integrated media conglomerates continue to roam the earth. Elsewhere, such beasts are generally on the wane, although Comcast’s acquisition of NBC earlier this year is an important exception.

Otherwise, in the US, media behemoths such as AOL Time Warner and ATT fell apart (although Comcast NBC is making a comeback), Vivendi in Europe exploded, and the story is similar from one country to the next. The main point for here, though, is that Shaw appeared to be merely tinkering generously with the ‘pay-per Internet’ model and then using it to defend other elements of its media stable. I was also circumspect of its claims about all of this coming from the good graces of the company after a series of consultations with subscribers. I think it had more to do with the intent politics of the Internet that have been at a steady and high boil for at least the past six months — a kind of late realization of the gravity of the stakes at hand, after years of slumber.

Anyway, to make a long story short, as soon as you start talking about concentrations of corporate power and the Internet being bent to private interests, people get their backs up, and in cyberspace, where anonymity is the lubricant of choice, they let you have it

Know Your Facts, who I introduced to you above, blasted me, stating that I should, umm, in his very own words, “No your facts before you write a objective review”. I don’t think that I ever claimed to be objective, but I do claim to be thorough and honest and good with the evidence at hand and that I produce, interpret and put in context. But before I could talk to KYF about the production and interpretation of facts, and how that renders notions of ‘objectivity’ problematic, he wound up and smacked me, FULL CAPS ON.

High Speed Internet services from Shaw are available from Shaw. He sent me a link that went to a Shaw page that required me to tell them where I lived so that Emma, or whatever their silly ‘agent’ is called, could tell me what’s on offer. It was a dead-end.

But I was wondering, had I made a mistake, lost the plot? Was it true, as WordUp said (slinking into the saloon), that by just referring to the ‘big 5’ other media behemoths alongside Shaw that I had blinded myself to reality?

Umm, no. I checked again. And again. The document I was relying on was still there. It clearly said everything I said above. Here it is again for your reference.

But then Craig arrived. Craig, you see, is from Shaw. He seems like a nice guy. He posted something to The Mark, in the comments section under my article. Everything now makes sense.

Shaw changed its pricing again on June 6th. The source I had been relying on had been superceded. The new page is here.

The improvements are considerable and I am glad that Shaw has seen fit to go further than the initial scheme announced to much fanfare.  There are still some quibbles that one might gnaw on, but the broad principle that access to the highest end Internet capabilities should not be tied to a subscription to any of Shaw’s television services.

To be sure, Shaw has raised the bar and it is to be applauded for doing so.  If it can just get rid of the bandwidth caps altogether and make sure pricing is in line with relevant global comparisons, then, at least when it comes to Shaw, we will be able to rest at ease.

Yet, one thing that also is crucial to this is that the bar set by Shaw should also become the minimum baseline standard adopted by the rest of the ‘big 5’: Bell, Rogers, Quebecor, Telus and Cogeco. Moreover, and to repeat from an earlier post, these must not be seen as a diversion from the central issues that remain core to the upcoming CRTC hearings on vertical integration and UBB.

Ooops, I did it again. Did that screw it all up for you?

Shaws’ New High Speed Internet Regime: Iron Fist vs the Velvet Glove

Shaw announced plans to implement a new regime for its Internet Access services this week. There is much in the announcement to be commended, and much still to rail against.

First, the much welcomed headline news is that Shaw’s new plans basically double the bandwidth caps for its Lite and High Speed services, while the caps for the Extreme service will be increased from a 100 GB cap to 250. The prices and the speed for each service will remain the same. Nice start!

Second, Shaw is promising much needed investment in broadband networks over the next year and a half and to convert all of its television channels to digital. As the company notes,

In making this move we will triple the capacity of our network, freeing up space for more Internet, HD and On Demand programming.

Third, the new pricing regime makes available some of the fastest and most generous high-speed Internet services in North America. It will most certainly, as Michael Geist, Peter Novak and others have noted, put pressure on the rest of the ‘big 5 ISPs’ – Bell, Rogers, Quebecor, Telus and Cogeco – to fall in line.

Shaw’s new bandwidth caps will be between two (vs Rogers) and five (Bell) times as great as those of the other dominant ISPs, as the following table illustrates.

The commitment to invest heavily in a “major upgrade of our network”, and to convert all its channels to digital, in order triple the capabilities of its networks is good news.  It would seem to bring Shaw closer into line with global trends (and ahead of standards in most of the United States).

The emphasis on network upgrades dovetails with ‘hierarchy of priorities’ set by the CRTC in its Network Neutrality decision too, or as it prefers to call it, the Internet Traffic Management Practices decision. Regardless of terminology, the basic idea is that Network Investment is the preferred method to deal with any congestion that exists. Shaw’s proposal appears to be in line with that idea.

If it acts as a spur for greater investment by the other major telecom and ISP providers, all the better, but we should not hold our breath. Their feet will have to be held to the fire.

Iron Fist Replaced by the Velvet Glove?

But now for the odious bits of Shaw’s intended course of action.

First, the highest speed services with the most generous bandwidth caps, or no caps at all, are only available bundled with either of Shaw’s Legacy TV or its Personal TV model. And these services will also only become available over the next 18 months as its networks are upgraded.

The bundled, highest performance Internet offerings offer speeds of between 50 and 250 Mbps and genereous bandwidth caps of between 250 GB per month and a voluminous 1 Terrabit (TB), as well. The caps are removed altogether in some cases. This is a good thing and appears to bring Shaw’s offerings closer into line with ‘global best practices’.

But tying the highest-performance Internet service to its ‘legacy’ television services is a blatantly protectionist bid — a first line of defense for Shaw’s Global television network, massive cable and satellite distribution system, and big suite of cable and satellite television channels. Enrolling you in its Internet services enrolls you unwittingly into the Shaw Business Projection Plan for all these other services. Your tail wagging its corporate dog.

The fact that Shaw is able to leverage control over its networks to influence the channels of communication flowing through them is not surprising. It is a problem as old as Roman Roads and Venetian Canals. It is a problem of the first order, for all that, and to be resisted now as much as in the past.

In 1910, the long lost precursor to the CRTC, the Board of Railway Commissioners came to a conclusion that would be startling if it happened today. As the BRC found in the ‘double-headed telegraph news monopoly’ case, Cdn Pacific Telegraph Co. and Great North Western Telegraph Co (the latter under ownership control of Western Union) had exclusive distribution rights for Associated Press news services in Canada. Cdn Pacific Telegraph was charging its

. . . subscribers for the commodity, viz., the news, delivered at a flat rate; . . . while in the case of rivals [Western Asssociated Press] the payment . . . was for the transmission, and not the commodity. . . . [T]elegraph companies could put out of business every newsgathering agency that dared to enter the field of competition with them” (BRC, 1910, pp. 274-275).

The bundling of ‘connectivity’ and ‘content’, as Shaw does in its new plans under one corporate umbrella is one of the biggest problems with vertical integration. Always has been, always will be.

Theoretically, the CRTC can do something about this after its upcoming vertical integration hearings next month. It can be taken for granted, however, that Hell will freeze over before anyone seriously considers divestiture of Canada’s big 5 integrated telecom-media behemoths — Shaw/Global (Corus), Bell/CTV, Rogers/CityTv, Quebecor (TVA), Cogeco (Radio).

The government could set up a competitor entity, the Canadian National Broadband Co (CNBC), just like the Australians. That’s not likely to happen either, the price tag of $40 plus billion being only one among many economic and ideological deterrents.

The CRTC should give serious consideration to imposing ‘functional separation’ requirements on the big 5; it would be a good compromise. Not to hot, not too cold — the Goldilocks solution to vexed Internet policy issues.

Just to be churlish, we can also note that Shaw’s plan to convert analog tv channels to digital ones is not a bright, new idea. It is long overdue and coincides with the mandatory switch over to digital broadcasting for the rest of the broadcasting system in August 2011. Shaw’s acceptable use policies are also just as abhorent as they have always been, setting out

  • restrictions on what people can and cannot do with their Internet connections.
  • broad assertions of its authority to act on behalf of copyright claims a
  • its right to make ‘editorial judgments’ about all kinds of content hosted on and moving through its pipes.
  • and to own user created content.

Shaw has moved the ball forward and we should not only hope, but push to have at least the minimum bar it has set met by the remaining ‘big five’ ISPs in Canada that control access to roughly 95 percent of Canadian subscribers: Bell, Rogers, Quebecor, Telus and Cogeco.

The advances so far did not come from the good graces of Shaw. They came from an extraordinary confluence of pressure that has been put on Shaw and all of Canada’s ISPs with greater and greater intensity over the past four to five years.

The three most significant pressures shaping the flow of events are probably:

  • Open Media and the massive public that it helped to mobilize;
  • the ‘tweet’ in the night by then Industry Minister Tony Clement scolding the CRTC for its UBB decision in January of this year and the upcoming hearings to be held by the CRTC this July into the matter which have ensued partially as a result;
  • and crucially, the pressure from investment bankers, who saw mounting public anger and the threat of regulation as a potential danger to Shaw and the others’ bottom line and their ability to raise capital.

Ultimately, while we should appreciate what Shaw’s announcement has put on the table, this should not divert our attention from the fact that much remains. Nor should it give Shaw a free pass when it comes to the CRTC’s upcoming hearings on vertical integration.

Telus Hearing Angels?

The other day I posted that Telus stands apart from the other dominant integrated telecom and media giants in Canada — Bell, Rogers, Shaw, Quebecor and Cogeco — on several grounds.

First, that while it has Usage Based Billing and bandwidth caps on the books, it has yet to implement them — although it has just announced plans to do so. If it does, it will be in the same league as the rest of the incumbents. Until then, there is still a chance that it will back down.

Second, unlike the other ‘big 5’, it is not a fully-integrated media conglomerate. It does not own broadcasting or other major ‘content’ services.

Third, it is opposed to vertical integration because companies that own the ‘medium’ and the ‘message’ lock up content in ways that are anti-competitive and against open networks. It is already encountering the difficulties that that entails in its attempts to gain programs for its IPTV, mobile tv services, etc.

Today, Telus filed documents for the upcoming CRTC hearings on vertical integration outlining that opposition. It is worthwhile to read. Here’s a link and another.

The following quote from Telus press release announcing its position gets to the thrust of its position:

“The unprecedented concentration of market power in the broadcasting sector created by the common ownership of programming services and distribution platforms requires regulatory safeguards to protect consumers . . . . The potential for abuse of market power is real and the risk to consumers is significant. Without proper regulatory safeguards consumers could soon be facing increased costs and reduced choice in their TV viewing options.” Michael Hennessy, senior vice-president Regulatory and Government Affairs at TELUS.

To be sure, unless it renounces plans for UBB, bandwidth caps and to stop throttling P2P services and OVP (online video providers), Telus is certainly nowhere being on the side of the Angels. However, it has gone part way down the right path, and in so doing, broken ranks with the others who simply see the Internet as a threat and merely an adjunct to their ‘business models’ when useful.

The Great Struggle for the Soul of the Internet and Network Media in Canada (Part 1)

A strange confluence of forces has just made the push to have Netflix and other over-the-top video distributors (OVDs) such as Amazon, Apple and Google regulated by the rules of the Broadcasting Act a whole lot stronger.

Events kicked into high gear this week when Astral Media renewed calls for the CRTC to regulate OVDs just like any other broadcaster. Bell, Rogers and Shaw quickly endorsed the call.

Astral, Bell and other incumbents are coming under increased scrutiny from investment bankers worried that OVDs could wreck their bottom line and this seems to have increased their resolve to thwart would be rivals. Moody’s — the investment ratings agency – also recently raised such concerns, while casting doubt on the dominant integrated media companies’ — Bell CTV, Shaw Global (Corus), Rogers City TV and Quebecor Media – decisions to acquire ever bigger stakes in the television business.

When investment bankers worry, CEOs tremble and Netflix as well as the open Internet generally could end up paying the price.

The Canadian Media Production Association‘s recent appeal to the CRTC to regulate Netflix under the Broadcasting Act added to the full court push, as did the Supreme Court‘s decision last month to hear a case from various groups representing media workers who want ISPs as well as Netflix, Apple, Google, and so on to be regulated like broadcasters.

Lastly, a Standing Committee on Canadian Heritage report published last month and the CRTC’s upcoming reviews of its unpopular wholesale UBB decision and vertical integration have also brought the issues to a head.

These issues are not new. In fact, in its famous “new media” decision in 1999, the CRTC categorically asserted its authority to regulate broadcasting services delivered over the Internet, but decided to stand on the sidelines while such services were in their infancy.

The vertically-integrated, dominant telecom, cable and internet service providers love the approach because it has given them a green light to develop new markets while letting them off the hook with respect to issues about vertical integration, anti-competitive behavior, Cancon requirements and funding commitments in the emerging digital media universe.

The CRTC’s decision to stand on the sidelines has no doubt played well to the ‘hands-off-the-Internet’ crowd, as well. The truth is, however, that this has only postponed the day of reckoning.

That day of reckoning has been moving ever closer since broadcasters finally made a concerted effort to launch substantial video portals in 2007/2008 (e.g.,,,, while offering some programs through Apple iTunes and YouTube. Simultaneously, they have  fought tooth and nail to defend their existing markets and expand into new ones, while using a well-stocked arsenal of measures to block rival OVDs such as Netflix. Six such tactics stand out:

First, bandwidth throttling was used by Bell in 2008 to cripple the CBC’s attempt to use BitTorrent to distribute an episode of Canada’s Next Great Prime Minister, while today Rogers’ throttling of P2P applications causes no end of frustration for those who play World of Warcraft online.

Second, ‘bandwidth caps’ and Usage-Based Billing are being used by all of the major ISPs to deter online video use. Netflix has deliberately degraded the quality of its service to help subscribers avoid these punitive and restrictive measures as a result.

Third, the incumbents do not apply the same measures to their own services. Bell’s chief regulatory officer, Mirko Bibic, recently provided a great example of the tortured logic used to justify such treatment when he argued that, despite using the same network facilities, Bell’s OVD service is not a ‘true’ Internet-based service, while Netflix is.

Fourth, the incumbent telecom and cable companies’ refusal to interconnect their systems with others has blocked large OVDs and Internet companies such as Amazon, Apple, eBay, Facebook, Google, and Netflix from bringing their ‘content distribution networks’ as close to users as possible.

Fifth, Canada’s integrated multimedia conglomerates have used a combination of program rights, geo-gating and digital rights management (DRM) technologies and a smattering of deals with Apple and Youtube to shore up their control over access to our ‘national media market’. The Rogers, Bells, Shaws, Quebecors, and so on of this country do not like the prospect of having to compete for each and every new digital market with newcomers one bit; nor do cable providers in the United States.

As a recent New York Time’s article observes, Time Warner and Cablevision are locked in battle with Viacom (MTV, VH1, etc.) and Scripps Howard (HGTV, Food Network, etc.), with the cable companies arguing that the rights they have acquired to deliver channels to audiences’ tv sets also lets them beam those same channels over the Internet to iPads and iPhones. Viacom and Scripps Howard vehemently disagree.

In the incumbents’ “perfect world”, they would simply fold the OVD market into the suite of rights they acquire for traditional television markets without having to compete with Netflix at all. If they had it their way, the Internet would just be bolted on to the side of their lucrative television business.

Netflix strengthens the hands of content creators and rights holders on both sides of the border relative to traditional broadcasters. In Canada, this battle over the essential resources of the media economy — networks, money and copyrights — are concealed by a fog of sanctimonious rhetoric about cultural policy led by vested interests.

Seen from the broadcaster’s point of view, Netflix’s recent acquisition of new drama series and its deal with Paramount Studios for online video distribution are just further evidence that the company is steadily encroaching on their turf — one more reason why it should be quickly brought to heel. Even if we thought for a moment that regulating Neflix and OVDs was a good idea, what should we do as Hollywood experiments with using Facebook as a new ‘window’ for blockbusters such as The Dark Knight, Philosopher’s Stone, Yogi Bear, and Chamber of Secrets, among others?

Do we regulate Facebook as a broadcaster too?  I’m all for attending to that company’s privacy issues and other mattters, but Facebook and broadcasting? Obviously, there is no shortage of slippery slopes and pitfalls along the incumbents’ garden path.

The sixth defensive weapon in the incumbent’s bid to hobble new rivals is their coordinated push for government regulation. Perhaps the award for sharpest U-turn on these issues goes to Shaw after it acquired Global TV in the fall of 2010.

After a decade of opposition to the CRTC in general and to the regulation of the Internet specifically, Shaw President Peter Bissonnette laid out the new gospel in front of the Canadian Heritage Committee referred to earlier: “If there’s one message we want to leave with you . . . it is that over-the-top competitors have a free ride. They’re aggregators of broadcasting. They provide broadcasting services in Canada.” They should be regulated like broadcasters.

For anybody still under the illusion that the Internet is unregulable, Shaw and others point to extensive regulatory tools that they’d like to see pressed into service: e.g. ISP levies; extending Section 19 Income Tax Act Exemptions so that adverting on Canadian Internet sites can be written off just as it is for Canadian-owned newspapers, magazines and broadcasters; Canadian Media Fund contributions; Cancon Quotas, etc.

Acceding to the full sweep of this agenda would not just wreck Netflix’s ‘business model’, it would destroy the future of the Internet. To stem the tide, we need to understand just how wildly out of synch the ‘sky-is-falling’ rhetoric is with the fact that the television industry is more lucrative then ever. We also might wonder if Netflix, Apple, Google, Amazon, et. al. might agree to adding some water to their wine in return for a quick stop being put to the discriminatory practices that now hobble their activities in Canada?

%d bloggers like this: