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CRTC Zero-Rating Rulings are a Significant Win for the Open Internet: Bolster Common Carriage, Competition and Cultural Policy

Two rulings by the CRTC the other day constitute a significant win for common carriage (aka ‘net neutrality’), competition, Canadians and cultural policy.

The second of the two rulings found that Videotron’s Unlimited Music program runs afoul of Canada’s telecoms law. It does so by giving an undue preference to subscribers of the company’s highest tier data plans over the rest of its customers and to the music services included in its offering such as Apple Music, Google Play, Spotify versus those left out but available over the internet, e.g. the CBC and commercial radio stations.

Combining the lessons of that decision with its 2015 Mobile TV decision (upheld by the Federal Court of Appeal last year), the CRTC took the additional step of developing a general framework that in most cases prohibits carriers from acting like publishers or broadcasters that pick and choose content-based services that don’t count towards your data caps while everything else you use the internet or your mobile phone for does. The framework also banishes pay-to-play schemes like the one in the US wherein content providers or in-house affiliates like DirecTV ‘sponsor data’ so that internet traffic from the use of their content does not count, in this case, against AT&T subscribers’ monthly data allotments.

That particular example (and a few others) had caught the eye of the FCC’s previous chairman Tom Wheeler as a potential violation of common carrier rules but has since been waived away by Trump appointment, Ajit Pai – by fiat rather than any formal proceeding. The CRTC’s new Differential Pricing Framework strikes a hard stance against pay-to-play schemes because they essentially treat the internet like a glorified cable TV system rather than the public internet where access is governed by common carrier principles.

Lastly, the CRTC’s new Differential Pricing Framework leaves some wiggle room for making decisions on the margins with respect to services that escape the Commission’s general ban on zero-rated plans. It will base its judgements on whether or not to grant an exemption to such services when they offer exceptional public interest benefits, are open to any content, app or service provider, are ‘content agnostic’, have minimal to no impact on the interoperability of all of the internet’s interlocking parts, and are not based on payola schemes (paras 126-129).

Broadband Internet Access and Mobile Wireless Providers are Common Carriers not Publishers (or Broadcasters)

The practices at issue are known as “zero-rating” and are the most recent frontier in the battle over “network neutrality”, but which I prefer to refer to as common carriage in line with the more formal terms of telecoms law and history. The decisions by the CRTC last week firm up ISPs and wireless services’ status as carriers rather than broadcasters or publishers, meaning that control and choice should be in subscribers’ hands to the greatest extent possible versus those of the companies. In this sense, the rulings are all about power and control, and the fact that the CRTC decided that more power and control should rest with subscribers, content providers and would-be rivals has the incumbents and their cheerleaders up in a ruckus.

The decisions mean that ISPs and mobile wireless providers like Bell, Telus, Videotron, Shaw, Teksavvy and Rogers generally cannot pick and choose which services, content and apps won’t count toward your monthly data caps and which will. While the rulings do not add much that is new to the landscape, they do clarify the rules-of-the-road and aim to head off a regulatory game of whack-a-mole as ISPs and wireless companies try to skirt the principle of common carriage that those who control the medium should not control the messages that flow through them. Put this all together with the Telecommunications Act’s rules outlawing unreasonable discrimination between both users and services, the CRTC’s network neutrality rules, and last year’s Federal Court of Appeal ruling that upheld the Commission’s 2015 Bell’s Mobile TV ruling, yesterday’s decisions strengthen as well as clarify the net neutrality regime in Canada.

No Such Thing as a Free Lunch

All the big incumbent telcos and ISPs, except Rogers, and their hangers-on from the consultancy world, argued that banning zero-rating denies consumers access to ‘free stuff’ that they like a lot while undercutting a useful tool that can encourage affordability and adoption of the internet. It also, they say, removes a key source of innovation and competitive rivalry (see, for example, Trump’s FCC Chair appointment, Ajit Pai, Mark Goldberg, Roslyn Layton).

Such advocacy, however, is better seen as an attempt to wrap commercial aims in noble public interest garb. The commission gave short shrift to their claims, and for good reason: programs like Videotron’s Unlimited Music and Bell’s Mobile TV target subscribers for their most expensive data plans rather than promote affordable internet access and wireless services for those most likely to need the help. Moreover, there are better ways to deal with the issues including fostering more competition and defining broadband internet access as a basic service so that more forceful regulatory and policy steps can be taken to meet such goals if “the market” fails to do so. The CRTC did just that late last year when it defined broadband access at speeds of 50 Mbps down and 10 Mbps up a basic service, and thus this decision needs to be seen in that context (paras 68-70).

The Peculiar Structure of the Communications and Media Industries in Canada Require Strong Common Carrier Rules

The claim that zero-rated services give people ‘free internet’ also collides with the fact that ISPs and mobile wireless operators that do not use zero-rating have subscription prices that tend to be significantly more affordable and with data allowances that are twice as high on average as those which do use zero-rating (Rewheel, 2016).

Prices also tend to be even higher and data caps even lower where vertical integration and diagonal integration are extensive (i.e. vertical integration is when a firm owns the network as well as content services that rely on it, while diagonal integration is when a firm that owns a wireline network also owns a wireless network). This is of special importance to Canada given the very peculiar structure of its communication markets.

Concentration levels in broadband internet access and mobile wireless markets around the world tend to be “astonishingly high”. This is true in Canada too.

The extraordinarily high levels of vertical and diagonal integration in Canada, however, is what puts us in a league of our own and, crucially, begets the need for especially tough common carrier rules. Take, for example, the fact that Bell, Rogers, Shaw and Quebecor’s Videotron own all the main commercial TV services in Canada (185 in total). Add in Telus, which is not vertically-integrated, and the top five players in Canada account for nearly three-quarters of the broadly drawn network media economy (see here and here).

In addition, the last stand-alone mobile wireless operator in Canada, Wind, was acquired by Shaw last year, and made a branch of this vertically- and diagonally-integrated giant. This is of great importance because where there are stand-alone or wireless-centric operators like T-Mobile and Sprint in the US, or 3, Free, Tele2 and Play in Europe, data plans tend to be more affordable and have data allowances that can be six- to ten-times as high as their vertically- and/or diagonally-integrated counterparts!

In short, the market in Canada is structurally biased toward carrier control, high subscription prices and low data caps. We need especially tough rules to deal with these exceptional conditions. The CRTC’s general ban on content-based zero-rating services addresses these realities head on – and pushes back against them but stops short of addressing the issue of data caps directly, as some groups like Open Media advocated (paras 40, 56-58).

The CRTC Just Says No to ‘Balkanizing the Net’

As the CRTC’s rulings also observe, zero-rated services can impose significant costs on other content, app and service providers who must meet the technical design specs and other administrative criteria of zero-rating platforms (paras 41-43). Even Facebook has experienced long delays in designing its service for T-Mobile’s Binge On service in the US. News media have had similar experiences with respect to Google’s AMP and Facebook’s Instant Article platforms. The lesson of those experiences is clear: while theoretically open to all, only the biggest players tend to be able to incur the substantial expense needed to design their services for these platforms — and walk away if things don’t work out as they hoped.

Facebook’s Instant Articles platform illustrates the point. It is chock-a-block full of the biggest news organizations in Canada and the world, such as the CBC, Postmedia, the New York Times, Wall Street Journal, Financial Times, Guardian, etc. New ventures like Canadaland, iPolitics, the Tyee, etc. are conspicuously absent (see here and here). Yet, even after expending much time, money and expertise, the New York Times, Vice, the Los Angeles Times, Forbes, the Chicago Tribune, and several Hearst publications have walked away from Facebook’s Instant Articles platform due to lackluster results and the perceived loss of control over their content, audience data and revenue (see here). In short, while advocates tout zero-rated plans as being pro-innovation, competition and consumer – and basically “free” – they are nothing but. The fact that they feature the biggest brands suggests that they reinforce the power and control of both blockbuster brands and the platforms that host them.

As the CRTC’s ruling observes, having to negotiate deals with and design services to meet the technical requirements of multiple ISPs’ zero-rated platforms across Canada would impose heavy burdens on content creators. It would also insert a new gatekeeper between them and audiences, using the seduction of “free stuff” to influence people’s selection of content, apps and services in ways that steer them away from the general internet towards the companies’ own offerings.

The lure of free, in other words, would tilt the field in favour of walled gardens built around proprietary standards and against the public internet based on common protocols (e.g. TCP/IP, HTML, etc.). Indeed, this is why some of the cultural groups took a stance against zero-rated plans, including, and unusually, l’Association Québécoise de l’Industrie du Disque, Du spectacle et de la Vidéo (ADISQ), and the Independent Broadcast Group (paras 37, 43, 53-58).

Common Carriage is Good for Culture (Policy)

The ruling is not just good for common carriage and competition but for Canadians and culture policy. While the Canadian Media Producers Association and CBC called upon the CRTC to use zero-rating to promote Canadian content, its swift rejection of that idea is based on the principle that communication networks should not be tied to the pursuit of such goals. The ruling’s hat-tip to people’s privacy and the concerns it raises with respect to how zero-rated plans could discourage the use of virtual privacy networks further points to values and uses of the internet that are rooted in the culture of people’s everyday lives versus the ‘systems-control’ and cable TV-centric model of cultural policy that has prevailed for much of the past century (paras 106-113).

Competition Should Be Based on Substantive Factors vs Marketing Gimmicks

While the strict limits on content-based zero-rated plans applies to all ISPs and wireless carriers, the decision’s biggest loser in all this is likely Videotron. It was the complaints filed by Jean-Francois Mezei and PIAC against its Unlimited Music program that kicked off the review to begin with, and to them we can be thankful. Some, however, worry that this outcome could undermine the more competitive wireless market its presence has fostered in Quebec.

That Videotron has spurred on greater competition in the province, there is no doubt. However, as the CRTC’s decision makes clear, rather than using marketing gimmicks like zero-rating, Videotron and its competitors should compete based on price, speed, data cap size, quality of service, network security and privacy. Marketing gimmicks like zero-rating, in contrast, obscure the fact that, operating in highly consolidated markets, the big telcos and ISPs don’t like to compete on price so that they can maintain fat profit margins in the 20-40% range (with Videotron and Wind, now renamed “Freedom”, at the low end and Rogers, Bell and TELUS at the other end). Either way, their profits are two- to four-times more than the average for Canadian industry – which in itself is a proxy for their dominant market power (paras 47-59).

Moreover, the CRTC and government policy has already developed a regulatory framework in the companies’ favour by refusing to mandate wholesale access to their mobile networks for MVNOs (mobile virtual network operators) and, some fear, in the details of the wholesale access regimes that are currently being cobbled together for fibre-to-the-doorstep internet access and mobile wireless. Why should policy makers put their thumbs on the scales even further by sacrificing essential principles like common carriage, freedom of expression, privacy and a new approach to cultural policy to the incumbents’ desire to skirmish with one another on the margins using marketing gimmicks like zero-rating rather than in a full-out battle for minds and market share?

Some also worry that the CRTC’s decision throws Videotron’s customers under the bus. Yet, as the decision makes clear, it is only its high-end subscribers with access to the Unlimited Music program who will feel the pain. Moreover, the bottom line is that unduly discriminating between customers is against the law. The CRTC not only found Videotron to be offside with respect to the long-standing undue preference rules of the Telecommunications Act and the other underpinnings that have come to define network neutrality in Canada, it also held up Videotron Unlimited Music service as precisely the kind of content-specific zero-rating service that will be a non-starter from here on out. The company has until July 19th of this year to remove the service.

Ultimately, it is Videotron that played chicken with the Commission, and thus with the interests of its subscribers. Well acquainted with the law and having been at the heart of the Mobile TV rulings that have clarified the rules-of-the-road over the past few years, Videotron chose to roll the dice anyway in the hope that its gamble would pay-off. It didn’t, and it lost. In short, it has nobody to blame but itself for the consequences that befell its customers.

Yet, while this valuable subset of Videotron’s subscribers might indeed suffer, the alternative course of action – blessing zero-rating — would cause more collateral damage for Canadians in general, to competition across the internet- and wireless-centric communications and media economy (over-and-above its effects within the communications industry), and to content and cultural creators. The latter would have to shoulder additional costs and other burdens while ceding yet more power to ISPs and ‘platforms’ at precisely the moment in time when they need as much good fortune as they can manage to muster to chart a course through the turbulent waters that the content media industries now face.

While Videotron and others suggest that the company might yet find a way out of its predicament – perhaps by creatively rejigging its offering yet again (although there does not seem much hope for that), or perhaps by appealing to Cabinet or the Courts – a victory by either of the first two of these options would constitute a serious blow to a good decision that has been a long time in the making. It would also look bad in the context of the whole of the situation as well, a situation in which current chairman J. P. Blais has distinguished himself from his predecessors since the Commission’s first big decision under his leadership in 2012 when BCE’s bid to acquire Astral was spiked. Last week’s zero-rating ruling could be the last of the Commission’s big rulings under Blais direction. In this sense, the two decisions could ultimately constitute book-ends to his tenure at the Commission. For Cabinet to force the Commission to revisit, revise or repeal the ruling would send a signal that when the stakes are down no matter what the independent regulator does, the Government – whether Conservative or Liberal – will swoop in to protect the interests of Canada’s incumbent telco and ISP giants while throwing the interests of independent regulators and the Canadian public under the bus.

On this score, the current Liberal Government’s track-record so far is mixed. It’s decision to reject Bell’s appeals to reverse the wholesale fibre-to-the-doorstep regime and the CRTC’s decision to suspend the rules that reserve the Canadian advertising market during the Super Bowl to Canadian broadcasters (i.e. Bell’s CTV has the rights at present), have been steps in the right direction. It’s lackluster response to the CRTC and others’ entreaties to take an active role in making sure that affordable broadband access is available to all Canadians and its decision to bless BCE’s take-over of one of the last significant telco-ISP, Manitoba’s MTS, have been deeply disappointing.

These are political calculations that the government will have to make, but a sober review of the facts on the ground in the zero-rating case suggests there’s no reason for rash judgements, the screams of bloody murder by the incumbents’ defense league notwithstanding. Dial back the hyperbole, and the reality is that the Commission’s zero-rating decision does not establish a lot of new facts on the ground but clarifies the rules of the road while firmly rebuffing the incumbents’ strident efforts that aim to remake the internet more like Cable TV. The sign posts that zero-rated plans are a non-starter have been there all along but the incumbents have tried to run roughshod over them only to be turned back each time – by the CRTC and by the Courts who have reaffirmed its authority to take the steps it has. This decision warns them of the consequences once again.

Exceptions to the Rule and Bolting the Barn Door After the Horse is Gone?

While tough, the new framework is also flexible and balanced insofar that the general ban on content specific zero-rating services like Videotron’s Music Unlimited or Bell’s Mobile TV services will not apply to managed services like IPTV services and Internet-of-Things uses such as telemedicine applications or Microsoft’s Xbox and Sony’s Play Station (para 9). That adds much upside for the telcos and is line with the kinds of things that the Commission heard both from them as well as internet and mobile wireless equipment makers like Sandvine and Cisco during the hearings. However, it is also the case that managed services will now likely emerge as the next frontier of battles over common carriage (net neutrality).

This is because managed services are not hardwired into networks with clearly drawn lines between them on the one side and ‘the public internet’ on the other. Instead, they are a function of software drawn lines in the sand whose precise location only the telco-ISPs really know. There is room for must mischief here, and the track-record of telecom history for over 150 years almost certainly guarantees that we will have it.

That this is so was on full display in the Federal Court of Appeal’s ruling that rejected Bell’s appeal of the CRTC’s decision in the Mobile TV case. The case was precisely about drawing lines between telecommunications on one side and broadcasting on the other. Bell sought to exploit such ambiguities to offer its Mobile TV service to subscribers in a way that was clearly off-side according to telecoms rules but just fine if its activities could be shoe-horned into the broadcasting mold. As the court stated,

. . . Technology has evolved to the point where television programs are transmitted using the same network as voice and other data communications (para 22) . . . . [I]t was reasonable for the CRTC to determine that Bell Mobility, when it was transmitting programs as part of a network that simultaneously transmits voice and other data content, was merely providing the mode of transmission thereof – regardless of the type of content – and, in carrying on this function, was not engaging the policy objectives of the Broadcasting Act. The activity in question in this case related to the delivery of the programs – not the content of the programs – and therefore, the policy objectives of the Telecommunications Act (para 53).

That the CRTC has exempted ‘managed services’ form its zero-rating framework and decided to take an ‘ex post’, case-by-case review of cases as they arise is a potential weakness of the decision precisely because it greatly increases the chances that battles on these new frontiers will continue apace (paras 122-125). Ex post rules favour those with the deepest pockets, as well, and this too skews the field in the favour of Bell, Rogers, Shaw, Videotron, Telus, et. al. In other words, any claims that the Commission has not given due consideration to their concerns is blind to these realities.

The fact that the ruling also permits a small number of content-agnostic zero-rated applications, such as when an ISP does not count internet usage against your data caps when used during off-peak hours or to manage your bill and subscriber account, is another example of common sense and flexibility being built into the decision (paras 98-100).

Lastly, the Commission held the door open ever so slightly to the possibility that a new service or application might arise that offers exceptional public interest benefits that deserves to be zero-rated. To this end, it opened a path for anyone considering such an option to consult with Commission staff before launching (paras 126-129). It also adopted a case-by-case approach to ruling on complaints. Anyone who thinks a zero-rated offer crosses the bright line rules restricting such offerings could bring a case to the CRTC.

Some see this as a slippery slope at odds with the general ban on zero-rating, but the Commission’s recent track-record on the Mobile TV, illicoTV and now Videotron’s Unlimited Music services stand as firm markers that it is willing to stand firm. Yet, whether that will continue after the present Chair, however, is another matter to which the government should be attentive, yet even then, the Differential Pricing Framework does seem to limit the scope for exceptions to the general rule. Once again, however, there is also no denying that the ‘after-the-fact’ (ex post) approach favours incumbents while putting the burden on individuals – whether deep-pocketed industry rivals or the proverbial David battling the Telecom Goliaths for justice and a communications system fit for Canadian citizens in the ‘internet age’.

Where Things Stand: Canada and the Rest of the World

The debate over zero-rating has constituted the frontlines in the battle over common carriage and the internet for the past three- or four-years. That terrain has shifted in this time and is shifting fast now. More than forty countries have addressed the issues, in a wide variety of ways, including the US, the EU28, the Netherlands, Slovenia, Chile and India. So, this begs the question, are the new Canadian zero-rating rules – and common carriage principles more generally – at the strong or weak end of the spectrum?

Relative to conditions in the US under the Obama-era FCC, it is hard to say definitively one way or another: both the Obama-era FCC’s and CRTC’s rules lay towards the strong end of the scale. However, just as President Trump has been ruling by Executive Order, the newly appointed FCC chair, Ajit Pai, has been ruling by fiat to dismantle the strong common carrier rules put into place by his predecessor. Prior to this recent turn, however, zero-rating practices had been banned in a few specific cases as a condition of ownership change approvals but were mostly still under review, but with a proposed regulatory framework put on the table just before the change in administrations.

At first blush, the new CRTC Differential Pricing Framework appears to be tougher than what had held sway in the US even before the Trump Administration arrived in town. Yet, a few things temper that view.

First, constraints on zero-rating in the US that were put into place after broadband internet access was reclassified as a common carrier service in 2015 were just one part of a still-developing picture that also included a ban or limits on the use of data caps as a condition of merger and acquisition approvals (e.g. Charter Communications acquisition of Time Warner Cable and Brighthouse Cable last year). Without data caps, zero-rated plans are redundant.

Second, they were also the focus of ongoing study by a working group dedicated to the task within the FCC but led by well-known internet economist Shane Greenstein and a variety of others from within the telecoms industry and across the media and economy more broadly (claims that the FCC has been an economic free zone are complete bunk in light of these and many other basic facts). The totality of these efforts and the longer evolution of attention to the issues at hand are strengths not present in the Canadian context.

The most decisive point, however, is that conditions in the US are different than those in Canada, and those differences arguably justify the tougher rules that at least now exist on paper in this country. Unlike Canada where vertical and diagonal integration is the norm at Bell, Rogers, Quebecor and Shaw in the US it is the exception and there is only one US company that stands close to them in terms of size and structure: Comcast, but then again, even it doesn’t really have a mobile wireless operation, although it has just recently announced the launch of a MVNO – which is very different than the large-scale, facilities based operations of its Canadian counterparts. It’s share of the total telecoms-internet and media market is 11%; Bell’s share of the Canadian market is two-and-a-half times that amount (28%).

Vertical and diagonal integration are not the pivot upon which these questions about carriers’ undue control over content and consumers turn but the more prominent those phenomena are the more pronounced the problems are (e.g. high rates, low data caps, punishing overage charges, excessive control, privacy, etc.) and the greater the need for strong rules. In this respect, the CRTC is on the mark, while its soft stance toward managed services, potential exceptions and ex post review may turn out to be weak points, the exploitation of which will need to be aggressively defended against in the time ahead.

Relative to the EU28, developments are too new and evolving to say with any certainty. But there, too, the adoption of new guidelines on net neutrality last year also put those who would use zero-rating on notice that such efforts would be closely monitored, much like the FCC was doing in the US. However, unlike the US, the EU rules are weaker than those of the late-Obama era FCC because they stand all on their own without the FCC’s working groups and merger & acquisition reviews. They also lack the general applicability of the CRTC’s framework.

Lastly, the CRTC’s rules are also similar in style and strength to those adopted by the Telecommunications Regulatory Authority of India, which banned zero-rating across the board but on an ex ante basis. TRAI did so in the face of the staunchest of opposition from some of the world’s biggest digital giants, notably Facebook, which led the charge, flanked by the same ideological warriors that have also led the defense of Bell, Telus and Videotron in Canada, e.g. Jeff Eisenach, who wrote a brief commissioned and submitted to TRAI in India by Facebook and which Telus wheeled into action largely unchanged within the Canadian context (see comparisons of both documents here and here). And so too did Roslyn Layton make the case for why advertising supported mobile phone and internet access was a “good thing” in both cases (see here).

Avoiding Getting Sucked into Trump’s Vortex

Their contributions are especially important in this context because Eisenach and Layton are two of three members of President Trump’s Telecom Policy Team (the other is Mark Jamison). They have been leading the charge in the US and worldwide to roll back the successes that have been chalked up in recent years for common carriage, competition and people’s rights as citizens and consumers to use the phone and internet connections they subscribe to as they damn well please, and without the distraction of ‘free baubles’ getting in the way and threatening that freedom at every turn. Their efforts are backed by a dubious President and conservative, business-beholden think tanks like the American Enterprise Institute, Technology Liberation Front, Free State Foundation, Information Technology and Innovation Fund, Mercatus Centre, and other such groups. On the scholar/corporate lobbyist connection in which Eisenach looms large, see the New York Times piece here.

As indicated above, their ideas have been imported into Canada and put onto the public record of CRTC proceeding by Telus and Bell, and made part of the broader discussion by the same and other industry cheer-leading consultants. Their ideas are worthwhile reading but ought to be given short shrift and generally have been – unless following a Trump-like agenda appeals to you. Yet, as they take their cues from Ayn Rand it is time that we take ours from those like Hannah Arendt, who raised questions about how want to live and tailor the institutional arrangements of society so that people’s freedom, dignity and capacity to live in a democratic and just society can flourish.

The Battles Ahead

As per my usual, this is once again way too long for a blog post. I’m sorry. But, to paraphrase Mark Twain, I wanted to write you a short letter but I didn’t have enough time so I wrote you a long one instead.

That said, where do things stand? They stand in a good spot, generally speaking. The CRTC has adopted rules that are well in line with the Telecommunications Act’s long-standing provisions with respect to no undue discrimination between subscribers and services — a cornerstone of common carriage. It is also of a piece with developments in the last three years in which efforts by the carriers to act like publishers choosing which content, apps and service their customers will get for free and which will be discouraged by dint of counting against people’s data caps have been thwarted by the Commission and the Courts each step of the way.

That was the lesson of the Mobile TV case, and it is the lesson from last week’s decision that put the kibosh on Videotron’s Unlimited Music service. There are no surprises here. Things follow a logic and a well-lit path.

There is also reasonable recognition of the incumbent providers’ interests and flexibility with respect to managed services and the exceptions for administrative type services, etc., while the door has been kept ajar to new services that might come along and where zero-rating them makes sense. Whether the managed services exception and the ex post approach that the Commission has adopted, however, emerge as major battle zones in which the incumbent telcos and ISPs continue their efforts to remake the internet in the image of Cable TV, only time will tell. The openings afforded by this aspect of the decision are its weakest links, so we must be very alert to such prospects.

Crucially, the CRTC’s bright line rules on zero-rating also conform to the peculiar realities of the Canadian communications market, characterized as it is by extremely high levels of vertical and diagonal integration in which all of the biggest wireline and wireless networks are owned by Telus, Rogers, Bell, Videotron and Shaw, all of which – except Telus – own all of the main TV services (except the CBC and Netflix) and several of the most important sports teams (e.g. the Montreal Canadians, Maple Leafs, Raptors, etc.) in the country. This is without parallel and thus it is entirely appropriate that the CRTC’s rules have taken the particularly tough form they have.

Underneath all of this is just common sense: common carriage is essential to ensure that those who own and control the medium and who have all the incentives and ability in the world to control and influence the content, activities, services and interactions that take place through their networks don’t make good on those potentials. In short, that potential needs to be constrained by tough rules, enforced by a regulator with a spine. The CRTC has shown that spine, but will no doubt experience incredible blow back for doing so. It already is.

The question is, will the current Liberal Government have the spine to back the independent regulator, or will it cave in the face of the immense pressure that it will no doubt face? That pressure will come from the biggest industrial interests in the land, who have been adding ideological winds to their sails from the gusts now blowing North from the Trump Administration, an administration that appears to relish ruling by Executive Order and administrative fiat, with nary a care for the conventions, culture and values of democracy. This is not a model to emulate.

Communications are the lifeblood of a democratic society and culture, and so these things matter. Now is the time for steps to be taken to ensure that competitive realities as well as the needs of citizens, consumers and cultural creators are embedded within the institutions and rules-of-the road that will define the increasingly internet- and mobile wireless-centric communications and media universe of the 21st Century.

The CRTC has taken steps to do just that, for which Canadians can and should be thankful. Now it’s time for the Liberal Government to step up to the plate. Will it? Time will tell.

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.

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