GATINEAU – Differential pricing can benefit a broad range of players in the communications market, Telus told the CRTC on the fourth day of its DPP hearing, but just don’t let the vertically integrated (VI) entities use their “unnatural incentives” to give themselves an advantage.
“Since differential pricing practices increase the size of the market, they allow both carriers and content providers to spread these fixed costs over a larger number of consumers. This process has produced, and should continue to produce, newer and better services at stable or falling prices throughout the Internet ecosystem,” said Dr. Jeffrey Eisenach, managing director and co-chair of the communications, media and Internet practice at Washington’s NERA Economic Consulting. He appeared as part of the Telus panel (and has an, er, interesting sideline going with the U.S. presidential election).
The company argued in its appearance that differential pricing practices are well established in many industries including the communications sector. It pointed to free over-the-air TV as one example of sponsored data. Also, if there are cases where DPPs may result in anti-competitive behaviour, the CRTC already has tools to deal with them under the Telecommunications Act.
Telus noted, though, the Commission needs to be aware that vertically integrated entities (Rogers, Bell, Quebecor, and Shaw – which shares an owner with media company Corus) have the potential to disadvantage other ISPs and content owners because they can prefer their own affiliated broadcasting services in zero-rated packages. It’s the “pocket-to-pocket transaction” that is of concern.
“Not only does the zero-rated programming service benefit from greater advertising revenue, it is likely also to extort greater wholesale fees for the service,” said Ann Mainville-Neeson, VP of broadcasting policy and regulatory affairs at Telus (pictured above in a CPAC.ca screen cap). She added that these higher fees could result from the VI company demanding them because the audience reach of the service is greater as a result of the zero-rating.
Asked whether small ISPs should be allowed to zero-rate content or offer other DPPs, Mainville-Neeson noted that it’s not about the difference between small and large ISPs, but rather the control that VI entities have over programming services and the “unnatural incentives” they have to encourage their own services at the expense of competitive ones.
“With those unnatural incentives you have the ability to foreclose the market for your competitors and you have every incentive to do so.” – Ann Mainville-Neeson, Telus
“With those unnatural incentives you have the ability to foreclose the market for your competitors and you have every incentive to do so,” she argued.
Throughout the hearing the Commission has asked whether designing broad categories of content would help alleviate concerns around DPPs. Some have said yes and others not so much. Independent TekSavvy Solutions is in the latter category.
Bram Abramson, chief legal and regulatory officer at the company, noted under questioning the issue still comes down to dealing with ISPs who seek to differentiate themselves based on content rather than network.
“We recognize there is always an attempt to differentiate yourself especially when there are very powerful competitors around. That said, if we had a marketplace in which certain ISPs became specialists in a certain content category and another in another category, I think we’d end up with a marketplace which to a much greater extent was focused on particular types of content tied to carriage rather than on innovating with respect to services like customer support,” he said. This would be a “less than optimal” way to serve telecommunications policy objectives, added Abramson.
In its opening remarks on Thursday, the competitive ISP argued the Commission should adopt a Net Neutrality Code to address potential cases of anti-competitive behaviour. It would be guided by four key principles: market power, gatekeeping, platform and content exclusivity and network configuration.
Speaking to the content related principle, Janet Lo, director of consumer agreements at TekSavvy, said locking content up can potential impair another ISPs from entering into similar agreements is undue.
“Eliminating data caps, or more accurately forcing all users onto flat rate unlimited data plans, would leave only the heaviest Internet users better off.” – Stephen Schmidt, Telus
“We’d go further and challenge any content selection, origination, or packaging: affiliation agreements don’t sound like common carriage,” she said.
The Commission has heard from parties that say the use of DPPs should be allowed if there are few offerings in the market and by allowing them to proceed would lead to greater innovation to the benefit of consumers. Cogeco Communications agreed that DPPs are innovative pricing practices that could bring benefits to consumers and other stakeholders in the Internet ecosystem.
It acknowledged though that there could be cases where these practices introduce unjust discrimination against certain parties. The company highlighted the CRTC’s decision on mobile TV as a case in point.
As such, Cogeco signaled its support for some guiding principles that would indicate what types of DPPs are allowed and those that wouldn’t.
Consumer group OpenMedia appeared earlier in the day to argue for the elimination of data caps. The organization noted that DPPs have only risen because of data caps and without them, there would be no need to have them. It suggested that the Commission should be looking to eliminate the caps, or the root of the problem, prior to looking at potentially discriminatory pricing practices.
Telus noted that removing caps would only benefit a segment of Internet users, could result in lower adoption of the Internet because of higher prices and would result in the company having to increases prices to make up the lost revenue.
“Simply put, eliminating data caps, or more accurately forcing all users onto flat rate unlimited data plans, would leave only the heaviest Internet users better off,” said Stephen Schmidt, VP of telecom policy and regulatory affairs and chief legal officer at Telus.
The hearing wraps up Friday with appearances by Shaw Communications, CIPPIC, Quebecor and the Competition Bureau.
