GATINEAU – The CRTC took a big step towards ensuring that net neutrality reigns in Canada with its decision today to order Vidéotron to no longer zero-rate its Unlimited Music service.
In Telecom Decision 2017-105, the Commission ruled that Videotron violated subsection 27(2) of the Telecommunications Act by providing certain customers with access to Unlimited Music at no charge and not having it count against their data plans. The company has conferred its eligible subscribers and content providers included in the service “an undue and unreasonable preference", says the regulator in its decision.
It went on to say that Vidéotron subjected an undue and unreasonable disadvantage on ineligible subscribers, eligible subscribers who don’t access the service, content providers that aren’t included in Unlimited Music but are similar to those included, and on other excluded content providers.
“The Commission finds that Vidéotron’s practice of zero‑rating certain content is generally harmful to consumers and content providers, as it favours particular content or applications over others,” reads the decision. It added that if this practice were allowed to continue, it could discourage the development of other services to the detriment of Canadians.
“Further, the Commission considers that the inception and offering of content-specific data programs that are priced differently from other similar programs would put ISPs in a position where they are picking winners and losers. In the Commission’s view, this is a clear example of an ISP exercising a gatekeeping power and is inconsistent with the policy objectives set out in the Act, particularly those in paragraphs 7(a), (c), (g), and (h),” said the CRTC.
In a statement, Vidéotron noted its disappointment with the decision.
“We regarded Unlimited Music as a compelling example of innovation and diversification from a new market entrant seeking to differentiate itself from the dominant mobile carriers, to the benefit of Canadian consumers,” said Manon Brouillette, president and CEO.
The company said that it would study the decision over the coming days before it makes a decision on what its next steps might be. It added that the service would be maintained until further notice, and that customers would be advised of developments as soon as possible.
The ruling is part of a larger Commission effort to ensure that its definition of net neutrality remains a foundation of Internet services in Canada. In an accompanying decision, the CRTC has effectively banned differential pricing practices in Canada.
Throughout the differential pricing proceeding, proponents had argued there are consumer benefits because these types of services give them access to content and services at lower costs. Opponents noted, however, that this would negatively affect consumer choice because ISPs would then act as gatekeepers.
And while "big telecom" often gets painted same brush, not everyone was on board with Videotron's point of view. Rogers was notable by its objections and was pleased with the decision today. "This is a good decision for consumers and for open and fair access to the internet, which is a vital resource in our digital economy. We’re glad that internet providers won’t be allowed to act as gatekeepers and give privileged access to a select few," said David Watt, SVP, regulatory at Rogers, in a statement.
Telecom Decision 2017-104 said the short-term benefits of these practices “would be greatly outweighed by the negative long-term impacts on consumer choice if ISPs were to act as gatekeepers of content through their use of such practices.” The Commission added that differential pricing is likely to result in ISPs dealing with a handful of popular content providers, which “coupled with the significant financial incentives for consumers to access zero-rated or discounted content, would effectively steer consumers toward content chosen by the ISP.”
“This type of situation would be exacerbated in the case of sponsored data arrangements, in which large content providers with significant financial resources compensate ISPs for preferential treatment of their data traffic.” – CRTC Telecom Decision 2017-105
Content providers not included in differential pricing plans could be further disadvantaged in other scenarios.
“This type of situation would be exacerbated in the case of sponsored data arrangements, in which large content providers with significant financial resources compensate ISPs for preferential treatment of their data traffic, thereby creating a barrier to entry for smaller content providers that do not have the same financial resources or negotiating leverage,” reads the decision.
Some suggested during the proceeding that if all services in a certain class were part of a differentiated pricing program, then it could be allowed and wouldn’t pose any competitive concerns. Not so, said the CRTC. It pointed to Vidéotron’s Unlimited Music service noting that while the company wants to expand the service to include as many music streaming services as possible, it’s just too difficult to do so in the ever changing world of the Internet.
"The CRTC chairman’s term ends June 17, 2017 so perhaps our next chairman will be more open to competition." – Jeff Fan, Scotia Capital
Scotia Capital telecom, cable and media analyst Jeff Fan wondered in a note to investors why the CRTC would interfere in the market and take away something that differentiates wireless upstart Videotron and helps spur competition in the province. "We wonder why a service that encourages usage that consumers enjoy (where the content or app is not owned by the carrier) requires regulatory intervention," he wrote.
"(Quebecor) is merely leveraging its network capacity and passing on that benefit to its users. It’s competitors are open to offer the same features but have not done so and other content providers are also open to the same arrangement with (Quebecor) with some technical requirements being met. This decision is similar to the concern raised by the prior US FCC administration about AT&T's zero-rating of its DirecTV Now TV service. Under new Chairman Pai, the FCC did not see it as an issue and noted: 'These free-data plans have proven to be popular among consumers, particularly low-income Americans, and have enhanced competition in the wireless marketplace.' The CRTC Chairman’s term ends June 17, 2017 so perhaps our next Chairman will be more open to competition."
TD 2017-104 also established a framework under which differential pricing practices would be allowed and the criteria against which they would be evaluated. Rather than opt for an ex ante approach, as some argued, the Commission settled on a complaints-based process with four elements as guideposts.
When it comes to the data itself, as long as it’s treated in an agnostic manner, a differentiated pricing program should get a pass. Where certain data is treated differential than others, that’s where a program could run into problems. The same goes go for exclusive content – if it’s only available to certain subscribers or the differential pricing practice only applies to a certain class of content, then the program may run counter to the CRTC’s new framework.
The Commission is also making sure that all content providers have the same ability to participate in differential pricing services. For example, if administrative and technical requirements are burdensome or time consuming, the program may be called on the carpet. Lastly, sponsored data arrangements where an ISP gets paid from a content provider to zero rate certain content are also likely to get the Commission’s permission.
The CRTC has said that it won’t review these types of programs prior to market introduction, but if ISPs are unsure, they may seek a ruling on their appropriateness prior to implementation.
Videotron has 90 days (or until July 19) to bring its Unlimited Music service into compliance with the new framework. The Commission also directed the company to report when and how it has come into compliance.
