TORONTO – Calling ongoing discussions on net neutrality a “distraction”, John Lawford, executive director and general counsel for the Public Interest Advocacy Centre (PIAC) said the bigger issues needing to be examined currently are vertical integration and competition law in Canada. Lawford spoke during a panel discussion Monday on “Competition in Telecom: Net Neutrality and Innovation” at the Canadian Telecom Summit being held this week in Toronto.
“Net neutrality is done,” Lawford said, with the CRTC’s acceptance in 2009 that the Telecom Act’s non-discrimination provision (Section 27(2)) applies to Internet services in Canada.
“The real work is at the top. Competition law needs to be called into question here, and government policy on how much cross-ownership there should be between broadcast and telecom, how much control and how much concentration in the market are the real issues,” he added.
The Canadian telecom industry “is a very concentrated market with very large players controlling both content and delivery,” Lawford said, adding this has led to a number of recent cases where the big telcos have attempted to capitalize on their market power. For example, Lawford pointed to what he calls the “tied selling of BDU subscriptions to over-the-top services” and the low-cost pricing of Bell’s CraveTV and Rogers/Shaw’s shomi services (although it’s been announced that shomi will be made widely available to all this summer).
Furthermore, when Bell wanted to give its existing customers a preferential rate for its Bell Mobile TV service, “we saw an attempt to zero-rate one’s own broadcasting-related packets,” Lawford said. “The CRTC called a stop to that one on the basis of discrimination. That’s before the courts right now.”
Other examples cited by Lawford include Bell Media’s refusal to provide content for Leiacomm’s Internet-based content distribution service (the CRTC dismissed Leiacomm’s “undue preference” complaint against Bell in September 2014) and exclusive content services such as Rogers GameCentre (the CRTC dismissed Bell Canada’s complaint against Rogers Media concerning how it offers its GamePlus service on March 16).
“Net neutrality is like the floor, and these are the higher levels of the debate.” – John Lawford, PIAC
“This is the kind of discrimination and market power and vertical integration effects that I believe are the ones that are the most important issues to concentrate on,” he said. “Net neutrality is like the floor, and these are the higher levels of the debate.”
From the consumer’s perspective, broadband continues to be very expensive, Lawford said. “Canada is not at the top of the heap in terms of broadband speeds and costs. There are still the (bandwidth) caps, which are used very aggressively to manage traffic in Canada, and are very, very expensive,” Lawford continued. “Basically, the only criterion for policy shaping in Canada is congestion. Now, that may cause problems when we get to VoLTE (voice over LTE), and we do have problems at the moment with Netflix,” Lawford added.
Ariel Katz, associate professor and Innovation Chair in Electronic Commerce at the University of Toronto, spoke about the content licensing regime in Canada and offered his perspective on why he believes Canadians pay more for less content than other Internet users around the world.
“We have the largest number of copyright collectives in the world, and it’s supposed to provide a streamlined way to get those licences very quickly. That’s the whole point,” he said. “And we have a Copyright Board that is well-staffed and well-funded, more than any other comparable institution in the world… but I think that’s exactly the problem.”
Copyright Board proceedings are “terribly slow and expensive”, Katz added. In addition, the concept that copyright tariffs are “mandatory” is rarely challenged in Canada, he said. “It turns out (mandatory tariffs) are a great business for a small group of lawyers and consultants who appear before the Copyright Board,” he said, adding the notion of “mandatory” tariffs creates a barrier to entry into content markets.
“This is the new Canadian pastime, finding a VPN, paying for content, but getting it through the U.S.” – Ariel Katz, University of Toronto
“The results are Canadians are paying more for less content and they look for workarounds. So this is the new Canadian pastime, finding a VPN, paying for content, but getting it through the U.S.,” Katz said.
In its Open Internet Order 2015, the U.S. Federal Communications Commission chose to regulate the Internet as a Title II common carrier under the U.S. Communications Act. As part of that Order, the FCC has adopted three “bright-line rules” that prohibit blocking, throttling and paid prioritization of broadband services. In addition, the FCC has banned “unreasonable interference or unreasonable disadvantage” to broadband consumers or edge providers.
The order is under attack from a number of quarters, however.
“The most interesting part in the 2015 Order that flies well under the radar is the fact that the FCC has now asserted jurisdiction over interconnection between networks, not just how traffic is treated within a network. They’re saying they are now going to consider the reasonableness and discriminatory manner in which traffic arrives at a network,” said Christopher Yoo, director of the Center for Technology, Innovation and Competition at the University of Pennsylvania Law School.
“There are a number of exceptions that are not well fleshed out… what constitutes reasonable network management and what constitutes what we’ll call specialized services,” he said. Yoo added that VoIP (voice over IP) offerings in particular require some form of specialized service, such as traffic prioritization. “The regulator has given very little guidance on what constitutes a permissible service or not… The breadth of that exception will determine a great deal about the impact of the Order.”
When the discussion was opened up to questions from the audience, Peter Miller, telecom and broadcasting lawyer and chair of Interactive Ontario, took exception to some of the panellists’ comments.
Regarding Katz’s point that Canadian content is too expensive for too little, Miller said: “In general, that isn’t true. In fact, all the studies that I’ve seen have shown, particularly in the TV space, Canadians actually get more content for less money.”
As for Lawford’s assertion that the net neutrality issue is settled in Canada, Miller said he thinks “it’s far from done”. He cited a recent research report from Sandvine that concluded Netflix usage now accounts for 37% of Internet traffic. “If you add up all the video traffic (on the Internet), it’s probably about 60%,” Miller said, adding this means more than half of the traffic on the Internet is a form of broadcast content.
“We have the current CRTC and the current government that doesn’t want to do anything about that. I think that could change going forward,” Miller said.
Miller added that he sees a number of possible “unintended consequences of net neutrality”, including the potential for the Internet to become fragmented, if companies are encouraged to set up specialized services that take bandwidth away from the common good.
“That can’t be good, and another thing it does is it actually leads to what I would call cross-subsidies. If you’re a low-bandwidth user, you’re mostly using Internet for text, versus someone who’s downloading 100 hours of video a month. On a per-bit basis, all bits are not equal. The low-bandwidth user is probably paying for more per bit than the high-bandwidth user. How is that fair? So I just think we need a bit more critical analysis of this,” Miller said.
