GATINEAU – The CRTC kicked off its hearing on Internet differential pricing practices (DPP) on Monday and heard that while they have a place in the provision of data services, vertically integrated (VI) companies should be banned from using them to promote their own content.
The Canadian Network Operators Consortium (CNOC) were the first of the service providers to appear Monday afternoon and it noted DPPs can help ISPs differentiate service offerings. However, if VI companies use them to promote their own affiliated services at the expense of others, this raises concerns about anti-competitive behaviour.
Matt Stein, vice-chair of CNOC and CEO at Distributel noted during his opening remarks that DPPs do offer benefits ranging from increased consumer choice, enhanced access to online content and greater affordability, but, he added he worries about “undesirable and dangerous outcomes.”
For example, some ISPs may confer an undue advantage on themselves by promoting their own affiliated content while other providers could be disadvantaged because their content isn’t part of zero-rated packages then ISPs could become gatekeepers of content.
In an attempt to offer a balanced solution to the DPP issue, CNOC has proposed a framework it believes gives all parties what they’re looking for. A key tenet of the CNOC proposal is to allow the zero-rating of broad categories of content and not specific content – a clear swipe at the VI companies.
“The principled approach we are proposing would ensure that vertically integrated entities cannot prefer their own content, since such practices, if allowed, would interfere with the launch or uptake of other potentially new and innovative services and distort competition in the markets for online distribution of content,” said Christopher Hickey, director of industry affairs at CNOC.
Under questioning, Chris Tacit, counsel to CNOC, noted this is a market driven and inclusionary approach that allows VI companies to participate. They can put their own content in zero rated packages as long as other similar content is also available.
“This framework has a safeguard that actually allows them to have that benefit as long as it’s done in a way that doesn’t distort competition and gives them an undue preference.” – Chris Tacit, CNOC
“If there is other like-for-like content or other substitutable content in that basket, in that category that’s subject to that DPP we wouldn’t have any objection to the VI entity also including its own content,” he said. “This framework has a safeguard that actually allows them to have that benefit as long as it’s done in a way that doesn’t distort competition and gives them an undue preference.”
Many parties in the proceeding have argued that DPPs are bad for the market, no matter what. The Canadian Media Concentration Research Project (CMCRP) suggested on Monday they are “anti-competitive,” they “stifle innovation” and are nothing more than a “power grab” by ISPs seeking to be gatekeepers of content.
(Ed note: The CMCRP has noted, since publishing this story that it has not, in fact, called for the elimination of data caps, which a previous version of this story said. While on Monday at the hearing one of its representatives, Ben Klass, did refer to data caps as "arbitrary, punitive, and unreasonable," and later when asked by chairman Blais: "should I draw a conclusion that you believe that data caps are not just and reasonable?" and he answered "Yes," the CMCRP did make it clear in its written and oral presentations that it has not made a statement that it is in favour of banning data caps. Klass added elsewhere in his appearance on Monday: "I don’t know and I don’t have an answer on whether the Commission should ban data caps across the board or whether that’s the right thing to do, but I do hope you’ll recognize that data caps are a serious issue that needs to be addressed and that it gets the attention it needs throughout this proceeding." While other groups have explicitly asked for caps, CMCRP has not. We regret the error.)
According to Sandvine, a company that provides network intelligence software to multiple operators around the world, banning the practice of differential pricing would damage the market. “If all players must sell exactly the same product in exactly the same fashion, only the largest ones will survive,” argued Don Bowman, CTO at the firm, in his opening remarks.
“Differential pricing seeks to find a better expression of consumer value, either through price certainty – exchanging variable volume pricing for fixed time via zero-rating,” he said. This could also come in the form of peak versus off-peak pricing or through device specific plans.
Under questioning, Bowman argued that differential pricing has led to many innovations in the market. For example, the Kindle may not become a success if Amazon wasn’t able to package the cost of connecting to a network in with the cost of the book itself.
There have also been calls for the Commission to mandate the elimination of data caps. Sandvine argued this would lead to less efficient networks.
“Sandvine doesn’t feel that data caps are an effective way to manage congestion in the network. So, our counsel to our customers is there is a discipline that’s called traffic management… and that’s applying a tool when needed where needed so its not a broad average. It doesn’t make sense to say the network is congested anymore than it makes sense to say the road is congested. It’s a time and a place.”
Cartt.ca will have more from the hearing on Tuesday with the likes of with Facebook, Bell Canada and others appearing.
