CRTC to review differential pricing practices on Internet service

Canada's telecom regulator will take a close look at its policy on net neutrality as a public hearing begins this week on Internet pricing practices that allow access to certain content for "free" but charge customers regular rates for other data usage.

The Canadian Radio-television and Telecommunications Commission (CRTC) kicks off a five-day hearing on Monday at its Gatineau, Que., headquarters, tackling the topic of "differential pricing," which is when an Internet provider charges one price for customers to access some content and a different price to download or stream other content.

The proceeding was spurred by multiple complaints over Videotron Ltd.'s Unlimited Music program, which lets subscribers to the Quebec company's premium wireless plans stream select music services such as Spotify and Google Music without any impact on their monthly data bucket.

But the hearing will take a broader look at such practices – sometimes referred to as "zero-rating" because carriers exempt certain traffic from any data charges – and some parties have suggested the CRTC should go even further and ban the common industry practice of imposing data caps on wireless and Internet plans, arguing such limits also run counter to the principle of net neutrality.

That principle holds that Internet service providers (ISPs) should treat all content that flows through their networks equally. In Canada, the CRTC can enforce net neutrality through a section of the Telecommunications Act that bars carriers from giving themselves or others an "undue preference."

The commission also introduced a policy on traffic management in 2009 that requires ISPs to disclose their practices and explain why any sort of traffic management is necessary in the first place. The traffic management policy has been used to stop ISPs from throttling – or slowing down – speeds for online gamers.

As the wireless and Internet markets mature and carriers try to stand out from each other to win or keep customers, Canadian telecom companies have experimented with commercial offers that some say violate net neutrality. When the CRTC announced this week's hearing in May, it cited the open case of the Videotron music service and also pointed to mobile television apps previously offered by BCE Inc. and Videotron that exempted a certain amount of data used to stream programming from customers' data caps. The CRTC ordered the companies to discontinue the pricing practice in the latter two cases.

"It is clear that differential pricing practices are occurring in Canada and will likely become more prevalent as data consumption increases," the CRTC said, going on to suggest it plans to introduce new, broad guidelines.

"Rather than making decisions on such matters on a case-by-case basis, it is appropriate to launch a proceeding to analyze the policy issues surrounding differential pricing practices for Internet data use and to establish a clear and transparent regulatory approach," the commission said. "Doing so will provide a measure of certainty for all stakeholders, including consumers, application providers, and ISPs."

A coalition of public interest groups calling itself the Equitable Internet Coalition states Canadians support an "open Internet, free from ISP interference," and argues differential pricing should not be permitted, with some exceptions for public safety or informational purposes. The coalition is also urging the CRTC to question ISPs on the technical need for data caps on Internet and wireless plans.

Internet advocacy group OpenMedia argues that data caps – which it says many consumers dislike – should be part of the hearing because if there were no caps on usage, differential pricing itself would not be an issue.

But carriers argue data caps are necessary to manage network congestion and say eliminating caps would lead to low-use customers subsidizing the bills of heavy users. On differential pricing itself, many telecom players argue such promotions stimulate competition and can benefit customers by offering different choices and making some services available at lower prices.

Yet, not all agree. Rogers Communications Inc., Canada's biggest wireless provider, says differential pricing is inconsistent with the principle of net neutrality and can hinder innovation by working against services that are not covered by exemptions on data charges.

In contrast to Videotron, Rogers has taken a different approach to streaming music that does not involve data exemptions; it includes subscriptions to the premium version of Spotify (which allows users to play any song at any time and has no advertising) for customers of certain high-end wireless plans. Rogers executives have said they want to encourage customers to use more data.

The Competition Bureau filed an intervention in June arguing some types of differential pricing should be banned – including instances where the application favoured by exemption from data charges pays the telecom provider or where the content is affiliated with the provider.

Zero-rating has become controversial in jurisdictions across the world, including the United States, where T-Mobile's Binge On video streaming service is facing scrutiny by the Federal Communications Commission. Facebook Inc.'s Free Basics service – which offers access to a limited number of Internet apps with no charge for the data access – was banned in India for breaching net neutrality. Facebook representatives are scheduled to appear at the CRTC hearing on Tuesday to offer a defence of zero-rating offers.

The Equitable Internet Coalition is also expected to appear on Tuesday, as is BCE. Rogers will appear Wednesday, OpenMedia and Telus on Thursday and Videotron and the Competition Bureau on Friday. The hearing begins Monday with representatives from the Canadian Media Concentration Research Project as well as the Canadian Network Operators Consortium Inc., a lobby group that advocates for small ISPs.

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