Nordicity Insight: Differential Pricing Practices
Posted by Sabrina Wilkinson in Ottawa on Nov 11, 2016

Last week, telecom operators, public interest groups, academics, industry groups and concerned citizens clashed before the Canadian Radio-television and Telecommunications Commission (CRTC) on the issue of differential pricing practices related to Internet data plans. In short, differential pricing practices offer consumers identical or similar products or services at different prices. In this context, the CRTC honed in on zero-rating pricing and sponsored data. Zero-rating pricing occurs when a service provider does not count the data used from an application toward a monthly mobile data cap. Sponsored data refers to instances where a content provider enters an agreement with a service provider to exempt or discount data associated with its application.

Triggered by an application made by several public interest groups concerning Vidéotron’s provision of its Unlimited Music services to its mobile wireless subscribers, the proceedings were officially set into motion in May, 2016 by Telecom Notice of Consultation (TNC) CRTC 2016-192. The TNC set the scope of the hearing by asking intervening parties to:

  • Define differential pricing practices in relation to Internet data plans over both wireline and wireless networks;
  • Address the benefits and risks of the practices; and,
  • Lay out any regulatory measures, if any, that the CRTC should implement.

The week kicked off with the Canadian Media Concentration Research Project (CMCRP), the first of many intervenors who argued that differential pricing practices exemplify anti-competitive behaviours, stifle innovation, present privacy concerns and impose requirements and costs on content providers. Many of these ideas were reflected in the views of OpenMedia, who urged the Commission to restrict the use of data caps on wireless networks and eliminate them on wireline networks altogether.

With less focus on data caps, the Equitable Internet Coalition called for the CRTC to recognize the role ISPs have as gatekeepers as well as the tools they wield that can restrict Internet access. Moreover, the coalition proposed an analytical framework to assist the Regulator in determining whether different pricing practices comply with the parameters of the Telecommunications Act. At the close of the week, the director of Stanford Law School’s Centre for Internet and Society, Barbara van Schewick, garnered high praise from CRTC chairman Jean-Pierre Blais for her contribution to the proceeding, which highlighted the various tolls differential pricing practices place on small service providers.

From the other side of the aisle came service providers Bell Canada Enterprises (BCE), TELUS and Vidéotron. BCE argued that no intervenor had presented tangible evidence that differential pricing practices have produced harm in the Canadian telecommunications market. Moreover, BCE suggested that regulation from the CRTC would run the risk of interfering in market outcomes.

Both BCE and TELUS emphasized cases of differential pricing practices in foreign jurisdictions and suggested that data caps were both beyond the scope of the proceeding and an issue of network congestion, not pricing. On the topic of safeguards, TELUS suggested they may be necessary to prevent harm from vertically integrated broadcasting companies, however, the CRTC best adopt a flexible and case-by-case approach. Vidéotron, meanwhile, argued its Unlimited Music service was an innovation that allowed the operator to differentiate itself from other larger providers in the market and, moreover, the app offered consumers a broader array of choice.

While it’s unclear where the Regulator will align itself in relation to the week’s interveners, the proceedings undoubtedly reflect a recognition from the CRTC that the way Canadians use and think about the Internet is changing. Two major reports from the regulator, the 2016 Communications Monitoring Report and Nordicity’s 2016 Price Comparison Report of Telecommunications Services in Canada and Select Foreign Jurisdictions, reveal that Canadians’ data consumption on wireline, and particularly wireless, networks are increasing. These proceedings also echo recent examinations and fact-finding exercises on differential pricing practices in other jurisdictions including those in India, the US, and by the European Commission.

In addition to these international developments, the CRTC’s Review of Basic Telecommunications Services established that broadband connectivity, at just and reasonable rates, is critical to participation in the digital economy. The 1,200 comments left on the CRTC-facilitated Reddit forum in advance of the differential pricing practices proceedings, make it clear that Canadians will be following the outcome of the hearing with great interest.

What will the impact of this decision be on Canadians? Interveners vary in their response to this question and, in truth, the immediate impact on an individual broadband consumer may seem small – manifesting in changes to the provision of certain applications or, perhaps, tighter restrictions on the use of data caps on wireless and wirelines networks. However, as participants made entirely clear this week, the broader implications of this decision, the ways it will touch innovation, competition and, most importantly, the consumer interest – will take longer to play out.

Sabrina Wilkinson is a Research Analyst in the Ottawa office with passions for literature and long distance running.