Focus: U.S.and Canada diverge on net neutrality

Technology lawyers say recent regulatory decisions have set Canada and the U.S. on diverging tracks when it comes to net neutrality.

In April, the Canadian Radio-television and Telecommunications Commission shut down an attempt by Quebec-based Videotron to favour certain types of online content with a service that exempted some music-streaming services from mobile data caps. Just weeks later, the U.S. Federal Communications Commission began the process of dismantling its own net neutrality rules with a vote to undo a 2015 order that brought Internet service providers under the jurisdiction of Title II of the country’s Communications Act.

“Canada and the U.S. are moving in opposite directions on net neutrality,” says Safwan Javed, a Toronto lawyer with entertainment and media firm Taylor Oballa Murray Leyland LLP, who has written on the subject for the Public Interest Advocacy Centre.

Timothy Denton, a former CRTC commissioner who now runs his own technology and telecommunications law practice in Ottawa, agrees.  

“Our policy, as in so many other instances, stands quite distinct from the U.S. and it will be interesting to see how the experiment plays out,” he says.

“In the long term, both countries will work out different rules for what carriers can do to Internet traffic, but I’m not sure one will influence the other in that regard.”

The 2015 U.S. changes stopped ISPs from creating fast- and slow-lane Internet traffic by prohibiting them from blocking, slowing or discriminating in any other way in its treatment of lawful content.

But new FCC chairman Ajit Pai, who was appointed in January, has made scrapping the restrictions a priority, claiming in a statement that they have stifled innovation and investment in domestic broadband.   

“With the possibility of broadband rate regulation looming on the horizon, companies investing in next-generation networks hesitated to build or expand networks, unsure of whether the government would let them compete in the free market,” he wrote, advocating for a return to a “light-touch” approach to Internet regulation.  

The CRTC’s decision and policy position on “differential pricing” arose out of Videotron’s 2015 launch of Unlimited Music, a premium service that allowed customers to stream as much music as they liked on services such as Spotify without having the data use count against their monthly allowance.

Proponents of the practice, also known as “zero-rating,” argued before the commission that it has the potential to boost consumer choice while lowering prices, but the CRTC concluded that it generally negatively affects competition and innovation in the sector.

“Any short-term benefits of differential pricing 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 CRTC’s policy statement reads.

“Ultimately, differential pricing practices are likely to result in ISPs having arrangements with only a small handful of popular, established content providers — those with strong brands and large customer bases. This situation, 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.”

Such marketing innovations by ISPs should be shunned in favour of enhancements to “the speed, coverage, capacity, security, and reliability of their existing networks, for the benefit of Canadians,” the CRTC statement adds.

Javed says the decision cements Canada’s position as a pro-net neutrality jurisdiction, calling the CRTC’s approach a “well-balanced and measured” one that also allows “market players to employ sustainable business models.”

Ren Bucholz, another net neutrality proponent, says ensuring the equal treatment of Internet traffic should remain a key goal for regulators.   

“One of the reasons that the Internet has been as exciting and important a development as it has been is because of the neutrality of the structures that make up the network,” says Bucholz, a commercial litigator with Paliare Roland Rosenberg Rothstein LLP. “That neutral setting allowed a seemingly infinite number of new technology and business models to thrive.”

In a statement issued after the CRTC decision, Videotron president and CEO Manon Brouillette expressed her disappointment with the result.

“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,” she said.

The company has since asked the commission to review its decision, and to postpone the July 19 deadline it was given to halt the service, so that it can have more time to transfer existing customers.

Cynthia Khoo, a Toronto technology lawyer who represented the non-profit Internet activist group OpenMedia before the CRTC, says the Videotron decision was a natural progression from the commission’s previous pronouncements on net neutrality.

In 2015, the CRTC ruled in another case with Videotron at its heart after complaints were made about mobile TV apps run by the company and its competitors at Bell. The services allowed customers to stream programming on their mobile devices without having the usage count against their monthly wireless data caps.

A CRTC panel found zero-rating the apps contravened the Telecommunications Act by conferring an “undue and unreasonable” preference on subscribers to their own services. Khoo says the new decision goes a step further because the zero-rating in the Unlimited Music case applied to content that was not owned by the carrier.

She’s hoping the CRTC’s zero-rating crackdown will help hasten another of OpenMedia’s long-term goals: the elimination of data caps altogether for home and mobile Internet use.

“Zero-rating was only an issue because of our low data caps. When you give people the opportunity to stream videos or music for free, they’re less likely to question why the caps are so low to begin with,” Khoo says. “Our hope is that by taking away that ability, carriers will have to invest in their networks, raise data caps and make service more affordable for everyone.”

Khoo says she expects Canada’s telecommunications giants to continue looking for ways around the CRTC’s net neutrality policy, noting that carriers are not required to run services by the regulator for approval due to the complaints-driven nature of the process.

“I think it will put a stop to the most blatant violations, because it’s not going to be a good use of their resources to develop a new service only to have it shut down by the CRTC when someone complains,” she says.

Vitali Berditchevski, a communications lawyer in the Toronto office of Torys LLP, says the CRTC policy carves out some situations when zero-rating or non-neutral Internet traffic management may still be acceptable for ISPs.

For example, he says bill checking or other administrative access to customer accounts could legitimately be zero-rated, while time-of-day price offers could pass muster under certain circumstances. Data throttling could also be acceptable when networks are operating under temporary capacity constraints, Berditchevski says.

“It’s not a blanket ban, although the default rule is that ISPs should be content-agnostic rather than choosing content,” he adds.

Berditchevski says he doesn’t expect this policy to be the CRTC’s last word on net neutrality.

“The challenge for the CRTC, as well as for everyone else in this area, is that it is moving quite quickly,” he says. “I don’t know if it will be in one year or in five years, but depending on which direction things go, I think we will see some further decisions.”

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