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The Canadian Net Neutrality Debate

My weekly Law Bytes column (Toronto Star version, homepage version) discusses the recent revelations that Industry Canada is highly skeptical about the need for net neutrality legislation.  I argue that the need to prevent a two-tier Internet in Canada has never been greater.  The Canadian competitive landscape is dominated by a handful of companies, with the top five providers controlling 84 percent of Canadian Internet connections.  Indeed, Canadian consumers who have access to broadband networks (many communities are still without access) invariably face steady price increases and service limitations from the indistinguishable choice between cable and DSL.

Leveraging their dominant positions, Canadian telecommunications companies have been embroiled in a growing number of incidents involving content or application discrimination. Over the past two years, Telus blocked access to hundreds of websites during a dispute with its labour union, Shaw attempted to levy surcharges for Internet telephony services, Rogers quietly limited bandwidth for legitimate peer-to-peer software applications, and Videotron mused publicly about establishing a new Internet transmission tariff that would require content creators to pay millions for the privilege of transmitting their content.

The government documents uncovered last week confirm that Industry Minister Maxime Bernier is aware of the situation.   One prepared for the House of Commons Question Period notes that "Canadian telecommunications companies, like Bell and Telus, are increasingly determined to play a greater role in how Internet content is delivered.  As the carriers of the content, they believe they should be gatekeepers of the content, with the freedom to impose fees for their role."   

Despite publicly maintaining that he is undecided on the issue, another document leaves little doubt that net neutrality legislation is not in the cards for Canada.  A Question and Answer memorandum dated November 16, 2006, highlights Bernier's potential position on net neutrality.  Echoing the position of the major telecommunications companies, the proposed response concludes that "market forces have served Canadians well when it comes to the Internet. Public policy must consider a number of aspects of this broad issue, including consumer protection and choice [and] enabling market forces to continue to shape the evolution of the Internet infrastructure, investment and innovation to the greatest extent feasible." 

I conclude by noting that after reports of the internal government position on net neutrality leaked out, Bloc MP Paul Crête raised the issue last Wednesday in the House of Commons, asking Bernier to commit to the principle of net neutrality.  Bernier declined to do so, instead citing a recent Ipsos-Reid public opinion poll that he said demonstrated that 75 percent of Quebec residents support his plans for telecom reform. In addition to mistaking polls for policies, Bernier did not mention that only 14 percent of respondents were even aware of the government's telecom policy changes and that the survey made no mention of Internet access issues.  More tellingly, he also neglected to reveal that it was Bell Canada that commissioned the survey.

10 Comments

  1. Kevin McArthur says:

    Debunking the Ministers Myths
    Michael, it may be useful for your readers to dispel the top three common Net Neutrality myths.

    Myth 1) Telecommunications Companies are entirely private organizations and should not be regulated. They paid to build the internet, and they should therefore be able to do whatever they want with their networks.

    Reality 1) The telecommunications companies rely significantly on public grants, tax exemptions and public and private property easements to operate their businesses and as such are hardly entirely private organizations. Because of these special privileges, it creates a significant subsidy for telecommunications carriers that are rapidly becoming content producers. This creates an anti-competitive situation that must be regulated to maintain free-market principles and to prevent ISPs from leveraging their subscribers to out-muscle and unfairly levy competing services. Net Neutrality is simply required to preserve competition on the public internet.

    Myth 2) An ‘extra’ second Tier of internet service will help everyone have access to better products and services and will ensure more rapid growth of telecommunications infrastructure.

    Reality 2) The Tiering process is achieved through a technology called QoS which is short for Quality of Service. It should more acurately known as Packet Prioritization. This technology allows certain types of information to be prioritized over others and is definitively _not_ extra. It can only work by lowering the priority of other traffic on the rest of the internet. It’s simply digital line-jumping and this ‘service’ makes the internet experience for those who do not pay even worse. It results in an addictive feed-back cycle that artificially drives demand and creates the problem it is designed to solve. Tony Soprano might be able to explain this concept better.

    With QoS and without Net Neutrality the ISPs will be able to control consumer internet usage such that the most competitive services such as Digital Telephone or Internet TV will become the exclusive offerings of the ISPs. This is not a competitive market, and there is a definite role for government to ensure that our internet remains a competitive and free market; a market free from these types of digital racketeering schemes.

    With Net Neutrality general service levels will still need to be maintained in order for internet services like gaming, video conferencing and web browsing to work efficiently. This will require upgrading our Internet infrastructure as it has been done in the past; for each subscriber on a network there must be a certain amount of available bandwidth to support them — and Net Neutrality guarantees a consistent service level for all applications and competitors.

    The profit margins are at record highs due the constantly falling cost of bandwidth. A Gigabyte of data transfer currently retails for less than a quarter and the caps ISPs are placing on so called ‘unlimited’ usage plans are approximately 60 gigs per month. Even at the maximum usage, and assuming retail rates for bandwidth, the cost per subscriber is less than $15, yet ISPs are charging anywhere between $40 and $60 dollars a month for that service — a more than reasonable margin and this is especially evidenced by their record profits.

    Myth 3) Content producers get a free ride, and it is the ISPs who pay for increased bandwidth usage.

    Reality 3) Currently the internet is, for the most part, a neutral medium; everyone who uses it pays for access. This includes the average internet user who pays an ISP for internet access but it also includes each and every content producer on the internet. The cost is currently shared 50:50 with every bit uploaded being billed at the same competitive rates as every bit being downloaded. The content producers pay their fair share for uploading just as users pay their fair share [via their ISP] for downloading.

    Its an unmistakably equal process and Net Neutrality guarantees it stays this way.

    —-

    I hope that helps your readers understand some of the misleading arguments that are being made by the Minister and by the ISPs.

    Kevin McArthur
    Neutrality.ca – Currently over 950 signatures!

  2. Vincent Clement says:

    Respectfully Disagree
    Michael and Kevin – Net neutrality has absolutely nothing to do with maintaining or improving competition. Net neutrality legislation would, at best, guarantee that content would not be prioritized and that content providers would not be double charged. It would not increase the number of ISPs.

    Now if we classified ISPs, or at least the owner of the pipe into your house, as a common carrier, well, there is a chance that the market may become more competitive. So let’s stop hijacking the term net neutrality when we are really talking about common carrier.

    Kevin – So to maintain free-market principles you suggest even more regulation. That flies in the face of free-market principles. The reason we have limited competition is because of the current regulations not because of a lack of regulations. The existing players are experts in manipulating the current regulatory system to their benefit. Do you honestly believe this will change with new regulations?

  3. Kevin McArthur says:

    Neutrality.ca
    Vincent, with respect, Net Neutrality has everything to do with maintaining and even allowing for competition. You are again, trying to confuse the difference between ISPs competing for access services and competition on the internet.

    While there are a small handful of broadband access providers in my town, there are literally many thousands of companies operating their businesses online. It is protecting the latter from anti-competative behavior by the former that is so critical.

    “So to maintain free-market principles you suggest even more regulation. That flies in the face of free-market principles. ”

    Yes, Vincent, we must bring our competition laws into the digital age. We have many laws designed to facilitate competition including laws against racketeering, monopolies, price fixing, predatory pricing, and interfering with access etc. These are all laws that have not caught up to the internet age but that are critical to preserving the ‘freedom to innovate’ and competition that currently exists on the public internet and that is threatened without Net Neutrality.

    Competition laws, most certainly, do not fly in the face of free-market principles.

    Internet companies want competition and deregulation — but they want it on a level playing field with the ISPs. Is that really too much to ask of the Ministry of Industry?

  4. Brian Livingston says:

    More Regulation = More Competition?!?
    I agree that this is an important issue that needs to have it’s public profile raised. Thanks to all who have politely contributed to the debate…keep up the fine work.

    I also understand the attraction of legislating fairness, and I believe that often works, but usually only in the short term.

    I say if they want to compete, let them. But force them to compete without training wheels.

  5. Kevin McArthur says:

    Training Wheels?
    Brian, the issue is not training wheels, the ISPs get a marked advantage by having direct access to the subscriber. This advantage is governement granted through easements and is not available to general competitors like VoIP or IPTV providers. They also get all kinds of infrastructure tax breaks and subsidies that they use to build this subscriber base.

    They are then using that government gifted subscriber base as leverage against competitors — and that is wrong. Either the government gets out of the business, and stops letting them use public property to operate, or they regulate a fair market for everyone that recognises this fact.

    We’re not asking for training wheels, were asking for the government not to interfere in free competition by giving one side an advantage — and since they can’t do that, because local internet _access_ requires it, the content/service side must instead be a regulated, level playing field.

    The meat of Net Neutrality legislation is described in this report [ link ] and primarily calls for the following language to be added to the laws.

    Recommendation 6-5

    The Telecommunications Act should be amended to confirm the right of
    Canadian consumers to access publicly available Internet applications and
    content of their choice by means of all public telecommunications
    networks providing access to the Internet. This amendment should:

    (a) authorize the CRTC to administer and enforce these consumer
    access rights;

    (b) take into account any reasonable technical constraints and
    efficiency considerations related to providing such access, and;

    (c) be subject to legal constraints on such access, such as those
    established in criminal, copyright and broadcasting laws.”

    (d) not withstanding any other provision in this paragraph,
    network operators shall not discriminate against content,
    applications, or services on broadband Internet services
    based on their source or ownership.

    Thats it. No hand out, no training wheels — just fair competition and non-discriminatory access for everyone.

  6. Michael,
    I read your column, and was troubled by Bernier\\\’s faith in free market forces, particularly within a country where the telecom industry is an oligopoly. As if Bell and Telus are going to do right by consumers, as opposed to trying to create another revenue source. The future of Net Neutrality in Canada probably lies with the U.S. showing us the way.

    Mark

  7. Steve Kempton says:

    Policy Direction to CRTC
    I find it curious that no one in this dialogue is mentioning the contents of the Policy Direction to CRTC issued on December 18, 2006. Yes, the Policy Direction does say:

    “(a) the Commission should

    (i) rely on market forces to the maximum extent feasible as the means of achieving the telecommunications policy objectives, and

    (ii) when relying on regulation, use measures that are efficient and proportionate to their purpose and that interfere with the operation of competitive market forces to the minimum extent necessary to meet the policy objectives;”

    However it also says:

    “(b) the Commission, when relying on regulation, should use measures that satisfy the following criteria, namely, those that…

    (ii) if they are of an economic nature, neither deter economically efficient competitive entry into the market nor promote economically inefficient entry,

    (iii) if they are not of an economic nature, to the greatest extent possible, are implemented in a symmetrical and competitively neutral manner, and

    (iv) if they relate to network interconnection arrangements or regimes for access to networks, buildings, in-building wiring or support structures, ensure the technological and competitive neutrality of those arrangements or regimes, to the greatest extent possible, to enable competition from new technologies and not to artificially favour either Canadian carriers or resellers; and…”

    I think sub-clause (iv) is of particular interest. I am not a lawyer but does this not effectively say that any regulation that the CRTC may impose should ensure competitive neutrality and not allow for a privileged position for Canadian carriers or resellers i.e., Telus Rogers, Bell etc.

    While this clause does not implace net neutrality does it not provide the CRTC with the “wiggle-room” to create regulation that does provide for net neutrality if they deem it necessary?

  8. Steve is right. He is no lawyer. clause (iv) has nothing to do with anything remotely related to net-neutrality and therefore provides no wiggle room.

    The CRTC already has authority to provide the protections needed – undue preference, content blocking, etc.

    What more do you want?

  9. Kevin McArthur says:

    Neutrality.ca
    “What more do you want”

    If Net Neutrality already exists, how about some enforcement, I’ve got a list of violators on the site, how bout some CRTC action there?

    No CRTC action == need for better laws.

    Telus continues to block competing SMTP services.
    Shaw continues to charge a VoIP tax.
    Rogers continues to fuss with legitimate P2P traffic.
    MCI-Verizon continues to discontinue service to ISPs who exercise legal, free expression.
    HostOnFibre continues to shut down sites based on a ‘personal, moral stance’
    and Videotron is still barking up the tree for a transmission tariff, like his ISP doesnt get enough unfair advantage already.

    Guess I’ll keep petitioning for clear laws that might actually get enforced and that will prevent future abuses from occuring.

  10. Steve Kempton says:

    Isn’t this a Dialogue
    I was under the impression that this forum was a dialogue whereby interested parities may get a better understanding of the relevant issues and come to some sort of understanding to a very complicated issue. In my thread entitled “Policy Direction to CRTC” I merely posed a few question based on the actual contents of the Policy Direction as provided by Industry Canada which no one had actually previously referenced. In the comment that followed from “Written by on 2007-02-20 15:54:31″, no name or credentials provided,this person seems to take on a rather adversarial tone which I do not understand. As I had stated I am not a lawyer and I was asking a question that I thought was legitimate based on a layman’s reading of the Policy Direction. I did not expect a response that had such a flippant tone without a shred of reasoning or evidence to justify the response, let alone the anonymity of the respondent.

    Based on this “person’s” response I am no closer to understanding why Clause (iv) is irrelevant (if in fact it is) and how legislation, policy directions, or regulations to ensure net neutrality can be improved or brought about.

    I think a less adversarial tone and the idea of an open dialogue would be more welcome and beneficial