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ISPs Push For Two-Tier Internet Based on Data Caps

Appeared in the Toronto Star on January 11, 2014 as Internet Providers Push for Two-Tier Internet Based on Data Caps

Net neutrality has been one of the defining Internet policy issues of the past decade. Starting with early concerns that large telecom and Internet providers would seek to generate increased profits by creating a two-tier Internet with a fast lane (for companies that paid additional fees to deliver their online content quicker) and a slow lane (for everyone else), the issue captured the attention of governments and telecom regulators.

While the net neutrality challenges evolved over time, the core question invariably boiled down to whether Internet providers would attempt to leverage their gatekeeper position to create an unfair advantage by treating similar content, applications or other services in different ways.

In response, net neutrality rules surfaced that were designed to safeguard online competition. Countries such as Chile and the Netherlands included net neutrality requirements within their telecom laws, while others developed regulatory guidelines and principles. In Canada, the Canadian Radio-television and Telecommunications Commission established the Internet traffic management practices in 2009, which serve as the Canadian net neutrality rules.

Concerns over net neutrality may have receded once policies were established, yet Internet providers continued to search for business models that could generate incremental revenues from their networks. Having failed to establish a two-tier Internet based on speed, they now appear to be focused on an alternative two-tier approach based on data usage.

The premise of a two-tier Internet based on data usage stems from the proliferation of data caps among many providers, particularly for fast-growing wireless Internet services.  The days of “unlimited Internet” are over at many providers, replaced by packages that include a fixed amount of data usage each month with expensive overage charges for those that exceed their monthly allocation.

Sensing consumer frustration with data caps, network providers have begun to offer access to some services or content that does not count against the monthly cap. The result is a new two-tier Internet: one Internet that counts against the monthly data cap and another that does not.

For example, last week AT&T, one of the largest U.S. Internet wireless providers, unveiled plans to offer “Sponsored Data”, which will allow websites and content owners to essentially pay for users to access their content. Subscribers will access sponsored data in the same manner as other content through AT&T’s wireless Internet service, but it will not count against the user’s monthly cap.

AT&T argues that the plan does not run afoul of U.S. net neutrality rules since all content is delivered at the same speed. Yet the change creates a two-tier Internet with obvious advantages for deep-pocketed content providers who can promote their services as “data-free”, while potentially superior start-up services become perceived as costlier alternatives.

Canadian providers have also begun to examine how data caps can be used to differentiate between content. For example, Bell offers a $5 per month mobile TV service that allows users to watch dozens of Bell-owned or licensed television channels for ten hours without affecting their data cap. By comparison, users accessing the same online video through a third-party service such as Netflix would be on the hook for a far more expensive data plan since all of the data usage would count against their monthly cap.

The Bell plan is currently the subject of a complaint before the CRTC, which maintains that Bell’s practices violate the Commission’s net neutrality rules by treating similar content in an unequal manner. The complaint will be addressed in the coming months, but regardless of the outcome, it is increasingly clear that there is a new front in the net neutrality fight with Internet providers intent on leveraging data usage to create a two-tier Internet.

Michael Geist holds the Canada Research Chair in Internet and E-commerce Law at the University of Ottawa, Faculty of Law. He can reached at or online at

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