Effect of zero-rating on competition under debate

OTTAWA — A panel discussion on net neutrality Friday dug into whether zero-rating can help or harm market competition, with Ted Woodhead, senior vice-president of regulatory affairs at Telus Corp. taking issue with the argument that innovation could be harmed if rules prohibiting such content are eliminated. “I keep hearing that innovation at the edge will disappear, innovation at the edge will die,” Woodhead said at the New Developments in Communications Law and Policy conference. “This is sort of the Loch Ness monster argument. No-one’s ever seen it, but it’s certainly there.” How zero-rating is viewed under Canadian law is currently in the process of being determined. While the CRTC has ruled that companies can’t exempt mobile-TV services from data caps, that decision is now being appealed in court. And a similar case, regarding a music streaming service offered by Quebecor Inc.’s Videotron that exempts a variety of participating music services from data caps, is currently in front of the commission. Tamir Israel, a lawyer with the Samuel-Gloshko Canadian Internet Policy and Public Interest Clinic, pointed out during the discussion that Facebook Inc.’s social media service only achieved its dominant position in the market after “dislodging another and better incumbent, Myspace.” “Now if, at the time, Myspace was operating a portal … where it could decide who could access customers for free and who can’t, and it didn’t allow Facebook onto this ecosystem, there’s a good chance Facebook never would have gotten the foothold that it did,” Israel said. “And then we would be left with a less-innovative and, arguably, a less functionally good service.” Even in cases where an Internet service provider (ISP) isn’t giving preference to its own content, such as with Videotron’s zero-rating music service, which allows multiple music services to participate, the problem still exists, he said. “When you put that type of ecosystem in place, there’s an inherent bias towards established players who are going to get zero-rated,” Israel argued, which means that new players may not be able to get the foothold they need. “That really skews the conditions that we want to have in place for innovation to flourish online.” Israel said while services like Unlimited Music can be popular with consumers, that’s also “where the harm comes from, because… that will mean that service that’s not in it is, by definition, going to be at a disadvantage.” Woodhead said the issue of net neutrality “is an idea that was dreamed up by some law professors to address theoretical harms” of which there has been little evidence. “One of the concerns I have around this debate is that it essentially goes to the heart of consumer choice and it goes to the heart of differentiation amongst competitive providers,” Woodhead said. “I think ultimately where some people want this to go is that all services look exactly alike, and all customers in all circumstances are treated exactly the same. That, to me, is a new and somewhat frightening concept,” he added. In a competitive market, providers try to differentiate their products, and that’s a positive thing, Woodhead said. “To me, the greatest danger here is that we back into, with high and lofty ideals, a situation where in fact we’re crippling a competitive market and a competitive environment,” he said. He added: “And if we end up in a situation where, as I say, you cannot differentiate, you have taken one of the major benefits of competition.” American consumers love T-Mobile U.S. Inc.’s Binge On service, while it’s “activists and law professors” who are complaining, Woodhead said. “Where I see this going is to a place where … we’re deciding that consumers aren’t capable of making up their own minds … because of some theoretical harm that hasn’t actually ever emerged.” He said that when it comes to Facebook’s Free Basics service, which only allows users to access pre-submitted Internet content, “for governments and regulators to say, that’s not good for you, strikes me as a very strange concept, and frankly, paternalistic.” Israel said net neutrality is descended partly from the principle of common carriage, which dates back to Roman times, and held that “entities that provide connectivity and facilitate communications need to be neutral, because what they are doing is providing a public service, connectivity, communications, that facilitates downstream goods, downstream business, downstream interactivity, that’s very valuable and has to be done in a non-discriminatory way.” In response to a question about whether zero-rating is a net neutrality violation, TekSavvy Solutions Inc. chief regulatory officer Bram Abramson said that Free Basics could have a zero-rated browser people could use to access content. “But anyone in the world who wanted to create content that met the specs for that stripped-down browser could do it. In other words, I think a lot of the time, there are solutions that side-step the approach of zero-rating, which is a pretty heavy solution. “ — With reporting by Anja Karadeglija at akarad@thewirereport.ca and editing by Charelle Evelyn at cevelyn@thewirereport.ca

Effect of zero-rating on competition under debate

Broadcast | May 6, 2016

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Effect of zero-rating on competition under debate

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