Canada’s Net Neutrality Code

Last week the CRTC released an important net neutrality policy (Telecom regulatory Policy 2007-104) that got a lot of people talking. There’s been coverage by Dwayne Winseck, Michael Geist [1 & 2], Timothy Denton, Peter Nowak [1 & 2], and foreign reporting that understandably used the FCC’s approach in the U.S. for contrast. Jean-Pierre Blais reflected on the process in a recent interview (in which he also stated that the recent basic service decision was as close as the CRTC could come to recognizing broadband as a human right).

I’ve written about differential pricing before, and feel no need to summarize the decision here, or the decision-making framework it establishes, but there are some elements that stood out for me. First, this is the CRTC’s most explicit discussion of net neutrality ever. The term net neutrality didn’t even appear once in the earlier decision on differential pricing, and there has previously been a tendency to frame these topics in the regulatory language of ITMPs. Now the CRTC has embraced common lingo, and the latest regulatory policy is expressly “part of the broader public policy discussion on net neutrality. The general concept of net neutrality is that all traffic on the Internet should be given equal treatment by ISPs” [10]. Elaborating its definition of net neutrality, the CRTC states that “net neutrality principles have been instrumental in enabling the Internet to grow and evolve as it has”. These principles include innovation without permission, consumer choice, and low cost of innovation (low barriers to entry)[11]. Here we have the CRTC laying out some internet values — what made the internet so successful and what needs to be preserved (see Timothy Denton’s laudatory post). This document is remarkable because it lays out something approaching an ideal vision for Canadian telecom, with the internet as a central part. There were elements of this in the 2009 ITMP decision, which together with the recent differential pricing decisions (and subsection 27(2) of the telecom Act) now “effectively constitute Canada’s net neutrality code” [156].

For the rest of this post, I’d like to take a closer look at what the CRTC imagines or desires for Canadian telecom, specifically the roles of different actors and their relations. First, ISPs are common carriers [22], which generally means they are prohibited from discriminating or picking favorites among content. Chairman Blais has since said he thinks this CRTC decision will “reinforce the fact” that ISPs are “mere conduits”, playing a limited role in carrying information from one place to another. Once ISPs start making decisions about content they become gatekeepers to that content, and other concerns come into play (including net neutrality and copyright). Differential pricing can be used for just such a gatekeeping function, which would have “negative long-term impacts on consumer choice” as the CRTC predicts ISPs would make deals “with only a small handful of popular, established content providers – those with strong brands and large customer base” [67].

The scenario that worries the CRTC is one where vertically-integrated ISPs use their control over internet traffic to direct consumers to their own content or that of their partners. Differential pricing is one way of controlling consumer behavior, but arguments in favor of the practice say that it provides consumers with choice, and allows ISPs to innovate and compete through these offerings. In response to these arguments, the CRTC was forced to lay out its vision for innovation and competition. Unsurprisingly, the CRTC’s vision is for ISPs to engage in the noblest form of competition: facilities-based competition: “when ISPs compete and differentiate their services based on their networks and the attributes of the services on those networks, such as price, speed, volume, coverage, and the quality of their networks” [46]. The most important innovations aren’t “marketing practices” like zero-rating, but improvements to ISPs’ networks [59]. ISPs should focus on the internet’s plumbing, and consumers will choose the superior network.

While ISPs are imagined to be competing for customers based on the quality of their networks, competition for services is best served by the “open-nature of the Internet”, which allowed “today’s large, established content providers” to grow and innovate. “In the Commission’s view, new and small content providers should enjoy the same degree of Internet openness in order to innovate, compete, and grow their businesses” [56]. Since ISPs are envisioned as pipes, innovation in content should come from the edges of the network (or at least, that possibility should remain open). Content providers need to be able to enter the market and practice ‘permissionless innovation’, by giving consumers what they want without needing to cut a deal with each ISP that controls the last mile [11].

If we are trying to achieve something like a level playing field for content providers, then we can’t ignore the massive advantages that established content giants currently enjoy, and I wonder what else we might do to lower barriers to entry? Perhaps the whole idea of an ‘eyeball network‘ is an obstacle, where the network’s users are imagined principally as consumers watching a one-way information flow. This may be fine if it’s easy for a new content provider to compete for eyeballs, but that’s not the case today unless a you’re depending on an established content service (YouTube, Netflix) as an intermediary by having them carry your stuff. If we wanted to develop new ‘content’ in Canada, we need to recognize that in much of the country incumbent ISPs already act as the gatekeepers. If I wanted to start a new content service from my metaphorical garage, I would only be able to reach the global internet on my incumbent’s terms. These terms might include prohibitions on uses of their network, and the ISP’s control over addressing through NAT (imagine a world where every device could have a unique IP address…). Now imagine if I could easily get fibre to an internet exchange where I could connect to various international carriers… As with facilities-based competition, I think it’s important to try to imagine what an ideal world would look like when we’re talking about innovating and accessing diverse content over those facilities. As with facilities-based competition, I worry that the CRTC is most concerned with preventing existing concentrations of power from getting worse, than taking active steps to realize a specific vision.

Differential Pricing


The CRTC recently concluded its differential pricing (or net neutrality) hearing. If you weren’t glued to CPAC earlier this month, you can check out the transcripts while we wait on the Commission’s decision. Like any regulatory issue before the CRTC, this one has a long history. The hearings included several mentions Canadian Gamers Organization’s complaint against throttling of certain types of traffic associated with gaming, and the related ITMP regime that developed out of complaints that certain peer-to-peer traffic (like BitTorrent) was being throttled. These cases clearly implicated net neutrality, because they involved ISPs treating some kinds of traffic differently than others, making certain applications perform worse. The CRTC took a dim view of this sort of discrimination unless ISPs could justify its necessity. For example, blocking ‘malicious’ traffic (like DDoS) is acceptable under the ITMP regime because the reasons are deemed valid, but torrenting shouldn’t be blocked just because it is sometimes used to infringe copyright. In an alternate world of net neutrality absolutism we might have ended up with a regulatory regime under which all traffic is protected, and ISPs are legally prohibited from mitigating the sorts of DDoS attacks that have been knocking many services offline in recent years. However, most net neutrality advocates would not support such an extreme interpretation. Under the existing regulatory regime, Canadian ISPs can intervene when they can justify the need, but are not generally allowed to give some kinds of traffic preferential treatment over others.

Most recently, the question has been whether the practice of pricing certain types of traffic differently than others amounts to a similar kind of discrimination. For this, we owe a debt to Ben Klass, whose 2013 complaint (while he was an MA student in Manitoba) got the ball rolling. Klass is one of a small (but growing) number of individuals who have participated in a regulatory process that was really designed to serve the institutions that are being regulated (the ISPs). His work is a great example of how a regulatory system that depends on parties coming forward with complaints fails, when the stakeholders (ISPs) who are meant to come forward don’t want to complain, even though the issue is of public policy importance. Differential pricing is clearly an important public policy debate to have, and the CRTC has recognized as much with the recent hearings.

While an ISP may treat traffic related to Netflix, YouTube, and CraveTV the same way, if two of these services count against a subscriber’s data cap while one does not, then that is a form of differential pricing (known as zero-rating). I may be able to watch Netflix or YouTube without buffering, but if an ISP makes Netflix zero-rated, I will end up paying more at the end of the month if I watch YouTube and exceed my cap. In this example, distinctions are being made about traffic passing through these networks, and they will presumably affect the behaviour of subscribers. The ethical dimensions of these discriminations become clear in situations where ISPs start favoring services in which they have an interest, or when money starts changing hands between companies so that ISPs treat certain applications more favorably than others. Instead of blocking content, an ISP might simply make it unaffordable, with roughly the same effect.

Many ISPs (large and small) have argued that these policies are not nefarious attempts to control subscriber behaviour, but are all about offering choice to consumers, and differentiating themselves from their competition. Some have continued to claim these discriminations are about managing network congestion (much like the old rationale for throttling BitTorrent), but this argument took a beating at the CRTC hearings and isn’t likely to be very convincing. There are good business reasons why you might want to offer customers different options, including unlimited use of a particular app. However, if an ISP is concerned about the amount bandwidth people are using, zero-rating certain services and imposing caps on the rest seems like a silly way to address the problem.

The CRTC’s forthcoming decision has to grapple with some tough questions, and some easy ones. Vertically-integrated companies using internet pricing to discriminate against competing services has analogies with common carriage in the railway/telegraph era, and feels like the sort of unjust discrimination the CRTC is meant to prevent. But if we are going to accept the existence of data caps (and not everyone agrees we should) then should it be a matter of principle to subject all traffic to the cap? If we can discriminate against malware, maybe we can discriminate in favor of security updates, by zero-rating them, or zero-rate access to essential government services. Without data caps, these become non-issues, but a world without caps would have its own issues (which wireless and satellite providers are well aware of).

It’s times like these I don’t envy the regulator’s job.

Finally, we should remember that differential pricing, just like interventions against malicious traffic, presumes monitoring to accurately distinguish different applications and data usage. The ISP does not need to know exactly what subscribers are doing online, but it needs to be able to tell when subscribers are using a zero-rated service. Unless the ISP is somehow relying on the app to provide this information, this means using DPI technology to inspect and categorize traffic. For better or worse, differential pricing is part of the process of intermediation, in which ISPs play a growing and more refined role in governing our digital flows.