October 31, 2016 1:33 pm
Updated: October 31, 2016 3:15 pm

CRTC hearings on net neutrality: What you need to know about differential pricing

The hearing stems from a complaint about Quebecor-owned Videotron over the way it bills customers for the data they use. In 2015, the company launched an unlimited music streaming service allowing its customers to stream music from specific third-party services without it counting toward their monthly data cap.

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Canada’s telecom regulator launched a public hearing on net neutrality Monday, specifically focusing on the practice of “differential pricing,” which is when internet service providers (ISPs) provide access to certain content like music streaming for “free” — in other words, not counting that service towards the customer’s monthly data usage total.

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The Canadian Radio-television and Telecommunications Commission (CRTC) kicked off the five-day hearing at its Gatineau, Que., headquarters, where Canadian ISPs and companies like Facebook will weigh in on the billing practice.

READ MORE: CRTC to review net neutrality in Videotron music streaming case

The hearing stems from a complaint about Quebecor-owned Videotron over the way it bills customers for the data they use. In 2015, the company launched an unlimited music streaming service allowing its customers to stream music from specific third-party services without it counting toward their monthly data cap, a practice dubbed as zero rating.

The Public Interest Advocacy Centre complained the new service allowed Videotron to discriminate against other music-streaming services that were still subject to data usage fees.

What is differential pricing?

Simply put, differential pricing is when the same or similar products or services are offered to customers at different prices. This can take shape in a few ways.

For example, the practice is widely referred to as “zero-rating” when a service provider exempts data usage from a particular app or service from a monthly data plan. That means if your service provider offered unlimited streaming of Spotify, you could stream all the music you want from that service without paying for it. However, try to stream something from Apple Music and it’s going to cost you data.

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Sponsored data means an application or service has entered into an agreement with a service provider to offer free or discounted access to its content.

Those who support differential pricing say that the practice allows consumers to benefit from free services and promotions, making for more affordable options.

However, opponents say differential pricing goes against the principals of net neutrality – which maintains that ISPs treat all online content equally – and limits consumers’ right to choose the content the want.

Where do Canada’s telecom companies stand?

Major service providers including Bell, Telus and Shaw are in favour of the practice, arguing it results in more choice.

In its submission to the CRTC, Bell says the practice would increase engagement in the digital economy, while making service more affordable for Canadians, noting differential pricing will “directly benefit consumers in the same way that toll-free long distance, promotional coupons, waived internet installation fees and free previews of television broadcasts do.”

Shaw also applauded the practice in its submission to the CRTC, saying “this disruption is good for innovation, choice and competition, and it is highly valuable to consumers.”

READ MORE: 5 things you should know about CRTC’s new cellphone contract rules

Social networking giant Facebook also says it’s in favour of differential pricing and is scheduled to testify in front of the CRTC Tuesday.

Rogers, on the other hand, calls zero-rating discriminatory, saying it limits competition by favouring certain content.

Smaller providers like TekSavvy are also weighing in on the debate. In a statement to Global News, a TekSavvy spokesperson said differential pricing won’t benefit customers if it’s used as a “crutch” alongside “way-too-high bandwidth pricing” and low data caps.

“TekSavvy does not discriminate by source, destination, content, or traffic type.  Nor do we think that’s appropriate — we’re the pipe, and we shouldn’t be picking winners and losers in the content business,” said the spokesperson.

“The real issue is a lack of competition that would drive prices down to match the cost of supply.  When bandwidth costs a lot of money, an escape route for telco-selected content can look attractive.  With real competition, those issues go away.”

Telecom rights advocates, on the other hand, have mixed opinions about the practice.

Non-profit digital rights organization OpenMedia believes that allowing the wide-use of differential pricing would greatly affect how Canadians use the internet and threaten innovation on the web by giving unfair advantage to incumbent companies and stifling growth for startups.

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“It’s bad for consumers because the whole idea of the internet is that once you have purchased access to it, it should be entirely up to you what websites you visit and what services you use,” David Christopher, communications manager for OpenMedia, told Global News. “This is all about your right to choose.”

OpenMedia also plans to argue that the CRTC impose an outright ban on data caps, saying Canadians deserve unlimited data at affordable rates.

However, Canadian telecom expert Mark Goldberg disagrees with the opposition to both differential pricing and the idea of getting rid of data usage tiers.

“What the consumer groups failed to acknowledge is data volumes have variable incremental costs, most significantly pronounced on mobile networks; and, offering varying levels of data usage tiers (including unlimited data, in some cases) provides consumers with more options,” Goldberg wrote in a recent blog post.

“Abolishing data usage tiers results in reduced choice for consumers, reducing the ability to find lower priced options for consumers who don’t need or don’t want to pay for an unlimited plan.”

What do data-caps have to do with this?

Many opponents of differential pricing argue that big telecom companies are using the tactic as a way to maintain low data-caps, otherwise known as the extra charges you would be billed after going over your monthly data limit.

The CRTC’s annual Communications Monitoring Report for 2016, issued last week, gave weight to the importance of the data cap hearings. It revealed that the average amount of data downloaded by Canadians has skyrocketed, with broadband usage increasing 40 per cent from 2014 to 2015, and Canadians downloading an average of 93 gigabytes monthly. Mobile data usage saw an even bigger spike, up by 44 per cent.

READ MORE: Canadians’ cellphone services among costliest in G7, says report

The report also showed average total household spending on telecommunications, including wired Internet, wireless devices and phone services, has reached $215 per month, with the largest increase on mobile services.

— With files from The Canadian Press

© 2016 Global News, a division of Corus Entertainment Inc.

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