ARCHIVED - Transcript, Hearing November 1, 2016

Volume: 2
Location: Gatineau, Quebec
Date: November 1, 2016
© Copyright Reserved

Attendees and Location

Held at:

Outaouais Room
Conference Centre
140 Promenade du Portage
Gatineau, Québec

Attendees:

• Chairman: Jean-Pierre Blais
  
• Members: Yves Dupras, Peter Menzies, Linda Vennard, Chris MacDonald
  
• Legal Advisors: Carolyn Pinsky, Daniel Finestone
  
• Secretary: Cindy Ventura
  
• Hearing Manager: Suneil Kanjeekal
  

Transcript

Gatineau, Québec

--- Upon commencing on Tuesday, November 1, 2016 at 9:00 a.m.

1306 LE PRÉSIDENT: À l'ordre, s'il vous plaît. Order, please. Madame la Secrétaire.

1307 THE SECRETARY: Thank you, Mr. Chairman, and good morning. We will now begin with the presentation by Equitable Internet Coalition. Please introduce yourselves and you have 20 minutes for your presentation. Thank you.

PRESENTATION

1308 MR. LAWFORD: Thank you. Good morning. My name is John Lawford, and I am the executive director and the general counsel to PIAC, and counsel to the Equitable Internet Coalition.

1309 The Equitable Internet Coalition is an association of five public interest and consumer groups, formed for the purposes of this proceeding. Our members believe that access to the internet and internet content should be equitable, that is, as free as possible from internet service provider imposed limits on, and interference with, consumption of information, apps and services online.

1310 With me today is Geoff White, also counsel to the Coalition. To his left, Herb John, president of the National Pensioners Federation; and the Coalition’s expert, Barbara Cherry, the famous B.A. Cherry from yesterday, professor at Indiana University’s Media School; and Ben Segel-Brown, my articling student directly behind me.

1311 This proceeding is about whether or not differential pricing of internet data, that is discriminatory data pricing, complies with the requirements of the Telecommunications Act. This is a very important proceeding because, as your latest communications monitoring report shows, Canadians are using more data, subscribing to higher speed and higher usage plans, and they’re paying more for internet service. As with the ITMP Framework, the Commission seeks in this hearing to establish a clear and transparent regulatory approach.

1312 Today this panel will address its key positions about discriminatory data pricing and its permissibility under Canadian telecommunications law, and present our proposed analytical framework for assessing discriminatory data pricing.

1313 We will not focus on it today, but data caps are a major concern of the Commission. Consumers do not like data caps. They are costly, artificial, and they are penalizing measures which instill fear. They increasingly seem to have no relation to managing network congestion. Discriminatory data pricing practices are marketed as relief from data caps, but without data caps, such pricing would not be an issue.

1314 Moving to our key positions. The Telecommunications Act, even in the current state of retail internet service forbearance, provides a very limited basis upon which discriminatory data pricing is permitted. The Commission has consistently been concerned with carriers putting barriers in place between customers and the content of their choosing, and concessions to favour certain customers.

1315 The Coalition believes that like the Federal Communications Commission did in the United States, the CRTC should explicitly recognize the gatekeeper function of ISPs and the powerful economic incentives and technical means that they have to restrict access to the internet.

1316 Regarding section 36 of the Act, we said in our filings that it could be engaged by discriminatory data pricing that has the effect of reducing access or blocking access to other content by preferential treatment of other types of content, however, we believe the Commission appropriately focussed this consultation on subsection 27(2).

1317 Geoff.

1318 MR. WHITE: The Commission must take the holistic, polycentric view required by the Telecommunications Act and the telecommunications policy objectives it seeks to achieve.

1319 However, a number of the proponents for discriminatory data pricing — who are, basically, a small group consisting of either large incumbent carriers, large digital monopolies or large equipment manufacturers, and not any users or user group representatives — seek to simplify the debate by basically saying discriminatory data pricing is good for competition and economic efficiency, and, besides, consumers like free stuff. A number of these parties also brush off, if not totally ignore, the Telecommunications Act and the relevant legal standard of common carriage.

1320 The “free stuff” argument also ignores problems with societal costs of data caps; ignores problems with ISPs as gatekeepers; and ignores the objectives of the Telecommunications Act.

1321 The Coalition members agree: consumers do like free stuff. But discriminatory data pricing is not free. The costs of discriminatory data pricing are borne by all consumers, including vulnerable consumers, and by society, including competitors and edge providers.

1322 Some parties argue that low-income access to the internet may be a goal of discriminatory data pricing. This creates a two-tier internet, with lower income consumers having access only to a curated, corporate corner of the internet which is unlikely to satisfy all of their social, economic, expressive and developmental needs.

1323 Second, this claim ignores the reality that zero-rating keeps data caps low, which costs all consumers, and harms low-income Canadians in particular. Last, zero-rating programs tend to be offered only on more expensive plans, as is the case for Videotron’s “Unlimited Music” service.

1324 MR. JOHN: Seniors take the issue of net neutrality and the negative effects of zero-rating on broadband access very seriously. At our national convention in September, the National Pensioners Federation issued three resolutions on “Broadband and Net Neutrality”; “Net Neutrality and Zero-Rating” and “Access to Affordable Broadband and Net Neutrality”. With your permission, we wish to place these on the record.

1325 Zero-rating is detrimental to seniors in particular, who use the internet in different ways than younger Canadians. For example, seniors are the heaviest wired home internet users. They rely on it more than younger Canadians in many areas, for example, the crucial matters such as health and transport services and access to government services. Zero-rating is however overwhelmingly targeted to millennials and offered on entertainment services such as video and audio streaming and are not as heavily used by seniors. As such, seniors will effectively subsidize the zero-rated services of others.

1326 MR. WHITE: Sorry, Mr. Chair. We have that exhibit which the Secretary has which you can consider whether or not ---

1327 THE CHAIRPERSON: The -- just, okay. We’ll stop the clock for a second. The resolution was made publicly, I would take it, and was -- has been public since September? It’s been on your website?

1328 MR. JOHN: Yes, we -- after the -- our convention, we have to go through the resolutions to update from what was submitted with friendly amendments and that. So the original resolutions are posted on the website. They will be updated with the final versions within the next week, I believe.

1329 THE CHAIRPERSON: I see. And there’s no position you’re taking in this proceeding that’s inconsistent with what was in that resolution; is there?

1330 MR. JOHN: No.

1331 THE CHAIRPERSON: Okay. Thank you. Okay. Please continue.

1332 MR. WHITE: There’s much evidence on the record that consumers, when fully informed about the true nature of discriminatory data pricing, do not support it. Consumers understand that discriminatory data pricing interferes with the free and open internet, discriminates against certain customers, others and it hurts innovation.

1333 Some incumbents have tried to directly or indirectly to relate the purchase of internet connectivity to the purchase of other consumer products or services, such as toothpaste, discounted movie tickets on Tuesdays, and student discounts. None of these things are comparable to telecommunications services, which cannot, because of the Telecommunications Act, be sold in a manner that is unjustly discriminatory.

1334 One incumbent’s survey asked about respondents’ perceptions of value propositions regarding home internet, wireless internet, property insurance, vehicle insurance, banking service, airline travel, and public transit. Mobile internet value is third worst regarded, only beaten out by public transport and airlines, hardly a high hurdle to get over.

1335 MS. CHERRY: I prepared two reports, which the Coalition filed, about the U.S. approach to discriminatory data pricing. The U.S. perspective is relevant to the Canadian context for a number of reasons, including the similar common law lineage of common carrier legislation in Canada and the United States, the two countries’ forbearance regimes, and the FCC in its Open Internet Order of 2015 analyzed issues such as those facing this Commission today.

1336 Both countries’ telecommunications laws include longstanding prohibitions and legal principles derived from common law relating to a common carrier’s prices, terms and conditions of service that evolved from the conduit or transmission function of the service offered to the public, and policy considerations related to the provision of an essential service.

1337 I noted that properly framing the inquiry in this proceeding is critical for guiding the Commission’s examination of the issues. The appropriate frame of reference for this proceeding must be the Telecommunications Act. Yet, some parties and consultants in this hearing have implied, incorrectly, that the relevant enquiry to be made is about economics and competition, and in some cases that the relevant body of law is competition or antitrust law only.

1338 Competition law is a separate body of law that does not address the concerns, values, or objectives underlying common carriage law embodied in the Telecommunications Act, nor the focus of the policy direction.

1339 In both the U.S. and Canada, the role of competition issues in telecommunications law relates primarily to forbearance, that is, competition is preferred over regulatory intervention where competition is considered sufficient to protect the interests of users. Even where competition is sufficient, the FCC does not have the authority to relieve common carriers of their core common carrier obligations. While the CRTC has the authority to relieve carriers of their obligations under subsection 27(2) of the Telecommunications Act, importantly, it has not.

1340 Fostering increased reliance on market forces under subsection (f) is only one of many policy objectives under section 7 of the Act, and it is a means to achieving the ends of the Act, according to the Policy Direction. However, those parties and consultants that rely only upon antitrust and economics principles, including the view that pure price discrimination is appropriate and beneficial, incorrectly assume that economic efficiency is the primary or indeed only concern. This ignores the appropriate legal standard and the limits on the permissible scope of discrimination long recognized under the law of common carriage.

1341 MR. LAWFORD: In the United States, the result of the FCC’s enquiry was a set of bright line rules and an analytical framework for other cases as they arose. Central to the FCC’s Open Internet framework is the finding that ISPs have the technical means and the economic incentives to undermine what telecommunications law requires by virtue of their potential to be gatekeepers.

1342 Gatekeeping is undesirable from a social perspective and from an innovation perspective. As Rogers stated categorically, “Differential pricing does give ISPs the ability to act as gatekeepers in every case.”

1343 The Commission should, in its new regulatory framework, explicitly recognize the gatekeeper function of ISPs.

1344 MR. WHITE: The Coalition has proposed a definition of discriminatory differential pricing, and proposed an analytical framework which can assist the Commission in identifying whether or not a differential pricing practice complies with the requirements of the Telecommunications Act.

1345 To be clear, this is not the final regulatory framework, the bright line rules, but an approach to analysing discriminatory data pricing which, along with consumer safeguards and a body of precedents, will result in a clear and transparent approach to discriminatory data pricing, and one that will ease the burdens associated with the case-by-case approach.

1346 The analytical approach consists of three stages that assess discriminatory data pricing against a set of factual and policy enquiries, which are balanced.

1347 Here briefly is the framework.

1348 Stage 1, the Commission would identify the key telecommunications policy objectives to be considered in the analysis. The Coalition believes that subsections:

1349 7(a), to facilitate the orderly development throughout Canada of a telecommunications system that serves to safeguard, enrich and strengthen the social and economic fabric of Canada and its region;

1350 7(b), to render reliable and affordable telecommunications services of high quality to Canadians at both urban and rural areas in all regions of Canada; and

1351 7(h), to respond to the economic and social requirements of users of telecommunications services; are the most relevant policy objectives in respect of discriminatory data pricing.

1352 This is particularly given the central role access to the internet plays for almost all Canadians; the gatekeeping function of ISPs and the way discriminatory data pricing is being used; and the dependence of discriminatory data pricing on the existence of data caps.

1353 Stage 2, the Commission would focus on the actual effects of the discriminatory data pricing in question on customers, content -- including third party content and application creators -- carriers and competition, with reference to the key policy considerations. This is the “four-Cs” analysis.

1354 Regarding the effects on customers, the framework looks at factors such as whether the differential pricing practice is available to all customers in all tiers, all plans, and of all abilities.

1355 Regarding the effects on content or edge providers, the framework looks at factors such as the impact on those providers and the environment for the emergence of new edge providers or services, whether one type or category of data or content is preferred and why, and the extent to which content providers can benefit from, or are harmed by, the discriminatory data pricing.

1356 Regarding the effects on carriers, which could also be referred to as the competitive effects test -- the framework looks at the effects on both the offering carrier and competing carriers, and looks at such factors as impacts on the carrier’s own traffic and business, and impacts on non-participating users, as well as impacts on other ISPs. This also considers other ISPs’ ability to offer discriminatory data pricing.

1357 Stage 3, the Commission would consider whether there are any policy reasons that would support allowing the discriminatory data pricing. These factors could be assessed by examining issues such as whether the practice in question enhances telecommunications access or affordability, or the broadcasting policy objectives.

1358 Regarding broadcasting, the Coalition believes any favouritism towards Canadian broadcasting, like all other effects, would need to be balanced against the other potential negative effects.

1359 The result of these three stages would be a ruling on whether the discriminatory data pricing is permitted. Those practices not expressly supported or expressly prohibited would then be subject to complaints.

1360 Finally, if the Commission engages in regulatory measures to prevent unlawful discriminatory data pricing, the Commission would then consider compliance of those measures with the policy direction.

1361 In the Coalition’s second intervention it ran two of the several types of differential pricing practices currently observed in the market through that analytical framework. The two types, serving as illustrative examples, represent somewhat opposite ends of the discriminatory data pricing spectrum.

1362 The first was Vidéotron’s Unlimited Music, which the Commission will rule on as part of this proceeding. The Coalition called this type of discriminatory data pricing the “zero rating category exemption types”, because it exempts certain categories of content from data charges.

1363 The second type of discriminatory data pricing is related to the zero-rating of customer care functions. Under the Coalition’s framework, Vidéotron service did not pass muster, whereas the zero-rating of customer care functions did.

1364 MR. LAWFORD: Regarding the Commission’s ITMP framework, and whether it should be amended to address discriminatory data pricing, the Coalition does not believe the ITMP framework is the proper vehicle for addressing discriminatory data pricing.

1365 First, we are unconvinced that discriminatory data pricing is a network management issue. That said, we acknowledge that both the ITMP Framework and this proceeding are ultimately about ISPs, how they manage their traffic and bill for it. And we recognize that some economic ITMPs can also be a form of discriminatory data pricing.

1366 Second, we think the ITMP Framework requires changes to improve its transparency and consumer safeguards, including changes to the presumption that economic ITMPs would generally not be considered unjustly discriminatory.

1367 Crucially, we are concerned that by amending the ITMP framework to account for other forms of discriminatory data pricing, the effect could be to let ISPs off the hook for undue discrimination if they are able to claim that their price discrimination is an economic ITMP.

1368 This leads us to submit that if the Commission does consider it wise to produce some form of an internet code by blending the ITMP Framework with a new regulatory framework for DPP, it should improve on the ITMP part of the framework, and not just bolt on a differential pricing piece.

1369 The FCC’s approach, whereby economic practices are not considered reasonable network management, may be an appropriate model for the Commission, and one which will enable the CRTC to more effectively enforce subsection 27(2).

1370 In conclusion, as the Commission seeks to establish a clear and transparent regulatory approach to differential pricing practices, we note the Coalition has proposed a definition and an analytical framework that we believe will assist the Commission in determining whether discriminatory data pricing practices may be permitted in the public interest. And we look forward very much to your questions. Thank you.

1371 THE CHAIRPERSON: Well, thank you and welcome. And I must apologize, Professor Cherry, I sometimes take 24 hours to connect the dots, so I didn’t make the connection yesterday in the testimony. So welcome to our hearing. And I’ll put you in the hands of Vice-Chair Menzies. Thank you.

1372 COMMISSIONER MENZIES: Thanks. I’ll start with a couple questions that sort of popped off the page for me from your oral presentation.

1373 When you in paragraph 12 say discriminatory data pricing is not free and the costs are borne by all consumers, do you have a sense of what that cost is? I mean, I understand it in general, but what -- or what that cost would be from using the Vidéotron as an example?

1374 MR. LAWFORD: Well, of course we’re not privy to how much Vidéotron has spent in terms of marketing and in terms of increased traffic and what that requires in -- to their system to upgrade for that. The only information we have on increased data usage is a study, which I don’t know if it’s on the record, that indicates there’s sometimes as much as a threefold increase in internet traffic when differential data pricing practices such as Vidéotron’s are implemented.

1375 So we don’t know what the traffic growth has been there and whether they had to buy a bunch more servers, et cetera. But there are definitely costs. And those are -- the point is that those are borne across the subscriber base of Vidéotron. So that’s one aspect of -- did you want to add?

1376 COMMISSIONER MENZIES: I’m just trying to get a sense of the significance of the cost.

1377 MR. WHITE: The cost can be roughly categorized I suppose into two categories. There’s the like financial cost, opportunity cost and then there’s social cost as well.

1378 In terms of financial costs, this Coalition, I mean, this Coalition has approached an economics consulting firm. They had a proposal in terms of how would you model the costs of this. The Coalition ultimately didn’t proceed to engage in that sort of analysis on the basis that the law is relatively sufficient. And there’s lots of evidence on the sort of the uneconomic, unfinancial costs.

1379 Sorry, let me back up. In terms of the financial costs, if you look at the penalties that customers who aren’t benefitting from these differential pricing practices and the Appendix A to some Coalition members PIAC, COSCO, CAC and Vidéotron unlimited music, their Appendix A to their January 2015 filing shows the costs to those who are outside the Vidéotron unlimited music streaming. Those are the lower tier players who, consuming the exact same content, end up paying a lot more in overages.

1380 In terms of social costs there’s the effects on innovation and other of those things as well. And in terms of measuring that we don’t have a concrete number for you.

1381 COMMISSIONER MENZIES: Okay. Thanks.

1382 In paragraph 16 of your oral presentation there you make reference to -- Mr. White says there is much evidence on the record that consumers, when fully informed, do not support it.

1383 What specifically would you point us to as being the most compelling of that evidence?

1384 MR. WHITE: The most compelling evidence is -- and I think the panel has picked up on this yesterday. There aren’t many parties before you asking for differential pricing. There aren’t any consumer groups or individual consumers who have intervened in this proceeding who are saying I want zero rating. I want discriminatory data pricing. You have this Coalition here speaking on your behalf. You have a lot of individuals who have taken the time to say this is bad. We don’t like that. You have a small ISP, Tbaytel saying this is bad for our business. You have the British Columbia Broadband Association saying you shouldn’t be sanctioning discrimination on the basis of data packets. And in response to that you only have one equipment manufacturer, two out of the three largest telecommunication service providers saying this is something we want. That’s the evidence.

1385 COMMISSIONER MENZIES: So there isn’t any specific piece of evidence that you were pointing us to. That phrase was really a generalization that when you look at the overall record it is not supportive of differential pricing?

1386 MR. LAWFORD: Well, one of the striking things ---

1387 COMMISSIONER MENZIES: All I -- I mean ---

1388 MR. LAWFORD: Sorry, no.

1389 COMMISSIONER MENZIES: --- it doesn’t really matter. I just thought if there was one single piece of data that you were trying to direct us to there that you might and that it might be useful to us.

1390 MR. WHITE: The data is a qualitative assessment of the number, the volume and the content analysis of the interventions that have been filed.

1391 COMMISSIONER MENZIES: When you were taking us through your proposal for an analytical framework, I just wanted to clarify on that that the purpose of that -- of this suggestion is -- remains for us to be able to identify differential pricing practices where they may occur for the purpose of forbidding them. Is that correct?

1392 MR. WHITE: It doesn’t prejudge the outcome. It’s a test to assess a differential pricing practice according -- you know, under the 27(2) test in the telecommunication test. It’s not saying that the analytical framework doesn’t say -- isn’t necessarily a bright line rule saying no differential pricing of data. It says these are the factors, the relevant inquiries on the facts and policy that the Commission should think about when testing the lawfulness of discriminatory data pricing.

1393 COMMISSIONER MENZIES: So some differential pricing may be permitted; right? But this is the test to find out what may be permitted and what would be prohibited?

1394 MR. LAWFORD: That’s correct. And you would ---

1395 COMMISSIONER MENZIES: Is that correct?

1396 MR. LAWFORD: --- you would probably after this hearing very possibly throw out some -- it’s very possible to throw out some bright line rules or some edge cases, if you will, that are looking -- if you accept a version of what we’re proposing that would on almost every occasion be offside. So it might be possible to set and this, in your regulatory policy, a couple of bright line rules, for example, not favouring own content if you’re VI. And then use the engine that we’ve created here for the middle cases. And on -- by contrast, there may be ones which on this record you’re satisfied, like customer care, that have no real implications, in which case those could also be part of the regulatory framework announced at the end of this hearing. And then the middle group would go through this process.

1397 MR. WHITE: If I may?

1398 COMMISSIONER MENZIES: Go ahead.

1399 MR. WHITE: There is a philosophy that this Coalition is advocating for. It’s the philosophy that the FCC adopted in its open internet order. It’s the philosophy I believe this Commission adopted in the ITMP framework where it talks about innovation coming from the edges of the network.

1400 There’s a philosophy. There’s a belief that the internet should be open, that ISPs should not be picking winners and choosers. But it wasn’t enough, the Coalition felt after its first intervention and even going into the first intervention today, no zero rating whatsoever. And in fact, PIAC made an application to the Commission for zero rating of wireless calls to help lines in 2014.

1401 So it’s not that Coalition members are necessarily, you know, instinctively against zero rating. And when we applied our analytical framework zero rating of customer care functions is something that this Coalition thinks passes mustard. That that would be okay because the overall effects on innovation at the edge, the overall effects on competing ISPs, et cetera, would not rise to the level of being unjust or undue under 27(2).

1402 COMMISSIONER MENZIES: Okay. So part of the conundrum of having data caps is that if they were eliminated, and this is sort of informed by the broader debate about DPPs, there’s an amount of revenue that companies are currently collecting because of the current structure. If there were no more data caps and no more overage charges, one assumes that they would have to make up that revenue someplace and that there’s generally only one or two ways to do that, and one of them is to increase overall prices.

1403 So how do you view that and wouldn’t it -- isn’t it more to the benefit of consumers for them to have lower prices that are reflective of their usage, which although as our report showed last week, although they’re growing considerably are still below 100 gigs a month, or higher rates that effectively subsidize heavy users?

1404 MR. LAWFORD: Again ---

1405 COMMISSIONER MENZIES: Which consumer are we ---

1406 MR. LAWFORD: Are we dealing with? Sure, no -- well ---

1407 COMMISSIONER MENZIES: --- looking out for here?

1408 MR. LAWFORD: --- here -- we’re looking out for all consumers. And the answer is not to sacrifice completely the unjust discrimination principle in seeking an answer.

1409 What we’re -- we’re not here to say kill data caps. We’re not here to say that.

1410 We think consumers don't like them and we would like to see the market react with offers that give higher data caps or unlimited offers at price points that consumers can use.

1411 The theory that we're working on is if differential data pricing remains or becomes endemic, you're going to have lower caps for longer. Lower caps for longer because there's no incentive to raise them.

1412 If there is free and open internet access and applications that consumers desire that may or may not require higher bandwidth, companies in order to compete to get those consumers will have to offer better caps, better -- higher caps, perhaps eliminate them.

1413 If it's a captive curated, if you will, system, then the free stuff is free and the caps stay low on everything else and stay low forever. So that is the approach we're taking to this.

1414 If this Commission can keep a fairly open internet, we believe the pressure to raise caps will be there in the market.

1415 COMMISSIONER MENZIES: So if in a world where data caps still exist, you hear the argument from -- the arguments on the record and I'm sure we'll hear more of it during the week that differential pricing plans have worked very well for consumers over the years in terms of say mobile where there's free evening calling, Hydro rates where there's off-peak rates and peak usage rates, et cetera, et cetera, so that those sorts of practices are very consumer friendly. That's the argument they would make.

1416 So what's your view on that and are those the sort of differential pricing practices that you would approve of or otherwise?

1417 MR. WHITE: The issue about data caps really relies on it being demonstrated that there is this cross-subsidization between low cap people -- consumers and unlimited consumers.

1418 In terms of the analogy for industries, Hydro or the telephone example of free evening calling, there is a traffic management purpose to those to shift consumption off of peak time. That relationship -- those types of examples don't seem to be pertinent to what we're talking about here, as one of the panel members noted yesterday. There's no real incentives to shift your usage to -- I mean some of the smaller carriers have that unlimited during off-peak time but not all of them are doing that.

1419 You've got monthly billing trying to solve what the Chairman referred to as a peak network issue. But in all of the cases of Hydro and free evening wireless calling, there's not -- the company isn't telling you it's free to call your sister but not your brother. I mean that's what we're talking about. We're talking about there are legitimate network management purposes but not with the carrier telling you it's only for what we say is okay in terms of who your contacts are.

1420 COMMISSIONER MENZIES: No, I understand that having made the analogy myself but the -- but the answer I'm looking to is -- doesn't have to be a yes or a no. It could be a maybe.

1421 Would these sorts of practices that, as you say, are not choosing how you use it but when you use it, whether they're time-based or geography-based or whatever, are those the sorts of things that you would see as being okay or would you like to see them go through the analysis that you've presented to determine that?

1422 MR. WHITE: There could be -- there certainly could be cases where that's fine. You know, for traffic management purposes we see that but when you ask about geography, I mean there was a case before the Board of Railway Commissioners where this type of thing, the differential pricing between zones was noted as sort of discriminatory.

1423 So we are not saying no to legitimate network traffic management but you still have to run it through the 27(2) test and we've looked at all the factors. It's the impacts on everyone.

1424 COMMISSIONER MENZIES: Yeah, I wasn't there for that one with the Railway Board Commissioners. So thanks for reminding us.

1425 In terms of -- I want to move to subsection 27(2). So for Professor Cherry, you have submitted there that subsection 27(2) contains "longstanding prohibitions on a common carrier's prices, terms and conditions of service that derive from common law".

1426 Could you elaborate and try to go to what specific common carrier principles you think apply most directly to differential pricing practices?

1427 MS. CHERRY: Yes. The basic obligations of common carriers actually derive under the common law of tort. So it's based on the status of the company or basically just the function of the service you provide. It has nothing to do with market power competition. It's simply are you in the business of providing a conduit or transmission function and are you holding yourself out to serve the public? That's all that's required to be a common carrier.

1428 The longstanding obligations that have evolved are that common carriers have the basic -- following basic obligations. You must serve upon reasonable requests. You must do so without unreasonable discrimination, at just and reasonable rates and with adequate care.

1429 These are the fundamental obligations. They actually have their origins in the English common law. They go back to the middle ages frankly. And these are the basic obligations. It comes with just simply providing the service.

1430 So section 27(2) reflects that dimension about no unreasonable discrimination. The fact that you have to -- you can't give an unreasonable preference or disadvantage. That's been interpreted to mean that essentially similarly situated customers in situations must be treated similarly.

1431 COMMISSIONER MENZIES: Okay, thank you. And in your June 12^th submission, I think it's on page 12, footnote 8, if it's helpful, you state the policy concerns embedded in section 36 and then subsection 27(2) of the Telecommunications Act differ.

1432 Can you just elaborate on what you were getting at there when you're -- the difference that you're trying to distinguish for us there?

1433 MS. CHERRY: Yes. The obligation under section 36 -- let me get the exact language in front of me. The language of section 36 -- I have it right here -- states that:

1434 "Except where the Commission otherwise approves, a Canadian carrier shall not control the content or influence the meaning or purpose of telecommunications carried by it for the public."

1435 What that is simply stating that if a carrier were to engage in that kind of behaviour, you know -- are no longer operating as a common carrier because a common carrier is simply a conduit. They're just simply a carrier transmitting. So if you're actually starting to control or influence the meaning or purpose, you are no longer functioning as a common carrier.

1436 So the way this is stated essentially is saying that to engage in this function, to get it into control of content or influence the meaning, you are no longer staying within your function as a conduit. In that respect, it's an admonition that you are not to engage in activities beyond what your common carrier function is.

1437 That's different, however, from looking at 27(2) where 27(2) is actually a contification of one of the longstanding obligations that if you are functioning as a common carrier, you are to give no unjust discrimination and unreasonable preference. You just manage.

1438 COMMISSIONER MENZIES: Okay, thanks. And I mean I know you said and emphasized this morning that you were happy to focus on 27(2) as opposed to 36. But I'm curious to know when you say that section 36 could be engaged by differential pricing practices where you think that engagement might take place.

1439 MS. CHERRY: John wishes to ---

1440 COMMISSIONER MENZIES: Sure.

1441 MR. LAWFORD: Yeah. That's mostly to do with effective blocking if you will. It's a matter of having, for example, a preferential pricing system in your ISP that, for example, gives you, say, the four major, you know, online services and has an extremely low cap so that you had no reasonable prospect, no reasonable prospect of actually using the internet for anything else.

1442 Let's say you've got a 50 megabyte rather than a 50 gigabyte limit and -- but all your Facebook is free and all your Google, but effectively you're paying for everything except the free stuff, that might be effectively blocking, if you will, those other services because they’re so expensive. It’s really an extreme example.

1443 Or otherwise if, for example, there’s a preferential deal where in order to get your free Facebook you’re agreeing not to -– you won’t have access to other parts of the internet, other social networks. That could be an example. But no I don’t think those things are going to appear in the market.

1444 So 36 is a bit of red herring. Here it’s less likely being gauged than 27(2). So that’s the kind of examples we were thinking of.

1445 COMMISSIONER MENZIES: Okay. So it was -– it’s kind of a bit of a side argument in terms of that, okay.

1446 MR. LAWFORD: Yes.

1447 COMMISSIONER MENZIES: Can you just confirm your view that it seems to me that the mere fact of zero-rating, that what you’re saying -– the mere fact of zero-rating involves the ISP and the control of content -- or influence the meaning or purpose of the telecommunications being carried? Is that -– would that be fair to say?

1448 MR. LAWFORD: So you’re saying the mere fact that they engage in zero-rating could be seen to be influencing the meaning or purpose?

1449 COMMISSIONER MENZIES: Is that your view? Yes.

1450 MR. LAWFORD: Is that our view? No, that’s not our view.

1451 COMMISSIONER MENZIES: Okay. What is your view on that zero-rating?

1452 MR. LAWFORD: Zero-rating itself doesn’t block access to the other parts of the internet, if it’s implemented such as Videotron has done and therefore it’s on the -– it’s difficult to analogize it to an editorial control.

1453 Again, the way it would be structured would have to be so severe that it were influencing the message because it was so difficult to use the rest of the internet. Just the mere fact that you’re doing this is not necessarily engaging 36.

1454 I mean I heard the allegations yesterday that there are studies showing there’s some deep packet inspection going on. Well then maybe we’re getting into territory like that, into Section 36 territory.

1455 Because you’re using probes of what someone is doing with their information and you are turning yourself from a common carrier, sending it from A to B, to somebody who inspects things and then sorts them.

1456 So I mean there’s an argument there but we haven’t seen the evidence that the group –- first group yesterday proposed so we don’t know if that’s happening.

1457 COMMISSIONER MENZIES: Given the differences between the two services, do you see any justification for a different regulatory approach to wireless versus wireline, when it comes to these issues?

1458 MR. LAWFORD: The wireline -– wireless, excuse-me, is the leading edge of this because of the cost of data on wireless devices, but as that improves with 5G and so on and so forth, I believe that the practice would spread to wireline, excuse-me. And there’s no principle basis to differentiate between the two as far as we’re concerned.

1459 COMMISSIONER MENZIES: Okay, thanks.

1460 In terms of your 4C approach, can you just take us through that a little bit?

1461 What I’m trying to get at is how you would have a supply that -– would it be a matter of grading within each C? You know 7 out of 10 points, within the AC, or 3 out of 4 Cs, or 2 point -– you know, how would you – how would you see us using those 4C categories to come to those -– well you’re looking for a determination through them. What would be the balance or would it –- or is that just the basis for wherever you want to –- we would like to take it?

1462 MR. WHITE: When we thought about our analytical framework we looked at all of the previous Commission and Board of Railway Commissioner decisions and its overall historical reluctance to approve differential pricing.

1463 As Michael Ryan notes in his text, I’d say the -– it’s very limited circumstances in which this type of activity is accepted and when PIAC and Chimo Community Services brought its request for zero-rating to the Commission, the Commission came back and said here are the seven types of evidence you will need to provide us in order to justify the zero-rating that you’re asking for.

1464 Now in terms of an overall grading approach, how do you -– how does the Commission balance the 4Cs and all of the things we’ve put to you?

1465 I’m sorry to say but that is a case by case analysis, but it’s about effects. You are balancing the overall effects.

1466 So it may very well be and this is -– this is your role. It may very well be that there is some negative impact.

1467 I’m using just a hypothetical. We’ve given you two demonstrations of how our framework applies to Videotron Unlimited Music, which we say is offside and zero-rating of customer care functions, which we say is onside.

1468 It may very well be in an extreme case. There is some zero-rating happening that you could make an argument is negatively impacting some types of content, one class of customer.

1469 I’m not saying this is okay, necessarily. But what if -– and we don’t have these scenarios before us, but what if there was some huge overriding social policy objective being achieved?

1470 Perhaps that’s a case where it can be justified, but we’re not seeing that right now. The only case we have to go on is Bell zero-rating affiliated content, essentially, which the Commission said no to and the Federal Court of Appeal agreed with.

1471 And we have Videotron who says they’re not going after social good, they’re going after 18 to 24 year olds, millennials. So that’s not a case. So we don’t think that’s risen to the threshold.

1472 So in terms of grading you’re gradations would be on a relative scale of more harmful to the 4Cs or less harmful. In the case of zero-rating of customer care we saw minimal impacts there.

1473 COMMISSIONER MENZIES: Okay. So it would be an overall public good sense of analysis then, so I mean some have suggested, for instance, that -– something like VRS would be an example of something that could be zero-rated without offending some of the principles you’re talking about. Is that -– would you agree with that?

1474 MR. WHITE: That’s a possible example and it reminds me of the time PIAC and Chimo Community Services asked for zero-rating of wireless calls.

1475 COMMISSIONER MENZIES: Some -– the suggestion has also been made that some -– in terms of zero-rating, that it may be acceptable if the choice of the app that was to be zero-rated was left in the hands of the consumer, as opposed to the service provider.

1476 What’s your view on that?

1477 MR. LAWFORD: That does assist and we were discussing it actually last night.

1478 The thought would be that you would have a certain bucket of data the customer could use free, on what they wish. So they have the choice. I think that’s the scenario you’re positing with the question?

1479 COMMISSIONER MENZIES: Yes, you would ---

1480 MR. LAWFORD: Yes.

1481 COMMISSIONER MENZIES: Part of the subscription offer would be do this and pick the app of your choice for free.

1482 MR. LAWFORD: Sure. It ---

1483 COMMISSIONER MENZIES: Unlimited data.

1484 MR. LAWFORD: It assists. It assists, but I guess the unease that we have with it is so you get to pick one, but there’s so much more that you need to do on the internet and is that not likely to end up in effect or de facto favour very large popular services Facebook, Google, you know?

1485 And if that’s your one choice -– or even if you get two or three, the internet has infinite resources, so in a way you’re -– even with that you’re favouring slightly but it’s much less problematic, because the choice does give some mitigating effect, if you will, to the customer who then can have a bit of choice. But there’s still discrimination going on because someone is going to lose there.

1486 If it’s a pure bucket of 10 Gigabytes that you can use on anything, that’s much less –- even much less problematic. It’s just like having an extra 10 Gigabytes on your cap, really. And it’s not doing something.

1487 But if they’re going to say pick 1 or pick 10 it’s better, but not perfect.

1488 COMMISSIONER MENZIES: Okay. Because I -– I mean you made the point there, it’s really no different than -– well I guess it could be described as no different than just increasing your data cap; right? If it had a cap on it itself, as opposed to being an unlimited service.

1489 What -– I mean you’ve outlined a couple of them, but are there -– are there other specific risks to allowing that sort of practice? Doing a, you know, sort of going half-way on it and saying okay you may do this but you may not do that? Do you see any risks in that approach?

1490 MR. LAWFORD: Well interestingly, you know, this is -– this is sort of veering into what I think is economics territory and really it’s up to the -– it’s up to the companies that are proposing that sort of thing to show you why it’s going to be beneficial under the test.

1491 So 27(2) says “no unjust discrimination”, you’ve still got some discrimination going on there and they’re edging towards less unjust and more just, but they have to make that case, not us. So just remembering that burden, then, with that context, I’d say you can fish around in that area but it may not be a middle position. It might be too much between two seats and you might end up falling through.

1492 COMMISSIONER MENZIES: Do you think there would be any point in us defining product markets in terms of what may and may not be permissible? For instance, saying -- going back to the idea that the consumer might have choice, so we can say, “You may offer a music” -- consumers may choose a music streaming service for unlimited data or they may choose a sports streaming service for unlimited or an extra or up to 50 or 100 or that sort of stuff. Do you see any point in us going down that road, as some might suggest?

1493 MS. CHERRY: If the issue is just simply data, what purpose would there be to say you can do it for one form of content or application or not another? The minute you start going down that road that involves the carrier having some reason why it’s denoting different product markets, and what is that underlying reason?

1494 COMMISSIONER MENZIES: I don’t know. I’ll have to write that question down and ask ---

1495 MS. CHERRY: Yes.

1496 COMMISSIONER MENZIES: --- to somebody else.

1497 MS. CHERRY: But you see, what’s important here, what’s important here is to recognize that when a practice is engaged in, there’s a reason for doing it, and to really get underneath and understand what the purpose is. And this is why the FCC distinguish between something that was done for truly a technical congestion management issue, on the one hand, and something that’s just a different economic practice.

1498 And the economic practices can be problematic or not problematic, which is why they have a case by case standard for evaluating that. But the economic incentives, you have to get underneath to understand why they’re engaged in the practice in the first place. And, also, not withstanding what their intention de jure may be, what’s the de facto impact. So even if it might appear they have a good reason, the impact de facto can also be discriminatory. So you have to take into account both.

1499 COMMISSIONER MENZIES: Okay. So for us to do something like that, in other words, would be assuming that there was goodness involved in this and we should not make that assumption.

1500 MR. LAWFORD: You should certainly test the assumption, yes.

1501 COMMISSIONER MENZIES: Test -- we should test the assumption prior to ---

1502 MS. CHERRY: Yes.

1503 COMMISSIONER MENZIES: --- prior to coming to such a conclusion.

1504 MR. WHITE: If I may, Commissioner Menzies, the problem with looking at the product markets -- at some stage in this path towards letting some zero-rating or discriminatory data pricing in, is either the carriers or the Commission has to start taking on the role of saying, “This is -- this type of content is preferable to another, or, worthy of promotion.” And I understand that you may have to do that with given -- or, section 20 in the Broadcasting Policy objectives.

1505 But, as John was saying, but not otherwise. You know, I’m going to read you a quote from Telus in response to PIAC’s application, to zero-rate calls to help-lines. It’s their position that,

1506 “It is extremely difficult to put in place a principled basis for choosing any such select group for preferential treatment, help-lines or other to the exclusion of other entities, all of which perform equally important social tasks and functions. As previously noted, such treatment could potentially contravene subsection 27(2) of the Telecom Act because of different treatment of customer groups leading to unjust discrimination or undue preference.”

1507 In terms of the Commission doing it, you run into the same problems. We’ve given you a framework which we think could allow minimally impairing types of discriminatory data pricing but on a balance, we don’t think TS carriers and the Commission should be in the game of preferring certain types of content.

1508 COMMISSIONER MENZIES: Okay. What about preferring types of ISPs? It’s been suggested that as differential pricing practices and zero-rating, some argue, offer innovation and benefit and differentiation in the market place that the Commission might consider having a different approach for new entrants and smaller players working their way into the market, as opposed to the incumbents in terms of that. What’s your approach? What are your thoughts on that?

1509 MR. WHITE: The Coalition says “no” to that, respectfully. The Commission has other policy levers and tools. It’s got its wholesale frameworks to promote competition on the wireline side, the wireless side.

1510 We don’t think 27(2) necessary authorizes the preferential treatment of so-called new entrants. And you’ve heard from new entrants or smaller players, Tbaytel is one of them saying, “We just -- we can’t even do this. We cannot. If this is allowed, this would further impact our ability to compete with the large wireless service providers.” And the British Columbia Broadband Association is also arguing against discriminatory treatment of data practices.

1511 Don’t think, even if this is allowed, it’s going to help. And we think, rather than ignoring 27(2) -- the whole -- the other policy levers that the Commission have are more appropriate to use here.

1512 COMMISSIONER MENZIES: So I understand that with the analytical frameworks you’ve offered us and the 4Cs that this would probably manage this but just to make sure I have it for the record, are -- when others have indicated that there’s certain administrative services that would be appropriate to even -- for people to zero-rate or for -- and I know we touched on socially virtuous services that might qualify, but what about administrative services such as apps for account management, data monitoring, bill payment, operating system updates, et cetera, et cetera? That was mentioned yesterday by, I think, at least one person that, you know, if you’re updating your system and you have a very low data cap and because -- it’s particularly -- because of your financial circumstances you’re getting a very low limit plan, that that could be an issue. What are your thoughts are those administrative services and that they might even be mandated?

1513 MR. LAWFORD: Sure. The test which we’ve proposed, if you run those sorts of things through, throw up fewer flags. We’re not going to tell you how the little engine will spit out an answer, but it’s engaging fewer of the problems.

1514 With customer care, those sort of administrative things -- competitors generally speaking are not directly harmed. It’s quite beneficial to the consumer in an absolute sense. The question would be putting a break on when it gets too far.

1515 We noticed that in the most restrictive forms of regulation of differential pricing, so India, it’s just emergencies; right? There’s an emergency, you can give people free access so that they can contact each other. That’s the top end of the scale. Right below it is administrative, in our view.

1516 I think going through our test, you’ll see that it engages competition and edge-providers must less. It benefits consumers much more directly and more universally. So it’s really less of a problem. And, again, we’re not going to run everyone through. But it would be much more likely to be on the approved side.

1517 There would have to be point in which the Commission looked at the principle and the 27(2) unjust test and undo and said there’s a point at which people are starting to abuse those administrative things and are starting to use them as competitive tools and that could happen.

1518 MR. WHITE: So we’ve run that, as mentioned, we’ve run -- the zero-rating of customer care through the analytical framework. It begins at paragraph 183 of our further intervention. And, broadly speaking, the zero-rating of customer care functions -- to the extent that it’s available to all customers; right? So that everyone, regardless of their plan, can access it and that it doesn’t -- like, it doesn’t impact -- there’s no extra cost to it. It doesn’t impact their data -- that doesn’t really engage the idea, this notion, of ISPs as gatekeepers.

1519 They’re not favoring which apps or which content customers should go to through their billing practices. It’s not likely to involve a significant amount of data in the case of account management. It’s consumer friendly. And it’s not something we think that really impacts the overall competition. I don’t think people are going to switch from wireless service provider to another on the basis of the zero-rating of their occasional check-in on their account -- on their device usage.

1520 So that’s an example where given all the caveats, and I think there’s some other caveats in the intervention, that would pass the analytical framework.

1521 COMMISSIONER MENZIES: Do you think there’s risk of gaming by allowing any of these things? Or how would you assess the risk of gaming the system?

1522 In other words, would it be easier just to say no to everything, or once you say -- start saying yes to some things you essentially start a game of endless Whack-A-Mole that goes on forever?

1523 MR. LAWFORD: Sure, you’ve got that risk of endless Whack-A-Mole, which is something again the Indian regulator didn’t want to play, right, and they just said no except for emergencies, and it’s understandable that there’s a temptation to go to that end and just it’s absolute.

1524 But we looked at all of the evidence, came up with our test, which allows you to give a preliminary view on these things or to go on complaint, and sure, people might game but provided that the framework that you decide on as a Commission is public, it’s out there as notice, if you start to game it’s obvious under this test, I believe, that you will start to fall afoul of the rule.

1525 And, you know, any rules can be circumvented by someone with an intention or even without intention that has the effect on customers and creators and outside content, as we’ve said, and, you know, there will be some policing, whether it’s enforcement by the Commission or by groups like ours, or whether it’s by competitors, I just don’t think you can avoid that.

1526 And the absolute prohibition of things like customer care functions those are already deployed right now by several of the carriers on the record. They’ve said they do this. It seems excessive.

1527 So yes, there could be gaming but the framework would be there to catch it.

1528 COMMISSIONER MENZIES: In terms of where it’s differential pricing practices may be approved, and in terms of transparency, would you see Section 24 as being useful to impose conditions of service regarding publication of details regarding differential pricing practices on the websites as well as, you know, any commercial arrangements that are made between companies? Would you see Section 24 as being the way to impose those conditions of service?

1529 MR. LAWFORD: Absolutely.

1530 COMMISSIONER MENZIES: And would you favour those conditions of service for ---

1531 MR. LAWFORD: Absolutely that would be the way to do it through 24, and absolutely we would support that.

1532 And that is one of the somewhat weaknesses of the ITMP framework is it’s not terribly public and that -- if that’s improved -- and although we didn’t put it on our oral remarks we did discuss at some length transparency measures and those are definitely something that we would like to see. And that way consumers’ can monitor something, so can other competitors and new edge providers to see what’s going on and complaints could be based out of that, so absolutely.

1533 COMMISSIONER MENZIES: And what, for the record, would be your view on any service providers providing or signing exclusivity arrangements with an app or an edge provider to offer that service on a differential pricing practice basis, virtuous or unvirtuous?

1534 MR. WHITE: I’m sorry, Commissioner Menzies, what’s the hypothetical?

1535 COMMISSIONER MENZIES: The hypothetical is that somebody signs an exclusivity arrangement with an app provider that would allow them to be the sole source of say it was White ISP Services is as arranged with Menzies App Services and Menzies agrees that he will only provide that app through you, give you the right to offer that as a data free service.

1536 MR. LAWFORD: I think that if you run it through our test it’s any competitive end -- sorry -- excuse me -- it’s unjustly discriminatory towards all other applications and gives an undue preference to that carrier as well. So that kind of thing likely fails the test. I can’t think of a way to ---

1537 COMMISSIONER MENZIES: But in all these matters ---

1538 MR. LAWFORD: --- structure it.

1539 COMMISSIONER MENZIES: Just to be clear on that -- and I appreciate the offer that you’ve given us with that test ---

1540 MR. LAWFORD: Yes.

1541 COMMISSIONER MENZIES: --- is that the conclusion is to -- if anything comes up run it through the test and see what comes out and that will be the answer. So you were just primarily offering us the means to come to a determination rather than prejudging a determination for ---

1542 MR. WHITE: I think the coalition has given you -- like we’ve said, we’ve given you this -- we’ve goal posted -- excuse me -- we’ve goal posted sort of two ends of the spectrum and you’ve got mobile TV out there as well in terms of something that is clearly offside.

1543 You can -- the Commission can in this proceeding make determinations on those based on -- we are advocating for you to say no to Videotron Limited Music. The Coalition or its Coalition members made the case in that proceeding. They’re still pressing their case on that. And they’re recommending, according to this framework, the zero rating of customer care functions. That, with the caveat, is fine, but we’re asking you to recognize the risks of allowing ISP’s to act as gatekeepers.

1544 So there may be some middle ground cases. The case of an ISP acting as the exclusive source of content -- of certain content on the web, that’s -- we don’t have that case right now I don’t think, so then that’s why we didn’t run it through.

1545 COMMISSIONER MENZIES: Okay. Two or three more questions here, just to sort of review. Earlier you referred to a study that demonstrated that the result of zero rating was to increase traffic three-fold I think you said. Is that study on the record of this proceeding?

1546 MR. LAWFORD: Well, I’ve been told that it’s actually not on the record and it’s been discovered since our second submission. So we can undertake to put that on the record if you allow.

1547 COMMISSIONER MENZIES: That would be fine.

1548 MR. LAWFORD: All right.

1549 MS. WHITE: There’s other evidence on the record, I believe, and we could, with your permission, add that to the undertaking.

1550 But Videotron in that proceeding ---

1551 COMMISSIONER MENZIES: If it’s on the record you could just point us to it.

1552 MR. LAWFORD: Just to point to it, right.

1553 COMMISSIONER MENZIES: And when you get through the ---

1554 MR. WHITE: But I believe Videotron cited a Cisco study about the impact of zero rating on -- of music services on traffic and there being a 7.7 increase in traffic there.

1555 I mean, it’s part of -- part of the appeal of zero rating is that it’s all you can eat. It’s a logical conclusion to say that it does -- it will drive users to consume it because there’s no fear, there’s no penalty of the overage.

1556 COMMISSIONER MENZIES: Okay. Thank you.

1557 Professor Cherry, where do you think the FCC will land with respect to T-Mobile’s zero rating plans or AT&T’s sponsored data?

1558 MS. CHERRY: At this juncture, the FCC has not opened any official proceeding to deal with zero rating. This is largely assumed to be the case because of the presidential elections that are pending. And so they -- so far the FCC has only made some informal inquiries in the form of letters by Chairman Wheeler to some of these companies asking for more information from these companies to understand how these zero rating plans are operating, but we haven’t -- we don’t have an active proceeding right now.

1559 The standard for doing so, however, will be under this general conduct standard that’s referred to in the 2015 internet -- open internet order that refers to having no unreasonable interference or disadvantage type standard. So it would have to go through that.

1560 I think it would be unwise to try and speculate how the FCC would act at this point. I don’t want to speak out of turn on that. I think there are some zero rating practices. It depends how they’re designed. I think there will definitely be some that will be found problematic, others not, but the FCC has not done anything official in that regard.

1561 And again, I say it’s most likely because of the presidential election. We don’t know who will be chairman of the Commission. We’re not even sure -- there’s one commissioner that has not yet been reconfirmed by the senate.

1562 COMMISSIONER MENZIES: Okay. How do you think those offerings would fare if they went through the framework that’s been proposed to us?

1563 MS. CHERRY: I think there are certain zero rating plans that are very problematic, in the sense that they are picking and choosing which content you can reach or not reach and it be zero rated.

1564 What that has the effect of is not only affecting what the customer can choose but affects the downstream market, and this is one of the things that the FCC has pointed out, that with the gate -- essentially the gatekeeping function then ISP serves by them being in the position to control what you can reach at what cost or what price is actually distorting the market now for the content providers and the application providers.

1565 So given that, I think the burden would be on the -- on a carrier in a given instance to show why it’s not, which is my understanding what the law is in Canada. The burden of proof is on the carrier.

1566 MR. LAWFORD: And Barbara’s just being a bit coy but, you know, Binge-One I believe if you take a look at Vidéotron’s unlimited music is ---

1567 MS. CHERRY: Yes.

1568 MR. LAWFORD: --- definitely something that is a very similar ---

1569 MS. CHERRY: Yeah.

1570 MR. LAWFORD: --- service, so we’ve said Vidéotron’s offside.

1571 COMMISSIONER MENZIES: Right. She has a standard of prudence that she has to meet that you don’t in that sense.

1572 MS. CHERRY: Well, I’m concerned ---

1573 COMMISSIONER MENZIES: Yes.

1574 MS. CHERRY: I think it would be problematic definitely, definitely problematic. And I have stressed, again, that I think would really help the CRTC here when I examined the ITMP framework, I think it would help if you further differentiate between what is a technical practice versus what’s simply an economic business plan, the latest business plan or way in which a company’s trying to generate revenue. And really get underneath and understand, what is the economic incentive? What is generating this? And that extends to not only the affiliated providers, but even if you’re unaffiliated.

1575 There’s ways in which distortions can happen in these other markets. And that’s what I think is a helpful what the FCC has dealt with. So that’s what I’m trying to share here is separating the two. An -- something that’s truly just an economic practice is not an ITMP. And being clear about that will then I think facilitate your ability then to determine whether or not then as a -- it violates 27(2).

1576 COMMISSIONER MENZIES: Thank you very much. Those are my questions. My colleagues may have some more.

1577 THE CHAIRPERSON: Thank you very much. I was happy to hear that there is a duty of reserve in the executive arm of the U.S. administration during electoral period. I wasn’t sure if that was the case reading recent press clippings.

1578 In any event, I’m having difficulty -- and Vice-Chair Menzies has asked a few questions about this and I just want to dig deeper. And it’s about the practices that may or may not have occurred in the past with respect to voice offerings of common carriers and how relevant they are to the current issues before us.

1579 And I’ll give you the example. We talked about the 1-800s, but let’s say, you know, we know that some wireless providers have had packages in the past that have exempted certain calls to certain people from being subject to any charges, picking friends or family or that sort of things. And yet there hasn’t been a lot of controversy about that in the voice world. Maybe that’s partly because it’s a bit like that frog you put in cold water and you certainly boil it, you didn’t -- you know, until you realize that you didn’t know what you were getting into by doing that from a common carrier perspective. That’s one option. Or the other possibility why it was less controversial is that there’s something fundamentally different here.

1580 And I was wondering if you might help us out with that. Because certainly the economics and the way the Commission and frankly regulators around the world dealt with voice, voice by essence was looked at in terms of rating, for instance. It was always based on time and distance; whereas, internet is about connectivity. It’s either on or off. And maybe that’s the essential difference.

1581 Anyhow, if you look at that particular case could you, you know, either of you and perhaps we should benefit from our expert here, what is the fundamental difference? Is there a difference? And why were we not as concerned about those sorts of offerings in the voice world but suddenly it is more of a concern potentially in the internet, the broadband world?

1582 MR. LAWFORD: Barbara’s been kind enough to let me get two words in before she answers the best part of it.

1583 The internet is a network of networks. And long distance was -- is as well, but there have been so many developments with voice in terms of the structure of the industry which was largely monopolistic and we needed to have -- I mean, let’s face it, there were shifts of -- there was cross-subsidization for various social purposes with long distance, with business services, that sort of thing, over the years. And the Commission backed away from that when it brought into competition and there was a long and painful transition period. And so that is used less now.

1584 And the internet is, to some extent, different in degree than the telephone system because it allows so much more usage of, you know, you can send video, audio, all sorts of things. It’s much more connected worldwide at much less cost because there is no long distance changes to it. It’s different in degree. So I’ll just say that and that complicates the answer somewhat, but there’s some interesting points that I believe Barbara has to make.

1585 MS. CHERRY: Yes, I think it’s important to keep in mind as these technologies evolve what their functionality was. With a voice system, the functionality was one subscriber could then communicate with another subscriber. In each case the subscriber, the called -- the calling person, the called person solely determines the content of what they’re saying. And simply, the telephone company is just facilitating the transmission of the voice between parties.

1586 When we started to add other functionalities like data processing and computers, in fact, the question did arise in the United States, what happens now when some parties might actually be in the business of providing some kind of content that somebody wants to reach? And this is what led to what is referred to in the United States as the computer inquiry proceedings.

1587 So what happened when somebody started being able to dial a number and receive the latest stock quote, sports scores, things like this, before the internet? The FCC engaged in a number of proceedings to say what kind of service is that? They ended up bifurcating what was the transmission component, which was the telephony component, common carriage component, and they bifurcated that from the party actually just providing the information itself. At that point it was called an enhanced service.

1588 When the 1996 Act was passed, it codified that dichotomy or distinction, just renaming enhanced to be information service.

1589 So the whole point is, you still have to recognize that you have the conduit function, but it is separable from the information that’s being reached via that conduit. And that’s a precursor for what we’re finding at the internet.

1590 So what’s different with the internet now is you have a whole lot of parties who are actually in the business of providing content. And in some cases, you are now actually converging broadcasting with others. So now you are going from a system that was originally designed for one specific purpose, purely a conduit to transmit voice where the content is not determined at either end by the carrier, to now these kind of hybrid versions where now the conduit can be used to communicate or connect with other kinds of information.

1591 So as long as you were talking about purely the voice, there was no distinction, if you will, about the content that was being reached. And so that was less problematic.

1592 Also, I noted that some of the reports that have been filed in this proceeding are misleading as well when they talk about, well, you had rural customers paying one or another or long distance charges. We have to recall also that during the voice world when these different kinds of pricing structures or plans were done, they were done on the -- under the auspices of the regulator for which there were other policy considerations were coming to bear.

1593 So, for example, having long distance to help subsidize local rates, having urban areas help keep the price down for rural. There were other policy objectives that were not unilaterally done by the carrier but were actually done as part of the regulatory oversight. In that regard, it’s also worth noting that in that case the companies are operating not only as common carriers, but also as public utilities, which is a separate body of law as well, where common carriers don’t have an affirmative obligation to extend facilities in the manner that a public utility does.

1594 So it’s actually -- you have to be careful when you’re trying to compare to other scenarios.

1595 So a price structure that evolved under the dual status of entities being both common carriers and public utilities subject to regulatory oversight of operations is quite different, particularly in that voice world.

1596 And we have been transitioning to what happens when now this network can be used for other purposes.

1597 THE CHAIRPERSON: When you’re talking about public utilities common carriers, and I guess other activities that are under general competition law, the image that came to my head was a kind of Venn diagram, where sometimes they share but they’re distinct, right?

1598 MS. CHERRY: Yes. I mean, basic idea is this; common carriage is a legal status that flows simply from the functionality of the service you provide.

1599 THE CHAIRPERSON: Right.

1600 MS. CHERRY: You’re a conduit. You hold yourself out to serve the public.

1601 A public utility is a legal status that’s derived from government granting you a franchise. It doesn’t have to be exclusive, but the fact that they give you a franchise, you are the -- you are granted the opportunity to serve in exchange for which you are given certain powers from government such as access to rights of way, imminent domain, so on and so forth.

1602 And it just so happens that some entities throughout history have been one or the other and sometimes both. Telecommunications and railroads, by the way, are examples of entities that have been both, common carriers and public utilities. This is something the history of the United States shares with Canada. Also what’s been shared is that, given we both have forms of federalism structures, that the regulation has been dual jurisdictional combined with provincial/state on one side and federal at the other. So we actually have quite a few similarities.

1603 Then, antitrust law is yet a separate body of law that applies to businesses generally and intermittently activities of some of these companies have also found to be violative of antitrust laws. But these are distinct bodies of law that evolve for different purposes, and we have to keep them straight in terms of what evolved under each, in order to make sure we don’t make improper characterizations or misleading representations.

1604 THE CHAIRPERSON: When I conceptually envision those Venn diagrams, I have three on the page? Is there another circle I should draw? I mean public utilities, common carriers, and the general regime of antitrust, what we would call ---

1605 MS. CHERRY: Those historically have been most important for the telecommunications networks; they’re common carriage vintage.

1606 Now of course, when you get into other kinds of networks, then you have the development of broadcasting law, cable TV. And then when you get into content, then of course you have to worry about Copyright infringement.

1607 So depending upon what kind of system it is, what it holds itself out to do; so for example, a broadcaster is not holding itself out to be a common carrier.

1608 If we’re talking about one-way broadcasting, the broadcaster itself is determining the content of what’s being distributed. It’s a one-way communication in a historical form.

1609 That also has relevance, by the way, for other constitutional provisions. This is why common carriage status is very important in the United States, for example, in addressing any potential First Amendment challenges.

1610 If you are a conduit provider as to that function, you are not a speaker for First Amendment purposes. However, if you are a broadcaster or you have some of what we call editorial discretion, then potentially First Amendment concerns become involved.

1611 So there are lots of different bodies of law and then one has to keep straight when they apply.

1612 I hope this answer is helpful to you but certainly First Amendment -- and that is why classification of common carriage, it was so important for the FCC to restore that classification, which fortunately Canada never went down that road and declassified, as I’m sure you’re aware.

1613 THE CHAIRPERSON: No, it’s actually useful. Obviously, there are some constitutional distinctions and ---

1614 MS. CHERRY: Yes.

1615 THE CHAIRPERSON: And structures in fact that we, in Canada, have more of an exclusive perspective on this in communications being federal.

1616 MS. CHERRY: Yes.

1617 THE CHAIRPERSON: And ---

1618 MS. CHERRY: You have more pre-emption.

1619 THE CHAIRPERSON: Yes.

1620 MS. CHERRY: Yeah.

1621 THE CHAIRPERSON: And of course the other distinction being that our approach to cable and direct-to-home has been more on the broadcasting side and licence, which is not quite the same in the U.S., the approach.

1622 MS. CHERRY: Well, Cable TV has its separate title under the Act.

1623 THE CHAIRPERSON: Yes, whereas we perhaps sort of put it more on the Broadcasting Act.

1624 MS. CHERRY: M’hm.

1625 THE CHAIRPERSON: Well, thank you for that. I think that’s actually helped me to think about the issues in front of us a little bit more.

1626 Just one final area, and I believe these are my last questions and Panel’s last questions for you, so just bear with me for a second here.

1627 And this is the whole notion of trying to figure out what the public interest is, does involve to a certain degree of figuring out what Canadian subscribers/customers/citizens might want. And yesterday, with CNOC, we were talking about, you know, what kind of evidence there was on the record and you talked to the Vice-Chair about this a little bit.

1628 I was wondering if you had a view on the evidence put forward and the survey evidence put forward by Bell on the record of this proceeding and what conclusions, if any, the Commission should draw from that survey that they have done and put on the record?

1629 MR. LAWFORD: Yes, we looked at Bell’s survey because it purported to speak to Canadians and asked the question that’s the question that we’re trying to decide today, but they didn’t ask the right question. They asked the question, “Do you want free services; do you agree with differential pricing?”

1630 Without putting any of the other context around it, we’re saying there’s cost to it. Maybe they didn’t have to go that far but they certainly had to give some kind of indication that it might have a downside, and that was not present in that survey.

1631 So as we said in the remarks, yeah, if you ask consumers, do you want free stuff, they say, yes, thank you very much. I’ll take a free sample.

1632 But they -- you know, if it’s a free sample but it comes with a lot of negative externalities or later costs that they can’t see, that’s an unfair question.

1633 THE CHAIRPERSON: Right.

1634 MR. LAWFORD: So the survey, we thought, was less valuable than it could be.

1635 THE CHAIRPERSON: And in fact, some of the questions refer to the Commission banning certain things. And do you think that was a fair and balanced way of asking the question?

1636 MR. LAWFORD: Well, certainly, in designing questionnaires, you have to make them understandable to a lay audience so to speak, but we thought it was -- we wouldn’t have written it that way. Let’s just put it that way.

1637 MR. WHITE: If I may, Mr. Chair, we cited this. It’s the NOKIA study which documents consumers fearing overages. So if consumers fear overages, of course, they would like certain parts of the internet for free.

1638 THE CHAIRPERSON: Right. Are there -- I guess, you’ve covered part of that question because Vice-Chair Menzies asked you. And if you were to point to the record we have in front of us, what is the better evidence, if any, of what consumers/subscribers/citizens want out of that?

1639 MR. LAWFORD: It was interesting that you ask the Reddit crowd, because the general public comments I think were, as Geoff noted, no one was asking for differential pricing amongst the people who just wrote in. And the Reddit conversation was deeper and it’s, in our view, an audience which has more of the background information. So it was interesting to see the reaction there and it was quite striking, I thought, that the conversation was wholly negative to differential pricing, rather than it being 50/50 or 70/30.

1640 So that was quite compelling, because we believe that the people who engage in that forum have a little more of the debate in mind. Now, it is selection-biased because it’s one platform and people use it, but it is a public platform and you didn’t see a lot of engagement from people supporting differential pricing.

1641 THE CHAIRPERSON: Right, but it could be subject to similar criticism as not asking the right questions to the right people?

1642 MR. LAWFORD: Absolutely and, you know, it’s part of the whole record and again the individuals who wrote in are very important. You also have all the consumer groups and public interest groups here saying the same thing and several carriers, including Rogers, saying it’s bad. And we believe on balance the record more supports caution with differential pricing than charging ahead.

1643 THE CHAIRPERSON: Right. Thank you.

1644 I believe those are our questions, and I thank you for participating in the hearing with a principled and constructive approach. So thank you very much.

1645 MR. LAWFORD: Thank you.

1646 THE CHAIRPERSON: So we will take a 15-minute break and we will be back at 10:45.

1647 Thank you. Merci, à 10h45.

--- Upon recessing at 10:28 a.m.

--- Upon resuming at 10:45 a.m.

1648 THE CHAIRPERSON: Order, please. À l’ordre, s’il vous plait.

1649 Madame la secrétaire.

1650 LA SECRÉTAIRE: Merci, Monsieur le président.

1651 Nous allons maintenant entendre la présentation par Vaxination Informatique. S’il vous plait vous présenter, après quoi vous avez 20 minutes pour faire votre présentation.

1652 Merci.

PRESENTATION

1653 M. MEZEI: Merci.

1654 Mon nom est Jean-François Mezei de Vaxination Informatique. Je présente à titre personnel. Je vous remercie de l’invitation.

1655 La Loi sur les télécommunications contient les clauses 27(2) et 36 qui incarnent parfaitement les attributs qui ont fait de l’internet un engin d’innovation et de croissance économique et sociale.

1656 Un réseau neutre voit deux relations distinctes. Le consommateur avec son fournisseur d’accès internet, et le consommateur avec un fournisseur de contenu.

1657 La facturation différentielle change ceci. Le fournisseur de contenu doit négocier avec un grand nombre de FAI, et en favorisant certain contenus avec un prix et punissant d’autres avec un prix élevé. Les FAI interfèrent dans la sélection par le consommateur du contenu. En d’autres mots, il influence le contenu.

1658 Il va sans dire que les clauses 27(2) et 36 existent pour une bonne raison, et ne doivent pas être diluées pour satisfaire les départements de marketing qui préfèrent rehausser leur image en utilisant les marques populaires telles que Spotify, au lieu de rehausser leur propre offre en augmentant les limites d’utilisation.

1659 Maintenant en anglais.

1660 There’s a fundamental question to be asked. Does an ISP carry bits or provide content? Does it give access to the internet or deliver content from the internet?

1661 The internet is fundamentally a data network. It carries packets from an origin to a destination. It is content agnostic.

1662 The social and economic fabric of Canada have become dependent on the neutral data network called the internet for growth and innovation. Changing the nature of the ISPs jeopardizes this.

1663 I want to discuss now why the internet has won. The X.25 networks in Canada was called “data pack”, were commercially available well before the internet became commercially available. So why did the internet -- who came after from a commercial point of view -- why did the internet win over X.25?

1664 With X.25, incumbents made it expensive and complex for anyone to become a content provider. The peer to peer network of IP networks allows anyone to become a content provider -- and this is important -- without needing to ask for permission from anyone.

1665 The business model of the internet foster increase use, whereas X.25 networks were billed by the kilo-character, which made sending a simple image expensive and thus stunted the growth and innovation.

1666 This core nature of the internet is what fuels innovation, growth and disruption in the digital economy. It’s also what enables competition to emerge from basements or dorm rooms against established players. And I note Facebook displacing Myspace is a famous example.

1667 Now, innovation and differentiation has been spoken a lot in this hearing. Seven (7)g of the Act in the Objectives, encourage innovation in the provision of the telecommunications service. And so an ISP riding on the popularity of a content provider like Spotify, neither innovates nor competes in the telecom market. It competes in the content.

1668 And imagine a scenario where all wireless carriers have identical telecom offerings, same price, same gig limits, and differentiate only on what content they promote via zero-rating deals. Would the Commission consider the telecom market sufficiently competitive or continue forbearance -- sorry, sufficiently competitive to continue forbearance, if they all had identical telecom offerings, but different content that they offered?

1669 The internet is an IP based network with established standards, similar to electricity running at 110 volts and 60 hertz. It is the utility nature which allows so much innovation and competition to happen in the digital economy. ISPs that try to manage content ruin this core utility nature of the internet.

1670 Now, in 2285, Spock will say, “The needs of the many outweigh the needs of the few.” In 2016, JF says, “The needs of the social and economic fabric of Canada outweigh the needs of incumbent’s marketing departments.”

1671 Restricting telecom carriers to their core business nudges them to compete and innovate in the provision of the telecommunication service, instead of using smoke and mirrors outside of telecommunications to give the appearance of competition and innovation.

1672 Now, low data caps has been raised by a number of people, and I have my take on this. Whether as an ITMP or a pricing tactic, low data caps are designed as a barrier that limits usage. On the other hand, sufficiently high data caps foster normal use while controlling abuse. With sufficiently high data caps, the concept of zero rating, certain content becomes moot since there is no barrier of usage to lift.

1673 Bell Canada admitted that Mobile TV usage dropped by # after it was submitted to its own bad tasting UBB medicine. Other services did not change -- as Bell noted -- simply because they were always treated to that bad taste tasting medicine which limits use. So it’s normal they wouldn’t change.

1674 If a carrier has enough spare capacity to zero rate certain content, then it has enough capacity to zero rate all or any stream of the same throughput, same capacity, or more simply raise the UBB limits.

1675 If a carrier has enough capacity to zero rate content of its choice, it means the market forces have failed to increase data caps or move prices down. By stunting usage, low data caps stunt growth in the digital economy.

1676 The Commission’s policies must foster increasing data caps for the whole economy, instead of allowing business practices that allow incumbents to keep low data caps by sugarcoating then with marketing gimmicks.

1677 Now I wish to talk about section 36. I’m not a lawyer, so maybe the small print may not fit, but there's still a general idea of the common carriage.

1678 Low data caps condition customers to not use content. By lifting its own data caps for content it selects, the ISP controls the consumer’s selection of content. Combined with the relationship that exists with content providers to setup and approve the zero-rating schemes, this constitutes, in my opinion, a form of control of content.

1679 Decision 1994-19 way back -- and I have to thank Mr. Klass for this -- granted exceptions to the ISPs for content which is part of an ISP’s core business, such as providing email servers or the ISP’s own website.

1680 In deciding whether to grant an exception to 36 or 27(2), the Commission needs to consider whether it helps the carrier fulfill a task expected of it, or whether it breaks the spirit of a common carrier?

1681 Where should the line be drawn between a limited exception to 36 or 27(2) and a policy which grants such a wide latitude, that it is effectively forbearance? Noting that section 36 cannot be forborne.

1682 The concept of zero rating specific content in low data cap environment requires a relationship with the content provider which should not exist in order to provide an undue preference to it. So it’s a combination of both 36 and 27(2) that is at the issue here.

1683 Everybody agrees 27(2) is an issue, but the combination of the two is what really matters and where I believe section 36 becomes important, because it’s done for the purpose of an undue preference. Therefore, I feel that exception to section 36 should not be granted for zero rating of other people’s content.

1684 Internet versus inWATS. Some people have argued that 800 numbers have set the precedent that should allow sponsored or zero-rated content on the internet. With inWATS service -- I’ve used some old technology because I went to the CRTC archives -- the content provider made a single deal with the telco that serves him to provide inWATS service across North America. You can choose certain region, made you made one deal with your provider, which provided access to everything.

1685 To emulate inWATS on the internet, each content provider would have to strike individual deals with potentially thousands of ISPs, each of which with different technical requirements that go beyond the standards to connect to the internet.

1686 Whether a content provider is in Moose Jaw or Botswana, it’s ludicrous to expect him to hire a lawyer to start signing deals with ISPs he has no business relationship with in order to allow artificial barriers to be lifted so potential customers won’t fear accessing his content.

1687 Now, again, to support a bit my argument on 36, zero rating requires a relationship. Whether an ISP reaches out to a content provider or vice-versa, a relationship must exist between the two to allow zero rating to happen. There are technical level, identify the traffic flows and the IPP addresses and so on and so forth; and the marketing level, the right to use content provider’s logo on the ISP’s advertising. I’ll note that in the Vidéotron file before, Vidéotron never spoke of such agreement, only restricted to that two-page technical agreement. But Spotify logo appears prominently in Vidéotron’s advertising.

1688 The ISP also needs to validate the legality of the content provider as that relationship makes him liable for content, a very significant change in the nature of the carrier. This breaks the precedent set by the ISP case.

1689 So despite claiming to be -- also, despite to be claiming open to any or all content providers, as in the case of Vidéotron, an ISP can still choose providers by modulating the fine print and technical requirements, which Vidéotron has also done.

1690 Now, CNOC has advocated a zero rating on the content type or categories or genres. While this appears to be more neutral, it ignores the technical setup which may still require the content provider to contact the ISP to find out the technical requirements so its data will be flagged and treated as zero rating. CNOC mentioned verification of legality of content which may jeopardize the safe harbour protections once they have such a relationship with content provider. So even if you don’t have a legal contract, if CNOC feels that zero rating certain type of content, they must ensure that it’s legal, it assumes that they start to bear certain responsibility.

1691 Also, identifying content type is more of an art than a science. This art may be good enough to help adjust or plan a network capacity but it shouldn’t be used for billing, which requires more exact data.

1692 Identifying a genre, such as a sports video instead of a cat video, is not feasible short of CPU intensive AI, artificial intelligence, to interpret the content which represents strong privacy issues. And as was noted, content identification fails with VPN, encrypted links, it hinders innovation. And Barbara van Schewick, I believe is her name, will speak of that I guess on Friday because her presentation was good.

1693 And it remains unfair to users of the same amount of bandwidth but who do not download blessed content types. So, for instance, a person with a disability will not be able to get streaming text from a video but would be able to stream audio for free. If they both use the same bandwidth, they should both be priced the same because the bandwidth is a service and that’s their cost.

1694 Competition Bureau, on the other hand, treats with the VI aspect of affiliation. If the Competition Bureau and others focus on preventing undue preference by vertically integrated incumbents, such a policy would result in a free-for-all for every ISPs except VI companies.

1695 Consider a scenario where Bell Canada woke up and put Game of Thrones on CraveTV. Everyone would want it. And all ISPs would want to zero rate CraveTV, except Bell Canada couldn’t because it owns it. It would be then in an unfair disadvantage because everyone is allowed to unfair -- to zero rate that content but Bell isn’t.

1696 When a policy needs many rules to deal with exceptions, it’s because the policy is wrong. Upholding 27(2) and 36 makes things simple, clear and with very few exceptions, giving level playing fields to all ISPs and all content providers, I should add.

1697 Since content deals grant undue preference, whether content is owned by carrier or not, it does not make sense to allow DPP for some or not of the VI companies.

1698 A permissive regulatory approach may give incumbents free range, with consumers having no means to challenge their zero ratings, which fit the loose policy because the policy is loose.

1699 Incumbents salivate at the thought of a permissive regulatory approach. It isn’t just zero rating of music service, which is pure marketing, but also potential for fees such as a $15 add-on for unmetered Netflix, a $10 add-on for unmetered YouTube, and so on and so forth. This raises ARPU, which is what the incumbents want.

1700 Why are we here today? It’s despite the very clear message sent with the MobileTV decision. ISPs, such as Vidéotron, still tried zero rating schemes. As I mentioned in one submission, it’s like racoons trying every trick to get into a racoon-proof garbage bin. A permissive approach will just continue this process until consumers have no energy left to fight it.

1701 Banning content-based zero rating is simply enforcing the Telecom Act. It does not introduce new restriction and should thus be seen as the light regulatory approach since it imposes no restrictions on the actual telecom activity and no policy with enough holes in it to allow the racoons to get in.

1702 Now, I’ve spoken a lot about the problems and now I bring my solution. I have a clear and unambiguous policy. No content-based differential pricing. Period.

1703 And I have a text -- I think it doesn’t fit in a Tweet though, so excuse me for that. For a service connecting a customer to the Internet, neither cost nor carriage of a telecommunication must be influenced by the origin, destination or nature of content.

1704 I’ve done some subtle wording changes since my September 21 submission to allow different pricing between different customers and specialized services. The origin and destination are needed to protect both upload and download because a lot of -- the move in the internet is going into upload, the different clouds and so on, so forth, so zero-rating policies should apply to both sides.

1705 I do have some exceptions: protecting network against cyber attacks, spam, and crimes such as child pornography. As I mentioned in my first intervention, a Voice-Over LTE usage for voice-only calls with a sunset clause during a transition; access to account management, example, enable extra roaming charges if the roaming has been disabled due to going over $50; and honour the quality of service flag set by the end user’s device for Voice-Over IP telephony to reach the SIP server which least -- with the least chance of packet drops.

1706 This does not solve the problem of an ISP purposefully under provisioning a transit link through which certain traffic is directed. This causes customers to purposefully have a bad Netflix experience, for instance. Such issues would have to be dealt with with 27(2) complaints because they’re quite separate.

1707 What my policy does not prevent. It does not prevent differential pricing based on time of day. It does not prevent differential pricing based on average throughput. So instead of saying we will zero rate certain radio services, you can say we’ll zero rate everything below 128 kilobytes per second, whether text, audio or video or whatever is invented in the future.

1708 It can zero rate all use during a period if below a certain usage level. So if you spend your prime time reading only text, it could be zero rated. But if you spend your prime time watching only Netflix, then that could charge you. This -- there’s a great level of flexibility that’s still allowed in terms of innovation and differentiation.

1709 Differential pricing of data based on subscription package. Customer A pays less per gig than Customer B if he has bought his package two weeks in advance and promises to stay at home on a Saturday night using the Telus Airline analogy.

1710 Reduced speeds for all data after a certain amount of data has been consumed, which we have seen in Canada on a couple of new entrants and in the U.S., AT&T and T-Mobile as well does this. T-Mobile I think it’s 25 gigs that you can consume unlimited. After that your speed is limited.

1711 There’s many other differentiation innovation that respects the nature of internet as a packet delivery utility that is content agnostic.

1712 By preventing carriers from meddling in content, it focuses the area on -- the areas where they can innovate and differentiate to compete where they should, namely, the provision of telecommunications.

1713 Je vais conclure en français.

1714 Il y a deux grands besoins. Avoir des services de télécommunication qui suivent ou devancent les besoins des canadiens au lieu de tirer la patte avec des limites d’utilisation trop basses, donc la demande qui est plus grande que l’offre; préserver la séparation entre le contenu et son transport, une qualité qui demeure essentielle au développement et à l’innovation de l’ère numérique.

1715 Les pratiques de différentiation de prix sur le contenu vont à l’encontre des ces buts et ne doivent pas être permises.

1716 Merci.

1717 LE PRÉSIDENT: Merci beaucoup, Monsieur Mezei.

1718 Le conseiller régional du Québec, Monsieur Dupras, va commencer nos questions.

1719 CONSEILLER DUPRAS: Bonjour, Mr. Mezei.

1720 Alors merci de votre présentation, c'est très intéressant. Avec votre -- la présentation de ce matin, la première question qui me vient à l’esprit -- si ça vous dérange pas, je vais continuer en anglais.

1721 You say -- you ask the question does an ISP give access to the internet or deliver content from the internet. How is it different then giving access to the internet what DPP does? Is it that by imposing technical requirements there is some sort of retransmission of internet content or repackaging? I mean, what happens when an access to such content on the internet is provided through DPP?

1722 MR. MEZEI: The reason I stated that because this is a core fundamental question as to what the nature of the service is, and it’s also a core differentiation between telecom and broadcasting, between a telecom carrier and a BDU.

1723 And I think this is where there needs to be a clear understanding that the role of an ISP is to take your packets and route it to an interface that connects to a transit provider on the internet, and that packets travels from transit provider to transit provider until it reaches a destination.

1724 And so the role of the ISP in the same ways of a telephone call, you would never see telephone calls saying “Look, if you -- if you’re going to call about recipes we’re not going to charge you long distance but if you’re going to talk about politics we’re going to charge you.” And what the zero rating basically ends up being is that, where they say if you’re going to access certain content we’re going to charge you a different rate then if you’re going to access other content.

1725 And fundamentally telecom operators have no business -- when their role is to carry packets from A to B, they have no business knowing what’s in the packet, and in most cases they don’t need to know who the destination is, because they feed it to their transit provider and, you know, they’ll know if it’s one of their ISP addresses as a destination they’ll know it and they route it to that IP, but if it’s not they just feed it to the transit provider and let the rest of the internet do this.

1726 Contrary to, for instance, Datapac, where Bell Canada had all of the connections, the internet -- an ISP plays a small tail-wagging-the-dog role and the internet is a much bigger thing. It’s a monster. You can’t control it. And the ISP is trying to select content from the internet by zero rating, and that implies a relationship which does not exist. The ISP does not have a relationship with content providers. It has a relationship -- a business relationship with transit providers.

1727 And so in that sense, zero rating expands the role of a telecom operator beyond what a telecom operator should be, and I think that’s the crux of the situation here. They’re closer to being a BDU when they start to deal with content.

1728 And I personally feel that you guys need to put your foot down on this, because we’ve seen with mobile TV the meddling of broadcasting and telecom, and I think there needs to be a very clear differentiation. If you allow ISP’s to start to deliver content, that’s a dangerous precedent that you set.

1729 COMMISSIONER DUPRAS: So I guess -- I mean, this would be the same concerns for the wireline market.

1730 You say it’s a result of a market failure. Can you tell us more about this market failure?

1731 MR. MEZEI: I know you don’t -- I know you’ve decided that wireless -- let’s be clear here. From all the evidence that was submitted, the vast majority of zero rating schemes are on wireless and this is where the data caps are the lowest.

1732 And I know that you’ve decided in 2013 or 2012 that wireless was sufficiently competitive to not regulate the rates, and I am not challenging that decision. However, you have to realize that from the Canadian’s point of view wireless prices are very high and there’s a lot of complaints about them, and I would tend to think that if you have to gauge where in the market forces area we’re probably much closer to market failure than to market success in that sort of range where you don’t regulate.

1733 And in that case, it’s my feeling that you need to make policies that will nudge the carriers into competing on price and caps where they refuse to compete. And this is where I feel the fact that they start to offer these gimmicks -- marketing gimmicks, such as zero rating, Spotify and stuff, instead of raising the gig limits.

1734 You know, a lot of things can be simply simplified if they just raised the limits. You mention VRS was pointed. Instead of targeting VRS for a person with a handicap, just give him a deal. You have a handicap we give you an extra 10 gigs per month, use it as you want. Much simpler from the regulatory point of view; it does not break any rules and it’s much better for the consumer because he gets to choose whatever he does with that 10 gigs without having to contact his ISP, without having to contact content providers, and without you having to bless that content. And I think this is where this is not happening. The raising of the gig limits is not happening.

1735 You know, the incumbents argue that the price per gig is going down, and that’s probably true, but the price to consumers is not, and if, for instance, the gig limits increase by one percent -- I’m just pulling a number out of the air -- by one percent per year while demand increases by 10 percent, there is a negative gap that’s not being fulfilled which allows -- as long as there is more demand then offer the incumbents can keep their prices high, consumers have no choice. Once there is more offer the prices will go down.

1736 Now, we know in terms of wireless, in terms of the wireline we have a sufficiently large number of ISP’s in Quebec and Ontario where market forces have worked. In fact, when -- in 2013 with the final revision of the original CBB rates before they were issued the incumbents started to offer unlimited packages because they knew the ISP’s would and they feared that they would lose customers. That’s a perfect example of stuff that works.

1737 In the wireless it doesn’t happen. The big companies did not react to WIND and Mobilicity and Public Mobile. They bought them. They let them fail and they bought them. It did not actually work to really raise the offerings.

1738 So my feeling is that the zero rating is just something to allow them to either not raise the caps, or delay raising the cap, or slow the raising of the caps. And that’s where, in my mind, it may not -- market failure may be strong a word but it moves them towards that or indicative of lack of health.

1739 COMMISSIONER DUPRAS: Could it be that there are capacity concerns that increasing data caps across the board would be too much for networks as they are today and that controlling which increase capacity can work with DPP’s is a way to start increasing instead?

1740 MR. MEZEI: That’s a very good point, and generally speaking my answer is yes. However, in my proposal -- as a matter of fact, even as far back as the original Videotron submission, I proposed that if there is spare capacity for low bandwidth then they should zero rate anything that’s low bandwidth, as oppose to zero rate specific content providers.

1741 As I said you zero rate anything below 128 kilobits per second and that takes care -- from the capacity point of view, something that takes 128 kilobits per second to deliver animation, animated cartoons, versus 128 kilobits per second to deliver music, to the ISP is exactly the same load and cost on his network, both streaming at that same speed so there is no reason to differentiate those prices.

1742 Now yes there is true there are limits and I am not calling for you to impose unlimited on everyone. This, you know, can happen if you nudge them. Over time it will happen and if you nudge them towards that it will happen.

1743 If you look at the north, for instance, yesterday the argument was brought up of allowing northerners to download zero-rated their Windows upgrades at 95 Gigs or whatever it is.

1744 It’s a laudable, nice act. The problem is the ISP has to pay for that 95 Gigs, because the satellite provider is not going to give zero-rating for that.

1745 And the same thing for any ISP; especially the ISPs that are on wholesale and use regulated rates until -– or especially the current rates until next week. They have to pay. So if they zero-rate something the ISPs still have to pay for it.

1746 When the costs are extremely low, which is something the incumbents can afford because they own the infrastructure and they have their own real prices, they can afford to do that, but when you actually have to pay real high prices for your bandwidth if you zero rate anything you still pay for it.

1747 So it could even be called “dumping” in a way, if you zero rate something that you still have to pay for; you know?

1748 And -– or it comes out where your prices are higher, because you have to subsidize. You have to end up paying for that usage anyways, in which case zero-rating causes prices to rise and we’ve seen with the Videotron case it’s only available in the highest tiers. So it’s not exactly consumer friendly, even though the advertising is.

1749 COMMISSIONER DUPRAS: Yes, but if, I mean, the cost is too high the market can always reject the offer. I mean they’ll have to tailor offers that people subscribe to for it to be interesting.

1750 And do you think that with the increased demand on wireless for more data, that the ISP -– I mean they won’t increase the data caps ever if we introduce DPP? I mean and that will suffice to satisfy the demand?

1751 MR. MEZEI: There are limits to wireless, because they have a fixed amount of spectrum, so that has to be respected.

1752 The problem happens, you know, if they charge $75 for 4 Gigs today and zero rate nothing, their argument that they are at capacity, they lack spectrum, is sort of valid.

1753 But once they start to zero rate, like Bell, for instance, when they zero rated video for its own service, it means that they had the spare capacity in it. In their network they have the spare capacity to deliver that.

1754 And so that is the main problem with DPPs, if you have the capacity to zero rate and can afford to do it, which is the difference let’s say between Bell video and an ISP in the arctic delivering a Windows update. But if the ISP has the spare capacity it can offer it for free, that spare capacity would remain otherwise unused without the DPP.

1755 And my contention is from a telecomm perspective, if you have spare capacity and you want to promote usage of your -– then you lift the very thing that hinders usage, because data caps the only reason they exist is to limit usage, to control usage.

1756 So if you have capacity problems you have lower data caps to limit the usage, to fit within that data cap, to fit within available capacity.

1757 And there are networks in Canada that are very limited in data caps and that’s understandable, but if you have spare capacity that’s unused then you raise your UBB limits. You reduce the limiting factor, because UBB limits basically the lower they are, the more fear you have of using the internet.

1758 So you raise the caps and people have less fear. They still have fear, but they have less fear.

1759 And you get to a certain point where you can use the internet normally and not fear it while there’s still some limits to protect against abuse.

1760 And from -– although in wireless we’re far from this, in wireline ISPs who offer unlimited or even 300 Gigs packages, will often find that the average use is well below that.

1761 So just because you offer a high UBB limit does not mean that everyone will use that limit. So your average use may actually be lower.

1762 So when an ISP says if you force us to do unlimited we’ll have to raise our prices but 500 percent that’s a bit stretching it because in essence, depending on your current offering, it may not actually even increase the price at all, because if the average use is 60 Gigs and you move from 300 Gigs package to unlimited package people aren’t going to change that much.

1763 If you have a 1 Gig offering and you move to unlimited there’s a huge pent up demand that’s not being served and that will obviously make a big change.

1764 So for wireless increasing the caps is more of a one to one relationship with the need to increase capacity, whereas in wireline that relationship is much looser. It exists, but much looser.

1765 For wireless, yes, so you know asking to raise data caps on wireless to 300 Gigs even I would say it’s a little much to ask. It’d be nice. We could ask for free internet for everyone with no data caps as well, but not realistic.

1766 So but the point is the minute that wireless carriers started to do or want to do DPP for content that they choose it means they have capacity that is available for increased use.

1767 And if you have capacity available for increased use what the telecomm market forces from the Telecomm Act should do is get the data caps to go up.

1768 Because that is actually what modulates how much people use if you want people to use more raise the caps.

1769 COMMISSIONER DUPRAS: And how would we do so, raise the caps? By retail regulating?

1770 MR. MEZEI: I’m not advocating retail regulation and I think wholesale regulation keeps enough people busy with all the tariffs and the debates that going into retail would be a nightmare.

1771 What I’m -– the message I’m trying to convey here is if you -– it’s that zero-rating of content is something which slows the -– or removes the motivation for ISPs to raise the data caps.

1772 Because they can market their service as being usable if you listen to Spotify, but they don’t market their service well, you know, I have a 300 Megs package on my phone, which Fido has since reduced to 100 Megs, I believe.

1773 Obviously I know I need Wi-Fi to use my phone or spend a lot of money and that limits and that’s my choice and I can spend more to do this.

1774 But they need to -– they need to match the UBB settings that they have on their offerings, the data cap settings, with whatever capacity that is available on their network and when that is not happening it’s because there’s a problem.

1775 And when they brag about oh you can use your phone to watch videos and stuff, what they’re really saying is something like the cigarette companies used to do with teenagers, get them hooked.

1776 So when your -– while your parents are paying for your phone get the kids to start to being addicted to watching videos on your phone, so once they become adults they can’t stop and they will end up paying the bill. Meanwhile you’ve got the parents pulling their hair trying to pay those bills.

1777 There’s a lot of marketing strategies involved with the zero-rating aspect of it in all those plans.

1778 The problem is that marketing goes against the spirit of the Telecomm Act, the spirit of common carriage.

1779 And it also -– because the economy right now depends so heavily on both users and content providers having access to everyone on the internet, when you start to limit this on a relationship by relationship basis you unravel the beauty of what the internet has allowed.

1780 And you know, so philosophically, you have the market forces argument that they should raise the caps. Philosophically, you should put your foot down saying the advantage of the internet is worth preserving. The marketing tactics of the incumbents is not worth preserving.

1781 And once you tell them that you can't do DPP for content, then you will see maybe them innovate and offer off-peak pricing for wireless data, as wireline, a lot of the wireline ISPs have done since the CBB days.

1782 So it's a nudge that I'm not asking for regulation. It's a way for you in this debate to steer the market in the right direction without overregulating it.

1783 And I'd like to say my solution, you know, the PIAC solution with all their different categories to test to see whether something should be or not, then you start to get into a lot of exceptions and a lot of processes and part ones. It's a never-ending story.

1784 So in effect, keeping the current regulation 27(2) and between brackets 36 as they are today is the simplest regulatory measure you can do to keep market forces focussed on a telecom product as opposed to diverging onto something that telecom operators have no business doing.

1785 COMMISSIONER DUPRAS: Do you see a separate regulatory framework for wireless than -- and not necessarily the same for the wireline?

1786 MR. MEZEI: No, and I'm very happy. In 2009 when you came out with the ITMP proceeding, which was my first ever hearing by the way, it only applied to wireline and I believe it's in 2010 that you expanded this to wireline which was a very wise decision.

1787 And the reason I say this and it's -- for wireless, it's very important. Once phones started to give you access to the internet, first generations of phones gave you data but you connected to a modem at the other end. So the phone did not connect you to the internet.

1788 Once it connected to the internet, it gives you an IP address and lets you access content to the internet. Then the wireless provider acts as an ISP. Whether it's wireline or wireless, the rules should be the same.

1789 Now, obviously the capacity in wireless is much less. So the gig limits will be less but the policy itself need not be different and should not be different.

1790 COMMISSIONER DUPRAS: Okay. If users could choose the application of their choice to zero rate, would that alleviate any concerns you have toward DPPs?

1791 MR. MEZEI: From my sort of not quite tweetable policy, two-line policy, it would be agreeable. It would work within that because the ISP is not involved in the choice of content.

1792 You could do this as a policy but I don’t know how many ISPs would bother spending their money to develop the systems to do that because it becomes -- starts to become extremely complicated to do this on a user by user basis.

1793 I think Vidéotron explained it in the original file, explained a bit the process. Basically, the routers that push the data through to the users, they take a note of every connection that's being made and they report back to the billing system. You know, such IP address spent so many minutes transferring so many bites of data. And then the billing system goes through in a batch mode at the end of the month to apply whatever policies, marketing policies the ISP has done.

1794 And those billing systems would become very, very complex if you start to enable this. And this would work only when you can identify basically the IP addresses. If you start to look for content and application of your choice which the ISP hasn't programmed, it's a lot of work to program recognition of specific application and content types and stuff.

1795 Yesterday, you know, Sandvine came in. I just took a look of the official standard video content types available. They're 78 of them, according to IANA, and those are the official ones for an HTTP transaction. If you don’t do HTTP, if you do another type of application level protocol, it's all bets are off.

1796 If you look at peer to peer exchanges with BitTorrent for instance, they had their own protocol which, you know, at one point migrated to UDP and which made it extremely difficult because you're communicating with many, many different people at the same time. It gets so technically complex to implement that aspect that it might not happen.

1797 It's not like a phone call where you have a simple billing record from telephone number to telephone number and the "to" is part of your five and your profile and it's easy to zap those calls.

1798 On the internet, the connections are not as easily billable. It may be many records that the router sends for one connection. There may be multiple connections for the same application.

1799 In the case of music for instance with Spotify, you have the actual connection for the music but you also have the connection for the user interface with, you know, the pictures of the cover art and all the web interface. You have multiple. And in the case of Vidéotron, that one is not zero rated. It's only the music that's zero rated.

1800 And so it becomes if you start to say I'm going to zero rate your application, you choose Spotify, I'm going to zero rate it, it becomes extremely hard for the ISP to actually zero rate all of the application. And then it becomes legally -- if I choose an application that's one connection, that's actually all zero rated. But another one that uses 10 connections and only one gets zero rated, how is the ISP's fine print at the bottom of the page going to work?

1801 The zero rating of a customer selection application is something that is -- it's nice but implementable, no, not realistic. And it shouldn't because it still requires the ISP identify the content and that's really none of his business.

1802 COMMISSIONER DUPRAS: Okay. In your framework, if there were -- well, if we have a framework that allows them, how should they be available? I mean should they be available to all subscribers equally as independent add-ons or could ISPs sell them as they please possibly only with premium plans?

1803 MR. MEZEI: You mean in terms of zero rating things? In the case of Vidéotron, it's only the higher tiers. Look, if you're going to go that route and allow it, which I strongly disagree with but if you're going to go that route, I don’t see why you should limit that. If an ISP offers, for instance my example, $15 for unmetered Netflix, if you're going to allow this, might as well allow all innovation and differentiation in that aspect.

1804 Now, my prediction it will unravel when you get to see a lot of people that are unhappy but if this is the route you take, there's no reason for you to start saying, well, if it's available, it should be available for all.

1805 Now, if you're going to go -- and for instance, the PIAC example of health centre calls, if you're going to go and say certain types of content should be zero rated for public good and so on and so forth, then yes, it should be available to all subscribers, irrespective of their package and with no add-on because this is a policy that you make from the CRTC to this.

1806 But if it's something that’s initiated by the ISP, I don’t see a need for you to -- you're essentially giving them free range and essentially forbearing 27(2). And if you're going to do that, might as well let them loose. If you want to let market forces go that way, go that way.

1807 My hope -- if you do this, my hope is that once capacity has increased so much, eventually ISPs will all go unlimited and these plans would all go the way of the dodo. That is my hope. And that is a shortest possible term before the internet returns to the success that it's been.

1808 During that time, you will be stunting growth in the economy because people will go after the content providers chosen by ISPs. And so you want to make that time as short as possible or just zap it to zero, which is what I'm praying for.

1809 COMMISSIONER DUPRAS: I mean this is the extent of my questions this morning. Thank you very much.

1810 MR. MEZEI: Okay.

1811 THE CHAIRPERSON: Thank you.

1812 Commissioner Vennard?

1813 COMMISSIONER VENNARD: Good morning. I'd like to talk a little bit about something that I found really quite interesting and that is the idea that the role of the ISP is changing and I’d like to just kind of explore that idea with you for a couple of moments.

1814 You said that the consumer has basically two relationships; one with the ISP and one with the content. Yesterday, one of the people -- one of the groups that showed up here talked about aggregators. I’m wondering if you’re thinking about what the role of the ISP should be and from what I heard you say this morning, it seems like, in your view, the ISP should remain focused on what they’re supposed to be doing and have the innovation occur in the delivery.

1815 MR. MEZEI: Yes.

1816 COMMISSIONER VENNARD: What about an aggregator; would you see things differently?

1817 In other words, what I’m picking up is that this sort of issue that you have is between -- a direct relationship between the consumer and the content, and that the ISP should not be in there.

1818 What if there were an aggregator in there? Perhaps this is a new commercial space that will develop at some point.

1819 MR. MEZEI: Well, there’s one example in Canada, the Rogers’ deal with Spotify, which the data is provided according to the Telecom Act with no differentiation.

1820 COMMISSIONER VENNARD: M’hm.

1821 MR. MEZEI: But my subscription -- as a matter of fact, my package has that, although I’m trying to delete it for various reasons. But as part of the monthly bill that I pay to Rogers, a portion of it goes to Spotify. So Rogers acts as a reseller essentially of Spotify.

1822 COMMISSIONER VENNARD: M’hm.

1823 MR. MEZEI: And marketer and then it goes a little deeper.

1824 And I have some concerns about that sort of arrangement because there is still that selection of content aspect but from a Telecom Act point of view, I can’t challenge that.

1825 COMMISSIONER VENNARD: But what if a consumer actually wanted that? What if somebody said -- and you also mentioned that there could be a shift there, where the competition is between finding the ISP that will deliver what the consumer wants. So the consumer or the customer may want that.

1826 MR. MEZEI: Yes, but then I would argue that you fail in your role to foster market forces in telecommunications. Because if you allow the ISPs to be identical, except in what content they offer in their bundles, then they no longer compete in telecommunications and they no longer innovate in telecommunications.

1827 And I think it’s really important to underline and repeat the fact that like it or not, and the big companies don’t like this, but the truth is they are utilities, and they are an essential utility just like electricity is and water is to the economy.

1828 And they’re essential in allowing businesses to emerge and to grow and allowing consumers to connect to these businesses and to grow as well as all social interactions and “the socioeconomic fabric of Canada”, to quote the Telecom Act.

1829 And when you change that role of -- the essential role of a carrier to start to meddle in content, maybe we ---

1830 COMMISSIONER VENNARD: But that’s precisely what I’m saying now.

1831 MR. MEZEI: Yes.

1832 COMMISSIONER VENNARD: If you were to put another layer in there, they’re not -- what they’re doing is selecting possibly because the consumer would want them to or perhaps the ISP would -- in other words, almost an agent-type of a role there.

1833 MR. MEZEI: Yeah.

1834 COMMISSIONER VENNARD: Something in between that, would you clearly have an issue with between that direct relationship?

1835 MR. MEZEI: Say, for instance, in the Rogers and Spotify case, I’d like to simplify ---

1836 COMMISSIONER VENNARD: Sure.

1837 MR. MEZEI: --- the number of players. Say, Rogers instead of bundling Spotify with a package with actually two or three packages that they have that the others don’t, say they offered -- say, Spotify at the retail charge 5 bucks a months and Rogers says, “Look, we’re giving you a deal, we’ll sell it to you for 3 bucks a month, and it’s an optional add-on to your package.”

1838 That would be something that’s interesting. Is this desirable at the telecom level? Probably not but from regulatory level it’s probably -- actually, one could even argue that such bundling, which is outside of telecom may be more of a Competition Bureau than your area of jurisdiction.

1839 And that might have to be an interesting debate. The minute they zero-rate, that involves -- telecom kicks in and it’s definitely you. But if it’s not telecom-related and it’s just a bundle outside of it, you may not even have jurisdiction. You know, it might be interesting to see Bell or Rogers do something and you challenging and going up to the courts to see up to what extent bundling content like Spotify, as an add-on, would be or would not be part of a telecom company’s allowable range.

1840 COMMISSIONER VENNARD: What is your view on the possible scenario that I just described where there’s an aggregator of some kind that a consumer or a customer could actually retain, in the same way as we do for many things?

1841 MR. MEZEI: Okay. If you’re speaking -- I’ll use the next presenter is Facebook. So I will use that as an example, and they’ll have a chance to correct if I’m totally wrong into how I see them.

1842 In many ways, they have become an aggregator because a lot of people now publish media through Facebook. And so someone can choose Facebook instead of Twitter or someone else and get their content from this. So they aggregate a lot of stuff, and you could add a business model with subscription to this to get to your -- aggregate -- your supposed…

1843 The end result though is Facebook is a content provider, not a telecom. And so you, as a consumer, still have your relationship with your ISP, who doesn’t know that you’re a Facebook person and then you have your relationship with Facebook. And you connect with Facebook and get all your different content deals through them, at which point it’s none of your concern, because it functions perfectly within the common carrier principles of the Act.

1844 This is an economic concern and if Facebook has anticompetitive behaviours, it’s not telecom. This is a Competition Bureau area or FTCA in the U.S. or whatever.

1845 When is the telecom company doing this, doing the aggregation and offering different bundles of content? It becomes a little more touchy but inherently the type of stuff that Rogers is doing with Spotify, I’m not inherently opposed to it. Even though I don’t like it, I’m not opposed to it.

1846 From the point of view of the work that we -- they’ve done on this, because it doesn’t affect the telecom -- the delivery of the packets.

1847 COMMISSIONER VENNARD: So in your view, there should be a clear line and that’s that?

1848 MR. MEZEI: Yeah.

1849 COMMISSIONER VENNARD: And other things, evolving roles and different roles and so on deal with that differently and keep that clear line?

1850 MR. MEZEI: Yes. One of the arguments raised by the incumbents was that limiting zero-rating would stunt innovation, stunt differentiation, stunt competition, you know, all the arguments. And this is why, you know, I am focused on the delivery of the packets. And stuff that is outside of this, I do not feel you need to regulate.

1851 If you put a clear policy to that neutral delivery of packets, the rest can be forborne essentially from Competition Bureau -- let the market forces go. Because then you have a neutral carrier and your job is done of enabling the economy to function and develop without the telecom operators interfering with it.

1852 And so in your case of the question of the aggregator, in fact I would say that implementing my suggested policy of a strict no zero-rating for content allows you to be much freer elsewhere -- everywhere else, because you have that core principle that protects everything else. And it’s much freer and you don’t need to regulate everything else and start to worry about different scenarios and have complex rules and regulations for this and that.

1853 So a simple rule very often that does -- it may, you know, the incumbents will grumble but at the end of the day, it’s not going to cost them any money; they’re not going to lose any revenue if you forbid zero rating; and you know, they might advertise higher caps and stuff; and they may start to bundle content like Rogers does with Spotify and stuff. At which point, if this becomes a problem, maybe, you know, PIAC and others will come in and say, well, we have a problem with this.

1854 But from a telecom point of view, and we are here with the CRTC discussing the Telecom Act or the broadcasting Act, because this is what your relevance is, I can’t fault the type of arrangement that Rogers has with Spotify, because the actual delivery is net neutral.

1855 COMMISSIONER VENNARD: Okay.

1856 MR. MEZEI: So they can aggregate all they want outside and they have all that freedom to do that, as long as the core, the telecom part remains net neutral.

1857 COMMISSIONER VENNARD: Okay.

1858 MR. MEZEI: That’s sort of my basic core principle.

1859 COMMISSIONER VENNARD: Okay. Thank you. I appreciate the clarity of your response.

1860 THE CHAIRPERSON: Thank you very much. Those are our questions. And thank you very much for participating in the hearing. I think we’ll hear from our one last intervenor before the lunch break.

1861 Madame la secrétaire.

1862 MS. ROY: Thank you. I would now invite Facebook to come forward.

1863 THE CHAIRPERSON: So welcome, Mr. Levin. And when you’re ready, please go ahead. But just clear for the record, you -- your answer -- your testimony and your answers here will be binding on Facebook; will they not?

1864 MR. LEVIN: I am an outside advisor.

1865 THE CHAIRPERSON: Please put on your mic.

1866 MR. LEVIN: Thank you. I am an outside advisor to Facebook. So if you’re asking me a question that relates to Facebook, I’ll give you an answer that binds Facebook to the best of my ability. If the question really goes to my experience with the United States National Broadband Plan with the FCC or with other work I’ve done with countries and cities and states on broadband access issues, it’s really my opinion and not binding on Facebook.

1867 THE CHAIRPERSON: I see. Okay. But with respect to the issues before us and when you speak, just make sure that -- we will assume you’re speaking on behalf of Facebook ---

1868 MR. LEVIN: Okay.

1869 THE CHAIRPERSON: --- when you answer questions.

1870 MR. LEVIN: And I will try to clarify when I’m really just speaking on my own views.

1871 THE CHAIRPERSON: Excellent. Well, please go ahead.

PRESENTATION

1872 MR. LEVIN: Thanks.

1873 I’d like to thank the Commission for this opportunity to participate in the discussion. The hearing and the consultation on differential pricing offers an important opportunity to maintain balanced policies that will foster innovation and help ensure that all Canadians can participate in the digital economy.

1874 I come to this issue having served as Chief of Staff to the FCC in ’90 -- from ’93 to ‘97 and then returning in 2009 to lead the writing of the United States National Broadband Plan. Since then, I have consulted with numerous other countries, states and cities in addressing their own broadband challenges. And I’ve also been involved in various efforts to connect low-income areas and individuals, such as with the FCC’s recent reform of its Lifeline program and E-Rate program to connect schools, libraries and healthcare facilities.

1875 I’d like to begin by giving an overview of Facebook’s views on zero rating, and then explain why in my opinion, those positions represent a reasonable and balanced approach, particularly based on my experience working on broadband access issues.

1876 Facebook’s mission is to give people the power to share and make the world more open and connected. That mission includes helping to connect the nearly 60 percent of the world’s population still not connected to the internet. Ensuring universal connectivity is a challenge that cannot be overcome with a single one-size-fits-all solution. I think it requires experimentation and a range of different approaches to overcome the diverse barriers that prevent people from coming online, whether it be in Canada or elsewhere.

1877 Facebook is a strong supporter of net neutrality and believes that it’s critical to the internet’s continued dynamic growth. Facebook also believes that there is no inconsistency between supporting the principles of net neutrality and permitting zero-rating programs that benefit consumers and promote competition.

1878 Zero-rating programs have existed around the world for years, and there is no evidence that maintaining a flexible approach to such programs harms consumers or the open internet. To the contrary, zero-rating arrangements have been shown to enhance consumer welfare, such as Facebook’s own experience with its Free Basics program.

1879 Through partnerships with mobile operators, Free Basics provides access to basic services, communications tools, health information, job sites, education services, without data charges on the mobile phones. By providing an opportunity for people to experience the value and relevance of connectivity for free, Free Basics provides an onramp to the broader internet.

1880 Free Basics is available to any operator, open to any developer whose service meets the same technical criteria. It’s free to both users and content owners. Facebook does not receive any payment, and no carrier receives payment for participating. All the program’s participation and technical guidelines are transparent and available online.

1881 Although not available in Canada, Free Basics has been effective at growing the number of people coming online in the more than 50 countries that it operates in without any demonstrable harm to consumers and the open internet.

1882 In light of the positive impact that such programs could have and the lack of concrete evidence of harm, Facebook urges the Commission to continue to permit zero-rating arrangements with a case-by-case review of such programs guided by certain general principles. Facebook’s view is that, at a minimum, each of the following characteristics should weigh in favor of a zero-rating program being permitted.

1883 Non-exclusivity. The program being available to all carriers on same terms and conditions; additionally, under any agreement with developers to zero-rate their content, the ISP is free to enter into the same, or similar arrangements with others.

1884 Second, open technical standards. The program being open to all content providers that qualify under the same technical standards.

1885 Third, between a carrier and content providers that are independent and non-affiliated. The program does not favour a carrier’s own content over other content. Indeed, any arrangement between an ISP and content provider that is not -- that are non-affiliated and independent clearly does not do so.

1886 And fourth, transparency. The ISP discloses in clear and transparent manner the terms of its offering, its scope, and when and how consumers will know they transition from zero-rated content to content that will count against their data plans.

1887 Additionally, Facebook recommends that the Commission consider whether a zero-rating program is designed to address a social need, such as bringing more unconnected people online or providing the public with government services, such as emergency services. Such arrangements should also, in Facebook’s view, be permitted.

1888 Now, Free Basics has all of these characteristics and, therefore, is a clear example of the kind of programming that should be permitted.

1889 By maintaining this type of flexible approach to zero rating, Facebook believes the Commission can continue to foster innovation, experimentation, and competition while also providing appropriate protections for Canadians.

1890 In my opinion, Facebook’s views represent a reasonable and balanced approach. I come to that conclusion based on my experience working on the U.S. National Broadband Plan and broadband access issues in the United States and around the world, with a particular focus on the vexing problem of adoption.

1891 Now, National Broadband Plans generally have three goals: getting networks everywhere; getting everyone on; and using the platform to improve the delivery of essential public services. As many plans have recognized, improvements in any goal drives improvements for the other. That is, deployment drives adoption and usage; more adoption drives deployment and usage; and more usage drives deployment and adoption.

1892 Today’s hearing on differential pricing addresses models that can have a positive impact on the adoption leg of the stool. Adoption is a complex problem involving price, digital literacy and other factors. My experience suggests it’s important that the Commission maintain a flexible regulatory approach that will allow for experimentation and innovative offerings, including those that have the social benefits such as bringing more people online.

1893 Now following up on the United States National Broadband Plan, the FCC proposed some changes to the government-funded adoption subsidy program, but in other proceedings also opened the door to enhanced private efforts to target low-adopting communities. The largest of these is Comcast’s Internet Essentials, Comcast being the largest cable company. And that program has now connected three million Americans. I think three points about that program are worth noting.

1894 First, for the program to work, the government had to allow Comcast to discriminate in its pricing policy to provide a lower price point solely for low-income -- qualified low-income persons.

1895 Second, the program has improved over time. To its credit, Comcast took the advice from experts who pointed out various ways the company’s initial qualification process created unintended and unnecessary barriers.

1896 Third, a number of other companies, including AT&T, Google, and most recently Sprint, have followed with their own targeted efforts.

1897 Now, we are in the early stages, but examples I think make clear that there are big benefits to being flexible in allowing private sector players to compete in crafting solutions that build on their own core competencies and motivations. While some raised concerns, particularly about discriminatory pricing, the simple truth is that the policy of enabling experimentation, course correction, and competition has resulted in millions being better off, millions more likely being better off in the future, and no one being worse off. Further, that increased adoption will improve the economics for network deployments and governments’ ability to deliver education, job training, health care, public safety and other essential services to families and individuals.

1898 Now, today’s hearing raises a similar issue of how does government treat differential pricing, as well as zero rating programs that try to encourage adoption. It adds to the discussion the important question of net neutrality.

1899 In the United States I believe the FCC did the right thing by adopting bright line tests, banning blocking, throttling, and paid prioritization. The FCC adopted these strict net neutrality rules, but, as an earlier panel discussed, expressly decided not to ban zero rating practices thereby conceding that zero rating, in contrast with the other practices, is not a per se violation. Instead, under the FCC’s net neutrality rules it’s subject to a case -- zero rating is subject to a case-by-case review.

1900 Again, I believe the FCC made the right decision, because one can envision zero rating programs that would create the very harms net neutrality are meant to prevent. One can also envision, however, zero rating programs that help address social needs, such as helping to connect millions without creating net neutrality harms.

1901 I am not an expert in Canadian law, but I think the policy questions, again, as discussed earlier today, are similar. It comes down to what principles this Commission could consider in determining whether a particular program falls in the first, harmful bucket, or the second, positive bucket.

1902 In making that determination, I would ask the following questions. Is the program non-exclusive and open to all carriers? Is the ISP free to enter into the same or similar arrangements with other content providers or platforms? Is the program open to all content providers that qualify under the same technical standards? Does the arrangement ensure a carrier’s own content is not favored over other content? And is the offer transparent?

1903 I believe that, when satisfied, each of these criteria should weigh in favor of the Commission permitting the zero rating program. With this approach, the Commission can continue to provide flexibility for the development of innovative offerings while continuing to protect Canadian consumers and uphold the principles of net neutrality. I believe this will also achieve the Commission’s goal of establishing a clear and transparent regulatory approach for zero rating programs in Canada.

1904 In closing, I’d like to thank the Commission for this opportunity to testify. I look forward to learning from your deliberations and hope the results allow both the government and private sector entities to innovate and improve on how we work toward enabling all to benefit from access to broadband.

1905 Thank you.

1906 THE CHAIRPERSON: Thank you very much for that presentation.

1907 I’ll put you in the hands of Vice-Chair Menzies.

1908 COMMISSIONER MENZIES: Thank you.

1909 Why don’t we start with the adoptability argument, and I’m curious to know how you see that as applying to Canada.

1910 I understand the argument around Facebook free basics and that as it was presented in India, and Africa, and other places. But Canada’s issue doesn’t seem to be -- at least it’s been presented to us, its adoptability issues seem to be accessibility rather than adoptability in terms of actually getting the service to people who want it ---

1911 MR. LEVIN: Yeah.

1912 COMMISSIONER MENZIES: --- at an affordable price.

1913 So how does that make sense, that adoptability argument within the Canadian context?

1914 MR. LEVIN: So I’m not going to hold myself as an expert. I’ll make a couple of observations.

1915 First of all, your adoption is high by world standards, which is great. Congratulations to you. It seems to have over the last three years basically stayed at about the same level, about 87, 88 percent. So -- at least from the statistics I’ve seen.

1916 So the question is with that 12 percent -- and, by the way, I don’t think with any service you ever get to 100 percent, but one should aspire to, you know, similar levels that which we achieved with, you know, broadcast television, electricity, and others, so in the high 90’s.

1917 In some places it is, no doubt because of the geographic structure of Canada, a deployment problem, and there are a variety of things and this program is not designed to solve that per se. But there probably are certain areas where it is a combination of price, and relevance, and digital literacy.

1918 And what Facebook has found in other countries is that there are discreet populations often in other countries a much larger percentage of the overall population in which that on ramp is needed and then once they get that on ramp they then choose to, even with limited income, rearrange their allocation of personal income to buy a broader package but that that on ramp serves to do that.

1919 In the United States we have -- we don’t have adoption as high as you have, but we also have a number of discreet different kinds of problems. The problem of tribal areas, for example, continues to vex us in the United States. Certain problems in certain -- because of different languages continues to vex us.

1920 So my only point would be you’re absolutely right and that’s one reason why Facebook really focused its initial efforts on those developing countries where adoption is much, much, much lower than in Canada rather than coming here or the United States first. But just because it’s not as big a problem here doesn’t mean that for some portion of the population it would not provide a valuable upside with, as I’ve said, really no downside.

1921 COMMISSIONER MENZIES: Facebook is very popular in Canada’s far north, from what I’ve been told and what I understand. Some of the pages that folks have built, including Inuit communities, et cetera, are very interesting in terms of sharing. It’s an opportunity for them to share their stories and that sort of stuff. But those are satellite communities for the most part and internet access is very, very expensive.

1922 MR. LEVIN: Yes.

1923 COMMISSIONER MENZIES: There’s no way that zero rated products could ever be offered in satellite sort of communities.

1924 MR. LEVIN: Well ---

1925 COMMISSIONER MENZIES: Is there?

1926 MR. LEVIN: Look ---

1927 COMMISSIONER MENZIES: I mean, the cost to the provider would be very high.

1928 MR. LEVIN: You’re certainly right as the world looks today. Will the world look that way in a year or so, in five years? I don’t know the answer to that. I do know that there has been enormous progress in terms of the -- both the cost structure of the satellite industry as well as the level of bandwidth that they’re able to do over there, and that continues to grow. So will that be true in five years? I don’t know the answer to that.

1929 But I think if -- my basic point -- and I think I speak for Facebook here as well -- is you do not want to adopt a hard rule that prohibits people from at least talking to others and over time as Moore’s law lowers the cost of many things makes that a possibility.

1930 COMMISSIONER MENZIES: What about the argument made by Sir Tim Berners-Lee that items such as Facebook free basics is not actually accessing the internet it’s accessing a closet within the internet or it’s a corner of the internet and that we should not be -- or that regulators should not be allowing the sort of second tier or parallel faux internet that doesn’t give people access to the complete one? So I thought I’d give you the opportunity to respond to his argument.

1931 MR. LEVIN: Well, thank you for that. Telling someone like me that Tim Berners-Lee said something is like telling a Catholic that the pope said something. I’m very reluctant. There’s a certain kind of infallibility to the man. But, nonetheless, I would challenge him in the following way, with enormous respect for his contribution to the world.

1932 The previous speaker said something I thought was important, which was it would be nice if the internet were free and had unlimited bandwidth. That’s not happening and there are no economic forces that will cause that to happen.

1933 And I’ve worked -- over the last 20 years I was privileged to be at the FCC when the internet arose and we had lots of different issues that came up. But at the end of the day it’s kind of like that, how do you -- that question about how do you actually get faster, better, cheaper networks, and there are a variety of different ways to do that.

1934 I’ve spent an awful lot of time actually not working on the net neutrality issues but since we did the national broadband plan I’ve worked a lot with cities seeking to lower the cost of deployment. The way to, in my opinion, for example, you know, limit the desire for data caps, is you create economic circumstances in which it’s cheaper to build networks and then people bring on fibre and new technology that creates such abundant bandwidth why would anyone need a data cap.

1935 So my answer to Sir Tim would be it would be nice. The economics don’t really drive it that way and also peoples’ behaviour, as we’ve seen around the world, don’t drive that.

1936 What we do know is that when people get on free basics, I believe the number is more than 50 percent of them then go onto what he would regard as the full internet.

1937 So it is an onramp strategy. That’s what it’s designed to do. It actually has worked very well to achieve both the goals of Facebook, others who participate and I would believe Tim Berners-Lee. If there’s a better way to do it great let someone else do that.

1938 COMMISSIONER MENZIES: So just help me understand how those 50 percent they access free basics, they experience the internet and then they subscribe to it?

1939 MR. LEVIN: Then they have a paid subscription, yes.

1940 COMMISSIONER MENZIES: Right.

1941 MR. LEVIN: That’s the experience of the carriers.

1942 COMMISSIONER MENZIES: Okay. That’s interesting. And that’s through your -– through your offer, the free basics?

1943 MR. LEVIN: Correct.

1944 COMMISSIONER MENZIES: Okay.

1945 MR. LEVIN: But I want to be clear, because the previous speaker said something which I -– you know, Facebook is an application. It is a platform for a certain kind of activity, like the activity you were talking about in terms of sharing and community.

1946 The internet basics product is a different platform. It is -– you know, Facebook participates in it. Facebook helps create it and set it up, but it’s a fundamentally different platform. It is a content aggregator in a very different way than Facebook.

1947 In other words people don’t come on to internet basics and necessarily use Facebook. They use a number of different services.

1948 COMMISSIONER MENZIES: At the same time I just want to talk about –- get your understanding of how this does or doesn’t challenge fundamentals of net neutrality.

1949 And not that the intentions aren’t good, but as grandpa used to say “the road to hell is paved with good intentions”, but if data has a price, right, has a cost.

1950 MR. LEVIN: Yes.

1951 COMMISSIONER MENZIES: And you are providing that to some people without applying that cost.

1952 MR. LEVIN: Yes.

1953 COMMISSIONER MENZIES: And yet it is being consumed by other people at a cost.

1954 MR. LEVIN: M’hm.

1955 COMMISSIONER MENZIES: How does that not violate, sort of, principle of net neutrality where everything should be provided to people based on the same basis?

1956 MR. LEVIN: Yes. So like first of all, what I would say to grandpa is the road to heaven has to be paved, so there is a certain kind of economic reality we have to deal with.

1957 And the net neutrality issue which you know, in the United States we spent nearly 15 years actually kicking around in a variety of different ways.

1958 It’s a very important principle and both Facebook and myself am very supportive of making sure there are clear guidelines for assuring net neutrality.

1959 At its core there’s a certain kind of non-discriminatory treatment and I think that when companies use their position -– and this was referred to by all the panelists this morning.

1960 When they use their position as the gatekeeper to essentially favour one kind of content or another then you have a net neutrality problem.

1961 As I’ve talked about the principles that Facebook has set forward and that I talked about in the testimony in terms of non-exclusivity and openness, I think that absolutely takes it out of the threat of being a violation of net neutrality principles.

1962 I would also note that both in the United States and in Canada, there is an adjective that modifies the rules, which is unjust, unreasonable.

1963 It is subject to a reasonable test and so as I think several -– as all the speakers said, if you are trying to do certain things, such as make sure that everyone has access to what in the United States is 911 or emergency services or some kinds of other things, then we want that -– we want to make sure that 100 percent of folks have kind of access to it.

1964 And this is why the concept of internet essentials and internet basics, I think, is a very powerful idea.

1965 It allows private sector entities not to violate net neutrality principles, but rather to experiment given their own assets and their own motivations, how do we have a sustainable model for raising it, whether in the case of some countries from 20 to 80 percent or in the case of Canada 88 to 95 percent, to raising that. That that motivation, I think, is another way in which it does not violate net neutrality principles.

1966 COMMISSIONER MENZIES: Okay, thank you.

1967 You make the case that speculation on what could go wrong is not a good foundation for regulation.

1968 And in terms of that, notwithstanding the fact that we all lock our doors at night based on speculation of what could go wrong, what sort of data do you think we should -– if we accepted that view, your view, what sort of data do you think we should be gathering or collecting on that sort of issue so that we can build a record on the impact of differential pricing practices going forward?

1969 MR. LEVIN: That’s a great question and I’m going to give you my answer, but I hope you’ll let me think about that and if I come up with a better answer augment the record with a comment.

1970 So I would look at a number of things, you know, for example, do the programs lead to the number of people adopting going down, to the number of people utilizing the full internet going down, certain kinds of content not being available, certain kinds of innovations being blocked.

1971 You know, it’s not simply that I think the speculation about harm is in fact speculative; it’s that there actually is the experience in -– there certainly could be experience that I’m not aware of in some countries where violation of net neutrality through zero-rating actually causes damage.

1972 But at least in terms of the actual behaviour of people in the 50 plus countries where internet basics has happened you don’t see any of what I would regard as negative data or negative trends.

1973 COMMISSIONER MENZIES: What’s your view on the argument by some that differential pricing practices and zero-rating could be permitted provided it was the consumer who was choosing the app to be zero rated?

1974 So that in the case of the Videotron issue that is -– have been the catalyst for this hearing, they are providing -– they are choosing the music streaming service?

1975 What would it -– what would your view be if say the offer was zero -– we will zero rate the music streaming service of your choice so that the consumer then is -– that there is no interference between the app and the consumer on the part of the ISP, but the consumer is empowered to make a choice.

1976 MR. LEVIN: Yes. Here’s an example of something where, Mr. Chairman, to your earlier point I don’t want to -– since I don’t know Facebook’s point of view on that I want to be clear that I’m giving you my point of view.

1977 I come at it from the perspective of I have concerns about certain kinds of discrimination. I am interested in a couple of things as my kind of primary goal.

1978 One of them is adoption, so I would be -– I would want to look at whether that drives adoption. And there’s an argument that, you know, music has actually – maybe people care more about that than educational apps.

1979 But my second point is there are a number of public services that are very important to deliver over the internet and that we need to improve the way we do it, education, health care, public safety, job training, et cetera.

1980 So I’d be more interested in those apps, but certainly it’s true that giving the consumer that preference is valuable.

1981 However, I would want to ask other questions like is it affiliated content? Is there some sort of marketing push? Is it simply a way of enabling what we might think of as the net neutrality harms to be -– to occur by virtue of clever marketing or kind of nudging the consumer in certain ways, so I’d have to look at more data.

1982 COMMISSIONER MENZIES: Right, so you’re -– just so I understand your point is that even -– even if the consumer was choosing if the content was affiliated it would still be a risky proposition?

1983 MR. LEVIN: I would have -– I would have concerns that would cause me to want to look at more information about that, but again I’m speaking for myself ---

1984 COMMISSIONER MENZIES: Okay, I understand.

1985 MR. LEVIN: --- not for Facebook.

1986 COMMISSIONER MENZIES: Yeah. When you talk about open criteria, does that mean there would be no distinctions between content type?

1987 MR. LEVIN: Correct. It just meets a technical criteria.

1988 COMMISSIONER MENZIES: Okay. And how -- to what extent would technical criteria be a challenge? I mean, would it restrict technological innovation or it’s just structured technical -- standard technical criteria that is pretty much universally applied?

1989 MR. LEVIN: Well, the technical criteria that again is open an available on the internet -- and I don’t hold myself out as a technologist -- is what Facebook and others have determined is the right kind of compromise that enables this program to move forward. This goes to kind of the heart of the economics, which is that if you have criteria that allows what you might think of as data hogs, it’s not going to work.

1990 And so, in that sense, there -- I think you want -- the openness criteria is I think very important. And it may be that others -- and I want to emphasize this is a non-exclusive program -- it may be that others come up with technical criteria that turns out to be better or more robust, I don’t know.

1991 And I could see where some people say, “Well, we have this very important public interest application, but it doesn’t quite fit that criteria.” But to that I would say -- and the experience with Comcast -- and I want to emphasize I don’t work for Comcast, I've never worked for Comcast, I admire what they’ve done and I've talked to them about their program, it came out of discussions we had with the plan -- they started in one place and they made the program better.

1992 By the way, the program that India said no to, the Facebook program -- and in India, to be clear, the regulator said no basically to all zero rating -- but the program was different. It definitely had certain characteristics of being more of a walled garden in those days. I think Facebook has also been responsive to legitimate concerns raised by various folks to make sure it did not violate that neutrality.

1993 The question you're raising is whether the technical specifications could be improved. My answer is that’s an ongoing conversation, and if it can that would be great. But you have to give them the freedom to experiment and a place to start.

1994 COMMISSIONER MENZIES: So what about the argument that differential pricing practices had been in place years ago or -- let me put it this way -- the argument that zero rating and differential pricing practices has a anti-competitive outcomes, that it entrenches establishment or it favours one provider over another, or they can make arrangements to be favoured, and that essentially if 10 years ago that they had been in place, the stories of Myspace and Facebook might have been much different ---

1995 MR. LEVIN: Well ---

1996 COMMISSIONER MENZIES: --- if they had been applied to one as opposed to the other?

1997 MR. LEVIN: First of all, I would just note that it’s open -- the program was open to all providers, so the -- it doesn’t have a competitive impact one way or the other if a provider -- or let’s put it this way -- if a provider chooses to use it, their competitor can choose to use it as well.

1998 Secondly, if there was a program that 10 years ago had said, “We’re going to do internet essentials and exclusively use Myspace and block off Facebook even if Facebook could have met the technical criteria.” That would have been the kind of program that under the criteria and the principles that I’ve listed would not have been allowed. So I don’t see it as having that kind of effect, and I surely haven’t seen it having that effect anywhere in the world.

1999 COMMISSIONER MENZIES: But then ---

2000 MR. LEVIN: If I can add to that one thing.

2001 COMMISSIONER MENZIES: Sure.

2002 MR. LEVIN: I like the idea that it is at least happening in the United States where companies now see an opportunity to bring online people who haven’t been brought online before. So, as the New York Times story the other day noted, you know, Sprint has a model that uses Sprint’s mobile network and uses WiFi routers to try to go after that population. Charter and AT&T both established new programs, and this is following up on what Comcast did.

2003 So, I want to be clear that I like the idea of people competing to bring people online, but in terms of the kind of the big impact on kind of tipping the scales for incumbents, at least I haven’t seen any evidence of that.

2004 COMMISSIONER MENZIES: Wouldn’t it be most prudent then to have a regulatory structure in place, that either forbid the practice or outlined where such practices may be approved and maybe not, in advance to avoid any disruption in the marketplace? For instance, when we talk about one provider versus another, we used Myspace/Facebook, it could be X versus Y, that harm could be done -- let’s put it -- I mean regulatory responses don’t generally meet a 911 standard of speed. And so damage could be done to consumers and to commercial operators in them meantime without some sort of framework to -- within which to manage that and prevent that ---

2005 MR. LEVIN: Yeah.

2006 COMMISSIONER MENZIES: --- in term of -- and I -- that is inherently speculative ---

2007 MR. LEVIN: Right.

2008 COMMISSIONER MENZIES: --- in that regard. But isn't that the right and proper role of a regulator to try to make sure there's a framework in place that offers innovation but at the -- offers room to innovate, but at the same time some sort of safety for consumers and commercial providers’ certainty?

2009 MR. LEVIN: Look, I know from my own experience and I assume from yours that there's always a tension between how you address certain kind of theoretical problems. I think that hopefully what I've done in the testimony and what Facebook has proposed, gives you criteria that would allow you to evaluate a zero-rating program to determine whether -- like I said -- it fits into that bucket of actually causing it neutrality harms or alternatively, is that bucket which actually achieves certain kind of social goods.

2010 I would certainly be opposed to any bright line forbidding of any kind of zero rating for all the reasons I've discussed. But I would not be, you know -- again I need to say that’s speaking for myself -- there are probably certain practices in terms of particularly with affiliated content or other things, that, you know, this Commission may choose to forbid and to be very clear about that. But I don’t want to speak on what those are, because I haven’t -- I've been looking at the kind of what are the principles that I think should inform that decision, rather than what a bright line test would be.

2011 COMMISSIONER MENZIES: You’ve mentioned and it was mentioned in your submission that you have some sympathy for zero rating of programs that -- websites, et cetera -- that have virtuous social aspects to them. Can you just kind of unpack that a little bit in terms of what you might be talking about? And where you would advise a line be drawn, because it’s -- it is an area in which subjectivity is part of the discussion. MR. LEVIN: Yeah. So I can think of some examples, but I'm not sure I can clearly answer the question of where the line is drawn, because I mean it is the nature of case-by-case analysis that you have to look at the totality of the circumstances.

2012 But for example, it is increasingly true that homework assignments for kids require access to the internet. So it could be that you would want a homework assignment that said, “You have to read this and you have to watch this video, and then you can respond by writing on the following questions.” And if that’s coming from an educational institution, that would be the kind of that I would hope -- again, given the technical specifications, I can't be assured -- but I would hope that what would be zero rated, because I think we want all children to have equal access to the source material to do their homework.

2013 There are certain kinds of information regarding traffic or public safety or various other kinds of things, civic information, that I would hope could be in that category of zero rated, but again that’s really for the process to develop.

2014 But I think that if that’s the kind of criteria I would be comfortable -– speaking for myself, I would be comfortable making those distinctions.

2015 Because in the same way that the post office says certain kinds of mail is going to be delivered for free -- if it’s coming from your legislature or member of Congress, at least in the United States, that has certain privileges. The United States post office basically discounts, you know, news and magazines, those kinds of things.

2016 You know that is the job given to you to determine. I’m comfortable with that.

2017 COMMISSIONER MENZIES: And just to confirm, that it would be your view that any services that were offered on a zero rated basis would have to be available to all subscribers no matter what tier they subscribe to?

2018 MR. LEVIN: I would assume that would be -– yes.

2019 COMMISSIONER MENZIES: Okay. Thanks.

2020 What about the -– how would you address the argument made by some that -- who advocate for a world without data caps, that the practice of zero-rating may have, despite its good intentions in the short term, may have the long term result of making that world of -– the world without data caps just a future fantasy?

2021 MR. LEVIN: Yes.

2022 COMMISSIONER MENZIES: Because it entrenches the current -– it entrenches current reality as opposed to applying pressure to the new reality they hope to be created.

2023 MR. LEVIN: Right.

2024 Well first, as to the specific program that Facebook is proposing, it’s not really relevant because we’re talking about -– this is appealing to a population that is currently not online. So they aren’t subject to data caps one way or another. This is about that onramp.

2025 And then like I said the majority of people eventually get on the internet and then they have a problem if data caps.

2026 I think the problem of data caps is a vexing one for our regulators. I noted that the previous speaker with a similar thing -- with a similar kind of question, said he did not want any kind of retail regulation of that. I tend to -– speaking for myself, I agree. I don’t think it’s appropriate for the government to say you should have a data cap of this or not that.

2027 There are certain situations, and this arose for example in the Department of Justice’s and the FCC’s evaluation of the recent charter Time-Warner Cable transaction, in which the fear was that because the companies have an interest in the -– what we might think of as the incumbent market of multi-channel video, they might use data caps in a way to stifle the development of a competitive platform over the top.

2028 In that case the company and the government came to an agreement about shall we say either prohibiting or limiting, depending how you think of it, data caps to prevent that kind of very specific harm that could come out of that specific transaction and I certainly think that’s appropriate.

2029 But look, to me -– and again this is actually what I’ve done a lot of work on personally in the last five years, the challenge is how do you make the economics favorable for the deployment of networks that have such abundant bandwidth that it’s just really not an issue.

2030 The existing -– we in the United States and Canada who have a kind of a similar market structure, we have been lucky that in the early days of the internet we had two wires into the home, but those wires were jerry-rigged to do the internet. That’s not what they were built to do.

2031 And the question is, are there competitive forces that drive the continuing upgrading of that network to we get to where Moore’s Law would drive us, which is such –- the marginal cost being so low that we actually don’t have data caps.

2032 That actually isn’t the issue we’re talking about here, though it’s related and happy at another time to always chat about that, but you know there was a reference to 5G; if we get to a world of 5G that certainly changes things.

2033 The cable industry pressed by things such as Google Fibre in the United States and then having the telcos respond by their own fibre upgrades, they’re moving to what’s called Docsis 3.1, that gets much more abundant bandwidth by using more of their plant to move data.

2034 And by the way they’ll then be doing mobile services in a different way, off of their Wi-Fi platform and that’s going to drive the mobile providers to upgrade their networks.

2035 Look the right answer there I think really from the government is to make sure that whatever the barriers are, that we eliminate unreasonable barriers and we make the economics of upgrades and new deployments better.

2036 That to me is a more robust answer than simply saying we think the data caps are bad inherently.

2037 There are certain people who believe that and I understand the argument, but the truth is that there are bandwidth limits and like I said these are -– right now they are jerry-rigged networks.

2038 I’m optimistic that in a few years we’re going to get to a point where that won’t be true, but we’ll have to see.

2039 COMMISSIONER MENZIES: One last item is do you think there are any lessons to be learned from the Free Basics Program that might be useful to us in connection rural and particularly remote regions of Canada?

2040 MR. LEVIN: So as you mentioned in I think in your first question, there is what we think of as the access gap, which is there’s no network which really serves and there’s the adoption gap, which is people who have a network but have chosen not to go on for any number of reasons.

2041 Free Basics is largely focused on those who have -– who have access, but have chosen not to adopt, but the more people who adopt the more that improves the economics of deployment.

2042 In some areas, you know, if you look at the income of certain areas a company might say there is simply no way given that level of income we can get a sufficient market share to pay us a sufficient amount to basically get a return on the investment into the capital.

2043 By the way lots of countries -– and I’m sure this is true for you, it’s certainly true in the United States, we subsidize the buildout in rural areas just as we also subsidize low income people to get on and we have various different programs to do that.

2044 My view is that while it is not the primary driver, and there probably needs to be some government subsidy in those areas which lack density and lack certain kinds of income characteristics, it nonetheless is a useful tool for -– the internet is a very hard thing to describe to people who haven’t used it or who are not literate or digitally literate and don’t know how to do a Google search.

2045 You know, this is not a problem for young kids, it is a problem for certain folks. And so I think it does provide a valuable onramp.

2046 But as your question suggested the problem -– I’m not sure it’s the top priority problem for you. I suspect it isn’t.

2047 But don’t foreclose -– I mean the core message I want to deliver is don’t foreclose the opportunity to take advantage of this kind of experimentation as it may prove useful in some areas down the road.

2048 COMMISSIONER MENZIES: Thank you very much. I’ll turn it back over to my colleagues.

2049 THE CHAIRPERSON: Thank you. Monsieur le conseiller Dupras?

2050 COMMISSIONER DUPRAS: Yes, one quick question on your approach.

2051 You say that it would be open to all content providers under the same technical standards. Meaning that the ISP would have the obligation to zero rate anyone who is available under the technical standards to customers?

2052 MR. LEVIN: Right.

2053 Remember it is optional for the ISP to ---

2054 COMMISSIONNER DUPRAS: It’s optional, so that’s it. So here the ISP could favour some content over other?

2055 MR. LEVIN: Well I wouldn’t express it that way. If the ISP chooses to participate in the program the ISP cannot favour any content that meets that technical specification.

2056 So it’s not really the ISP making the choice it’s really about does the content meet the technical specifications. If it does, the ISP doesn’t have an option of favouring one version of a music service over another version it has to allow both, for example, if they both meet the technical specification. Did I understand your question ---

2057 COMMISSIONER DUPRAS: So there would be categories?

2058 MR. LEVIN: No, no, no, there’s not categories. In other words, all the programs that -- all of the content that qualifies is subject to the zero rating and the ISP either accepts that or they don’t participate.

2059 COMMISSIONER DUPRAS: Okay.

2060 MR. LEVIN: But they don’t make a content by content decision as to what’s on the platform about what’s zero rated.

2061 COMMISSIONER DUPRAS: So either they zero rate or they don’t?

2062 MR. LEVIN: Right. Well ---

2063 COMMISSIONER DUPRAS: They open it up or they don’t?

2064 MR. LEVIN: Correct. And I might add, it’s not exclusive, so the ISP could choose -- could use the internet basics but they could -- if someone else comes up with a different one that has a different technical specification and different content qualifies under that the ISP also can do that.

2065 COMMISSIONER DUPRAS: Okay. And don’t you think this would be too much of a burden on an ISP to get into?

2066 MR. LEVIN: You know, that’s a good question, but I think it’s one that market forces should determine. My impression is that Facebook is trying to create a platform that is attractive to other content and attractive to the ISP’s. There’s an art to that, like any market. If you put too much of a burden on the ISP’s no ISP’s will participate.

2067 So the proof is in the pudding. In more than 50 countries they’ve been able to thread that needle affectively. In other countries maybe they haven’t. I don’t know. But that’s the problem that gets worked out kind of between the negotiation between the ISP’s and the content folks.

2068 COMMISSIONER DUPRAS: Thank you.

2069 MR. LEVIN: Thank you.

2070 THE CHAIRPERSON: So one final question, Mr. Levine.

2071 First of all, I want to say thank you for participating. Your testimony has been very useful.

2072 MR. LEVIN: Thank you.

2073 THE CHAIRPERSON: But I’ve asked others of this, and I’ve been struck how throughout this proceeding those potential partners that could benefit from DPP have either not intervened, have not asked to participate in the oral phase of the hearing -- and I guess Facebook is a good example.

2074 You are there and a very learned and insightful witness but you’re not an employee of -- you’re not an executive of Facebook, and, frankly, I don’t even know if maybe there were Facebook executives or employees in the room during your hearing.

2075 We’ve seen that in the past a number of years back when Netflix appeared and they sent a single person at the witness table -- probably it was a strategy -- but there were numerous consultants in the room supporting that individual.

2076 And yet a company like Facebook and other of these potential beneficiaries do draw a significant amount of money from the Canadian marketplace. They have an interest.

2077 And I asked the question of others, and so I’m asking you, what inference should we draw from the non-participation, or the reluctant participation, or the discreet participation of potential partners in a DPP arrangement that some ISP’s might want to put into place?

2078 MR. LEVIN: Well, thank you for asking the question instead of just coming to your own conclusions. So I’m going to give you my thoughts on it.

2079 As I said, I’ve done a number of things since the national broadband plan. I was asked by friends of mine at Facebook to help them think through this question of how could you structure the program for certain countries, including the United States, in a way that makes it work better, and, you know, we’ve had a lot of candid private discussions about that.

2080 But the heart of this effort is not the developed countries. And this is -- this should be clear from several questions. It really is focused on those billions of people who don’t have an on ramp to the internet today.

2081 Facebook is delighted to send me here and they’re delighted to participate in this because as you look at this question it does have a lot of importance going down the road. But the fact that they haven’t allocated a lot of political capital to getting a lot of groups here or sending a lot of people here, I think that is a demonstration of its -- you know, you’re right, Canada is a very important market for them and lots of people -- I don’t know the numbers but I’m sure it’s in the millions of Canadians use Facebook and its other platforms.

2082 So what I would say is like every -- like, you know, you figure out how are you going to devote political capital to a certain issue here or there in the same way, you know, that the thrust of this is really in the developing world. Having said that, it’s really important that all regulatory bodies consider all the issues that you’ve been thinking about; how do we assure that -- those fundamental principles of net neutrality and yet not close the door to experimentation and competition.

2083 This is where they thread the needle. I’m sure they would be happy to participate in other things. But it doesn’t make sense for them to vote a lot of political capital to that at this point in time when their focus is really more on the developing countries. Because, frankly, you all have done a very good job of making sure that the adoption rate is very high.

2084 THE CHAIRPERSON: Thank you for that.

2085 Let’s assume, therefore, I’m asking the question in a developed world context as opposed to a developing world context. Why shouldn’t I conclude that the absence of those potential partners for zero rating or differential in a developed world context, or even the Canadian context more specifically, is not an indicia that it’s not really important to them and, in fact, it’s much more important to the ISP’s; in other words, it is an ISP focused issue and, in fact, the innovators that might want to have their content put out there don’t really see this as a valuable vector to advance their innovations?

2086 MR. LEVIN: I’m not quite sure I understood your question so I’ll try to answer what I understood.

2087 THE CHAIRPERSON: Well, let me rephrase it. If, for instance, this was important to Spotify or other music streaming services, because that’s one aspect of this ---

2088 MR. LEVIN: Right.

2089 THE CHAIRPERSON: --- you’d think they’d show up because they have an interest ---

2090 MR. LEVIN: Right.

2091 THE CHAIRPERSON: --- and they really haven’t.

2092 MR. LEVIN: Now, look, obviously I don’t speak for Spotify and a number of other potential content providers. I think that it would be wrong to conclude that it’s not important. It’s just -- you know, at various points in a policy process -- I can truly remember when the net neutrality issues started at a certain point in time there were lots of people who were not there, and one of the problems is always that -- particularly in the context of net neutrality, you have -- the most important constituencies are the companies that don’t exist yet, that is to say the innovators, right, because they don’t exist yet and they -- and also a lot of them are really small and they don’t devote resources to government operations.

2093 I can remember when Google had a Washington office with one person, this friend of mine. Their office is considerably larger, as is Facebook’s.

2094 So I think that the right way to think about it is that right now there are a number of ISP’s who have their points of view, and I’m not commenting one way or another on their point of view. They want to retain the flexibility of an ISP to be able to do certain things for marketing reasons. And whether you think that’s good or bad or what the criteria are, we’ve given you ours but, you know, that is really for your judgment.

2095 On the other side, there are folks who have, you know, what I would think of as a more rigid view based on their analysis. Facebook kind of comes to this somewhere in the middle saying look, we are supportive of net neutrality but what we have seen with internet basics is that zero rating can play a useful role. We’re not bringing our content partners because it doesn’t, you know -- we’re trying to create that kind of neutral platform that creates this onramp.

2096 Some of our partners, they don’t -- this isn’t the most important thing for them economically. So they’re not going to devote the time and attention to that, but there may be a moment in time when it actually does make a difference to bringing everybody online.

2097 So I can’t speak for everybody else’s priorities, but I would not in any way view it as saying it’s not important. I would just say that, you know, you invited Facebook, I’m delighted to be here at that invitation. It is important to them; otherwise, they wouldn’t have sent me up here, but there’s no reason to have an entourage of 20 executives here, because I’m not sure they would add that much to the deliberations at this moment in time.

2098 THE CHAIRPERSON: Fair enough but the Commission is -- and I thank you for that participation but I -- you know, it’s good to remind all of us that the Commission is a consultation-based organization, and the quality of our decisions is a result of participation by diverse parties. So thank you for being there.

2099 MR. LEVIN: It’s a great honour to be here. Thank you so much.

2100 THE CHAIRPERSON: And it’s -- you know, I’ve seen other, we’ve seen in the past, you know, some bloggers chirping on the sidelines. That’s fine but it doesn’t really help us, but they seem to continue to chirp. And so ---

2101 MR. LEVIN: In my experience in government, there are always people who think you’re not helping a lot ---

2102 THE CHAIRPERSON: Yes, absolutely, but the reality is, you know, once the Commission has made a decision, yes, there are recourses but I think the big game is here and so we appreciate your presence here.

2103 MR. LEVIN: Very happy to be here. Thank you so much.

2104 THE CHAIRPERSON: So why don’t we adjourn until 1:45 and we’ll continue with the next Intervenor at that point.

2105 Thank you very much.

--- Upon recessing at 12:47 p.m.

--- Upon resuming at 1:46 p.m.

2106 THE CHAIRPERSON: À l’ordre s’il vous plaît. Order please.

2107 Madame la secrétaire.

2108 MS. VENTURA: Thank you, Mr. Chairman.

2109 We will now proceed with the presentation by Mr. John Roman.

2110 Mr. Roman, you have five minutes for your presentation.

PRESENTATION

2111 MR. ROMAN: Hello Chairman, Commissioners. Thank you for allowing me to appear before you today.

2112 I’m here to talk to you about first principles. To that end, I thought I’d share a quote reportedly by King Henry IV:

2113 “The shortest and surest way of arriving at real knowledge is to unlearn the lessons we have been taught, to mount the first principles and take nobody’s word about them.”

2114 I have three points to follow up on my initial submission. What is the just and reasonable price for a gig of data or telecommunications services, for that matter?

2115 And when debts on infrastructure development are fully serviced, is a previously just rate still reasonable?

2116 And finally, the Rumpelstiltskin dichotomy.

2117 What is a just and reasonable rate for a gig of data? Has the regulator considered what it deems the amount to be? Should the first gig of data cost more than each additional gig or should each and every gig cost the same? And if so, why?

2118 These questions only the regulator can determine based on evidence only the TSPs can provide. As we are discussing it here, data is effectively alchemy; ones and zeros converted into light or radio waves and then converted back to create a banking transaction, a meme of an adorable cat or a Crave program.

2119 This modern-day alchemy happens on demand, whenever customers want, and two companies have already been transmuting this straw into gold in unlimited amounts.

2120 After due examination, I request that CRTC recognize this practice for what it is; a breach not of section 27(2) but of 27(1) of the Telecommunications Act. Why 27(1)? Twenty-seven, one (27(1)) takes priority over section 27(2) and though differential pricing is the offending issue here, it’s really a symptom and not the ailment itself.

2121 In the current circumstances, the only way to determine if there has been a breach of 27(1) is for the CRTC to investigate. Until the regulator determines what is a reasonable and just price for a gig of data, any decisions on 27(2) can be little more than bandaids.

2122 As a hypothetical example, let’s say that a cell tower costing $800,000 has a monthly repayment plan of $80,000. On top of that, the telco in question will need to make some profit, say, $20,000 a month. Because I like round numbers, that means we’re dealing with $100,000. In 10 months, the debt will be paid off and the telco will have made $200,000 in profit.

2123 But here’s the issue. Once the debts are paid off, is it still just and reasonable if the TSP keeps the prices as they were, making $100,000 in profit a month, so that customers continue to service debts long since paid off? Or is it just for the TSP to reduce charges by $80,000 a month, while still maintaining the $20,000 in profits?

2124 The lesson here is that what can start out as reasonable, can shift and become unreasonable through nothing more than time, and lack of review.

2125 If data itself has no intrinsic cost aside from the electricity required to power the transmitters, then let’s just do away with data charges and simply bring back the access fee, to keep the lights on, so to speak.

2126 I am, therefore, requesting that the Commission determine what the cost of a gig of data is after the infrastructure development costs have been paid off. If this alchemy costs nothing once the philosopher’s stone is created, then the CRTC can ensure the savings are passed onto consumers.

2127 Mr. Chairman, I recognize that I’m quickly approaching my allotted time, so I’m going to wrap things up. And I hope that in my questions, I’ll be given the opportunity to address the Rumpelstiltskin dichotomy.

2128 Look, I appreciate that I’m fully asking you to add more work to your already full plates but as a federal regulator, the Commission is the only body in a position to do this. I rightly don’t have access to all the numbers as an individual, which means I can only raise a concern.

2129 You, however, can securely access the information needed to determine whether section 27(1) should be more strictly enforced.

2130 Referring back to Henry IV, I ask that you not take anyone’s word on whether section 27(1) has been breached. After appropriate review, you can decide whether the application of section 27(1) now precludes Bell and Videotron from charging for data.

2131 Thank you. I would be happy to answer any of your questions at this time.

2132 THE CHAIRPERSON: Thank you, Mr. Roman. I’ll put you in the hands of Commissioner Dupras.

2133 COMMISSIONER DUPRAS: Thank you. Good afternoon.

2134 MR. ROMAN: Good afternoon.

2135 COMMISSIONER DUPRAS: Are you aware that the wireless telephony is deregulated by the Commission since there is competition in the sector?

2136 MR. ROMAN: Yes.

2137 COMMISSIONER DUPRAS: And -- but what you’re asking us to look at seems to be a wish of yours that we would regulate -- re-regulate retail rates; is that what I understand?

2138 MR. ROMAN: Not necessarily re-regulate. I would suggest that it’s to regulate or re-regulate in any way is not necessarily the end result. The result is to examine what is currently going on in the marketplace. If it turns out, for instance, that everything is reasonably priced, that’s fine. Then consumers who regularly complain about data charges can be made aware of why charges are the way they are.

2139 On the other hand, if it turns out that there’s a lack of competition and that regulation does need to be more strictly enforced, then that option is still on the table for you.

2140 COMMISSIONER DUPRAS: Okay. You know this proceeding is to look at the differential pricing practices?

2141 MR. ROMAN: Yes.

2142 COMMISSIONER DUPRAS: And we want to make sure that -- we want to see whether there are concerns with these practices.

2143 Have you given any thought about this and do you see any risk or benefits with these differential pricing practices?

2144 MR. ROMAN: I have reviewed the differential pricing practices as well as the submissions -- the initial submissions by other contributors to this hearing. I tend to agree with -- I think it was Eastlink’s original submission, that in a marketplace with a lot of competition that we would have a situation where there would be reasonable approaches to differential pricing.

2145 That being said, with the concentration of the marketplace the way it is both with broadcasters and telecommunication companies being more or less aligned, if not owned by the same parent company, it becomes a blurring of lines that can raise issue.

2146 There was another point here on that matter. I've completely blanked on it. So I'll just move on and if I come back to it later, that's why.

2147 COMMISSIONER DUPRAS: Okay. Well, also I read that you would want to get rid of data caps.

2148 MR. ROMAN: If the evidence supports that argument, yes, that's something that would have to bear out. But I suspect that data caps are, to some degree, a holdover from developing infrastructure which made complete sense. You have to make money back on your infrastructure development, whether you're Bell, Rogers, Vidéotron, whomever, and you have to make a profit. That makes complete sense to me.

2149 That being said, if the price of doing business now once that debt is serviced is beyond negligible, next to nothing, then you can reduce the rates to a point where data caps, at least on appearance, would be nothing.

2150 COMMISSIONER DUPRAS: So it would be unlimited for everyone?

2151 MR. ROMAN: Assuming that the infrastructure costs have been paid back, yes.

2152 COMMISSIONER DUPRAS: And if it is unlimited for everyone, then I mean would it be -- would it be just, I mean, for those that use less the internet compared to those who are heavy users? I mean wouldn't those that use the internet less be in fact subsidizing the heavy users?

2153 MR. ROMAN: If there's no additional costs to using the internet, then there's no subsidization in that regard. So if the data caps have been removed because there's no incremental cost for a gig of data, I believe it was -- who was it here -- Media Concentration Research Group, the first group that presented, quoted Michael Geist saying that in 2011, each cost of a gig of data costed roughly eight cents and that subsequently that price had probably gone down.

2154 Assuming that price had gone down to say, as a hypothetical, one cent, you can bring back an access fee in and say okay, we're going to do away with data charges altogether. We're going to say if you want to have data on your phone, it will be $10 flat a month and that's what, 100 gigs. That really would cover I think the majority of people on their phones. So there are options there.

2155 COMMISSIONER DUPRAS: Well, I mean it's to the companies to determine the price.

2156 MR. ROMAN: Of course.

2157 COMMISSIONER DUPRAS: Because you know, it's a competitive market. So it could be anything.

2158 MR. ROMAN: Yes.

2159 COMMISSIONER DUPRAS: It could be higher.

2160 MR. ROMAN: If the price of a gig of data is higher, yes, certainly.

2161 COMMISSIONER DUPRAS: Since there might be more consumption and more -- more demands on the network.

2162 MR. ROMAN: Yes.

2163 COMMISSIONER DUPRAS: Okay. Well, these are about my questions.

2164 If you have anything that you wish to add, go ahead.

2165 MR. ROMAN: May I go back to the point I missed before because of time? Thank you. So my Rumpelstiltskin dichotomy if you will.

2166 In Bell’s initial submission to CRTC Hearing 2016-134 on the subject of video streaming, they said:

2167 “We submit that although of interest from an entertainment perspective, such applications and services are not necessary to meaningfully participate in the digital economy”.

2168 And they went on to explain what those were, banking, paying taxes, research, shopping, et cetera.

2169 At that hearing, they were adamant about discouraging video streaming or other high bandwidth usage activity. And yet, they had already been offering unlimited services, as we've seen as a result of this hearing.

2170 So as a telecom provider and a broadcaster, Bell defined what Canadians needed and then opened the flood gates on other services entirely. Had it seriously wished to help Canadians participate in the digital economy, it would have provided unlimited data for those services it deemed essential to that economy, Ebay, government websites, bank websites, public broadcasters, et cetera, but excluded Netflix, Shomi, Crave, streaming services.

2171 I'm puzzled that they'd offer a service that would be the greatest drain on their infrastructure and the most intensive user of bandwidth and provide it without charging by volume.

2172 It only makes sense if Bell knows its network infrastructure is already capable of handling the most intense of customer demands in which case one would have to deduce that it could obviously handle the much less demanding meaningful participation in the marketplace at no incremental charge as well.

2173 So if a TSP can provide both high demand video streaming and the much less intensive meaningful services at no charge, the only conclusion is that charging for data has become unnecessary.

2174 Thank you.

2175 THE CHAIRPERSON: Thank you, Mr. Roman. I believe those are all our questions.

2176 MR. ROMAN: Thank you.

2177 THE CHAIRPERSON: Thank you for participating in the hearing.

2178 Madame la secrétaire?

2179 THE SECRETARY: Thank you.

2180 We will now proceed with the presentation by British Columbia Broadband Association appearing via videoconference from our Vancouver regional office.

2181 Do you see and hear us? Can you repeat?

2182 THE CHAIRPERSON: Yeah, the volume is not very high on your end. Maybe the technical folks can adjust it? There we go. Yeah, apparently technology just requires the mic to be closer. Okay.

2183 THE SECRETARY: That's perfect.

2184 THE CHAIRPERSON: Go ahead.

2185 THE SECRETARY: So please ---

2186 MR. ALLEN: We will be about five centimetres.

2187 THE SECRETARY: There you go. Please introduce yourselves and then you have 15 minutes for your presentation.

2188 Thank you.

PRESENTATION

2189 MR. ALLEN: Okay. Thanks a lot.

2190 My name is Chris Allen. I am on the Board of Directors of B.C. Broadband Association. And monsieur?

2191 MR. SONICO: I'm Rey Sonico. I am the Secretary and Treasurer of the B.C. Broadband Association.

2192 MR. ALLEN: Okay. Thanks, guys. I'll just open up with some initial comments here.

2193 So the B.C. Broadband Association, or the BCBA as we know ourselves, we're a group of telecommunication service providers, equipment suppliers and infrastructure constructors in Western Canada largely made of ISPs. We represent smaller internet service providers. Many of our member ISPs operate in remote and rural parts of British Columbia and Alberta.

2194 In this proceeding, the Commission is asking whether differential pricing practices should be regulated, and how. Part of this investigation is trying to understand what constitutes differential pricing practices.

2195 A number of different pricing practices have been used as examples during this proceeding. These practices include charging different rates for data consumed at different times of day, in different geographical areas, and in different quantities.

2196 They also include traffic consumed for different purposes, like checking your account usage. And finally we're also looking at data being classified by different types, video, voice, those kinds of categorizations.

2197 And some of these practices are used today and some are not commonly used at all. We can imagine that in years to come, as the internet changes, and our society with it, that new and more imaginative pricing structures will be developed.

2198 As we've said, most of our members are small or very small internet service providers. And as small companies, we don’t have large budgets for extra network core infrastructure. So few of our members actually have the capacity today to do the kind of differential pricing that's being talked about. And some our members are so small that they actually aren't able to implement any type of bandwidth billing. It's just beyond their technical capabilities.

2199 But on the other hand, some of our larger members have implemented traffic management practices and are in a position today to launch differential pricing if that is something that makes sense for them.

2200 These are the members that initially made investments into the equipment required for traffic management in order to deal with the limitations that we face as small rural providers, such as limited backhaul and high-cost fibre capacity in some of the small communities we work in.

2201 So our concerns in this are really two-fold. First, we're concerned that a decision here, we could risk losing the ability to use data pricing as a network management tool and that it would also take away some of the originality that you can come up with in terms of inventing packages to be competitive.

2202 It's very important in our small networks that we be able to manage our networks through economic inhibitors, such as bandwidth billing, to stop the heavier users from taking more of the capacity available when you're doing rural last-mile connectivity.

2203 And the second point is that we're concerned that some of the large telecommunication companies could use differential pricing practices to exercise their market power in anti-competitive ways that will drive smaller competitive businesses out of the market.

2204 Now, we read a lot of the submissions and we actually agree with the broad principle that TELUS presented that in the absence of vertical integration issues or the abuse of market power, differential pricing can be beneficial to a healthy competitive market. We do share TELUS’ concern that vertically integrated companies in particular have the potential for abuse of market power.

2205 Our position, as we described in our initial submission, is that differential pricing should be broadly permitted. Differential pricing should be acceptable in cases where a service provider has made an arrangement with a content provider to inject the traffic downstream from their gateway, or the service provider has cached content downstream for their gateway. This is on-net traffic and should have less cost to the service provider so they should be able to pass that cost savings on to their end user and, therefore, really implement differential pricing practices.

2206 Now, we have some concerns because we do recognize that the larger carriers are in a better position to make the kind of deals with these content providers to bring content on-net, so to speak, but we think that restricting that practice will restrict innovation in the industry.

2207 We foresee in the future as 4K TV becomes a bigger streaming factor that injecting that traffic on-net in cache formats or within your own internal network is going to become essential, rather than delivering it over the completely open internet.

2208 And so any of the deals for on-net traffic injection between service providers and content providers should be consistent with an open, competitive market, and not abuse the market power of the large service providers. Like exclusive deals that prevent small providers from offering the same content as large carriers would stifle innovation and competition, and it would also veer away from net neutrality as the overarching goal of any kind of changes that are made.

2209 In general, as expressed in the comments from many respondents in the proceeding, we believe that minimal regulation is the best choice to permit the market to function and innovate. Regulation of differential pricing should be driven by complaints of anti-competitive behaviours rather than an onerous sort of if you, you know, wanted to put out new pricing you’d have to run it through some sort of a board to approve it type of a scenario.

2210 But in suggesting a complaint-based regulatory framework, we expect that the complaint process would not be so burdensome that small companies would not be able to initiate complaints. We also expect that the complaint process would be able to provide a ruling within a reasonable timeframe, so that market abuses can be curtailed before the competitiveness of the market is damaged.

2211 With minimal regulation that targets abuses of market power, differential pricing practices will be used by carriers in a manner that is consistent with open and competitive markets. The ability to use differential pricing will spur innovation in the telecommunications’ industry and provide consumers with better and more unique choices.

2212 It’s important that smaller ISPs, in particular, are still free to manage their networks through data billing practices that encourage fair use of the limited bandwidth resources in small communities and provide economic compensation to those ISPs to further invest in the ever growing data needs of their consumers.

2213 We hope the Commission will ensure fairness throughout the industry without creating too much regulatory overhead for the smaller players.

2214 Thank you for your opportunity to provide these comments and I’m happy to answer any questions that arise from that.

2215 THE CHAIRPERSON: Thank you both. I’ll put you in the hands of Commissioner Vennard who will start us off.

2216 COMMISSIONER VENNARD: Good afternoon. Thank you for appearing at our hearing. I thought you would be here in person, but I guess you’re in Vancouver.

2217 MR. ALLEN: That’s right. It’s a long flight.

2218 COMMISSIONER VENNARD: Yeah.

2219 MR. ALLEN: We’re going to try to attend the ISP Summit in Toronto next week so ---

2220 COMMISSIONER VENNARD: Okay. Good. Good luck with that.

2221 MR. ALLEN: --- it’s kind of too hard to do two flights to Ontario.

2222 COMMISSIONER VENNARD: Yeah, I hear you.

2223 I have a number of questions that I want to put to you that we can get into a discussion on, but first of all, I want to just clarify a few points.

2224 It sounds to me like if I look at your position as you describe it in number 10 of your oral presentation that you just gave right now, you’re really looking at the DPPs as a tool, a market tool more so than something that’s required to -- for traffic management purposes; would that be correct?

2225 MR. ALLEN: I think both -- in both ways it’s important. I mean, I think at the end of the day a consumer might find benefit in differential pricing practices if certain content they were very interested in, it was a big part of their everyday usage was available on a certain provider. But I also have to wear the hat of the provider who deals with expensive backhaul and expensive bandwidth in small communities and the need to manage that usage fairly across that network.

2226 COMMISSIONER VENNARD: Okay.

2227 MR. ALLEN: So I ---

2228 COMMISSIONER VENNARD: That brings me around to my ---

2229 MR. ALLEN: --- I can see both.

2230 COMMISSIONER VENNARD: --- that brings me around to my next question. Earlier today we heard a view that the role of the ISP should be strictly in the -- in transport and that’s that. Would you -- you don’t obviously don’t see yourselves that way. Would you care to comment on that or elaborate on that?

2231 MR. ALLEN: Yeah, I mean, our role is certainly to, at the end of the day, provide the internet. But I think our consumers expect more and more consistent service, good quality of service throughout as we deliver it. And to provide wide open blanket internet as many people are probably suggesting it, you know, no cost for any usage base doesn’t actually allow that to take place, especially in the smaller communities where, you know, you may be paying a lot of money for a 30 megabit pipe to feed a community of 100 people, in a wide open scenario, you’re not going to be able to provide a good, consistent peak time experience for your consumers.

2232 So, you know, ISPs shouldn’t be the gatekeepers of content. I certainly wouldn’t want to argue that we should get involved in that part of it.

2233 COMMISSIONER VENNARD: Right.

2234 MR. ALLEN: But I believe that we should be allowed to economically favour certain types of activity if it’s necessary in a smaller network just to manage that traffic.

2235 COMMISSIONER VENNARD: Okay. Do you see that as being inconsistent with the role of a common carrier at all from your viewpoint?

2236 MR. ALLEN: In the terminology of common carrier, I’m not sure I understand ---

2237 COMMISSIONER VENNARD: Where there’s -- there is ---

2238 MR. ALLEN: --- that definition.

2239 COMMISSIONER VENNARD: The common carrier doesn’t deal with the content. It’s completely agnostic.

2240 MR. ALLEN: Right, right.

2241 COMMISSIONER VENNARD: Like it ---

2242 MR. ALLEN: And ---

2243 COMMISSIONER VENNARD: --- it stems from the whole idea of the telephone. There’s quite a bit of background on this within our submissions, but the idea that you can pick up the telephone.

2244 MR. ALLEN: Right.

2245 COMMISSIONER VENNARD: If I telephone you, then the role of the pipe, if you will, is just to put my message out to you. Nobody interferes with it. And that’s what a lot ---

2246 MR. ALLEN: Right.

2247 COMMISSIONER VENNARD: --- a lot of our ---

2248 MR. ALLEN: And I think it’s ---

2249 COMMISSIONER VENNARD: That what a lot of our hearing has been about so far is to what extent. And this, of course, brings up 27(2), to what extent are -- it forms the basis of the hearing. If you read our notice of consultation that’s actually what we’re looking at here is that.

2250 MR. ALLEN: Yeah, so I would say, like historically, the role of the common carrier has been to do exactly what you’ve been saying. You know, just provide the internet and no differential pricing practice. And I would say that within our membership no one to date that I’m aware of has ever actually done any differential pricing practices. We have done bandwidth billing, but never differential pricing practices.

2251 I think what we’re trying to look forward into the future with things like 4K TV and certain things that will put extra constraints on the network that these things may have to come to be. You know, in the perfect world there’s enough bandwidth to go around and these things don’t need to be implemented.

2252 COMMISSIONER VENNARD: M’hm.

2253 MR. ALLEN: But I think that we’re maybe on the verge of a paradigm shift where it may become necessary. And I don’t think that we’re excited about that prospect necessarily because it’s going to involve a lot of extra difficulties in terms of the billing infrastructure to even be able to do that for a smaller carrier is very challenging. But it’s one of those things where I guess the door needs to be left ajar in some way to allow that to take place if it’s going to mean the difference between one or two heavy, heavy users wrecking the internet experience for the rest of the users. I think that tool will necessarily need to be there for some carriers in the future.

2254 COMMISSIONER VENNARD: Okay. Just for the sake of clarity, I just want to position you in the whole thing. You are -- your organization, the members of your organization of which I think there’s about 40 or 50 organizations that ---

2255 MR. ALLEN: M’hm. That’s correct.

2256 COMMISSIONER VENNARD: --- form your membership? You’re just on -- you’re on the other side of the gateway, if you will. Is that -- would that be a correct way to put it?

2257 MR. ALLEN: It’s sort of last mile is a lot of what our guys -- what our members that will buy a fibre access in a small community, for example, and then do last mile rural wireless from there.

2258 COMMISSIONER VENNARD: Okay.

2259 MR. ALLEN: We do have urban ISPs and a lot of us operate in the wholesale or our TPIA space as well, but primarily our membership deals a lot of that last mile ---

2260 COMMISSIONER VENNARD: Okay.

2261 MR. ALLEN: --- infrastructure piece. Yeah.

2262 COMMISSIONER VENNARD: Would you -- you refer to -- your submission or your intervention appears to be based very heavily on the idea of the data packets and not the packets and not interfering in any way with those which would, of course, would be consistent with a common carrier approach to things. But yet you mention on-net traffic. Can you explain to us how all of these different pieces go together?

2263 MR. ALLEN: Right, right. So the idea of on-net content would be to provide that -- to be taking it within your own network, like a caching server is an example of that. You can make an arrangement with a larger content company like a Netflix, for example, to have a content server within your own network so you’re not actually traversing the -- all the way back out to the true open internet.

2264 Like one of the problems for a provider is that our upstream provider to the internet is going to charge us for the data usage no matter what we do, but bringing it on net, so to speak, putting that into our network where it’s at a place where it doesn’t ever transverse the upstream providers network, that allows us to then have that content for free basically other than the constraints that it puts on our last mile infrastructure, which is often larger and can handle that.

2265 So on -- we started to think in our first submission about whether there was a technical way to differentiate between where a differential should be allowed and where it shouldn’t be.

2266 COMMISSIONER VENNARD: M’hm.

2267 MR. ALLEN: Because if you say that something’s on net so that now you say okay there actually isn’t any real cost to the subscriber -- to the ISP to deliver that to their subscribers. So maybe that’s an area where they shouldn’t -- they should be allowed to offer a discount on that traffic to their subscriber because they’re not paying the full price of it.

2268 But that -- the technical argument gets -- I mean, it’s gets difficult to manage and prove out and things of that nature, but I think we’re all in the mindset of a cost-based type of costing -- you know, true costing type of world. And so if it can be shown I guess that the cost to that content is negligible then you should be able to give that at a discount to your subscribers as a way of making yourself more attractive to your consumers.

2269 COMMISSIONER VENNARD: So that’s why you describe it as injecting content further downstream?

2270 MR. ALLEN: M’hm. You’re sort of injecting it, yeah, into the last mile rather than going all the way out through your gateway to your upstream provider and grabbing it on the open internet and delivering it back out through.

2271 COMMISSIONER VENNARD: Okay. So that would be under the control of your company for example, an ISP -- a competitive -- a small competitive ISP?

2272 MR. ALLEN: Exactly.

2273 COMMISSIONER VENNARD: Okay. And just ---

2274 MR. ALLEN: Yes.

2275 COMMISSIONER VENNARD: --- injecting it and making arrangements or deals with whomever they want. Is that -- so that’s basically what ---

2276 MR. ALLEN: Yeah, I think -- I mean ---

2277 COMMISSIONER VENNARD: That’s basically what your proposal is what you’re writing about -- what you wrote about in your submission?

2278 MR. ALLEN: Yes. I think that -- I think our argument there is really just to say that if someone were to build that type of scenario where they have this content for free on their network that they’ve arranged with another upstream provider and it has no cost to them they should be able to offer that at a discount to their consumers, and it does differentiate them in the market a little bit.

2279 We know it’s a bit of a slippery slope because ultimately a small provider has a much less opportunity to negotiate that type of a deal with a content provider than a large incumbent provider is going to be able to do just due to market forces, but we felt that we wanted to keep -- kind of keep that as an option if we were able to organize that within our own selves to be able to provide to our end users.

2280 COMMISSIONER VENNARD: To your knowledge, are any of your members thinking about something like this, or doing it, or planning it?

2281 MR. ALLEN: I do know of one our members’ who does have a caching server which does cache a lot of different content. As of today, he’s not offering that traffic for free to his end users, but I have had a conversation with him about that idea. So I think it’s something that could come to bear, yeah.

2282 COMMISSIONER VENNARD: It’s an interesting idea for sure.

2283 So that, of course, could be potentially quite lucrative for the competitive ISP. So can you fit that in ---

2284 MR. ALLEN: If they were able to drive a lot of new customers their way, yeah.

2285 COMMISSIONER VENNARD: And so could you maybe line that up with something like a zero rating?

2286 MR. ALLEN: Yeah, exactly, that’s what -- I think that is what you could do if you could work out a deal with a content provider so that you’re injecting it within your own network at no cost you could zero rate their traffic and make that a special package to your consumers and then they may choose you over the other guy because they like that content.

2287 I think where we wanted to make that differentiation though is that that’s fine in a market-based scenario. Where it gets difficult is in the vertically integrated companies that own that content with their other arm, you know, the larger guys, the Bell’s, Rogers, Shaw’s, Videotron that have that content arm themselves, they’re going to be able to buy that content within themselves for free virtually, or however they set up their arrangement, whereas anybody else in the open market they could restrict access to that content or charge at a very high level and that would create an uneven playing field I think.

2288 So that’s where we don’t feel that they should be allowed to inject their content for free, because that -- you know, that’s not fair and they would be therefore using their market forces in a very powerful way.

2289 COMMISSIONER VENNARD: Would you see a problem with it going the other way, where one of the smaller competitive ISP’s could possibly approach one of the vertically integrated companies? Would that have the content arm that you’re talking about and just running it through? Do you see it going that way too?

2290 MR. ALLEN: If -- I’m trying to imagine why they would allow free content to pass through that way. But if they did, then I think the ISP had then worked out an arrangement with a completely separate third party company for the content and was able to provide it on their network at lower no costs then they should be able to zero rate that to their consumers.

2291 COMMISSIONER VENNARD: Okay. Did you have any further comments that you wanted to make about that idea?

2292 MR. ALLEN: I think ultimately, you know, the key thing here is, like I said several times, there’s a lot of -- a lot of our members are -- you know, they’re five man operations, you know, that are billing an owner/operator type who’s out climbing towers and installing wireless infrastructure, and they -- and anything that comes to bear here that’s going to be a lot of regulatory overhead is going to be very hard on those smaller players. They’re already challenged in a lot of ways just based on their scale.

2293 So I think that was why we really wanted to make sure whatever the end result out of this is is that there’s not a lot of new regulatory hurdles for them to sort of jump through in order to be able to be compliant.

2294 So a light touch where a problem doesn’t exist is, I think, preferable. I don’t think today differential pricing practices are a big problem. It’s just it’s good to start looking at it and thinking about it because it definitely will start to become an issue down the road. But definitely not anything too heavy handed would be our preference, I suppose, would be an overarching statement.

2295 COMMISSIONER VENNARD: Okay. And on that note, I want to talk a little bit about the definition of the differential pricing practices that you mention in your submission. There are six examples that you provide to us. Do you disagree with any of them? Do you see any issues, or problems, or any regulatory concerns with any of them?

2296 MR. ALLEN: Well, I mean, if we’re talking about, you know, different -- time of day traffic, for example, is an example of a differential pricing practice.

2297 COMMISSIONER VENNARD: M’hm.

2298 MR. ALLEN: And that’s one that I think actually has been used by ISP’s in the past. We all know about peak time usage being an issue where, you know, most people between 6:00 and 10:00, 11:00 at night that’s your kind of peak time where everyone’s home, the kids are home from school, the parents are home, everyone starts watching their online streaming, that’s the toughest time of the day for an ISP to manage their traffic.

2299 You know, 2:00 a.m. to 7:00 a.m. the network can be very quiet. So by offering your data free during that window you can help influence subscriber behaviour to say okay if you’re going to do heavy downloads, or Windows updates, or things of that nature, try to schedule those or set those up for the middle of the night and we won’t charge you any extra for your bandwidth usage. I have seen ISP’s do that before and I think that’s a valid way of managing your network and just trying to encourage more fair use during peak times when there’s a limited resource.

2300 So that’s an example, I think, of a very positive use of differential pricing.

2301 COMMISSIONER VENNARD: Yeah.

2302 MR. ALLEN: You know, different -- I think the tricky one I think that is really doing it by type, you know, video -- making video, voice, different types of -- having them be zero rated. Maybe that’s where people get into more of the concerns about net neutrality and whether or not your -- I think the net neutrality piece of it is as long as you’re not picking one provider over another and saying on our network you can’t watch this content and you’re being fairly open, and as long as you’re providing a big enough data cap that a person can do the basics of what one needs to do with the internet today, you know, I think -- that’s the one where you maybe get into more of a slippery slope I guess is the specific types of content.

2303 The time of day, the geographic location -- I mean, I’ve never seen geographic location used really. The one that was brought up was checking your account usage or maybe accessing the company’s own website. You know, if you’re a subscriber of that ISP and you want to go that ISP’s website to check your bill or to see how much usage you’re using, there’s a lot of talk that that should be zero rated. And I think that’s fair, you’re not using -- you’re using traffic to help the ISP with your own management there and at the end of the day the amount of data you’re talking about when you go to check your bill is almost negligible as well, so I think -– I don’t think that’s a problem there.

2304 I don’t know if that’s all six. I don’t know if I captured all six, but ---

2305 COMMISSIONER VENNARD: No, I didn’t need you -– I really just wanted you to comment on if you had any concerns about them. If you agreed with any of them or had any concerns yourselves or wanted to raise what you thought would be a regulatory concern for us that we should keep an eye out on from your perspective.

2306 But I think you’ve -– I think you pretty much covered that.

2307 MR. ALLEN: I think as long as access to -– yeah, yeah.

2308 COMMISSIONNER VENNARD: Yes, okay.

2309 Further on in your submission you mention that there are potential benefits to customers and you mention rural and remote customers. Can you be a little bit more specific about what the benefits to the rural and remote customers might be?

2310 MR. ALLEN: So a lot of that benefit really is around the idea that everybody would have a better peak time usage experience.

2311 A lot of the small communities, as I did mention, they’re very bandwidth challenged, where the cost for bandwidth in these towns to provide this last mile service it’s more expensive than in an urban area, by 30 Megabit or 100 Megabit.

2312 Fibre optic connection to feed that community in a small community of 4 or 500 homes is a lot more than it is in downtown Vancouver or downtown Calgary, for example.

2313 So you’ve already got a more expensive cost in and less subscribers that you’re going to have when you get there, so during the peak times you have to give it -– be conscious of your usage.

2314 So a differential pricing practice that encouraged more fair use of that peak time capacity to -– possibly discourage people from doing 4K streaming or doing their heavy downloading during that period would be a benefit to your average consumer who just wanted to go on and have a good experience.

2315 In a completely wide open type of scenario with no network management and no billing -– differential billing practices, some people are going to get the good experience and some people are going to have the bad experience based on the amount of available bandwidth, so I think that would be an example of a benefit to the consumer.

2316 And I guess just the consumer choice argument where more options are a better thing, a lot of people would argue, so if you can have multiple different types of packages that suit the different type of consumers than I guess that’s a good thing as well.

2317 COMMISSIONNER VENNARD: Okay on the flip side there, can you comment please on the potential risks and that would be -- again I’d ask you to comment specifically on rural and remote.

2318 What do you say the risks ---

2319 MR. ALLEN: Well I guess the potential -– yeah, I mean the potential risks there are where an operator says okay well in my peak time I can see that sixty percent of my traffic is going to Netflix, so rather than pay the extra money to upgrade my internet infrastructure my best solution is to block Netflix or to make Netflix so prohibitively expensive that it’s, you know, it’s five times as much per Gigabyte to watch Netflix as it is to watch -– to do anything else on my internet connection.

2320 You know, that would be a bad example of differential pricing practice, where it was implemented in a heavy handed way that affected peoples’ ability to watch certain content and effectively made it economically difficult to the point where it stopped that from happening.

2321 COMMISSIONNER VENNARD: Okay. Can you give us some comments please on gatekeeping? It would -– within your scheme and your idea, it would seem that there might be the very big and real possibility of turning into gatekeepers. Can you comment on that?

2322 MR. ALLEN: Yeah, yeah, I think that’s for sure a concern and that’s something that -– it’s very important that no matter what type of differential pricing is allowed, that nothing be restricted. You shouldn’t be able to block traffic.

2323 I think you should be possibly able to offer discounts on certain types of traffic, internet traffic, but you shouldn’t be able to -– I think that’s a good distinction. You shouldn’t really be able to charge more for certain types of data.

2324 You should be able to have everything be at a certain level. Maybe you can discount certain things to possibly encourage behaviour, although that’s a little like gatekeeping, but charging more for certain things I think that type of differential pricing practice is designed to be a gatekeeper more than just offering discounts for certain types of traffic.

2325 And it is a dangerous thing to -– if the ISPs become too much of the gatekeepers of content. Yeah, I don’t want to become the gatekeeper of content in my business.

2326 I just want everyone to have a good experience with their internet connection at peak times and be able to have a business model that works and allows me to continue to invest in their ever growing data needs.

2327 COMMISSIONNER VENNARD: What sort of strategies would you see to mitigate that possibility of turning into a gatekeeper?

2328 MR. ALLEN: I guess setting a rule set that did maybe -– yeah, I think we would be in agreeance that charging more for certain kind of data should be a differential pricing practice that’s not allowed, so that’s a good way to stop gatekeeping.

2329 You know I think -– again I’m cautious of putting too much regulatory overhead in there where someone who wanted to do some sort of differential pricing would have to run it through for approval, because that wouldn’t allow you to adapt very quickly and it would create a lot of overhead for the Commission and for the ISPs.

2330 So that -– I don’t think I -– I think that’s why we were sort of arguing more for a complaints based system where if somebody saw that something was being done that they felt was really unjust and unfair in some way, that they could -– they could make a complaint that could be reviewed and -– in a fairly quick turnaround time we could -– a decision could be made as to whether that was a fair use of the market power or competition.

2331 COMMISSIONNER VENNARD: Okay. In your view, I’d like you to comment on if you see that differential pricing practices are the examples of market forces or anti-competitive behaviour? How do you see that?

2332 MR. ALLEN: They could be. They haven’t -- as I said a lot of this is theoretical because it hasn’t been an impact in our markets today.

2333 COMMISSIONNER VENNARD: Okay.

2334 MR. ALLEN: But they certainly -– there’s room for that. I mean we had a lot of internal discussion as to our position because we could see it from a lot of different angles and there is an argument to be made that any type of differential pricing practice will favour larger companies over smaller companies, because they’re going to be able to make those bigger deals with the content providers.

2335 So there is room for abuse within there and certainly there’s room for abuse if you own large amounts of the media content in the first place and use that market power as an advantage.

2336 So that’s something where -– that’s why we sort of drew the line in our submission about and agreed in some ways with what Telus was trying to get at, which was that if you owned that content you shouldn’t use your market power as a vertically integrated company to be able to -– to use that market force to, you know, harm your company’s competitors.

2337 So it’s -– there’s certainly a lot of room within differential pricing for people to abuse market power. How to properly set out a set of guidelines and rules around it I’m not at a great position to say exactly how that is -– and I don’t mean to sound wishy-washy, it’s just it’s a very -– it’s a touch world to get into that and we’re not there today.

2338 So I think it might be one of those situations where when you see it happening it will feel a lot like abuse of market power and theoretically I don’t know what it looks like exactly today.

2339 COMMISSIONNER VENNARD: Yes. I’d like you to comment also on transparency in terms of how would you -– how transparent do you think ISPs are, should be, need to be, when it comes to DPPs.

2340 MR. ALLEN: Well I think like I said none of our members, that I’m aware of, are doing DPP today, but I think ISPs in general when they have been doing it, if they’re doing it in a way to sort of manage their network space, they may not be -– they may not be that transparent because they may not actually be advertising to the consumer that they’re doing certain things in the background to -– well, sorry.

2341 I was thinking more from the point of view of throttling or doing different types of things with traffic. We’re talking strictly DPP. That’s a pricing initiative.

2342 So that’s got to be transparent, really. I mean I think if you’re going to have some sort of differential pricing practice, you’re generally doing it in a lot of ways to market to a consumer that hey this content is free on our network for example.

2343 So you’re going to be transparent to the consumer, because you want them to know that you’re doing it.

2344 So where we have seen DPP it has been transparent in that way, but I believe there’s probably other examples you could find where DPP could be being applied in ways that are maybe not as clear to the consumer and hidden in the fine print, that type of thing, that we might not even be aware of.

2345 The more transparent somebody’s being with it the more likely we would have been to have come across it, but I think in general ISPs try to be up front with their customers as much as possible. It’s difficult. There’s a lot of backlash if a consumer comes to an ISP and starts accusing them of doing things, that can be a bad situation that you don’t want to get into with your consumers.

2346 So from my point of view, all the ISPs in our organization don’t engage in anything that wouldn’t be transparent to their consumers.

2347 In terms of the transparency with the Commission is another way of doing things, I guess, in terms of looking at things if a situation was implemented or some regulatory framework was implemented, where DPP had a lot of rules around it. It would be interesting to see how the transparency the ISPs would have to provide to the Commission would be something to think about. Whether we’d have to provide regular reports or things of that nature that talked about any of the things we’re doing. If we were required, of course, we would want to be as compliant as possible in doing that.

2348 And like any business, we want to be as transparent as possible, yes.

2349 COMMISSIONER VENNARD: Also, do you think that there should be any restrictions placed on the DPPs?

2350 MR. ALLEN: So the restriction that we talked about is just around large media companies that are ISPs a well as big media content owners.

2351 We think that -- that places -- that’s abuse of market forces when they become so large that they own that content. If they’re willing to give that content for free to their end-users, they should be willing to give that same content for free to other ISPs.

2352 If they were to do that, then I think no problem. Then all the consumers could benefit from that. But if they use their market force to provide that content for free within their -- to their subscribers and don’t allow that to other ISPs or provide that content at an even higher price than the ISPs, that’s an element that shouldn’t be allowed and that’s an abuse of market force.

2353 That’s the only restriction that I think we would argue for at this stage.

2354 COMMISSIONER VENNARD: What about -- we’ve heard a few times the idea of categories. So for example, music streaming.

2355 MR. ALLEN: M’hm, so ---

2356 COMMISSIONER VENNARD: Not just unlimited music but anybody who wants to get into that part of the game. What are your views on that?

2357 MR. ALLEN: I think the problem with categories is that they are so broad and so difficult to argue. I think somebody maybe earlier brought up the comment about, you know, when does music streaming and podcasting cross over? When does an audio or radio programme become not music? So if you’re offering music streaming for free on your service and you’re not picking a single provider, how do you really open up your entire, every -- there could be some small music streaming service in Europe, you know. You’d have to offer that for free if you’re going to give that whole content -- or whole category for free.

2358 I think it’s very difficult to not start only allowing certain types of that content within the content, and I think frankly a regulatory nightmare to try to police that type of DPP. I can’t see how you could really ---

2359 COMMISSIONER VENNARD: So in your view, just keep the vertical integration out of it all together would be the way to go?

2360 MR. ALLEN: I think, yeah.

2361 COMMISSIONER VENNARD: Yes, okay.

2362 MR. ALLEN: I think, yeah. It would be technically very difficult to ensure fairness there, and you’d have a lot of small content providers complaining that their service wasn’t being offered for free on the ISP networks. And I just see that opening up a can of worms that nobody really wants to deal with.

2363 COMMISSIONER VENNARD: Okay.

2364 I’d like you to comment a little bit on DPPs for social needs. We’ve heard a bit about that too and social needs, again, definitional issues. The kind of obvious one would be something like emergency services and so on, but would you like to comment on that?

2365 MR. ALLEN: Right. I think probably access to government websites would be another kind of example of, you know, those types of things that…

2366 I mean, I can say that a lot of our subscribers are rural and remote and more and more they are being asked to rely on government services with their internet connection. So those are becoming more -- I don’t want to veer into the essential services hearing. We already had that hearing.

2367 But you know, it’s becoming more and more important. So zero-rating that kind of traffic could be something that would be a benefit to those consumers, especially pensioners, people on a fixed income, people with disabilities. Those people that need those services, you know, would be -- you know, those people would benefit from being able to access those services at a differential price point, I suppose.

2368 I would say that a lot of those services are not big bandwidth users though. There’s not -- you know, using government websites, those types of things, are not big bandwidth users.

2369 But there is an emergence in e-health, for example, in remote communities where a lot of videoconferencing with doctors is happening, and that is a big bandwidth drain. So that could be something that would be a benefit of a differential pricing practice.

2370 Putting the regulatory around the fact that ISPs have to provide that service at a differential price is tricky, unless the ISPs are also mandated that access from their upstream providers is provided at a differential price point. If that can be also pushed through to the backbone providers, then I think that would be a great benefit to -- a great example of differential pricing practice being used in a beneficial way to a consumer.

2371 But it would have to be the whole way through the pipe, not the last mile only.

2372 COMMISSIONER VENNARD: Yes.

2373 MR. ALLEN: So that the upstream provider still charges us for the video data but then we have to then provide it for free to our subscribers.

2374 COMMISSIONER VENNARD: Yes. So that would have to go all the way down the chain then right to the beginning?

2375 MR. ALLEN: Exactly. Yes.

2376 COMMISSIONER VENNARD: Yes, okay. Now, you say in your submission that you believe that differential pricing practices “should not be permitted based on the criteria described” and then you describe them.

2377 “These criteria require pricing certain packets differently based on source, destination, type or content.”

2378 So that kind of goes back to -- brings it back almost full circle to where we started, which is that from your perspective, as I understand your perspective, is the packets shouldn’t be messed with in any way or sorted out or anything else. And that the differential pricing becomes more of a tool, an economic tool, not a commercial tool.

2379 MR. ALLEN: Yeah, so it could be used to, yes, to encourage different types of behaviour at different times, for example, to manage network or, yeah, to put a premium on higher bandwidth applications possibly, if you need to manage that way.

2380 Yeah, and the argument of the packets -- is trying to get into more of a technical argument around beyond net versus offnet.

2381 COMMISSIONER VENNARD: Right.

2382 MR. ALLEN: And yeah, we aren’t in favour of people throttling certain types of packets as a network management practice, unless it’s absolutely necessary, yes.

2383 COMMISSIONER VENNARD: Sure. Okay.

2384 You also state that in your view, we should not at this time alter the ITMP framework either. Are you still of that view or is that changed since your submission?

2385 MR. ALLEN: I think that’s largely still the same, yeah. I don’t think we -- we don’t want to see any large changes really.

2386 A lot of our ideas are around if changes are necessary, then here are some ideas around that.

2387 COMMISSIONER VENNARD: Okay. Do you have any final comments that you’d like to make for us to consider?

2388 MR. ALLEN: No, I think it’s -- this is a great example of a hearing that’s coming out at a really good time in the process.

2389 Today, differential pricing practices, in our opinion, are not a big issue. So it’s good to have this hearing; let’s talk about it all now in an open way before, you know, if we held this hearing maybe in a couple of years, maybe differential pricing practices have been used in some sort of an abusive way that have harmed the industry.

2390 I don’t think they have today. So I think it’s great that we’re having this hearing now, and you’re getting lots of different input and hopefully it will inform a great decision.

2391 So thanks for the time. Always happy to be able to provide the small providers’ outlook on this.

2392 COMMISSIONER VENNARD: Okay. Thank you very much. Those are all my questions.

2393 THE CHAIRPERSON: Thank you for that. Just before you run away, paragraph 7 of your presentation today, you point out that, you know, one of the reasons you might not want -- one of the risks of us getting involved, “us” the CRTC, in data pricing is that you would -- and I’ll deal with it in two parts; it would prevent you somehow to manage your networks. I assume you mean the networks of your members, who are the TSPs. Is that correct?

2394 MR. ALLEN: Yes, yes. The end ISPs managing networks, yeah.

2395 THE CHAIRPERSON: And do I take it, it relates to using those tools to manage congestion?

2396 MR. ALLEN: That’s exactly what it is. I think one of the fears when I first started reading about this proceeding was the idea -- and I think some of the other groups may have argued for, you know, the unlimited bandwidth option for all and the charging for any gigabyte of data is wrong.

2397 Anything that took that away, I think, would really backfire especially for small providers. If we weren’t allowed to use bandwidth billing at all in terms of data caps, we would have serious problems with peak time congestion, overall performance of the network. If there was no economic inhibitor to our users from downloading as much as they possibly could, then the few would sort of wreck the network performance for the -- for the many.

2398 And it's also an important economic part of the business model today for small providers to be able to recapture some of their costs through the bandwidth billing.

2399 The upstream providers charge us for the usage. We have to pass that on to the end users in some way.

2400 THE CHAIRPERSON: Help me understand how a monthly data cap helps you manage time of day surges.

2401 MR. ALLEN: Sure. So our -- my company, which is a separate company from B.C. Broadband Association, is called ABC Communications. So we have a number of different plans with different speeds and different data allotments and when a person becomes conscious of their data limits and the cost for going over data limits, it causes them to give some thought to the value of data, not to just, you know, go wide open, use as much as they possibly can in a given month, have every advice in the house streaming in HD in the peak time.

2402 So by doing that, we found that it has caused people to think about their usage more, to be more aware of it and to manage that usage within their given month, within their data cap amount. With that said, we've had to constantly increase the amount of data.

2403 We've recently, in our rural networks, came out with a 250 gigabyte data plan whereas previously our biggest was 100 gigabytes for example. So we're constantly throwing bigger data buckets at the customers but we want that ability for them to understand there is a value on data and it doesn't -- it isn't free. It's not free to us and ultimately not free to the end user.

2404 And it is an important revenue source too. If we were to be somehow mandated to offer unlimited data on all our packages, our network's performance would suffer, but economically we would lose that revenue. It's very important for the smaller providers so that we can reinvest in our networks and upgrade all our equipment and backhaul to be able to provide more and more speed, which is also ---

2405 THE CHAIRPERSON: I don’t understand that second point because presumably unlimited wouldn't mean free. You would price it at some point.

2406 MR. ALLEN: I suppose if you -- if you offered true unlimited as a package and you set the price point in the $500 a month range or something, you could -- you could recapture your revenue that way. But then I think you would drive people away from your service if you -- if you offered that.

2407 I think it gets into a -- you know, regulatory around retail rates when you start trying to actually put data caps out into the end plans. I don’t think that anybody wants to see that in the industry.

2408 THE CHAIRPERSON: Right. I'm surprised by your $500 number but let's not waste more time on that.

2409 MR. ALLEN: Well, that's probably -- that's too high I mean but -- but for example, if a consumer were to use a terabyte on one of my rural networks, the costs to me, you know, in terms of that amount of my bandwidth being used up in the month could easily be, you know, 100 plus in wholesale costs. So it's a -- there's a very real cost to that data for small users.

2410 THE CHAIRPERSON: Right.

2411 MR. ALLEN: For small ISPs I should say.

2412 THE CHAIRPERSON: Let me get to the second part of paragraph 7 when you said it would prevent you from offering compelling packages.

2413 What do you mean by compelling packages?

2414 MR. ALLEN: So where we come up against other providers in the rural space particularly, we are constantly -- one of the differentiators that we can do is to offer more data. If we were, through our ability to work out arrangements with our upstream providers, able to get better rates on our data, we're able to pass that through to our end users and be more competitive as compared to another ISP that doesn't have that pricing.

2415 So any type of regulatory around the cost per gigabyte or that type of thing would inhibit our ability to do that and offer a compelling package that way.

2416 THE CHAIRPERSON: But okay, so when you're talking about packages, you're talking about packages of speed or data?

2417 MR. ALLEN: Speed and data caps. Yeah, data particularly.

2418 THE CHAIRPERSON: Okay. There's no other content.

2419 By the way, based on the discussion you had with Commissioner Vennard about transparency, I'd suggest before you get into trouble, you get legal advice independently on what the ITMP framework actually requires because from your answers, I didn't get the feeling you fully understood what the transparency requirements might be. But that's for you to do.

2420 More importantly, paragraph 1, you point out that some of your members are equipment suppliers and infrastructure constructors. I don’t want to ask questions about that, just about the telecommunication service providers.

2421 Do you agree that you're common carriers?

2422 MR. ALLEN: Yes, absolutely, yes.

2423 THE CHAIRPERSON: And I'm struck by the fact that your answers are often framed not under common carrier language but under abuse of market power, which is more a competition issue rather than a common carrier issue.

2424 MR. ALLEN: Right. I mean to be frank, I mean I guess we think of ourselves as telecom service providers, which I guess in the same way as our common carriers. That's how I consider my business to be.

2425 THE CHAIRPERSON: Okay. Well, again ---

2426 MR. ALLEN: Yeah, that's our answer.

2427 THE CHAIRPERSON: Again, perhaps you should get independent legal advice on this because there are section 36 and 27(2) obligations that you might not be fully appreciating.

2428 MR. ALLEN: Right. I think that brings up a point I guess about smaller providers and the amount of resources that they have to really understand all the regulatory that's out there. You know, some of our members have -- are literally two men operations. So really probably have never even been to the CRTC's websites. So ---

2429 THE CHAIRPERSON: I appreciate that.

2430 MR. ALLEN: That's one of the reasons why ---

2431 THE CHAIRPERSON: But Parliament still has said that you are subject to, as common carriers, certain obligations.

2432 MR. ALLEN: Certainly, yeah, agreed.

2433 THE CHAIRPERSON: All right. Well, thank you very much for being available for answering our questions. We appreciate it. Thank you.

2434 I see the next panel is a rather large panel. So why don’t we take a short break to switch out the panel and come back at three o'clock.

2435 Thank you very much.

--- Upon recessing at 2:50 p.m.

--- Upon resuming at 3:00 p.m.

2436 LE PRÉSIDENT: À l'ordre, s'il vous plaît.

2437 Madame la secrétaire?

2438 THE SECRETARY: Thank you, Mr. Chairman.

2439 We will now proceed with the presentation by Bell Canada. Please introduce yourselves and you will have 20 minutes for your presentation.

2440 Thank you.

PRESENTATION

2441 MR. DANIELS: Thank you, Madam Secretary.

2442 Good afternoon, Mr. Chairman, Commissioners and Commission staff. My name is Jonathan Daniels and I'm the Vice-President of Regulatory Law at BCE.

2443 It is my pleasure to introduce Bell's panel. To my right is Philippe Gauvin, Senior Legal Counsel, Regulatory Affairs, and beside him is Matt Henderson, Senior Manager, Network. And to my left is Karen Ng, Director of Wireless Product Marketing. Beside Karen is Scott Tubman, Director of Wireless Pricing, and beside him is Scott Barrett, Senior Manager, Program Management for Bell's wireline residential services.

2444 To begin, we recommend that three considerations guide the Commission's review of differential pricing practices, or DPPs, as they relate to internet and mobile data plans.

2445 First, DPPs like zero rating and sponsored data are consistent with net neutrality principles because the differentiation that takes place has nothing to do with how network traffic is treated.

2446 Second, it is impossible to assess, on an ex ante basis, which DPPs will result in an undue preference or unjust discrimination. This can only be done through a case-specific, ex post analysis of the facts.

2447 Regulating DPPs on an ex ante basis today, before we fully understand new developments such as the internet of things, could deprive consumers of concrete benefits, discourage innovation and competition, and have unintended consequences.

2448 Third, DPPs related to internet data plans have little impact on the market to date, so there is simply no market failure or other rationale for regulatory intervention.

2449 In consideration of these factors, the best course of action is to retain the current regulatory framework, a framework that is flexible and adaptable.

2450 Karen?

2451 MS. NG: Although the Canadian market is very small by global standards, Canadians enjoy early access to the latest innovations available in the world on both wireline and wireless platforms.

2452 Our state-of-the-art networks are ideal for the most demanding devices and applications. To a great extent, this strength is due to the large reoccurring investments made by Canadian network builders.

2453 Every year, Canadian wireless carriers invest about $3 billion in capital. Over $12 billion have been invested in spectrum acquisitions in the past decade. Not to be outdone, Canadian wireline network builders invest over $7 billion annually.

2454 The result of this investment is that despite Canada’s small population and challenging geography, our citizens have long enjoyed world class internet and wireless services and are consistently among the world’s most active internet users.

2455 The market is dynamic as it’s ever been. Considering the -- consider the changes that the internet of things or IOT could bring. IOT refers to creating internet connections for devices and products that are not typically networked. It combines communication technologies with data analytics to develop innovative internet-based solutions. For consumers, IOT enables you to track your luggage, manage energy consumption in your home, remotely diagnose problems with your car, and countless other applications.

2456 For example, consider an IOT application that allows your pet’s location to be monitored and a notification to be sent to your Smartphone if your pet leaves the backyard. Consumers could purchase pet trackers from a pet store or an electronics retailer or directly from the device manufacturer’s website. Using a sponsor data arrangement, the communication’s requirements could be seamlessly integrated into the overall solution. Now imagine dozens of such applications in a single household. This is the promise of IOT.

2457 It is early days for IOT applications. The industry’s figuring out which applications are possible and which ones will interest consumers. Technologies are evolving rapidly. Business models are a work in progress. The role of the DPPs for IOT applications is unknown but it is likely that some or many may depend on DPPs for their success. Our innovation economy will flourish if we allow these applications to develop to their full potential.

2458 It is also early days for zero rating and sponsored data and internet and wireless data plans. While there is some experimentation taking place, the practices are not widespread.

2459 It is also important to recognize that companies like Deezer, Facebook, Google and Stingray, who rely on ISPs and wireless carriers to distribute their products have provided evidence in this proceeding that zero rating and sponsored data have no negative impact on their business. Their position undermines the claims by the Equitable Internet Coalition and Open Media that these practices will harm application providers.

2460 Zero rating and sponsored data could establish a significant place in wireless and internet access markets in the future. The practices have the potential to offer compelling benefits to consumers and service providers alike. But we are not there yet. We will continue to monitor the landscape and, assuming the rules allow it, continue to experiment. The market should be given the freedom to experiment and innovate unencumbered by new regulations.

2461 Phil?

2462 M. GAUVIN: Étant donné les succès associés à une approche souple en matière de réglementation et la présence modeste de la gratuité et des données commanditées sur le marché, il serait illogique de conclure que le prix de détail des services internet et sans fil doit être réglementé.

2463 En fait, une conclusion plus appropriée serait que les marchés des services internet et sans fil s’adapteront efficacement à toute question relative à la concurrence ou aux consommateurs, y compris celles qui touchent aux pratiques de différenciation des prix.

2464 Les appels en faveur d’une réglementation sont d’autant plus troublants vu qu’ils sont associés à la gratuité et aux données commanditées.

2465 La gratuité et les données commanditées fonctionnent comme des coupons de promotion permettant aux clients d’acheter des produits au rabais.

2466 Comme d’autres pratiques de différenciation des prix, la gratuité et les données commanditées améliorent la découvrabilité, facilitent l’essai et l’utilisation d’applications et de contenus et favorisent la participation des utilisateurs à l’économie numérique. Ces caractéristiques s’harmonisent avec les objectifs de la politique des télécommunications du gouvernement.

2467 En outre, les pratiques de différenciation des prix stimulent la concurrence en permettant aux fournisseurs de services internet, aux exploitants de réseaux sans fil, aux fournisseurs de contenus et aux développeurs d’applications de différencier leurs services sur le marché. La différenciation est un élément fondamental du processus de concurrence. Elle procure un plus vaste choix aux consommateurs, leur permettant de retenir l’option la plus attrayante.

2468 De plus, les pratiques telles que la gratuité et les données commanditées permettent de réduire le prix de certains contenus sans pour autant augmenter celui d’autres contenus. Cela se fait sans que ne soit changée aucunement la nature des contenus.

2469 Les consommateurs canadiens sont favorables aux rabais sur l’utilisation des données. L’étude de Nanos Research que nous avons produite révèle que 83 pour cent des Canadiens ont une opinion favorable ou neutre de la gratuité et des données commanditées. L’étude indique également qu’il y a six fois plus de personnes s’opposant à l’interdiction de ces pratiques que de personnes qui y sont favorables.

2470 Jonathan?

2471 MR. DANIELS: DPPs are well accepted throughout the economy and the communications industry. Whether it is free calling features included with a home phone subscription or TV channel free views offered by BDUs, the practice is easy to overlook because it is common place. So when there are calls for regulating the practice the facts must be carefully considered.

2472 Calls for DPP regulation are grounded in concerns about potential anticompetitive impacts in a particular market. When seeking regulatory intervention, DPP opponents raise the spectre of harm but they are often generic in their description of what harm will actually occur. Ultimately, DPPs opponents’ concerns are not that consumers will be unable to access the content of their choice as is required of common carriers. Most acknowledge that consumers can still do that. Rather their concern relates to the impact DPPs could have in a particular market.

2473 What is important to note about this distinction is that DPPs therefore do not violate common carriage principle at all. Or in the words of Section 36 of the Telecommunications Act, through DPPS an ISP is not attempting to “control the content or influence the meaning or purpose of telecommunications carried by it for the public.”

2474 But there’s still concern that harm may be occurring. That is why we submit that the issue of DPPs is not a common carriage issue, but a subsection 27(2) question of unjust discrimination. In our view, the best lens to make that unjust discrimination assessment is through the use of competition principles.

2475 Thus, if there’s a concern about harm, the first question has to be harm to what? In the competition parlance, that starting point is defining the market. Is it the wireless market we’re talking about? The ISP market? A content provider market? An applications provider market? What is the relevant geographic territory? The market definition must be precise.

2476 Only after the relevant market is defined is it possible to assess the impact of sponsored data or zero-rating initiative on that market. And the Commission has experience in such assessments as they form the basis of -- for determining whether a market should be forborne or whether a wholesale facility is essential.

2477 If the competitive impact assessment concludes that a specific zero rating or sponsor data initiative has led to or will lead to the prevention or a substantially lessening of competition, then regulatory intervention is appropriate.

2478 For example, consider the hypothetical case of a wireless carrier zero rating an app that tracks the stock market. If the Commission concludes that by zero rating this one app the carrier has substantially lessened competition in the retail wireless market, then it should intervene.

2479 Similarly, if the Commission’s assessment concludes that by zero rating the app the carrier has substantially lessened competition in the market for stock tracking apps, then it should also intervene.

2480 However, if it reaches neither of these conclusions, there is no need for regulatory intervention and to do so would contra the policy direction.

2481 Our point is not that zero rating or sponsored data can never be anticompetitive, but that a structured analysis of the facts is required to reach such a conclusion. There is simply too many variables to make blanket pronouncements about the effects of DPPs on competition in any market.

2482 Phil?

2483 MR. GAUVIN: The Commission does not regulate DPPs when used for other internet services. For example, promotion prices for internet access, free installation, free or discounted apps for wireless subscribers do not attract regulatory attention, nor should they. They are examples of competitive markets working as they should to the benefit of the consumers.

2484 In the case of free or discounted apps, the contradiction is stark. For example, Rogers suggest that a wireless carrier that pays for a customer’s subscription to Spotify, a music streaming app, raises no regulatory concern as long as the customer pays for the associated data. But how is this any different than a Videotron Unlimited Musiccustomer paying the monthly charge of Spotify, but receiving the associated data for free?

2485 Just to be clear, we do not object to either initiative. We are just highlighting that it is difficult to put regulatory boundaries around some activities, but not others, without potentially creating significant harm.

2486 Under the current framework, any party can initiate an undue preference complaint against any telecom carrier. Complaints are investigated on an ex postbasis through an assessment of the relevant facts. The burden of establishing that any preference is not undue resides with the telecom carrier. These are significant protections that are in place today.

2487 Of particular importance is the ex postnature of the protections, which is appropriate for several reasons.

2488 First, given the early stage of DPP development and the lack of evidence of any harm, the applicable regulatory framework should provide as much flexibility as possible.

2489 Ex post regulation not only offers the maximum flexibility to the Commission, it offers it to market participants as well. This is all the more important in fast-changing industries like ours.

2490 Second, the facts are important. Even DPP opponents see the benefit of some zero rating initiatives, such as when subscribers use a carrier’s customer service app. OpenMedia, for example, supports zero rating this type of app because no party can be harmed in the process. But in order to reach this type of conclusion, a case specific competition assessment is required. That is why a case-by-case analysis is necessary.

2491 Third, a large majority of international regulatory bodies have adopted an ex post approach for DPP’s. The analysis conducted by Gilbert and Tobin, which we submitted with our first intervention, highlights this point. That analysis, shows that 14 of the 18 jurisdictions examined do not regulate DPP’s on an ex ante basis.

2492 Finally, there’s no evidence that the current ex post approach is deficient in any way. Although certain parties have jumped to the conclusion that a ban is required, numerous carriers and non-carriers alike, support an ex post approach.

2493 Jonathan?

2494 MR. DANIELS: Some intervenors have suggested that the creation of regulatory guidelines will simplify an ex post analysis. This may seem like a compromise between the current regulatory framework and an outright ban but it may, in fact, be the worst option available.

2495 Guidelines are problematic for a variety of reasons. They will inhibit experimentation. Consider a guideline that requires any zero rating initiative to be made available to all content providers within the same content class. This sort of imperative ignores that there may be valid technical or operational reasons for limiting a content class. For example, a zero rated video streaming service may be incapable of identifying or zero rating all types of video traffic. Should the service provider be prevented from zero rating the services that it can identify because of this limitation? We do not believe so.

2496 A guideline requiring any zero rating initiative to be made available to all content providers will also lead to regulatory complaints. Defining the class of content is complex and parties will disagree. Any definition will inevitably lead to challenges by those excluded from the class.

2497 Guidelines could also lead to negative unintended consequences. For instance, a guideline against zero rating affiliated content could lead to a situation where Telus could zero rate Bell Media’s content but Bell Mobility could not. Such an outcome would be absurd.

2498 At this early stage of development, the problems associated with guidelines make their adoption for DPP’s inappropriate.

2499 In conclusion, maintaining the existing regulatory framework, which relies on an ex post analysis of the facts about a specific complaint, is the most appropriate course of action. Imposing regulatory guidelines related to zero rating and sponsored data at this early stage in their development is not only unnecessary it will discourage innovation and could distort the market.

2500 Thank you for the opportunity to share our views. We’d be happy to answer any questions you may have.

2501 THE CHAIRPERSON: Thank you very much.

2502 Vice- Chair Menzies will start us off.

2503 COMMISSIONER MENZIES: Thanks.

2504 It seems kind of a good time to just kind of step back for a second and talk about the commodity that we’re taking about and how it’s used and that sort of stuff. So I have a few questions about data and data caps to start off with. So what do you base data caps on?

2505 MR. DANIELS: Okay. So -- sorry, I was just -- the first thing, I’m totally happy to answer any questions about data caps, but, in our view, data caps are beyond the scope of this proceeding. I think we’ve put our position on that table before. But ---

2506 COMMISSIONER MENZIES: No, no, I’m not discussing them. This is for background purposes ---

2507 MR. DANIELS: Absolutely, no problem.

2508 COMMISSIONER MENZIES: --- in terms of that. So we -- to be clear, so we’re understanding, because that’s the -- the usage of data is the commodity that we’re really talking about. So the framework ---

2509 MR. DANIELS: Absolutely.

2510 COMMISSIONER MENZIES: --- and trying to get a sense of its value is important.

2511 MR. DANIELS: Okay. So I’m -- in that regard, obviously our data caps differ for a wireline and wireless so I’m going to ask -- turn it over to Scott to talk about how we set our data caps starting on the wireline side.

2512 MR. BARRETT: Thank you.

2513 On the wireline side, we view data caps as one component of the service and when we’re developing new services or new product offerings we look at their relative position in the market, the speed that we want to provide, and provide enough data, as well as giving our customers choice, and we set an initial cap that we feel is relevant for that specific product but being able to offer our customers an unlimited option allows them to add data as they see fit.

2514 COMMISSIONER MENZIES: Okay. So is it used as a traffic management -- does it perform a traffic management function for you?

2515 MR. DANIELS: So the answer to that is it does play a part in terms of the network that we built. And again, to sort of answer that from a context you’ve got to break off wireless from wireline.

2516 So if I take wireline for example, as you know, we offer unlimited data on our wireline network. In some of our territories out in the Atlantic that’s the only option we offer. In Ontario and Quebec it’s an option that’s available.

2517 So if we offered it to everyone in Ontario and Quebec we would have to augment the network. So it is -- there is -- traffic management definitely affects usage. But we are -- we do have the unlimited option and consumers can take that and, of course -- and I’m sure we’ll talk about this later -- we believe in giving consumers the option.

2518 But if you look at the wireless network, the wireless network is in a completely different situation in terms of having -- are data caps important. I think many parties have acknowledged that something might be different in the wireless network. And if you look on the wireless side you can see that the average usage, just from your report last week -- I’m not talking about Bell’s I’m talking about generally in the CMR data -- that you had 104 gigabits usage on the wireline network as the average use of the consumer in 2015 and compare that to wireless and it was 988 kilobits per second. That’s less than a gig on average.

2519 So clearly our wireless networks are not built to withstand the kind of use that you see on a wireline network, and so data caps have a total role in playing in terms of influencing how usage is used.

2520 Again, as I said, there’s a role in both networks. We totally believe in giving users the best experience possible and excellent network experience, but, yes, data caps are a part of that.

2521 I’m just going to hand it over to Phil who can give you a little bit better description about how that relates to the network side, if that’s where you’d like to ---

2522 COMMISSIONER MENZIES: Okay. Well, maybe you could just -- when you’re doing that too, just give us some sense of what the impact would be on consumer pricing if -- as some in this proceeding have suggested that data caps, maybe not now but sometime in the future, aren’t necessary. What would be the consumer -- the impact on the consumer if there were none? And differentiate please between wireline and wireless because there’s obvious differences.

2523 MR. GAUVIN: Sure. So to the first question, which Jonathan was answering, I think there is two aspects to it. So first, do usage caps affect peak capacity on the network and reduce capital costs? So do the monthly caps do that? And second, are usage caps really necessary everywhere that we implement them? And I’ll get to the difference between wireline and wireless.

2524 So to the first point, I think intuitively we can all agree that someone that uses unlimited probably drives a higher amount of usage than someone that has usage caps on their plans. In fact, that actually pans out into the average usage of our users. So users that use unlimited drive a lot more usage than people that have caps.

2525 But to the second aspect, capacity costs can be addressed in different ways. So it could be a flat rate imposed on everyone, it could be fees that those that use the most pay the most, or it can be a combination of each.

2526 So for wireline, in some areas we have only unlimited plans, so it’s a flat fee that everyone pays. And, in fact, in Atlantic they would pay a bit higher than elsewhere, for example, or where there’s unlimited plans. In Ontario and Quebec where there’s a mix of both then there’s a choice.

2527 So like Chris Tacit yesterday was saying on behalf of CNOC, the consumer can choose -- even though there’s unlimited plans which are available in Ontario and Quebec, they can choose to subscribe to a lower tier that has caps.

2528 And for congestion, network teams are involved when we talk about implementing or removing unlimited plans. So obviously our network teams aren’t necessarily involved every time that we change tiers -- usage tiers within a plan, but if we talk about removing or adding unlimited which would have a material impact on the network, then we actually need to plan for that and try to make sure that there won’t be a noticeable impact on our users when we get rid of unlimited.

2529 MR. DANIELS: But to directly answer your question rates would go up.

2530 So let’s break this down. On the wireline side in Ontario and Quebec, for example, customers pay $15 or more depending if they’re in a bundle or whatever for unlimited.

2531 So if everyone is going to have to offer unlimited we’re going to have to take up the base rates for those people who don’t need it, who don’t want it, and take away -– because that would be removing that option from the market.

2532 And on the wireless side there’s a number of different ways to do it. You’d have to look at a higher rate, but you’d also have to look at slowing down traffic.

2533 So there are providers, Bell is not one of them, but there are providers in Canada, as you know, who offer unlimited wireless.

2534 But unlimited wireless that they offer, for example Chatter, offers low speed on their 3G network, but then after 5 Gigs they slow you down to 64 Kilobits per –- 64 Kilobits per second speeds.

2535 Wind slows you down after 5 Gigs, MTS and SaskTel slows you down after 15; in one case to 512 Kilobits, the other one to 256 Kilobits.

2536 So the notion of unlimited in wireless is not what we’re talking about and that’s not Bell’s experience. We don’t slow anyone down, so we also don’t have an unlimited offer. So we’d have to change the nature of the kind of offer.

2537 And my point really is that to all those who are out there saying what about data caps and should everything be unlimited, well let’s take it down.

2538 On our wireline side we provide our customers that option. On our wireless side we don’t but other competitors do because we don’t slow anyone down when they hit -– when they hit a cap.

2539 COMMISSIONER MENZIES: What percentage of your subscribers subscribe to your unlimited offer on wireline obviously, because you don’t have one on wireless.

2540 MR. DANIELS: Right. Well obviously in Atlantic Canada it’s 100 percent and I should –- you know in the North it’s zero, because we don’t offer it in the North, so you can understand the unique circumstances of the North.

2541 On -– in Bell Canada I have the number. It’s confidential, so I’d be happy to provide it. I think we might have already provided it as an undertaking.

2542 Sorry, we might have already in the record, but if we haven’t I certainly can provide an undertaking to give you the exact number. But it’s -– I’m happy to say publicly that it’s a significant share of our customers.

2543 THE CHAIRPERSON: Why don’t you do -– it’s November 14^th for the undertaking and if it’s already on the record just point to it.

2544 MR. DANIELS: Yes it’s -- I’ll refer to it.

2545 THE CHAIRPERSON: Okay, thanks.

2546 COMMISSIONER MENZIES: So would you -– you’ve already referred to a few shifts and changes in the offering of data and over the years.

2547 Is it possible for you to put together for us something that shows like over the last five years how your -– how the -– how you’ve sold data, you know, and sort of how data caps have risen?

2548 You know what they were five years ago if I paid you whatever it was, pick a price, $75, $50 a month, what the data cap was on that compared to what that same offer would be today and how those have grown.

2549 Because that would give us -– because some of your critics would argue that while all this has been going on and -– that the data caps have not gone up and you’re -– you’ve indicated that they have and that Canadians access, at least through your company to data has been increasing over the last few years.

2550 Can you put that together for us?

2551 MR. DANIELS: Well before I give you the undertaking, not to impose, we -– I have an oral answer on that that I can let our experts give.

2552 COMMISSIONER MENZIES: Yeah.

2553 MR. DANIELS: So it may not be necessary to get into all the details, but I did want to say before I hand it over to them to talk specifically, there are -– I mean my general answer to this whole accusation that prices have gone up and it’s true that if you look at in terms of if you look at RPUs -– RPUs have increased with the average revenue per user, so yes that’s gone up.

2554 But it you look at the value proposition in terms of the amount of usage that customers are getting and you don’t -– you don’t have to go any further than to look at what your own press release last week talked about, the increase in the average -– what the average customer is spending compared to a 40 percent growth in wireless -- or 44 percent in wireless and 40 percent in residential wireline. Those were the figures. There wasn’t a 44 percent or 40 percent increase in usage -– oh, excuse me, in rates.

2555 So what the difference in that is is obviously the better networks which provide better service and cost a little bit more and as well what you see is that consumers are actually getting a lot more value.

2556 Meaning that the amount they pay per Gig now -– and again I’m going to hand them over to specifically to talk Bell, but I think we have filed previously some analysis that looks at this on the macro basis. Not in this proceeding, but I remember we had -– and I think it was our -– the basic telecomm service proceeding, we have a submission that looked at Canada, what happens in terms of the amount of usage and what the rates and the correlation.

2557 And you can see there’s a huge difference between that in terms of that basically rates haven’t gone up nearly like like you said.

2558 COMMISSIONER MENZIES: Okay, because that’s what I’m trying to get at.

2559 You referred to it or it has been referred to at least in this hearing, I might have got it mixed up that -– I mean wireline ISPs spend something like $7 billion a year and wireless about $3 billion a year investing in networks.

2560 MR. DANIELS: Right.

2561 COMMISSIONER MENZIES: And that’s -– and that -– and coverage and I guess we’re just trying to get a sense, to frame this discussion, on what’s changed --

2562 MR. DANIELS: Right.

2563 COMMISSIONER MENZIES: -- and what is more or less available to the consumer.

2564 MR. DANIELS: So with that long caveat, sorry.

2565 COMMISSIONER MENZIES: Yes.

2566 MR. DANIELS: Let me maybe hand it over to my team here to talk both wireline and wireless, who can give you actual examples on our own pricing from five years ago.

2567 So maybe I can begin with Scott Barrett on the wireline side?

2568 MR. BARRETT: Certainly. Thanks, Jonathan.

2569 I don’t specifically have five years ago, but I did come prepared with some examples of changes in our internet plans from January 2013 to now.

2570 One of the examples when we first introduced our 50 Megs service, it was introduced with 175 Gigabyte cap and the rack rate on that was 86.95.

2571 Today that same 50 Megs service comes with a 250 Gigabytes cap and its rack rate is 79.95 and that obviously doesn’t include any promotional offers that might be in market today.

2572 Contrary -– we do also have examples where we’ve had increases in cost, so the 25 Megs service at the time in January came with 100 Gigabytes cap at 61.95.

2573 Today that 25 Megabits per second service comes with 125 Gigabytes cap at 69.95.

2574 And these are specific Ontario examples, but I can certainly give you more examples if you’d like.

2575 COMMISSIONER MENZIES: The more examples you could provide would be the better. I mean the timeframe for the last -– is less important, but something over the last four years, if that’s -– if that’s not to onerous for you that would be very helpful to us.

2576 MR. DANIELS: We can do that but would you like to hear the wireless side as well or would you prefer us to just put it in an undertaking? Up to you.

2577 COMMISSIONER MENZIES: You can give me the Coles Notes version.

---(LAUGHTER)

2578 MR. DANIELS: Scott, Coles Notes.

2579 MR. TUBMAN: I’m actually quite glad you chose five years because when in preparation I did look at five years ago. I looked at 2011 versus today.

2580 And so if we look at Ontario in 2011, we’re talking smart phones so there’s a voice component and a data component, but in 2011 for $100 you could get 550 local minutes and 3 Gigabytes of data.

2581 Today in Ontario you can get for $100 unlimited nationwide calling and 7 Gigabytes of data or $10 less if you want 300 local minutes.

2582 So I think it does speak to the fact that, you know, data caps have increased.

2583 Also just the size of our largest data caps, like I think I’d have to go back and do a thorough analysis, but I think the largest data cap that we sold in 2011, that I could find yesterday, was 4 Gigabytes, whereas today I know that we sell up -– packages up to 40 Gigabytes, so.

2584 COMMISSIONER MENZIES: So would it be fair to say that those are the areas in which you have been competing most aggressively with -– or at least -– I shouldn’t say most aggressively, but those have been fundamental areas of competition with your competitors in terms of what you can provide, at what price and the quality of the network and the volume of data; is that fair enough?

2585 MR. TUBMAN: I think on the wireless side I think there’s a few different areas that you can compete. Certainly service price, data caps, voice services, other services that we provide, as well as on the wireless side we also have data -– like the devices that you’re selling as well. So you know whether it be IPhones or other types of devices we also compete on that front.

2586 COMMISSIONER MENZIES: Is that for wireline as well?

2587 MR. BARRETT: Yeah, on wireline side it’s very similar in that we are very much competing on overall service plans that we’re offering, both the speed of the connection as well as the data that’s involved.

2588 So definitely those have been very dynamic in our marketplaces today.

2589 COMMISSIONER MENZIES: I think -– I mean if you’ve seen our advertisement, we focus on best network. Best. Best service, best network and we want to have customers to have the experience. So obviously, that’s how we try to differentiate ourselves. We don’t -- we try to have a excellent value for the customer. We’re not necessarily always the lowest price. But we believe that we provide the best value by having the best network, which means investing, which is why we’re spending the amount of money that we’ve been spending to build fibre to the home and build out LTE. And we’re not alone because our competitors are right there with us, which is why Canada is benefitting from in the way that it has.

2590 COMMISSIONER MENZIES: So do you see this trend from the last few years extending into the future? I mean, I just -- I was quoting from the -- you were quoting from our Communications Monitoring Report. And there’s a CISCO Report that we were using that looks at internet traffic in Canada by -- from 2015 to 2020 to grow 2.7 times and at a compound annual growth rate of 22 percent. And in Canada, busy hour internet traffic will grow 4 times at a compound annual growth rate of 32 percent.

2591 So, is it reasonable to assume that those -- the increases in value that you were -- the way you saw them that you were articulating to us in terms of increased volume of data and price competition would continue into the future on that basis or -- I’m sorry, I’ll just forget the or and ---

2592 MR. DANIELS: Absolutely. I mean, we -- the way we see the future there’s a tremendous amount of growth. People will continue to use the internet and use it more. And I think what we were trying to suggest to you today in the wireless space, which is a little different, is that we’re just -- we’re about to enter an explosion of wireless usage in a whole bunch of different contexts that none of us have experience with, which is the internet of things.

2593 So we see huge changes. And we think Canada has benefitted. I think the same report that you’re referring to has us ranked as fourth in the world in wireless. And we in terms of -- like I always say to people when people talk to me, which they do when you hear from Bell. Oh, let me talk to you about the rates. And I say, “Yes, but we have the best networks in the world.”

2594 And if I could lead in one thing in the world, if I was the regulator sitting in your shoes, I would take pride in the fact that Canada leads -- we may not have the lowest rates in the world, we have the best networks in the world. But what would be the combination that I would be more focussed on would be usage. And we are world leaders in usage on the wireless side, on the wireline side. Because that suggests we’re getting the combination of network and experience together correctly. And so I think actually we should take pride in that. And, yes, do I think it’s going to continue to grow? Absolutely.

2595 And I mean, you -- we know as well from my other proceedings that I deal with in terms of the estimates you guys have imposed, for example, the assumption of a 30 percent annual growth rate in traffic and the CPP as a requirement and so on.

2596 COMMISSIONER MENZIES: Sure. That’s something in which many people could take pride, but I would be very hesitant and far too humble to apply that to myself in any fashion as a regulator. So, but you may feel free.

2597 The -- that seems to me when you look at those trends though, that it would not be unreasonable to conclude that as that continues, the economic value of a data cap increases because the demand -- I mean, that’s what you have to sell is data and other things, but that’s one of the commodities you’re selling, and demand is going through the roof. Has been and is forecast to continue.

2598 So, data value it would seem, just based on supply and demand, would seem to be going up. And, therefore, the value of differential pricing practices and zero-rated practices would also be going up because they deal with -- well, not all differential pricing practices but zero rating deals with data, so that that would be an increasing economic opportunity in the years ahead. Would that be an unreasonable conclusion to make?

2599 MR. DANIELS: No, I don’t think it’s unreasonable. I think the way to look at -- the way I look at that is there can be many different -- I’ve told you our value proposition is best network. And it’s the experience from the consumer. So it’s not focussed on any particular one measure of data, for example.

2600 And on the wireline side, we offer unlimited. So when you say that the economic value of data is going to increase, well, we offer unlimited as an option. And, yeah, prices may be adjusted as we continue to invest in our network and it gets more and more expensive and so on, but so I’m not sure that that means that the price per gig. And I think that the price per gig what we’ve seen and what you just heard is that both on the wireline and wireless is cutting down. But I understand that you’re not necessarily equating that with price. You’re asking me about the concept of the importance of data and how much.

2601 And, yes, data is related to the quality of the networks and the experience and that’s -- we, you know, there may be and we do value it and we do put a price on it and especially -- you know, that consumers are willing to pay.

2602 So but the buckets will increase along there as well with it because we have to compete in a competitive market. We’ll do it and our competitors will do it.

2603 COMMISSIONER MENZIES: Okay. So where you offer -- is the ideal to be able to offer unlimited everywhere? And you’re offering it in some places. Would the ideal be to offer it everywhere?

2604 MR. DANIELS: Again, wireline or wireless?

2605 COMMISSIONER MENZIES: Wireline, sorry.

2606 MR. DANIELS: Okay. Wireline we offer unlimited everywhere except the north. And like, I mean, I’m happy to talk if you’d like to I can talk. I’ve had some -- a little bit of experience as you may know with Northwest Territories and Northwestel and their unique nature. They have a different economic parameter and I think there was some -- but outside of Northwestel on the wireline side we offer unlimited everywhere. So ---

2607 COMMISSIONER MENZIES: Okay.

2608 MR. DANIELS: --- it’s an option in Ontario and Quebec and it’s ---

2609 COMMISSIONER MENZIES: What is the value for those who are not taking that? Does the data cap give them an economic benefit by paying for that? I mean, they’re obviously paying less.

2610 MR. DANIELS: Absolutely. Yeah.

2611 COMMISSIONER MENZIES: But what would be the impact if there were -- if there -- roughly on price; right?

2612 MR. DANIELS: Well, quite -- okay. So let’s -- how much do we charge for unlimited? I mean, I’m using 15 to -- depending on if it’s in a bundle or not, but ---

2613 MR. BARRETT: It’s between 15 and $30 depending on how many services you bundle together.

2614 MR. DANIELS: So just meaning, my mom who doesn’t need unlimited is getting a value of not having to pay $15 extra a month for unlimited, which is an option that she’s not interested in because she doesn’t use it that way.

2615 COMMISSIONER MENZIES: Okay. So it seems -- I’m understanding that it’s more of a pricing strategy and an accessibility strategy for different economic levels than it is a traffic management strategy.

2616 MR. DANIELS: I did say before ---

2617 COMMISSIONER MENZIES: Wireline.

2618 MR. DANIELS: Okay. And I did say, however, if we had to offer it, if there was a requirement, because you asked me what would be the impact. One, we’d have to raise everyone’s rate but we’d also have to increase and invest in the network more to handle that capacity. Not necessarily on the access side, more on -- it -- you know, more on the back part. And so maybe I can ask Matt to talk a little bit about that.

2619 MR. HENDERSON: Yeah, so there’s three parts to the network that I’ve kind of characterized here. And you have the access network, we have our aggregation network, and we also have our core network. So, as you’re pushing more through the access network into the core, we’re obviously going to have to invest more into the core network, ensure we have more capacity to handle all the data coming through, so -- and also the transport that’s connecting all the network components together as well.

2620 COMMISSIONER MENZIES: So I have so few -- I understand it has been tried and it does exist in some places, price regarding hour of day, during peak period that there aren’t more options for people to differentiate price in terms of their time of day usage. Why has that not ---

2621 MR. DANIELS: So that’s not our strategy. As you know, there are others who do like TekSavvy. I know CNOC was here yesterday talking about it and TekSavvy actually has an offer where they do that. Maybe I could ask Scott Barrett to discuss why that’s not part of our strategy.

2622 MR. BARRETT: We’ve taken the approach to build our products as complete offerings with the speed and the data combined into one service offering and we felt that -- and we still feel that from a customer perspective it’s very simple. It’s very easy to understand when it comes to data caps. We provide them the tools to track their data usage and notify them before they hit their data caps if they so choose, as well as tools to estimate how much data that they would require if there's a change or even before they make a purchase decision. So it's very -- it's the way that our marketplace has developed, and as Jonathan said, some of the competitors are offering competitive options for customers to choose if they so choose.

2623 MR. DANIELS: The only -- the other thing that I guess I could add to that is that there's certainly a segment of the market who understands that and could work on a time of day discount. We haven't found that overly successful, in terms of -- so it's just not a strategy we've -- that we've pursued or -- now, that's not to say that it couldn't work or wouldn't work, and it's probably working for TekSavvy, so -- and others who do it. They're not the only ones. But that's just not part of our strategy. We just try to keep it simple for the consumer and understanding how much you use in a month is something that consumers can track and understand. Okay.

2624 COMMISSIONER MENZIES: So I'm taking from that that widespread offerings of zero-rated services would not have an impact on network congestion?

2625 MR. DANIELS: Well, so let me try to answer that in a couple of ways. Again, everything's different from -- it depends what we're talking about and it depends on the fact situation. But I don't think any ---

2626 COMMISSIONER MENZIES: I'll tell you, I will mention wireless, and I mean wireless.

2627 MR. DANIELS: Fair enough, okay. So but quite simply, whether -- and I can answer this for both wireless and wire line -- if you wanted to do -- let's -- and I really want to break it down, because up until now, with the last two days, everyone keeps talking about zero-rating, and they're throwing sponsored data into that. And I want to make an important distinction -- come back to zero-rating for a second.

2628 In sponsored data, someone's paying for the usage, so from a notion of -- that there's no traffic management or someone's compensating the ISP for sponsored data, so that issue doesn’t arise with sponsored data.

2629 But when you move over and talk about zero-rating, I don't think any ISP is going to introduce zero-rating without expecting an effect on their network and anticipating that effect and being prepared to handle that effect. I mean, I shouldn’t say any. I know that we and probably our major competitors would not allow degradation of the quality of service.

2630 At the end of the day, we manage congestion all the time on a daily basis. We manage it, we think about it, we worry about it, we invest in it every day, have different solutions, redirect capital to address congestion problems, and we try to hide it from the customer, meaning that they don’t have to worry about congestion. That's the experience we want the customer to have, a congestion-free experience.

2631 They don’t know what we needed to do to make it all work for them. And so that's how we handle and do that. And if we're going to introduce something zero-rating, yes, you're going to want to make sure you do it in a manner that you -- your network -- doesn’t degrade your network experience for your customer.

2632 MR. GAUVIN: And if I can just expand on that a bit. There's no incentive for ISPs to stimulate consumption of a service to the point that there's a noticeable degradation for other users on the network. And if you look at Binge On and how they -- and so T-Mobile, how they implemented Binge On in the United States, they're encouraging video streaming, but they're encouraging video streaming in a way that's at standard definition instead of HD definition.

2633 Similarly, if you look at Videotron, you know, I think most users don’t watch movies while they're listening to music, so the fact that they're encouraging music streaming likely means that some people that might have watched a movie are instead listening to music or whatever.

2634 So the DPP that's going to be put in place hopefully doesn’t stimulate usage to the point that it impacts the network, and if it was a bad idea to begin with, then the ISP will, you know, withdraw, grandfather that plan, or whatever, and try something else.

2635 COMMISSIONER MENZIES: Just one more question in that area. What percentage of data caps do subscribers usually use? So if I have a data cap of 100, typically, do you find people consuming most of it? I mean, obviously, people will go on vacation and have different months and that, but do people manage themselves tightly to their data caps or is there usually some slack in it, like, they use 70 percent or 60 percent or ---

2636 MR. DANIELS: I think it's all over the place, but if you would like to have, I could take an undertaking to provide so we could give you those numbers, which are probably confidential and ---

2637 COMMISSIONER MENZIES: That would be useful, yes, thank you.

2638 UNDERTAKING

2639 MR. DANIELS: Also for the 14th of November? Is that okay?

2640 COMMISSIONER MENZIES: No problem. Easy for me to say.

--- (LAUGHTER)

2641 COMMISSIONER MENZIES: I just want to talk about your concept of net neutrality in here. I mean, most recently, just in your opening statement here this afternoon, you say,

2642 "Differential pricing practices like zero-rating and sponsored data are consistent with net neutrality principles because the differentiation that takes place has nothing to do with how network traffic is treated."

2643 I don’t understand that. It seems to me that -- at least, when you get into zero-rating, sponsored data, that traffic is being treated differently in that some is I'm getting at no cost other than my basic subscription cost, and others, I am using -- assuming I have a -- I mean, there's no point in having a zero-rated offering if I have an unlimited plan -- but I have a limited plan, so I have limited usage, so I would get this music at no consumption cost and other music, I would have a consumption cost for. So how is that not treating traffic differently?

2644 MR. DANIELS: Because the way we see it, common carriers -- and again, I'm not trying to say this Commission doesn’t have a concern, but ---

2645 COMMISSIONER MENZIES: Well, it's the common carrier thing that I'm ---

2646 MR. DANIELS: Right. So we see common carriage as an issue of how you are treating the traffic technically, not from a pricing perspective. And -- because when we look back at the common carriage rules, and specifically, section 36 of the Act, in terms of influencing the meaning, we don’t think any of that's happening, because at the end of day, we believe our proposal is consistent with net neutrality because consumers are able to access any content they want.

2647 And so there's no differentiation in treatment from in terms of them being able to access. We're treating all the traffic equally. And so in that sense, we sort of view net neutrality as the common carriage for the internet, and we believe we're adhering to it.

2648 That's not to suggest that there -- as you can see -- that we -- that doesn’t mean that there's not issues that we have to discuss, but our concern is that people are saying, "Well, if you have a different price for it, and that somehow that changes the common carrier nature."

2649 We don’t think that's the case, because as long as everyone can access it, it's a standard price and we're only giving a discount off of one particular type of traffic. So all the carrier -- all the traffic's being treated equally, then you move to the question, well, what about the price? Is there some differentiation there? Absolutely. And is the differentiation justified? And we think that's the 27-2. But we don’t think that's a common carriage issue. We think we've met the common carriage task by technical treatment of the traffic.

2650 COMMISSIONER MENZIES: So your view is then narrowed down to your technical treatment of the traffic?

2651 MR. DANIELS: Yes.

2652 COMMISSIONER MENZIES: And that price -- you see price -- your argument, then, is -- just so I understand it -- is that price is irrelevant to traffic treatment? Because I mean, to use the -- I mean, it's been used earlier and we referred to it earlier in terms of, you know, the past practices and telephony, where you might have a different, you know -- over in mobile, you know, free evening calls and that sort of stuff.

2653 But this is different. This is, like I said, this is free calls to my mom but not free calls to Dad, sort of stuff. So I'm going to call Mom more often than I'm going to call Dad.

2654 MR. DANIELS: Right, and so let's take the two examples on the telephony side.

2655 COMMISSIONER MENZIES: So the traffic is being treated differently.

2656 MR. DANIELS: Well, I don’t think the traffic's being treated differently in that example. We had a program -- most wireless carriers out there had a program. I think the Chair alluded to it earlier. I think it was called Fab Five and Fab Ten. You could choose the 5 numbers that you wanted zero-rated or 10. Now, we don’t really have that much any more. Maybe we have it grandfathered. I'm not really sure, because we pretty much have unlimited calling in Canada, so that's how the markets develop.

2657 But you used to be able to choose the telephone numbers that you were going to call for free. I don't think that was a violation of common carriage. We treated them all equally. And the same thing with toll-free. We keep -- we love using the expressions. Toll-free was just sponsored voice to highlight that it’s like sponsored data. Again, it’s just a pricing mechanism that was different. The traffic is being treated identical from a technical, and I’ve never heard anyone accuse toll free as a violation of common carriage.

2658 Now, I just want to be clear, I’m not saying that doesn’t mean that we don’t need to have -- that we don’t need to have this discussion. The whole rest of our point is that there still could be issues of unjust discrimination. I just don’t think that’s a common carriage issue. That’s our submission.

2659 COMMISSIONER MENZIES: But there’s clearly a difference between you choosing or the provider choosing what will be offered and your Pick 5 or Fav 5 or whatever option in which the consumer is still in charge of how they use that because what you’re giving them is a certain volume or access to a certain volume at an opportunity and in terms of differential pricing practices, but the consumer is still choosing because if you -- if the provider is still choosing, it looks a lot more like a cable company than it looks like a telephone company.

2660 MR. DANIELS: Well, I don’t know if this helps. We had -- for a while, Bell-to-Bell calls were free, right. Like we distinction -- if you were calling someone who was on the Bell network, on the wireless network, it was free.

2661 Many other providers had the same thing, and I think that, you know, you find that in many countries around the world. And I think that’s just another example.

2662 I think Phil was going to add some stuff on this.

2663 MR. GAUVIN: Yeah. I think some copyright jurisprudence might be of assistance here because there was a case that went to the Supreme Court of Canada between the Canadian Association of Internet Providers and SOCAN. And at issue was whether or not cached communications, so cached music, for example, should result in a tariff payable to SOCAN. Is it a copy?

2664 And the Supreme Court, in that decision, said -- and also important to know is the Copyright Act has an exemption for communications carriers when they act as a mere conduit.

2665 And it says:

2666 “I conclude that the Copyright Act as a matter of legislative policy established by Parliament does not impose liability for infringement on intermediaries [that would be the ISPs] who supply software and hardware to facilitate the use of the internet. The attributes of such a ‘conduit’ [in quotes] as found by the Board include a lack of actual knowledge of the infringing contents and the impracticality, both technical and economic, of monitoring the vast amount of material moving through the internet, which is prodigious. We’re told that a large online supervise like America Online delivers in the order of 11 million transmissions a day.” (As read)

2667 I have no idea how many transmissions we deliver in a day, but it’s a lot.

2668 And I suspect that Videotron, you know, when we talk about music unlimited, they don’t know what music people are listening to, they don’t have a choice in what people are listening to. What their zero rating is, is the actual data.

2669 Now, for that aspect -- so we were wondering how to address this question yesterday, and we actually pulled out the Black’s Law Dictionary. If you ever went through law school, that Black’s Law Dictionary was the thing that you pulled out when you had questions, so it was also of help.

2670 And I have the printout here of the “common carrier” definition. It says:

2671 “A common carrier is a commercial enterprise that holds itself out to the public as offering to transport freight or passengers for a fee. A common carrier is generally required by law to transport freight or passengers without refusal if the approved fare or charge is paid, also termed a public carrier.”

2672 And if you go further down the definition, he has a quote which says:

2673 “A common carrier is bound to take all goods of the kind which he usually carries unless conveyance is full or the goods be specially dangerous, but may charge different rates to different customers.”

2674 So differential -- name me a common carrier, I’ll show you differential pricing, whether it’s airlines that have cheaper rates to the Caribbean, you know, at certain -- certain times of the year, whether it’s Post Canada that has different rates for different aspects of their sponsored data, so Amazon might pay for my postage when I order things from Amazon.

2675 Differential pricing is rampant in common carriers across the world.

2676 COMMISSIONER MENZIES: Okay. I guess the others would argue that they are not the internet and that the internet has unique characteristics to it because it carries -- it carries not just goods, but it carries speech, and that the free movement of speech and ideas as opposed to a crate of lobster on an airplane or two people going to Jamaica for a vacation are social values that deserve a higher level of protection because they’re fundamental to democracy in that sense.

2677 So that’s, I think, my understanding of where the argument comes down about net neutrality in terms of that is that anything that -- for instance, if a sponsored service or a zero rated plan, if a political party were to -- if one political party were to have that so the -- I don’t want to use anybody’s name -- so Party X has a zero rated plan through an ISP, but Party Y and Z do not have, is not that an offence to the concept of net neutrality and the free and uninterrupted flow of ideas and speech in that regard?

2678 MR. DANIELS: So I think that’s an excellent articulation of the concern, but that’s why we come down -- but the first statement was, “Is this common carriage?”, and I think we’ve talked about. So now we’re saying is there something special about the internet that needs some sort of different treatment.

2679 I think if you even -- whether it’s free speech or anything else, I think you guys have the lens and the tools to do that through a 27(2), so let me take your Party X versus Party Y comparison.

2680 First of all, just from a high level, if we’re interested about political ideas, what’s -- you know, I would do a market analysis in saying are both parties able to get their ideas out. Is anyone blocking access to either ideas? Are both there?

2681 They’re both on the internet. No one’s blocking. We can all agree on that.

2682 There may be one carrier -- WIN, for example, could offer unlimited access, so its customers can go and see Party X and Party Y without paying. There’s no distinction there. Does that mean that if I don’t have unlimited that there’s going to somehow be an influence between Party X and Party Y on my network that I’m influencing because I’m charging for data in both cases?

2683 Then you come to, well, what if I have a sponsored data program and a party can come or any party can come -- Party X and Party Y can both come to choose to participate in saying that they want to have their customers have a zero rate experience if they go to their -- to the web site.

2684 So I think we have to look at this, and I think it’s easier to see this in the context of an economic analysis, of -- that’s why we’re saying it’s kind of a competition analysis, and it gets a little bit confusing when you started talking in the free space of ideas. But basically, we’re talking about the availability of everyone being able to access that information.

2685 And as a starting point, zero rating works if everyone -- at the starting point -- let me take a step back.

2686 You have -- everyone has to be able to access anything on the internet, so that’s issue number 1. And then the question is, can you have some sort of program if it’s zero rated or if it’s sponsored data.

2687 Now, if it’s zero rated and we’re zero rating Party X but not zero rating Party Y, then I have some explaining to do, and I don’t -- you know, as to why are we choosing Party X and why not Party Y, and what’s the basis and so on. And I don’t know that I could meet a 27(2) unless I had particular reasons, rationale that I could give you on that in the face of a complaint.

2688 But that’s why we’re uncomfortable with saying “Let’s set up rules up front about this”. And that’s where we’re coming from on this perspective.

2689 COMMISSIONER MENZIES: But I mean, just to continue that analogy, I mean, if we were to deal with that after the fact, it might be too late; right?

2690 Because you’ve made the argument today and elsewhere that this should always -- there should be no framework. It should be just let go. And the opposite argument is, particularly when it comes to the free flow of -- I mean, we could talk about it in terms of commerce and anything else, but when it comes down to the -- that unique nature of the -- one of the most unique natures of the internet, the free flow of ideas and speech, that dealing with it after the fact would leave an opportunity for considerable disruption and harm to take place in the meantime and perhaps, you know, in extreme cases, distortions of democracy, or at least there’d be accusations thereof in those sorts of situations. Say it was during an election campaign.

2691 MR. DANIELS: And I think we can come up with examples, like these hypothetical examples that you’re describing where I can understand.

2692 But where we’re approaching this is let’s look at the market today, let’s look at the reality of today, let’s look at the experience of today. And for the most part, I cannot see -- like, on the record of this proceeding I’ve seen no one to be -- actually to demonstrate any harm that’s actually happened. There’s no cases of harm. And that’s our concern, because we really want to see harm in the market.

2693 And I take your point. You’re saying, “Well, what about the hypothetical case where it could be too late?” But in the experience, is that worth -- for the hypothetical case with absolutely no evidence of actual harm having occurred in our experiences today -- is that worth inhibiting by putting rules down which we don’t know how they’re going to play out?

2694 And that’s really, like, the other part of where if high level -- if I could leave you with one message -- we don’t know how this is going to play out. None of us know because of what is coming with Internet of Things.

2695 And I say that because we don’t really don’t know what kind of offers people are going to have, what kind of ways that sponsored data can make, and how innovation will play out. And we are just at the beginning stages. And that’s where we get uncomfortable with saying, “We have a hypothetical concern for harm so let’s put in a bunch of rules” when we haven’t seen how this played out.

2696 There’s been very little zero-rating sponsored data in Canada for years. You just see it starting in the States. It’s just starting really in the last year in the States, and we haven’t really seen what’s going to happen with the Internet of Things Applications.

2697 COMMISSIONER MENZIES: Well, that would be the debate because I mean there is no evidence of harm because there’s no evidence of that behaviour so far.

2698 MR. GAUVIN: But I ---

2699 COMMISSIONER MENZIES: Very little because we’re talking about something that people have not been doing, right? So it’s -- anyway, go ahead. You had something.

2700 MR. GAUVIN: The Commission is an administrative tribunal so the Commission has a lot of flexibility. And let’s take, for example, something terrible happens; an ISP instead of blocking -- because they see Section 36 -- raises the rates 1,000-fold for access to certain websites, competitors’ websites, or something they find objectionable. If there is an outcry and a need to act urgently the Commission can say, “Respond by such a date” very quickly and have a very quick process to deal with it.

2701 I think the likelihood of that happening -- because ISPs have brands and ISPs want to cater to their customers and Canadians and be able to sell their services -- there’s a very strong incentive not to do something ridiculous. And I’m not saying that there’s not bad ideas out there that die.

2702 And like Professor Layton said yesterday, there’s a graveyard of ideas out there. But there are strong incentives not to do something outrageous, and if something outrageous happens the Commission has the tools to deal with it.

2703 COMMISSIONER MENZIES: So I understand your hesitance, your desire to have for there to be no restrictions, no guidelines, just to leave it as it is. And there’s a reasonable logic to that, yet at the same time this technology -- and in the state that you’ve referred to your fast-changing industry and our fast-changing society, everything is changing very quickly and it’s all been based upon something that has developed.

2704 And there’s a couple of ways of looking at it. I guess you could say that the Internet has developed very nicely thank you very much for the past 25 years without much interference from us, right? And we may or others might make the argument that yes, and it’s developed very nicely. And notwithstanding the Internet of Things, that sort of stuff, it’s actually developed spectacularly and it’s changing the world.

2705 And it’s all been based on the idea that -- and the Internet is something that is offered on which people may offer their services on an equal basis without any interference or any prejudice or any tier in terms of who can get their eyeballs directed first in terms of that sort of stuff. And that it’s incumbent upon us to keep it that way.

2706 That the Internet of Things will develop does not need -- to me it seems a stretch that the Internet of Things requires differential pricing practices to develop. I think there’s a good chance it will develop or it won’t regardless of the specifics of the marketing.

2707 MR. DANIELS: So there’s a lot there. Let me take the last point first and then come back.

2708 You say it’s a stretch that the Internet of Things will develop. Of course, I agree. It’s not that the Internet of Things won’t develop or won’t come to Canada. But I do believe that take up and use is different around the world even with the Internet, different applications based on the structure of where people are, a whole bunch of different things.

2709 What we think the Internet of Things -- the reason why we think it is related to DPPs and especially probably zero-rating and sponsored data specifically is two-fold. First of all, in terms of Internet of Things it’s probably going to be products where people come and say, “I’ll take care of the usage.” It will be bundled in the price that they sell in the store for the product.

2710 Usage connected, you know, this -- I don’t know, the fridge, whatever. It connects and there’s a one-time payment, there’s a payment to us for the use of the network and it’s just bundled as part of the product. I think there’s example of that like the pet tracker that we were taking about or something. It could be an example of something that does that.

2711 And the other -- so that’s where sponsored data I think could be very key to Internet of Things. And that could be a way to differentiate people’s products to say, “Well, don’t be worried about the data usage associated with this because it’s taken care of. You just pay one price upfront.”

2712 On the other hand, there may be certain apps or certain things that people just aren’t used to developing. And therefore, Internet of Things is going to be a way for us to say for a new app or a new product, “We’ll zero-rate this to encourage the use.”

2713 Now, I don’t know much about broadband adaptation around world, but I was listening to Facebook earlier and they basically gave a stat that sort of blew my mind when they said 50 percent of the people who actually take this free service from them eventually once they see what the Internet can do upgrade to take in the Internet.

2714 And I can understand that because if you’ve never been exposed to the Internet -- well, I hate to say it but most Canadians are probably in that same position when it comes to the Internet of Things, and myself included. I have no idea how I’m going to react to a whole bunch of things that are out there and I’m going to be a little bit wary in some cases. I may have some reaction about do I really want -- what kind of data is being shared, what’s going on?

2715 And some of them may want to push in that direction. Who knows in terms of zero-rating? I don’t know the impact. So we don’t know for sure but we suspect it is going to be really important.

2716 COMMISSIONER MENZIES: Okay. I mean I know it’s obvious that capacity is an influencer in terms -- I mean, once you get five and you get video you know there’s more and all of a sudden your usage explodes from there. But I’m not sure -- anyway, there’s no way we can resolve that at this point.

2717 So I have a question about your poll. Your poll showed a strong preference for zero-rated services. It’s been critiqued by others for not having a different end to the sentence, I guess, in that sense. How do you reconcile that poll with the views of so many on the record in this proceeding through Reddit, et cetera who have a different point of view?

2718 MR. DANIELS: Easily hopefully. I’ll see if you agree with me in a second. I want to start by saying by saying I think polls are an important tool. I don’t think and I don’t believe, and don’t want Bell to be misinterpreted suggesting that you commission a poll and that tells the regulator what to do or how to do because obviously it’s best judgement and so on.

2719 We commissioned this poll earlier in the process because we wanted to make sure that we had what we suspected would be the view of the majority of Canadians probably see benefits in zero-rating and sponsored data. And we suspected that we know there’s a very strong group of people, a community of interest associated with open media specifically that would have a differing view.

2720 And we understand where they’re coming from, we understand their objections and so on but we didn’t think that necessarily they spoke to all views or what most Canadians think. And I’ll come back to that in a second.

2721 But when you say, “How do I compare it to the others?” You first mentioned Reddit. Reddit I think appeals to the same class, not strictly. I’m not saying other people couldn’t join it or whatever, it’s welcome to all. If you go on Reddit and you put in an opposing comment when you see it building up one way, you better be prepared to withstand some of the comments and the voting down and so on, and some people may not like that.

2722 But putting that aside, if we look at the open media with all of the submission -- you know, the 40,000 people, I think that’s a really good articulation of a strong viewpoint that’s held by a minority of Canadians.

2723 And where I make the difference about that is that open media’s campaign, or it was actually mostly, first of all, about data caps, not zero rating. It was called -- the campaign was called “End Data Caps” and it was Call to Arm, “This is our chance to get rid of data caps.” And it said -- this is what is said about zero rating. This was on the website, like, the page when you go into click whether you support or not, which results in the vote. “Zero rating, this makes websites they don’t like slower and more expensive to access.” That’s a straight quote from the website. And that’s just false. That’s not zero rating.

2724 Zero rating doesn’t do that. Doesn’t make anything slower, and so on. Now, people can tell me, “Oh, I have an argument as to why I can argue that.” But that’s not -- if you’re explaining to someone what zero rating is, that’s not how I think a fair description of it is.

2725 In contrast to that, we put in a survey that was balanced and representative. And we think it asked simple questions just to gauge Canadians. And, again, I’m not trying to take a statement to say, “Here, this you have to follow what the survey.” The survey was there to basically -- because we strongly suspected that most Canadians would probably like this process, the practice. We think that because we could sell it and we have consumers who are interested in it. And so, therefore, we wanted to reflect that and share that viewpoint.

2726 And so, I think maybe, sort of the best way to put, when you say the rest of this record, open media put in, in round 2, at paragraph 62, they said this -- they’re referring to Bell and our submission and other people like us with far views. They said,

2727 “These groups and individuals are, of course, entitled to contribute to the Commission’s proceeding and the record benefits -- diverse perspectives. However, they do not necessarily speak for everyday internet users in Canada.”

2728 All right. I accept that. I also believe that equally applies to open media and the people who participated in this proceeding. The people who have views, it’s a class, it’s a community and we understand that but I don’t necessarily think that represents the majority of Canadians and that, that’s what we were trying to reflect in this poll.

2729 COMMISSIONER MENZIES: Okay. A question to more specific and we were talking about, like your views, whether its fair when offering a zero-rated or a DPPP service to offer it in a non -- in a discriminatory manner.

2730 We can talk about whether it’s -- in a preferential manner is probably better -- I mean, Videotron’s unlimited music is only available to subscribers with plans of 2 gigs or greater or 1 gig and a Videotron wireline internet subscription.

2731 Shouldn’t -- if these sorts of services would be permitted, shouldn’t they be offered on a non-preferential basis so that people of all income levels would have access to it? Or what is your view on that? And you might as well throw in there -- I’m curious to know as to why you did not intervene in the -- regarding the Videotron process, initially.

2732 MR. DANIELS: Sure. I’m just writing this down so I make sure I don’t forget to talk about that second time. Okay.

2733 So, in terms of your question, do we think it should available to all classes? No, I don’t. I think zero rating is about encouraging a particular use. It’s associated with a product and I don’t think whether they offered to their entry level or to all of their customers -- that’s their choice of how they want to differentiate themselves in the market, and maybe this was meant to upsell, and I really don’t see that any differently than the fact that Rogers offers Spotify where they bundle on the price. But it’s not -- correct me if I’m wrong, but it’s not available in all their products; right?

2734 MS. NG: No, it’s not. It’s on 2.5 gig or higher.

2735 MR. DANIELS: I really don’t see a difference. Is that Rogers -- you know, not -- I think it’s okay for a carrier to decide to distinguish and decide how they want to market from the zero rating.

2736 I really think in the analysis, the question they have to come down is really ask, one, are they having an anti-competitive impact, in Videotron’s case, in the wireless market? I don’t think so. We’re happy to compete with Videotron in the wireless market and others. They’re using this to differentiate themselves. We haven’t matched it. So, they’re able to differentiate themselves.

2737 If you -- then you can ask, is it having an impact in the music streaming market? We don’t think. That’s why we said we didn’t think was a problem. The fact that they’re only offering to some of their customers again is competitive analysis and we don’t see why that would drive it. So, that’s my answer to your question.

2738 COMMISSIONER MENZIES: So these offers, then, they don’t really work like coupons, or senior’s day, twenty percent off, or something like that? Like, you see them as being -- that should be left open to offer them to very specific groups of consumers.

2739 And obviously, the ones that people would find the most attractive would be the ones with the most money, which is probably the idea that offends some of those who hold different views on this than you. That the people who would benefit are the ones who are the most attractive to providers and they would be the ones with the most money. To use the terminology of others, the rich would get richer and the poor would continue to pay heavily for less.

2740 MR. DANIELS: I guess where I disagree with that analysis is you’re suggesting that a higher stream or a more expensive plan is somehow related to income. And I remember sitting here in the basic telecom service proceeding and hearing people who really, really have, like, issues, which we all heard and we were all taken away in terms of fun and income perspective. And they were buying plans all over the place, because they were buying based on their need and their usage.

2741 And I don’t think it’s fair to draw a conclusion that the -- someone with a low income is more likely to spend less money and on a particular plan. In fact, what we’ll see sometimes is that low-income Canadians may use wireless because they’ll only have one device that they want to pay for, so they’ll use wireless. So, they may have a higher spend on wireless than a different income person.

2742 I don’t -- I’m just going to check -- do you guys have anything you want to add on -- from an income perspective or? No. So, all I’m trying to say is that ultimately I don’t think that the conclusion that people are drawing, which is to say that income directly relates to how some -- the package that people buy is correct.

2743 And I’m not saying that there’s -- you know, that someone who’s wealthy may decide to buy the most expensive plan because they like having the most expensive plan for whatever purpose. Yes, that could happen. But I don’t think that means that -- like, you can ask Videotron this. It would be better to defend their product, but, as I understand it, it’s geared towards 18- to 24-year-olds because they think they’re going to use music streaming more. It’s really about targeting that and yeah, they’ll try to upsell them.

2744 MR. GAUVIN: I think we can also ---

2745 THE CHAIRPERSON: I can understand the 18 to 24 more than I can understand the income levels. Eighteen to 24, you’re trying to get a customer for life and you can invest in that. And, I mean, I don’t wish to suggest that people would not have sympathetic feelings for the poor, regardless of their employment, but I just find it difficult to imagine that, you know, as a corporate strategy it’s, “Hey, let’s go after the low-income level,” particularly -- that that makes sense. I do understand, “Hey, let’s go after the youth,” because we can lock them in for the next 40 years.

2746 MR. GAUVIN: And granted ---

2747 COUNSELLOR MENZIES: Despite the fact that youth are and low-income do go together.

2748 MR. DANIELS: But we also do have entry level products. I mean, and we’ve talked about how, I mean, again, from the last proceeding, Rogers has a product. We have a response product and as an entry level $25 product for wireline internet that’s designed not for you but for the entry level. So, I think we try to serve all aspects of the market. Some people do a better job of focusing on different income streams or people who are most cost conscious. You know, so ---

2749 THE CHAIRPERSON: Okay. I understand your point of view.

2750 MR. DANIELS: I just want to add a very practical example as well. Yesterday, Sandvine mentioned the Amazon Kindle and the Kindle offers a plan where you buy a Kindle at a certain level which has cellular connectivity. So I don’t know if it’s 3G or LTE, but it’s connected to wireless. And you don’t pay a plan fee with that. You -- so Amazon has a deal, I believe it’s with AT&T, although I’m not sure. My information is dated. But they have a deal with AT&T. They sponsor data for their users.

2751 And if a new entrant wanted to offer the same deal -- so think of Amazon in the physical space with Canada Post. They pay Canada Post I’m sure, you know, outrageous sums just because of the sheer amount that they ship. If I go on EBay and sell one thing, I’m going to pay Canada Post, you know, $10 for the thing that I sell. So I don’t need to have the millions of dollars immediately to pay for shipping.

2752 So there’s a certain scalability to sponsor data. If I’m entering the market and I want to compete with the big player that has access to sponsored data, I only have to pay a very small amount because presumably when I enter the market I only have a very small amount of users. And I’m hoping to get a big amount of users, so I want to differentiate myself and have, you know, free data with my services and hopefully even at some point become the big player that pays big amounts.

2753 COMMISSIONER MENZIES: I’m aware that you don’t want any frameworks, what your position is on that but I do need to understand a bit more why. Because typically -- I was a little surprised to see that in the sense because typically the industry wants regulatory certainty of some kind. And if we leave it as you wish, there is uncertainty. And I’m trying to figure out how you balance that.

2754 But I’ll use an example and we had an example this morning of framework offerings. And Rogers offered two principles that should -- to apply to the pricing of all data plans.

2755 The first one was all applications and content provided over the internet and mobile networks should, in general, be subject to an ISP’s standard data charges. The second is that all customers should pay an ISP’s standard data charges when they consume data, regardless of the nature of the content or application they access.

2756 You disagreed with that. And they don’t -- I mean, those principles do not seem that unreasonable. Why do you -- you must have found something unreasonable in it to disagree and I need to understand that.

2757 MR. DANIELS: It’s -- you’re talking from the Rogers’ submission, is that -- I understand?

2758 COMMISSIONER MENZIES: From the Rogers’ submission.

2759 MR. DANIELS: Okay. So and the second one that you read there in terms of ---

2760 COMMISSIONER MENZIES: Sure.

2761 MR. DANIELS: --- all customers ---

2762 COMMISSIONER MENZIES: Do you want me to do it again?

2763 MR. DANIELS: Yeah. Well, sorry or ---

2764 COMMISSIONER MENZIES: All customers should pay ---

2765 MR. DANIELS: Sorry, just -- okay. So in -- yeah. So is it your understanding when you read that, for example, would you say that sponsored data would be permitted under number two where it says all customers have to pay when they use the data. Let me just start right there.

2766 COMMISSIONER MENZIES: I can’t prejudge that. You know that.

2767 MR. DANIELS: Well, I think ---

2768 COMMISSIONER MENZIES: Because it would depend on the inputs when you look at other plans.

2769 MR. DANIELS: All I’m saying is when I read that I said that doesn’t sound -- I’m not sure that sponsored data could fall under just the -- what you read to me in terms of -- because all consumers would have to pay the same amount for the data they use.

2770 And so I think we’ve just closed down sponsored data unless I misunderstood ---

2771 COMMISSIONER MENZIES: Well, that would be -- your read of it is that it closes down sponsored data and that ---

2772 MR. DANIELS: Could be, yeah.

2773 COMMISSIONER MENZIES: --- is why you would object to it.

2774 MR. DANIELS: Well, I’m just giving you an example.

2775 COMMISSIONER MENZIES: No, I understand.

2776 MR. DANIELS: We -- our general objection -- and so let me take a step back and just help you with ---

2777 COMMISSIONER MENZIES: Right.

2778 MR. DANIELS: --- our general objection about guidelines which may -- and then if you want to ask me about specifics.

2779 But our general objection, one, you heard it already before I’ve said about we have no idea where this is going. And we are worried about instituting without actual evidence of harm. And I take your point, how can you have harm if you don’t have the activities. Well, that’s the chicken and egg. And I say, well, let’s wait until we see have harm before intervening. That’s fundamentally disagreement.

2780 But also, when we’ve looked at a number of the different proposals, we see that the risk either directly or indirectly has of altering the playing field. And what’s really important to us is a level playing field.

2781 So, for example, people have called for vertical integration rules. And we think that is just -- that just distorts the level playing field. And I think we gave the example in our opening statement about could it be that Telus can zero rate something that we couldn’t. The same thing towards the sponsored data.

2782 So our general objection is that when we sat down to talk and we looked at a bunch of the different proposals that were on the table and we understand where everyone’s trying to come from, we kept thinking of areas and problems with different ones, how it could play out. And we’re just saying, why now? Why do it now when there’s really the -- all the evidence of harm is just theoretical.

2783 And so that’s where we’re coming from in terms of our general opposition to actually trying to do guidelines now.

2784 COMMISSIONER MENZIES: Okay. I had some other questions regarding various other offers of guidelines and that sort of stuff, but I’m not going to drag it on for those. And hopefully that doesn’t sound petulant, but it -- your position is clear that you just don’t want any right now, so it would just be forcing you to repeat that for a while.

2785 It was mentioned earlier today that things like zero -- practices like zero rating on differential that they come at a cost. That nobody was able to pinpoint the cost, but if data that might otherwise be charged for is being offered for free, the assumption that I believe in the argument is that nothing really comes for free. And so these practices come at a cost that get paid by all subscribers and consumers regardless of whether that opportunity, and this goes back to the tiering of it, whether that opportunity is available to them.

2786 What’s your response to that?

2787 MR. DANIELS: Well, at the risk of being slightly repetitive, I’m hoping you see where we come from. You got to break it down. Sponsored data. It’s pretty clear who’s paying for it. Someone else is paying for it. That’s absolutely correct. The person who wants to pay for it so that their website is free so that they’re attracting users or whatever reason, so just like toll-free. So there it’s a direct correlation very easy for me to point to and answer that question.

2788 If you come to zero rating, the reason why you’d be doing it goes back and someone was ask -- earlier today was talking about well, it could be the intention and then you have to look at the harm. So -- which I think are valid questions in an antitrust examination, a competition law examination.

2789 So why would someone be zero rating? In the case of Videotron, I think it seems like their business case is driven by trying to attract new users. It’s an investment, as you said. Like businesses do that all the time to try to get people to try their product and make it more attractive. It could be that we have a certain -- something that we want to try.

2790 So -- and to put this into real world context, I’m going to ask Karen to give a few examples of what actually we see in terms of both the sponsored data used by small players and some zero rating that -- in the States because we don’t really have it in Canada. Because I think it would just helpful to put it in context to see how it could be used.

2791 MS. NG: Yeah, so in the context of sponsored data program, there’s been a few. AT&T is probably the most notable one right now. They’ve got several partners. Obviously they have some big partners that have taken advantage of the programs. But it is very helpful in smaller examples as well.

2792 There is one studio called BBA Studios, which is fairly small. They’ve actually leveraged one of the sponsored data programs in the U.S. because they felt it was a cost efficient way to deliver their content to a certain market. So what they did was they actually delivered the trailer for their movie Frank Versus God over the internet free of charge to get users to view that versus, for example, paying for a commercial on TV. So this was more cost effective for them to get reach out there.

2793 With zero-rated programs, there’s quite a few of them. T-Mobile with Binge-On. They actually combine, you know, big providers like Netflix and YouTube, but they don’t close it down to the smaller ones as well. So you have companies like NewZ or QKids, BTM, Crunchyroll, they get promoted in the same manner as the big ones.

2794 So there’s a little bit more exploration on their website. They do actually have the applications listed for those who want to check it out. So they also benefit from sponsored data programs -- or sorry, zero-rated programs.

2795 MR. GAUVIN: Again, just to quickly add, so in the internet market and the telecommunications markets in Canada there is competition. So it’s not like electricity where I’m in Ottawa and if I go to the OEB site for Ottawa it really says your electricity provider is Hydro Ottawa.

2796 So if someone has differentiated pricing and I like their offer, I might take it. If I don’t like it, there’s a lot of choice out there that I can go to and take another provider. Moreover, there’s also international comparisons.

2797 So if at some point the market goes to a place where the Commission suspects or there’s allegations that we’re actually, you know, the industry is not increasing caps as they should -- so VR becomes the next big thing and Canadians aren’t using VR, which doesn’t appear to be the case because the stats right now are that Canadians use a lot of the Internet.

2798 But if there’s indicators that there might be something stifling usage in Canada, at that point the Commission has the tools necessary to first of all compare internationally what’s the data caps internationally and what’s the usage internationally and take action at that point.

2799 So for whether it’s zero-rating or sponsored data, I mean, we were debating sponsored data is free Wi-Fi is sponsored data. So for city Wi-Fi, the city is paying for users’ usage. In this room, the Commission or the government is paying for user’s usage. So is that something that we want to block? I don’t think so.

2800 For zero-rating, again it’s an indicator of competition in the market. Do we want to limit competition only to certain aspects that people should compete on, or do we want to allow people to compete and if there’s a problem we can deal with it?

2801 And the both the Commission and the courts have a history of dealing with urgent issues and as they occur. So the one big net neutrality jurisprudence that’s out there is Telus blocking ITU union workers on their website. And that immediately went to the Alberta courts and they said they would -- the issue was union busters, you know, the posting of union buster photos on the union’s website. And Telus, in order to protect its employees, thought that it would be a good idea to take that site down.

2802 And the courts immediately heard it, right. So if something bad occurs, whether it’s the courts or the Commission, the tools are out there to take care of it.

2803 COMMISSIONER MENZIES: Okay, thank you very much. Those are all my questions.

2804 THE CHAIRPERSON: Monsieur le Conseiller Dupras?

2805 COMMISSIONER DUPRAS: Yeah, one small question. These practices they are to compete, but isn’t that a type of competition that just takes up capacity on the network and doesn’t put the network necessarily to its better use?

2806 MR. GAUVIN: So as I mentioned earlier, if you take the T-Mobile Binge On example they’re encouraging usage of video but they’re encouraging usage of video that consumes lesser amounts of the network. And this happens in other industries as well.

2807 So if you think of airlines, for example, flights one way might be a very different price than flights the other way if you look at one-way prices. And airlines have the incentive to maximize the use of their networks or to fill up their seats, so get some money for what’s available out there. So they’ll have differential pricing in order to encourage people to fly back one way.

2808 So it’s the same with networks. There’s very little incentive for ISPs and WSPs to encourage usage such that the network will have negative impacts. So just like airlines, I mean, we hear a lot of complaints of overbooking. But if there’s too much overbooking, suddenly that airline doesn’t seem as attractive anymore.

2809 So it’s the same thing with ISPs and WSPs. You don’t want to overtax your network to the point that there’s going to be noticeable impacts for your other users.

2810 COMMISSIONER DUPRAS: And there’s a link that this would keep data caps at a low level?

2811 MR. GAUVIN: Well, again, there’s competition out there. So take Videotron, for example. They have their unlimited music streaming service ---

2812 COMMISSIONER DUPRAS: But let’s say it’s prohibited. I mean, Videotron wouldn’t have it and you wouldn’t go compete in that sphere. And you’d use the network for -- I mean, you’d offer something else with the network, maybe more data for the price. No?

2813 MR. GAUVIN: Again, if it’s prohibited, you’re taking a tool away that can be used to compete. Now is that good or bad? You need to weigh that. And again you need to think about what you’re prohibiting. Are you prohibiting zero-rating, are you prohibiting sponsored data? And again, sponsored data -- there’s examples out there which are very convenient for the consumer.

2814 The Kindle. I gave my mother a Kindle last year and just before she went to a trip to the Atlantic. And she could download Anne of Green Gables while visiting the area and it was like magic to her, right. She doesn’t need to connect to Wi-Fi. So it’s a very good solution for the consumer. One would think that’s something to be encouraged.

2815 And additionally, if it’s banned in Canada -- let’s say there is a rule that says TSPs of Canada thou shalt not sponsor data, it won’t block the Kindles of the world from acting in Canada. What it will block is Canadian TSPs from striking those deals with the content providers.

2816 And what I mean by that is if you think of Amazon where they have a deal I think with AT&T. It could be with someone else. They have a deal with AT&T for sponsored data. How does my mother access that network in Canada? So AT&T likely has roaming agreements with carriers in Canada and the roaming -- the carriers in Canada don’t necessarily know that it’s zero-rated or sponsored. All they see is data on their network.

2817 So again, there could be unintended consequences to whatever the Commission does on the sponsored data and on the zero-rating side and, you know, that’s worth thinking about. The safest course, in our view, is to do nothing. I know that doesn’t sound proactive but do nothing, and you have the tools necessary to actually act if there is harm in the market.

2818 MR. DANIELS: Sorry, there’s just one thing I just want change in something. When we say -- I don’t think it’s do nothing as much as we see a statement coming out from the Commission that you will decide these based on competition principles. I don’t quite think that’s the do nothing. I think that gives the guidance that Commissioner Menzies was asking before. So I just wanted to clarify that.

2819 But in terms of ultimately, competition is a wonderful thing. And taking away options by managing competition we don’t think is the right move unless you actually have evidence that harm is happening.

2820 The question is, would data caps go up if you did this? Who knows what the outcome would be. You’d be taking away -- maybe people wouldn’t use it, wouldn’t discover other things that they otherwise would have with Internet of Things and so on.

2821 So that’s our concern is that regulation that takes away options has the risk of interfering the market and we don’t know what the outcome is, and that’s why we rely on competition. Let it happen. And if there’s a problem, act.

2822 COMMISSIONER DUPRAS: Well, it’s just that demand is going up for data. And with DPP, I mean, there could be a chance that, you know, if you want more data it’s just going to cost you more unless you take whatever service we are providing at a zero-rated price.

2823 So what’s meeting the objective of the act the most? Is it to try to encourage something that responds more to the demand, general demand of the economy than to -- I mean, take up that capacity on the networks for practices like DPPs?

2824 MR. DANIELS: So I think that who knows what each player would do. We don’t offer zero-rated right now other than for our website so that people do tools. So I’m not saying that we will do it. I don’t know. We don’t have any imminent plans.

2825 But if you ask, “What objectives does it meet?” I could go through, but I think the best one is the first one to facilitate the orderly development throughout Canada’s telecommunications system to safeguard, enrich, and strengthen the socioeconomic fabric in Canada.

2826 We believe that innovation is the best way that -- that underlying that is ensuring that innovation takes place, and innovation we think zero-rating can. It may not. I don’t know for sure. But it can impact how innovation plays out in Canada, how the upkeep and take up of service will happen in Canada.

2827 And we think that it’s consistent with the policy direction which says rely on market forces to the maximum extent feasible, which we think you can do here.

2828 COMMISSIONER DUPRAS: And there’s also to respond to the economic and social requirements of users of telecommunication services.

2829 MR. DANIELS: I can point to that one too, yes.

2830 COMMISSIONER DUPRAS: But I hear your answer.

2831 Thank you.

2832 THE CHAIRPERSON: Just a few quick questions before we end today.

2833 You mentioned in your presentation that DPP’s could maybe help discoverability of content and facilitate trials and usage of content that people don’t know about so far.

2834 Some commentators in this proceeding suggested though that what’s being offered tends to be the most popular content, and that as a result it really isn’t a great tool to bring little known content developers to the forefront to be known. It doesn’t really help people who are on the margins or on the fringe of innovation to be the centre. Do you have views on that?

2835 MR. DANIELS: So I guess the starting point, Karen gave some examples before of some companies I’ve never heard of who are part of the sponsored data program so -- and we think there’s a direct correlation of sponsored data. So I’d like to answer that specifically in a minute, but let me deal with the zero rating notion.

2836 We really haven’t seen and have no idea how the internet of things take up, and so when you say how is it that I could say it’s going to be the most popular thing, we don’t have a zero rated product right now.

2837 THE CHAIRPERSON: I didn’t mention the internet of things I just -- discoverability generally.

2838 MR. DANIELS: Well -- but, for us ---

2839 THE CHAIRPERSON: Right.

2840 MR. DANIELS: --- where our argument comes from is really about the future applications, the discoverability of the new things. That’s where ---

2841 THE CHAIRPERSON: Okay.

2842 MR. DANIELS: That was what’s driving that statement.

2843 Now, that may be different -- and I think I could equally apply that statement to sponsored data in terms of -- you know, like, the way people sign up on Amazon, for example, what -- sorry -- Amazon -- Google --Google ads. The idea behind Google ads is you pay your money only when the customer clicks on your website. It’s very effective even for small players and big players because it’s I only have to pay, with the scalability that Phil was talking about, if the customer actually uses it. It’s very effective.

2844 Well, sponsored data may be the same thing. You’re only paying for people who are actually on your website using it, and they got there because they found out that it could be free. Maybe it helped. I’m not saying that it’s for sure, or that it will be successful, or it would make the world of difference, but it may make the difference for some companies. I don’t know.

2845 THE CHAIRPERSON: So just to make sure I understand what you’re saying. Are you saying the discoverability of apps or content on a zero rating or a differential rating basis would only occur in the case of sponsored data?

2846 MR. DANIELS: No, no. I was ---

2847 THE CHAIRPERSON: Okay.

2848 MR. DANIELS: I’m sorry if I confused you.

2849 THE CHAIRPERSON: All right.

2850 MR. DANIELS: I was trying to say first there’s the zero rating where it may be that there’s a new app, there’s a new way to do something, that we want to encourage take up of that, and so we zero rate it so people can try it, because hopefully once they try it they’ll start -- they’ll like it and they’ll use it afterwards and they’ll be happy to pay for the data usage afterwards.

2851 THE CHAIRPERSON: But wouldn’t you agree with me that you’re unlikely -- not you, but ISP’s would be unlikely to do that for something that’s not known yet but what you want is you want to piggyback on something that’s popular?

2852 MR. DANIELS: No, I don’t know if I’d agree. I’m going to let my -- maybe Karen can talk about that. Because I think around our shop the talk is about that we would have to use zero rating for future stuff to try to -- like, again, maybe -- like, it may not be in the context like Videotron that you’re seeing with them where they’re trying to differentiate their service. It may be we’re trying to encourage you to try some new service for -- you know, that has some monthly subscription or something like that that we think we can benefit from the data usage.

2853 So maybe I’ll let Karen talk about that.

2854 MS. NG: We have historically trialed a few programs. We do use sponsored data. Sometimes we choose applications, especially within our base to try adoption.

2855 I think of late we’ve just been a little hesitant to implement any of these programs at the moment. But it does use the most -- we do use popular ones -- I’m going to say that -- because it appeals to most broad ones, but a lot of the times the popular ones are mixed in with some not so popular content that we put out broadly as well.

2856 Within our mobile TV application, we do have ethnic content and some of them are a lot smaller that we promote within the same environment. So customers see that upfront with even the most popular content.

2857 THE CHAIRPERSON: If I were an innovator -- and it’s very hypothetical because it wouldn’t be me -- who discovered something innovative, an application, or has developed something, and would like to have a sponsored relationship with you, or any ISP’s, how would they go about doing that?

2858 MS. NG: We actually get partners come through, not through sponsored data programs of late, but partners do come through to us. We have a discussion on what they’re offering is. We look at the business models and sort of the market that we work with. And a lot of times we do find ways to work with them, maybe not on a sponsored side but maybe through promotions, offers that they would like to give our customers to stimulate usage in turn for communications to our base about the programs.

2859 THE CHAIRPERSON: Right. On the media side, I -- because there’s some history, I have an appreciation of how you get in the door of -- to get your content known in the media space. How does it occur on the non-media space?

2860 MS. NG: Sorry, I was referencing both non-media as well as applications that aren’t in that space.

2861 THE CHAIRPERSON: What I meant is let’s take it away from media. Let’s say it’s just a pure application.

2862 MS. NG: M’hm. They usually reach out ---

2863 THE CHAIRPERSON: Is the door to knock on easily found within your company?

2864 MR. DANIELS: Well, I think we -- I mean, we don’t have a general sponsored data program today, right, so -- AT&T does in the U.S., Verizon does, and they’ve launched theirs all in the last year. Freebee it’s called in the U.S. for Verizon. AT&T, I think it’s called AT&T sponsored data.

2865 If we had a general sponsored data program, which would make sense in the near future, it probably would be pretty easy to knock on in the same way that toll free -- someone could sign up for toll free. It would probably be that simple. But we haven’t commercialized that yet. We’re watching what the developments are to see how this is all going to play out, and we haven’t ---

2866 THE CHAIRPERSON: You’re saying it’s more likely than not that you would go down that road?

2867 MS. NG: We don’t know at the moment, but we’re not -- we would prefer not to rule it out though.

2868 THE CHAIRPERSON: Okay. In some of your submissions and answers you talk about making comparison to promotional prices. You mention it in paragraph 36 but you also mention it elsewhere. Isn’t the nature of a promotional offer is that it’s time limited and therefore there is maybe not necessarily an analogy to be made with DPP?

2869 MR. DANIELS: Okay. I guess the way I see it -- so, yes, I totally agree that a promotional offer is time limited. I guess what’s in my mind is that the promotional offer may be for exactly like a toll free -- sorry -- a zero rating kind of thing that for the next three months it will be zero rated, this will be zero rated. So we see -- and I just thought that’s a differential pricing practice so it falls into the discussion that we’re having.

2870 So it may not be that -- like, in the example I was giving you before about, you know, future applications, internet things, it may be short term promotions just to encourage use, try, and then you like, buy.

2871 THE CHAIRPERSON: All right.

2872 MR. GAUVIN: And promotions could also last the lifetime of the contract. For example, there could be sign up now for three years and you’ll get your modem for free instead of rented for the life of the contract. It could be the same for differential pricing.

2873 THE CHAIRPERSON: Now, I know you don’t want guidelines -- that was clear -- but obviously one of the potential outcomes of this hearing is that there might be guidelines. Other parties have suggested that should be. So do you want an opportunity to shape that alternative outcome?

2874 MR. DANIELS: Well hopefully we did. But I understand what you’re saying, and the answer -- I don’t think I can offer anything more than to suggest that we think that the best course of action in this is to decide based on competition principles. Our biggest concerns I think you’ve heard.

2875 And if you’re asking me do I have any specific comments about any specific guidelines, I’m prepared to answer or discuss them but I don’t have anything that I want to suggest to you as here’s what I would do or something like that.

2876 THE CHAIRPERSON: But you will appreciate that you’ve had your kick at the can?

2877 MR. DANIELS: Yes.

2878 THE CHAIRPERSON: Okay.

2879 MR. GAUVIN: Part of that -- so we have had discussions internally, and developing guidelines would be very difficult. And you heard Vaxination this morning say that just for video transmissions, just for http, there’s -- I don’t know the number, but it’s 50 or 60 different types of means of distributing that video traffic.

2880 So a rule that would say treat all content the same, or something to that effect, would be extremely difficult to implement in practice. So in terms of developing guidelines and sort of guidelines that have been talked about, we think would be very difficult. And having an exposed process based on competition principles and requiring evidence to be presented so that there isn’t an onslaught of complaints without evidence, I think, would be helpful.

2881 MR. DANIELS: I guess the only other thing I would say is a lot of the proposals we’ve seen have really focused on trying to make -- influencing in the marketplace that we could see having unintended consequences. We really see things like -- a lot of proponents have said the eye rules or something like that, and I’m trying to understand if we have Crave TV and we’re not allowed to do something, if you go by class and say, “Oh, but you can’t do it if you...” So that means that Telus, for example, could have a zero rating offer like Binge On Video Streaming but we couldn’t.

2882 So we’re just -- again, I’m just using that as an example to highlight how we keep -- we kept coming through these things; how could it play out in the market and how could we understand what people are trying to do but actually how could it play out in the market?

2883 And, therefore, our -- you know, our, I guess, last comment in this regard is; be very careful and we’re very concerned about making sure that the outcome is a level playing field and that there, you know, aren’t unnecessary rules.

2884 THE CHAIRPERSON: Yes, that elusive playing field. I always -- well, in fact David Colville always mentioned that we’re always looking for this level playing field, and then would mention that that’s probably why they don’t exist because we switch ends at halftime, even in ice hockey where you’d think they’d get the ice pretty even.

2885 But in any event -- but I get your point about, you know, at paragraph 49 you talked about, you know, you described it as an absurd potential outcome where, in terms of content, some side would get -- Bell Media content would be allowable, let’s say, on Telus but not on Bell Mobility. I sort of wonder if that’s not indirectly a quite serious indictment of the SCC’s decision in the Charter case, but let’s not go down that road because we’ll be just creating a sub-issue that’s not really relevant.

2886 However, let me ask the question but from another perspective, and getting back to sponsored data. What if, hypothetically, Telus had some sort of ad or app that they would want to put on through your sponsored data program, hypothetically down the road; how would you screen it, approve it?

2887 MR. DANIELS: Well, again, I don’t know in the sense of -- because we don’t have that program so we’re into, as you said, hypotheticals. But ---

2888 THE CHAIRPERSON: But the whole proceeding ---

2889 MR. DANIELS: But I do ---

2890 THE CHAIRPERSON: --- is to provide certainty before you get hit back, right? So I’m asking ---

2891 MR. DANIELS: No, no. Fair ---

2892 THE CHAIRPERSON: --- in very concrete terms here.

2893 MR. DANIELS: But, you know, today Telus and anyone else can buy toll-free from us. So it can -- you know, if they want to.

2894 THE CHAIRPERSON: Yeah, you know, I’m not sure, you know, taking examples from the voice world is immediately ---

2895 MR. DANIELS: They can --- they advertise on CTV.

2896 THE CHAIRPERSON: Again, a publisher, not a common carrier.

2897 MR. DANIELS: But, I guess, my point is only -- my point in trying to say that -- and you can say the distinction, I think if there’s a problem we’ll be before you pretty quickly on it and ---

2898 THE CHAIRPERSON: I think in that hypothesis it would be Telus would be in front of us quickly.

2899 MR. DANIELS: Yeah, they’ll be -- that’s right.

2900 THE CHAIRPERSON: Right.

2901 MR. DANIELS: And we’ll be there defending it because ---

2902 THE CHAIRPERSON: Right.

2903 MR. DANIELS: --- the onus will be on us, very clearly. I have to acknowledge that there would be discrimination and there would be onus on us to justify on the basis because that’s how 27 works.

2904 And so, you know, I don’t think these guys are going to be creating something without running it by us over here on the Reg side to make sure that we’re compliant in what we believe; you know, as we understand unjust discrimination.

2905 So -- but I can’t say specifically about any particular program, in terms of what you’re talking about in terms of Telus because we’d have to see what -- I mean, what would be the nature of the product that we’re offering. So it’s hard for me to answer in that hypothetical but I guess where I could say from a practical perspective is we would know that we’d have to defend it if there was a problem and we’d have to guidance from -- that came out of, you know, the Videotron Unlimited ruling. You’re going to make a ruling in that case, ---

2906 THE CHAIRPERSON: Right.

2907 MR. DANIELS: --- which we support.

2908 THE CHAIRPERSON: Would you agree that your -- I’m not sure if it’s one undertaking or several undertakings, but your -- let me put it in the plural, that your ISP undertakings meet, generally, the definition of what a common carrier would be conceived and how we’ve discussed it so far in this proceeding.

2909 MR. DANIELS: Yes.

2910 THE CHAIRPERSON: Would you agree with me that Section 36 and 27.2 are codification of those common carrier principles? It’s not a complete codification; you mentioned the Copyright Act, I think that’s also part of the codification, but that in the Telecom legislation that those are the codifications of the common carrier principles?

2911 MR. DANIELS: We had a long discussion about this yesterday. I 100 percent agree on Section 36. We were discussing whether 27.2 is a codification of common carriage or if it’s what we were talking about earlier. So I don’t know -- I don’t have a firm answer for you on that one because I could see a way to argue it both ways, but my point is that I would agree that the Commission has the jurisdiction to ensure common carriage, and that I also agree that the Commission has the jurisdiction to make sure that there’s no unjust discrimination whether it meets the common carriage definition or not because I think they’re common carriage -- I don’t think that your analysis stops at common carriage.

2912 THE CHAIRPERSON: I agree. But I was going to go down the next road, and maybe I’ll get you -- give you the opportunity through an undertaking to address this issue as to whether or not 36 and 27.2 are codification. Because at paragraph 30 you then go on and take that and say it should be assessed through the use of competition principles. And you may have heard the discussion this morning where, yeah, the Telecom Act sometimes has competition issues but common carrier obligations are somewhat different. There’s an overlap. And you’re equating 27.2 -- well, not equating it, but you’re putting 27.2 through a competition principle lens, as I read it here, and not a common carrier lens.

2913 MR. DANIELS: Well, I think what I -- what we were saying, and that’s why I was hesitating before about you asked me whether 36 and 27.2 are the codification of common carriage.

2914 My first answer is I 100 percent agree that there’s a common carriage obligation. And whether it’s 36 and 27.2 or if it’s 36 alone, at the end of the day, my submission to you is that as long as I’m treating all the traffic equally and everyone can access any content, I’m meeting my common carriage obligation.

2915 That doesn’t -- that’s not the end of the analysis, which is why I’m saying there’s still 27.2, it’s unjust discrimination, and our recommendation under 27.2 in this context is that you look at it through a competition lens. That does not mean that 27.2 can only and ever be used for competition law principles. There could be other circumstances, but we’re saying in this context, the sponsored data, zero rating, the issues that we’re dealing with, we think they’re competition issues, ultimately, and that therefore you have the tools and you should use -- we recommend to use -- that you use your competition analysis, and that you’ve used it elsewhere in other parts of the Act.

2916 So that’s our suggestion of how the tool that you should use, and that’s why we said use it through the lens. That wasn’t to suggest 27.2 only and ever is strictly a competition law statement.

2917 THE CHAIRPERSON: Right. And of course when you do it through a competition principle lens, you can bring around the policy direction. Would you agree with that?

2918 MR. DANIELS: Yes, I agree with that.

2919 THE CHAIRPERSON: Okay. Let’s go back to Section 36. Does the policy direction carve down our obligations in Section 36?

2920 MR. DANIELS: No, I don’t think so.

2921 THE CHAIRPERSON: Because?

2922 MR. DANIELS: Well, because I think what Section 36 -- Section 36 is a prohibition. It’s a straightforward prohibition and it says unless you allow, okay, so somebody has to apply for you to allow and that’s a different thing:

2923 “...a Canadian carrier should not control the content or influence the meaning or purpose of telecommunications carried for it by the public.” (As read)

2924 So I see that as a straight prohibition; I’m not allowed to do that.

2925 THE CHAIRPERSON: So your view is that we would not have to do a policy direction analysis if we’re occupying Section 36 territory.

2926 MR. DANIELS: Or, let’s put it this way; if that someone want -- maybe there may be a role if someone was applying for permission ---

2927 THE CHAIRPERSON: That ---

2928 MR. DANIELS: --- for an exception.

2929 THE CHAIRPERSON: That would be the hypothesis, obviously because ---

2930 MR. DANIELS: Yeah.

2931 THE CHAIRPERSON: --- otherwise there’s no Commission decision or action.

2932 MR. DANIELS: Right. But I’m prohibitive from doing it, end of story, when I read 36 unless I try to come to you. Maybe I suppose that ---

2933 THE CHAIRPERSON: A hypothetical is ---

2934 MR. DANIELS: Yeah.

2935 THE CHAIRPERSON: --- when the Commission is actually applying in a case where somebody’s come to them to ask for an exception under Section 36. I’m asking when the Commission turns its mind to that decision we apply the competition law -- the policy direction, which I think you’ve admitted is a competition law aspect.

2936 MR. DANIELS: Well, I think the policy direction, yes, I think is competition law. But I don’t think it’s limited to competition law; right? The policy direction has other parts to it.

2937 THE CHAIRPERSON: My point being ---

2938 MR. DANIELS: Yes.

2939 THE CHAIRPERSON: --- and maybe you want to take it away ---

2940 MR. DANIELS: Yeah.

2941 THE CHAIRPERSON: --- as an undertaking because it’s a narrow legal issue which makes such great hearing father at 5:04 at the end of the day, is I think there’s a fundamental distinction between the common carrier obligations that may be in the Telecommunications Act and the Telecommunication Act specific competition principles that are also there. They’re elsewhere as well, but let’s say without our realm of jurisdiction. And there is a threshold question there, if you’re applying DPPs and analyzing them from a common carrier perspective, you may end up in a different place than if you’re looking at it through competition perspective.

2942 And I put it to you that, you know, you want us to put it through the Section 30 -- paragraph 30 through a competition lens because it comes with a competition lens which you might find more supportive through the policy direction, the history of the Commission’s decision and historical approaches. So I do think it’s an important threshold issue to answer the question of whether Section 36 and 27(2) constitute a codification of the common carrier principles.

2943 MR. DANIELS: Okay. So although I too actually enjoy these conversations because -- I’m going to take the benefit that you’re offering me and we’ll put it in writing because I’ll -- we’ll probably do a better job there than I’m doing ---

2944 THE CHAIRPERSON: All right.

2945 MR. DANIELS: --- in terms of talking here.

2946 THE CHAIRPERSON: Right. And addressing the link to the policy direction in both those cases.

2947 MR. DANIELS: Understood.

2948 UNDERTAKING

2949 THE CHAIRPERSON: Right. Okay. I appreciate that. Thank you.

2950 Yeah, there’s not a lot of people in the country that would find that fascinating primetime discussion.

2951 So those are our questions. Thank you very much.

2952 Did you want to add anything? No.

2953 Okay. Then that undertaking is for the 14^th of November. That’s all right as well?

2954 MR. DANIELS: Yeah, we’re ---

2955 THE CHAIRPERSON: Okay.

2956 MR. DANIELS: --- fine with that one, although that one I ---

2957 THE CHAIRPERSON: You’re ---

2958 MR. DANIELS: --- I’m actually going to do it.

2959 THE CHAIRPERSON: You know, you’ll probably think that earlier because we were passing it off to your colleagues that they had to do work to meet the 24 -- 14 November. You probably thought I was somehow trying to get back at you, but that’s not the case. I think it’s a very ---

2960 MR. DANIELS: No, I ---

2961 THE CHAIRPERSON: --- interesting issue.

2962 MR. DANIELS: But I’m just acknowledging that yeah, I’ll be involved in that one directly.

2963 THE CHAIRPERSON: That’s fine then. Thank you very much. And we’re adjourned until 9:00 tomorrow morning.

2964 Merci.

--- Upon adjourning at 5:06 p.m.

REPORTERS

Sean Prouse

Mathieu Bastien-Marcil

Nadia Rainville

Lyne Charbonneau

Marie Rainville

Patricia Cantle

Lise Baril

Jacqueline Clark

Janice Gingras

Suzanne Jobb

Mathieu Philippe

Date modified:

2016-11-01