ARCHIVED - Transcript, Hearing November 3, 2016
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Location: Gatineau, Quebec
Date: November 3, 2016
© Copyright Reserved
Attendees and Location
140 Promenade du Portage
- 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
--- Upon commencing on Thursday, November 3, 2016 at 9:03 a.m.
4461 LE PRÉSIDENT: Order, please. À l'ordre, s'il vous plaît. Excuse me at the back of the room, order please.
4462 Before we start I’d like to acknowledge that we are honoured to have in our hearing room today some representatives from the Telecom Regulatory Authority of India who are on a fact-finding mission here. And we, as regulators from around the world, often have these exchanges with our colleagues, and so, you’re very welcome and we’ll have a chance to talk a little later on in the day. So, thank you for being there. Alors, Madame la Secrétaire.
4463 THE SECRETARY: Thank you, Mr. Chairman, and good morning. We will now begin with the presentation by Media Access Canada. Please introduce yourselves and you have 15 minutes for your presentation. Thank you.
4464 MR. TIBBS: Thank you Madam Secretary. For the record, my name is Anthony Tibbs. I am the Chair of the Board and Acting CEO of Media Access Canada.
4465 From left to right, we have Reza Rajabiun, the consultant for MAC in these proceedings; Glenn Martin, Executive Director of the Canadian Hard of Hearing Association; Gary Birch, Neil Squire Society; myself; and to my immediate left, Kim Kilpatrick.
4466 Commissioners, Commission staff, and members of the audience, good morning.
4467 According to Statistics Canada, nearly four million Canadians, roughly the population of Alberta and Manitoba combined, have a disability that limits their capacity to participate in social and economic activities. Around half of these Canadians have a severe or very severe disability. Having full access to media is critical to Canadians with disabilities in order to fully engage in the social and economic fabric of Canadian society.
4468 Media Access Canada, or MAC, and the Access 2020 Coalition represent a variety of national disability organizations, some of which are represented today, with the objective of achieving full accessibility of media and communications services by 2020. We are one clear voice for accessibility in media.
4469 Innovation in applications and services designed for the needs of persons with disabilities provides substantive new opportunities for our stakeholders.
4470 Reliable and affordable access to an open internet is particularly critical for the ability of consumers with a disability to take advantage of the opportunities provided by and made available by an emerging information and communication technologies and to enrich and strengthen the social and economic fabric of Canada, as mandated under the Telecommunications Act.
4471 MAC’s concerns regarding the affordability and reliability of fixed and mobile broadcast access available to Canadians with disabilities have been detailed in previous submissions to the Commission. These concerns are critical to understanding the disabilities perspective on differential pricing practices provided in our submissions to this proceeding.
4472 We are here today because growth in practices under review are likely to exacerbate barriers facing Canadians with a disability in accessing fixed and mobile broadband access services they require.
4473 We are concerned about discrimination in a two-tiered internet system that is emerging around us, where luxuries such as high definition entertainment videos and games are zero rated or prioritized in special service lanes, while applications and services that are essential to Canadians with a disability are relegated to slower data capped access paths to the open internet.
4474 Growth in differential pricing practices under review here would counteract our broader efforts to improve accessibility. In fact, a two-lane internet is arguably creating a class system that ensures new and additional revenues for large media companies at the expense of Canadians with disabilities and others.
4475 It is the first step to closing the open internet. Please, stop it before it gets started. To do otherwise will segregate Canadian society and limit our access to the wide range of applications and services designed to enable and otherwise meet specific technology needs of consumers with diverse disabilities.
4476 Much like the average consumer, Canadians with disabilities utilize and benefit from services of large multinationals such as Facebook, Google, and Netflix.
4477 In addition to these, we rely on a wide variety of other technologies and services in the Canadian and global markets to meet our individual needs. These include Canadian companies, educational institutions, non-profit entities, healthcare centres, and other people, places and services working with disabilities communities.
4478 We would like to see all applications and services we use be zero rated. We therefore support calls by parties such as open media for the Commission to mandate removing, or at least substantially increasing, data caps on fixed and mobile internet plans.
4479 The rise of price and service quality differentiation in the two-tiered internet means that certain large and resourceful entities will increasingly cooperate with network operators to zero rate and potentially prioritize their traffic.
4480 Opening the door to zero-rated, sponsored, and prioritized data services would push our community to identify now and in future what accommodations can, through policy, override a two-tiered system. This would require deep pocket funding on our part, or at the very least a funded body to ensure an accessibility lens filters all internet practices.
4481 As a practical matter, it doesn’t seem feasible to accommodate the universe of innovative applications and services in the marketplace for accessibility, educational, and otherwise enabling technologies in zero rated special services for various parties and promoting in this proceeding.
4482 Zero rated and potentially prioritized special services are going to exclude applications and services that are essential in our community. A two-tiered system will create a minimum of two economic class system that will undermine every Canadians’ right to a free and open telecommunication and broadcasting system.
4483 Growth in popular applications and services in these zero-rated services would consume scarce network capacity, reducing the quality of service for accessing services that require reliable connectivity to the so-called “cloud”.
4484 Practices under review therefore introduce an inherent element of discrimination against consumers that rely more on accessible content and technology applications available on the slower data capped paths to the open internet.
4485 These include consumers with a disability, as well as the wide variety of innovative companies and organizations using the internet to meet diverse needs of persons with disabilities.
4486 This is particularly a problem with respect to mobile broadband services, where technological innovation has generated various new applications and services for Canadians with disabilities, but expensive data plans and restrictive caps act as a barrier to access and use of technologies and applications that are already available.
4487 MS. MARTIN: We agree with the Competition Bureau that some forms of discrimination in markets might be efficient and beneficial to consumers. However, zero-rating network intensive applications, such as TV programing, movies, streaming media, is not one of them.
4488 From the perspective of the disability community, differenced pricing of data in fixed and mobile plans would create the potential for inefficient and unjust discrimination by common carriers of communication infrastructure.
4489 Unlike the average consumers of network intensive applications and services such as IPTV and games, internet access is not a luxury for our community, but an increasing necessity for our ability to communicate and fully participate in social and economic activities.
4490 Some parties are asking the Commission to mandate fixed and mobile providers zero rate content and applications they produce.
4491 Other parties are asking the Commission to maintain a permissive ex post rule of reason approach to zero rating, where it reviews existing or proposed plans for their compliance with the 2009 ITMP framework and the Telecom Act.
4492 Other claims that differential pricing will help improve adoption and extend the consumer choice. They offer little evidence to support these claims.
4493 MAC disagrees with the contention that zero rating would be beneficial for increasing adoption, or as a strategy for enhancing consumer choice. Common sense tells us the exact opposite.
4494 In terms of adoption, most Canadians, including those with a disability, have already adopted the internet. The use of technologies Canadians with disabilities require is typically constrained by relatively high prices for data services in the Canadian market and mediocre best efforts speeds Canadian operators deliver.
4495 The only real evidence of what will happen in a two-tiered system can be found by looking at what has happened so far. Access to content, speeds and services to access the open internet will disappear for the most economically challenged people in Canadian society, which statistically includes Canadians with disabilities, so that media companies can make a little bit more money.
4496 The truth is that all of the applications that have been included so far by Canadians and U.S. operators and their zero-rated plans are network intensive content, such as TV programming, multimedia services and music streaming. Even Sandvine is recommending a basic service of three to five applications only. This is about increased profit, not an improved telecommunication system.
4497 It is precisely for this reason that companies like Videotron, who are engaged in zero rating certain services, can be used as evidence as to why we can’t go down this road. Videotron has already reserved the right to throttle traffic in their retail contracts.
4498 T-Mobile in the U.S. has recently been fined by the FCC for similar network management practice on its zero-rated services.
4499 Please do not open this Pandora’s box because Canadians with disabilities will once again suffer from lack of access.
4500 Allowing common telecommunication carriers to zero rate network intensive traffic based on type of nature and the content and applications is dangerous.
4501 We strongly disagree with the free lunch position as history has proven there is never a free lunch. In fact, the proposed practices will negatively impact on our access to fixed and mobile broadband connectivity to the open internet.
4502 Before we elaborate on our concerns and recommendations, it is relevant to comment on certain claims by a number of the parties about what is good for the disabilities community and MAC’s submission in this matter.
4503 Rogers, on the surface, appears to agree with MAC that all applications and services on fixed and mobile networks should be subject to a standard data charge. However, it contends that we have asked for special treatment in this matter, which is not what we have said.
4504 Telus, in contrast, seems to be arguing the Commission should roll back the federal court of appeal decision in the Bell Mobility TV case, while similarly accusing MAC of requesting some kind of special treatment for Canadians with disabilities in this matter.
4505 These claims are incorrect and misleading, as should be obvious from a careful reading of our written submission and reply comments.
4506 Further, given Telus’ conduct and clear lack of understanding anything about Canadians with disabilities, we can only say we are thankful for the Commission in their role to ensure the Telecommunications Act is interpreted to the benefit of all Canadians, not just media and telecommunication companies.
4507 Adoption of narrow exemptions for specialized services, such as the video relay service, public and emergency services, are in a public interest. They are also perfectly compatible with adopting clear ex ante prohibitions against differential pricing of data in the retail internet service plans. But this is not enough, as the internet is much larger than that.
4508 Of particular concern is the claim by Telus using MAC’s submission in CRTC 2015 134 as the source of authority to justify its call on the Commission to legalize discriminatory differential pricing practices under consideration in this proceeding.
4509 Telus has strongly disagreed with MAC’s recommendation for the Commission to mandate concrete and verifiable minimum standard of basic service reliability for fixed and mobile broadband access.
4510 Statements by these entities about MAC’s position do not represent the view of Access 2020 Coalition stakeholders working through MAC to ensure full accessibility of media and communications by 2020.
4511 Similarly, some submissions by large internet content and service platforms, such as Facebook and U.S.-based think tanks, claim zero rating would be beneficial to vulnerable populations, such as those with a disability. These claims also represent a misleading attempt by certain industry interests to appropriate the voice of Canadians with the disabilities in this proceeding.
4512 So for the record and to be clear, Canadians with disabilities do not want a two-tiered system as it will lead to one system for rich and one system for the poor.
4513 We urge the Commission to recognize claims by these parties have little to do with the interests of Canadians with disabilities that work together to improve their access to communication services through MAC.
4514 MS. KILPATRIC: We were therefore pleased to see the federal government appeal and uphold the decision by the Commission prohibiting differential pricing practices by Bell and with respect to its over-the-top media offerings in the mobile market.
4515 We urge the Commission to build on this enlightened judicial precedent, recognizing that various media and communications applications and services are now delivered on the same physical networks.
4516 Given affordability and network capacity constraints we face are trying to deploy technologies we need, particularly in the case of mobile access services. The prospects of operators offering free data for a limited range of network intensive entertainment services would be particularly discriminatory from a disabilities’ perspective.
4517 In their submission, some proponents of zero rating have tried to mitigate obvious concerns about discrimination and reduce consumer choice associated with sponsored zero-rated special services.
4518 As an important example, S-Vine -- oh, Sandvine, sorry, suggests that it advises operators to zero rate services in a way that gives the consumers a choice among multiple services from a list of three or five application content providers, i.e. my three, or my five.
4519 Sandvine claims that this approach gives consumers sufficient control and choice over the services they receive and mitigates the potential for inefficient and unjust discrimination. Consequently, it recommends this approach in its so-called best practices for network operators.
4520 MAC, Access 2020 submit that such a definition of consumer choice is wholly inadequate in terms of the universe of competing content and application service providers that are available on the open internet for all consumers, including those with diverse disabilities.
4521 A choice of three or five options to pick from will inevitably exclude the wide range of services and applications designed to address the needs of individuals with particular disabilities and technology needs. As such, most applications and services we need are likely to be excluded from this special treatment and delivered on slower data-capped lanes of the two-tiered internet access networks.
4522 Furthermore, differential pricing of data will have a negative impact on the transparency of the market by increasing the complexity of retail contracts, particularly in the fine print. This will increase information asymmetric between sellers and buyers, making it even more difficult for consumers to make informed choices among offerings in the market and to hold network operators accountable for the services they deliver.
4523 Over the past few years, a baffling range of services, options, bundles and add-ons are being offered by network operators, which can create a perception of consumer choice. However, this is not necessarily the case as pricing complexity makes it difficult for consumers to make informed decisions. As detailed in a recent investigation of wireless data prices by the Financial Post, for example, and I quote:
4524 "The big three [telecoms] are pushing data usage this year...all throwing in a couple of extra gigabytes to consumers who sign up for new phones and opt for medium data usage...but how companies charge for data is increasingly being criticized since Canadian consumers looking for the best deal have their work cut out for them. Prices vary to the point of seeming arbitrary... .The Big Three offer the most expensive plans and their prices match almost exactly, albeit with different perks thrown in, followed by those from [the] flanker brands... .The providers say the pricing differences in data fees are because different prices appeal to different markets... .Part of consumers' confusion is that it's not clear how much it actually costs to transmit a gigabyte of data on a network, as...[telecoms clearly] guard that number[s]."
4525 Growth in differential priced plans would only create more confusion for consumers by making it even more difficult to figure out how much they are actually paying for data and quality of services they are receiving in return. At the same time, increasing contractual complexity associated with practices under review could actually encourage some operators to engage in confusion-based marketing techniques in order to attract fixed and mobile customers away from their competitor.
4526 In terms of consumer protection, differential pricing for object data based on senders, content, and application types, is likely to be particularly harmful to relatively lower income consumers, who cannot afford to pay for luxury service plans for unlimited data or very high data caps.
4527 Contractual disclosure and the appearance of transparency in the fine print are not going to be sufficient to provide enough information to average consumer about the likely catch in service packages that include an offer of a free lunch in terms of free data when using a small range of services.
4528 These risks are particularly a concern for Canadians with disabilities because of the already substantive lack of accessible marketing information and contracts, as well as barriers in communication between some of our stakeholders and their service providers.
4529 MR. BIRCH: By opening the door to differential pricing, the Commission would encourage operators to experiment with new confusion-based marketing strategies complexity of the new plans enables.
4530 Risks to consumers and reduced market transparency from differential pricing practices under review are substantive. These risks exists whether we are talking about affiliated traffic, as in the Bell TV case, or from an independent third party, such as Facebook, Netflix, or streaming music services, as in the ongoing Videotron affair.
4531 If differential pricing of Internet access plan is allowed and zero-rated special service fast lanes for network intensive applications become more widespread, they will invariably have negative network effects on the quality of service in the best effort access available on capacity-constrained networks.
4532 For basic applications, such as email and simple web browsing, the degradation of best effort services from the rise of a two-tiered Internet may not matter that much for users. However, connection reliability and minimum quality of service guarantees are increasingly essential for deploying various advanced technologies by our community, ranging from video and multimedia communications, to the Internet of things for monitoring and controlling sensors, to computer vision and mobility applications.
4533 The fact that most of the analytic and control functionalities for technologies that are essential to our community are now managed in the Cloud, their effective and reliable use increasingly requires some form of minimal quality of service guarantees, in absolute terms or statistically.
4534 A flexible approach to minimizing the negative impact from the rise of a two-tiered Internet on quality of service in accessing the open Internet is to offer services that include minimum service quality guarantees. Operators can do so voluntarily, or with a regulatory mandate that sets minimum standards of service that are both sufficient for users and realistic to implement by operators, such as the ones we have asked the Commission to adopt in the basic services proceeding.
4535 Fortunately, the same network control technologies used to create zero-rated fast lanes can be deployed by operators to deliver minimum quality of service guarantees for particular sets of services or users that need better than best effort reliability.
4536 Confirmed in Sandvine's submission, network control technologies are available that allow for the fine grained price and service quality differentiation across users, application service providers, types of content, time of day, and other traffic attributes.
4537 MAC's emphasis on minimum standards and quality of service guarantees aim to encourage developers of network control systems, such as Sandvine, and network operators to deploy these technologies in a manner that improves their capacity, to delivering fixed and mobile access services that are sufficiently reliable for deploying Internet technologies and services that enable and assist Canadians with disabilities.
4538 Although MAC proposed the mandated adoption of minimum quality of service guarantees in the basic service proceeding, this proposal remains relevant in the context of this proceeding as well. Mandated minimum quality of service guarantees represent a flexible mechanism for the governance of a two-tiered Internet, as they can put a lower bound on the negative network effects of growth in zero -- in sponsored zero-rating and prioritized traffic on quality of access to the open Internet.
4539 For this reason, various advanced economies are adopting this approach in response to concerns about the price and quality of service differentiation. A notable example can be found in Europe, where the body of European regulators for electronic communications incorporated quality of service guarantees as a key element in the implementation of EU network neutrality guidelines this past summer.
4540 In the narrow context of this proceeding, however, even if the Commission were to mandate some form of minimum service standards or guarantees, differential pricing of data would still create affordability and consumer protection concerns for consumers with a disability.
4541 MR. TIBBS: To conclude, the growth in differential pricing of network intensive services, whether they are provided by an affiliate or are from an independent third party, will relegate access to applications and services consumers with disabilities require to the best effort data capped lanes of a two-tiered Internet.
4542 We support the Commission in building on the important precedent it set in the Bell Mobility case, and judicial support for the Commission's analysis in that matter, and to adopt a clear ex ante prohibition against differential pricing practices now under review.
4543 We submit the analysis by the Competition Bureau is flawed, as it does not account for the negative network externalities inherent in zero-rating network intensive applications in capacity-constrained networks. The Competition Bureau also does not consider the negative implications of increasing pricing complexity.
4544 By increasing the complexity of retail plans, differential pricing will make it even harder for consumers to ascertain what they are paying for in terms of data charges. Low-income vulnerable consumers, including many with a disability, are likely to be the primary victims of the smart pricing strategies and marketing gimmicks that growth in differential pricing of data will incentivise.
4545 We submit that protecting consumers and honest competition based on clear data pricing represent sufficient reason to adopt a clear prohibition against differential pricing practices.
4546 High-income consumers may be able to afford unlimited plans or those with high data caps, but will also suffer if growth in zero-rated special service fast lanes reduces quality of service in the best effort slower lanes. Allowing network operators to zero rate network intensive entertainment services would be particularly discriminatory from the perspective of Canadians with disabilities.
4547 We agree with Rogers that a complex set of regulations may be -- may not be effective in furthering the statutory objectives. We disagree with proposals for the use of a rule-of-reason, case-by-case factor analysis for determining compliance, before or after the introduction of differentially priced plans.
4548 MAC, therefore, supports imposing a clear ex ante prohibition on differential pricing of data based on the nature, origin, and type of content and applications in retail contracts for fixed and mobile services.
4549 We would be pleased to answer any questions the Commission may have.
4550 THE CHAIRPERSON: Well, thank you very much, and welcome to the hearing.
4551 Maybe I'll just take a quick opportunity to remind you of who the Panel members are, so as we converse you might know who we are. So, obviously I’m Jean-Pierre Blais, I’m the Chairperson; to my right is the Vice-chair Peter Menzies who’s Vice-chair Telecommunications; to my left Yves Dupras who’s the Regional Commissioner for Quebec; to my far right is Commissioner MacDonald who is the Regional Commissioner responsible for the -- for Atlantic provinces and Nunavut; and to my far left is Commissioner Vennard who is the Regional Commissioner responsible for Alberta and the Northwest Territory.
4552 So, to begin with I’m going to put you in the hands of Commissioner Dupras who will start us off.
4553 COMMISSIONER DUPRAS: Good morning.
4554 Well, thank you for the submission, I mean it’s quite exhaustive and well-thought out.
4555 I understand you're afraid that differential pricing will affect the reliability and affordability for disabled people. And that -- I mean it might enhance the incentive of operators to maintain restrictive data caps and that it may become more expensive for data.
4556 First, I’d like to ask you about the applications and the services that are used by the disabled Canadians that you refer to as being data intensive. Can you provide us with more details on that, please?
4557 MR. BIRCH: I’ll start then I’ll pass it over to Kim. But some -- I mean the first one that comes to mind -- it’s already been brought up in these hearings I understand -- is video relay services; speech recognition, a lot of it is now done in the Cloud and I personally find that if I don’t have a good bandwidth ---
4558 COMMISSIONER DUPRAS: And if you could ---
4559 MR. BIRCH: --- what goes from an excellent service to ---
4560 COMMISSIONER DUPRAS: Yes, and if you could at the same time while you're talking about ---
4561 MR. BIRCH: Sorry?
4562 COMMISSIONER DUPRAS: If at the same time while you're talking about them, you can tell us how much data it may consume at the same time, it would be ---
4563 MR. BIRCH: Wow.
4564 COMMISSIONER DUPRAS: --- interesting to know. Well, if you have an idea compared to ---
4565 MR. BIRCH: I have no idea. I have no idea.
4566 COMMISSIONER DUPRAS: --- compared to video or ---
4567 MR. BIRCH: That’s part of the problem.
4568 COMMISSIONER DUPRAS: --- other ---
4569 MR. BIRCH: I’m not prepared today with the video relay. I think that the people behind that have figured out what is needed on a minimum quality ---
4570 COMMISSIONER DUPRAS: It’s just that ---
4571 MR. BIRCH: --- of services. But, you know, for voice recognition all I know is it’s actually very effective when I have a good broadband connection and it’s actually quite amazing, because I have a lot of trouble typing with my hands.
4572 COMMISSIONER DUPRAS: Yes.
4573 MR. BIRCH: But as soon as I lose any, you know, performance, then it degrades completely.
4574 COMMISSIONER DUPRAS: Yeah.
4575 MR. BIRCH: There's a lot of vision-based applications now for the blind that I’ll get Kim to talk a bit more about, and they rely on -- heavily on high bandwidth as well as now we’re getting into object and recognition and guidance systems, et cetera.
4576 COMMISSIONER DUPRAS: Yes.
4577 MR. BIRCH: So -- and a lot of these are in the Cloud and they rely on that ongoing high bandwidth. The exact amounts I couldn’t tell you this morning.
4578 COMMISSIONER DUPRAS: No, it’s just that you ---
4579 MR. BIRCH: I’m not sure anybody actually knows to be honest.
4580 COMMISSIONER DUPRAS: it’s that you mentioned that -- I mean people with disability consume more data than people without. And I just ---
4581 MR. BIRCH: I'm not even ---
4582 COMMISSIONER DUPRAS: --- wanted to get a sense of ---
4583 MR. BIRCH: Depending upon their reliance on certain applications ---
4584 COMMISSIONER DUPRAS: --- that ---
4585 MR. BIRCH: --- but it may -- it may not even be that they always do, it’s just that when they need it for their technology to work properly and effectively for them, they need it. So if they -- they can't afford to be on a lane where suddenly their quality of services is low, because then that technology that could be life threatening for them is not working properly. So it’s -- you know what I mean? Like -- so they have to have quality of service that they can count on, whether they're using a lot of data or little data.
4586 I think Kim’s also got a few examples to add.
4587 MS. KILPATRICK: Yes.
4588 COMMISSIONER DUPRAS: Thank you. Go ahead.
4589 MS. KILPATRICK: So for example, for me being totally blind -- and I can't tell you in numbers, but I can tell you about this change in speed of the application loading. There are some applications I use -- it's like a video call, if I get stuck -- if I can't read something or sometimes if you got lost and you couldn’t -- no signs, so your phone becomes like a video call to a sighted person volunteering who describes things to you. If it’s a good connection, it -- a bad connection would be about half as fast. I could look up, you know, and keep track of the exact difference in the application of how much data each one uses, but there are several applications like that I use.
4590 There's also an OCR, so scanning and reading printed material, which takes up a fair bit of data to use, but if I can't read a handout in a meeting, I have to use it, there's no question of whether or not I need it. There's also global GPS applications, which for people who are sighted they can look up and read the street signs or know exactly what street they're on. Colour identification as well as -- of course as Gary said speech recognition, sometimes I used that but sometimes I don’t, sometimes I use Braille as I was using that here this morning there with my phone.
4591 So it’s more a critical -- critical abilities to get around, artificial intelligence taking up quite a lot which would be object recognition. The rise of indoor navigation, so within a building I could come here independtly if it could guide me with reading the signs and knowing the rooms, otherwise it's much more difficult. So it’s just more critical than someone playing Pokémon Go or something that I am able to use my applications to function in this world, a sighted world.
4592 COMMISSIONER DUPRAS: Yes, okay. Any other?
4593 MR. RAJABIUN: Yes, this goes back to our proposal for -- it’s hard to pin it down, but in the basic service proposal hearings, we proposed 5/5 minimum standouts for fixed right now, and increasing it to 5/5 in five years for Mobile 1.5 symmetric as a minimum baseline. And this is in the absolute term, so some applications don’t need that absolute level of speed, they need the reliability and the latency.
4594 And technically -- as I think the gentleman from Sandvine mentioned a few days ago -- having that service quality guarantee, actually helps the network operators manage their networks better by separating the incentives of the marketing departments versus the engineering departments.
4595 So just to be concrete is -- so they can do this statistically, but we have proposed concrete measures as a first step based on -- for the Commission to be able to move forward.
4596 COMMISSIONER DUPRAS: Okay. So these are the minimum warranties that you were referring to? Do you collect any information about how many of your stakeholders surpass their data caps? Is that something that occurs regularly or more for some people than others?
4597 MR. RAJABIUN: We don’t have information about that because you need a very large survey to be able to come up with something like that. But even the answer to that question is problematic because if -- various operators have said, “Oh, only 5-10 percent of our users are surpassing their data caps”, but that’s negating the fact that that suppresses demand already.
4598 So the reason that they're not surpassing their data caps is because they're not deploying the technologies that would eat up the data cap. So that’s a tricky question and I don’t know -- even if you had the answer for it -- as some others have contended they have the answers for it -- it’s a very valuable answer in terms of your deliberations.
4599 COMMISSIONER DUPRAS: Okay.
4600 MR. BIRCH: If I just add, people with disabilities when something does not, you know, ---
4601 COMMISSIONER DUPRAS: Yeah.
4602 MR. BIRCH: --- yeah, I mean they would just opt for something they could afford and then not use the technologies that would ---
4603 COMMISSIONER DUPRAS: In periods where for instance they’ve totally taken their data, I was wondering how far does voice and text go to serve the needs of people with disabilities? I mean that can always be used -- I mean it might not be latest technology, but how far does it go to serve the needs?
4604 MR. BIRCH: I'm not sure I’m fully -- you're asking instead of using all these apps that are --or services that are ---
4605 COMMISSIONER DUPRAS: No, but that’s -- that can also be some technology on which you can rely failing being able to access at certain times while more innovative ---
4606 MR. BIRCH: I think what both Kim and I ---
4607 COMMISSIONER DUPRAS: --- solutions.
4608 MR. BIRCH: --- were trying to get across in our previous answer is that -- the answer that’s no. Like, if she’s in a situation -- I think the last time at this hearing she was explaining a very real scenario where she was taking a path that she’s used to but there was construction going on and she needed to use that app that calls up a visual volunteer to navigate her through safely. You couldn’t do that with just voice.
4609 MS. KILPATRICK: Like, it’s not -- I agree it’s not -- so I was, on a weekend, going down a regular street. There was construction. Of course, no workers there. Signs, there weren’t the greatest barriers. I had my dog, but, you know, my dog doesn’t tell me what’s going on in that way. And I had to call someone on the -- on my cell phone with data to ask what was going on, how I could safely get around it. If I went out in the road, was there a barrier between me and the road?
4610 If you were texting -- I mean, you can’t call someone or text them to ask them those kinds of questions. So, I think sometimes -- it’s a matter of safety and it’s a matter of what people without disabilities take for granted; that they can look around and observe their environment.
4611 And I did get around safely before all of this, but there’s no reason to turn back. I need -- I can’t look at the bus stop number. I have an app that tells me the bus schedules, otherwise how would I do it? You know, I -- all of these things you couldn’t do independently without. So, I don’t think calling -- no, calling and texting is not sufficient to live an independent life.
4612 COMMISSIONER DUPRAS: Yes, I understand.
4613 MR. BIRCH: The fact that there may be some alternative way of accomplishing the same task — and in some cases, there aren’t; in some cases, there may be — that notion was put to the test a couple of years back when Donna Jodhan took the Federal Government to task in the federal court regarding the accessibility of Federal Government websites.
4614 One of the positions of the government was, “Well, no you can’t fill a passport application out yourself if you’re blind using our website but you can always call us.” And the decision out of that case was that if a service is going to be provided, it should be accessible to everyone regardless -- even if there might be another way of doing it, the various avenues of accessing it should be accessible.
4615 And so, from that perspective, yes, some things can be done by voice or by text, but there are a lot that can’t and that shouldn’t be the deciding factor as far as these proceedings are concerned.
4616 MR. RAJABIUN: And that’s sort of exactly why we have asked for the Commission to define both fixed and mobile broadband, regardless of the delivery technology, as an essential service. So, we don’t have these kinds of questions anymore. And recognizing that the legacy technologies, voice and text that you’re talking about, are absolutely not a substitute to the internet.
4617 COMMISSIONER DUPRAS: Now, I’m referring to data caps. I mean, the speed, the latency, all that I understand, but there are some limits in data that are on certain plans and you’re afraid that those might even be reduced with the introduction of differential pricing practices.
4618 MR. BIRCH: There’s that and also, you know ---
4619 COMMISSIONER DUPRAS: And you’re also calling for, I mean, increasing of the data caps or the removing outright of the data caps. I think you’re supporting -- I don’t know whom you referred to this morning, Open Media, and -- but, I mean, if let’s data caps were removed, that could have the impact of loss in revenue for the ISPs and they could try to recoup this loss by increasing rates, even if they are unlimited. Is that something you think that the stakeholders would be ready to accept or don’t they prefer to have pricing options like data caps offer?
MR. RAJABIUN: I think your presumption about data caps increasing prices is incorrect. In the short term, it might. But as, again, the CTO of Sandvine indicated during his presentation, utilization of data caps is a very inefficient method for network management.
4620 So, actually, they could be increasing the efficiency of their networks by creating -- by tightening the constraints on network operators, you can be increasing the efficiency by which they manage their networks, reduces their cost which can then be passed out to users.
4621 And the second question is that -- there will be some sort of short term revenue loss, but that has to be thought in terms of the longer term gains -- internal efficiency of the operators and also in terms of consumer welfare that goes with it. So, there is -- it’s not a one-way cost. That’s a very short term accounting way of looking at data caps only.
4622 So, there’s a technological aspect of it. And I think there is clear agreement from a technological and economic perspective on both the data caps and minimum service quality guarantees. And it’s very interesting that we are sitting here and very much agreeing with the party that disagrees with us in this proceeding but we agree with our technical analysis of the steps that the Commission needs to take in the next few years to move forward.
4623 COMMISSIONER DUPRAS: Okay. You said if zero rated or sponsored data practices were allowed that the Commission should require some measure of accessibility accommodation for people with disability in authorizing such practices ex ante. Do you have examples of such measure of accommodation?
MR. RAJABIUN: Well, there is a narrow way of doing it which brings us to the discussion of the VRS, but there is a broader way of -- but obviously, that’s absolutely exclusionary and not efficient. It would be -- that’s one application, but even blind people -- deaf people use many other applications too.
4624 So, another way of doing accommodation is to create a special service lane that’s open for people that define themselves as having accessibility needs. Commission mandates it and then the operators have to tell Sandvine to shape a particular path for these specific customers given whatever they need zero rated and given minimum service quality guarantees. So, that would be a general accommodation.
4625 But that’s still segmenting the internet and would be extremely complex and, to be frank, I don’t think the Commission has the resources to be able to create that kind of complex system. And that’s one of the reasons why we have our supporting and open approach to this with the minimum service quality guarantee so we are not excluding future applications. We don’t want to be looking in the past saying voice and text are good enough and keep it.
4626 We want to be looking at the internet of things. And the argument -- some of the very misleading arguments you’ve heard about the internet of things not being applicable with zero rating which is -- excuse me, some of them are absolutely illogical in the sense that the user that’s paying is not necessarily the customer for that data. So -- it’s very difficult to segment that accommodation.
4627 And one reason we’ve also asked the -- to improve -- to be able to provide that accommodation, in the basic services proceeding, we have asked the Commission to develop a disabilities rights office to be able to create the institutional capacity and knowledge and expertise within the CRTC to be able to handle and share the disabilities likes on these issues.
4628 So, it’s -- we don’t want to say that, Oh -- it’s very difficult to just frame out accommodation out of this complex system in a very -- in response to your question, very easily.
4629 COMMISSIONER DUPRAS: Okay. You also indicated that there’s a range of applications and services available to persons with distinct disabilities that is too large to pin down a concrete list of examples which ISP could include in their DPP in order to reasonably accommodate their communications needs.
4630 Although all needs will not be covered, I mean, wouldn't it be better that some Canadians with some disabilities have the data usage rather than no Canadians at all?
4631 MR. BIRCH: Well, I mean, I think this is part of the world we live in, like what person with a disability gets what kind of assistive technology. And there is jurisdictions that go on a list-based system, you know, and then if you -- if the technology you need happens to be on that list you might get it, if you jump it through a bunch of other hoops, you know. So the trouble is new or better technologies come online and they never get on a list or it takes forever.
4632 So I think that's why we're going for this, we're advocating for this open system because it just gets bogged down in complexities each time you try to do that. And so I think I understand what you're saying. Like, well wouldn't it better that some Canadians get the access they need, while others suffer, but that doesn't seem like a level playing field to me, right.
4633 So we need to come up with a system where they have access, you know, and we're not trying to filter out different thigns. Because that's just going to get more and more complex and then get weighed way down in all sorts of complex bureaucracy, et cetera.
4634 MR. RAJABIUN: And I think your question is assuming there is a trade-off, and that assumption is incorrect.
4635 You can have those very narrow exceptions and also have the open system. So there is no trade-off between banning zero-rating and having a very ---
4636 COMMISSIONER DUPRAS: Because if ---
4637 MR. RAJABIUN: --- narrow exception ---
4638 COMMISSIONER DUPRAS: Yeah.
4639 MR. RAJABIUN: You can have a very narrow exception for emergency services. It would be -- this would be very important for lower levels of government and their delivery. You can be all under one public interest special service lane for the services that you think meet the public interest criteria by which that can be separated, and the rest of it can remain open. So there is no trade-off.
4640 COMMISSIONER DUPRAS: And it would be mandated?
4641 MR. RAJABIUN: If you want.
4642 COMMISSIONER DUPRAS: Yeah, well if ---
4643 MR. RAJABIUN: It would be very complex to do, first of all.
4644 COMMISSIONER DUPRAS: But if it's not, I mean, how ---
4645 MR. RAJABIUN: Well, that's why you need the openness. That's why we want the openness because even if you were to mandate that special service public interest rate, we don't think the public sector would be able to implement it very efficiently.
4646 So think about if we give you a list of applications, plus emergency services, and healthcare, you add that, what are you going to do with that? That would be very hard to implement that in the operators.
4647 Maybe they can add it and zero-rate it, but monitoring that verification, if it's being implemented, if it's being throttled, I mean, it's very challenging for the Commission to identify what average or medium speeds the average consumer in Canada is getting. Looking into the detail of the delivery of such a special service would be a nightmare bureaucratically.
4648 COMMISSIONER DUPRAS: Okay.
4649 In terms of transparency, you say that it's not -- it would not be sufficient, and that the ITMP framework is not sufficient. What else would you want to see more in terms of transparency?
4650 MR. RAJABIUN: What's the price of data? The simple question of actually a package, service package, consumers being able to identify what the price is for how much data they are getting. And this goes back to, again, another one of our -- I'm sorry if I keep on going back to a proceeding that's closed and you're contemplating its decision right now, but they are very related.
4651 COMMISSIONER DUPRAS: There was a suggestion that we introduce a requirement where zero-rated data, subscribers would be able to track the data usage and data costs associated with zero-rated content. Is that something you ---
4652 MR. RAJABIUN: That doesn't ---
4653 COMMISSIONER DUPRAS: --- that satisfies you?
4654 MR. RAJABIUN: No, that's part of more a general confusion-based marketing strategies that improve some efficiency and that distorts that -- restricts demand. But we are talking about transparency, (a), at the point of sale, so the consumer can identify which products have what prices. And obviously, as you heard from the investigation of National Post, the pricing doesn't matter that much because they're sort of the same for the big operators but the perks vary around it.
4655 The -- and the second stage of that is the same stage of transparency as the network transparency. That if I'm paying for a 50‑mg connection, I should at least be able to get 5, or 10, or some level of minimum service at all times that crosses through the peak traffic periods. So that's connected to the transparency of what you're getting in return for what you have paid after the decision to purchase that product has been made.
4656 COMMISSIONER DUPRAS: And do you feel that this is not what people are getting?
4657 MR. RAJABIUN: I'm sorry?
4658 COMMISSIONER DUPRAS: I mean, do you have evidence that this is not what people are getting?
4659 MR. RAJABIUN: It's been submitted to the record on previous proceedings, not in this one, yes.
4660 COMMISSIONER DUPRAS: Okay.
4661 MS. KILPATRIC: Can I just also say that because my main job is to teach people with blindness to use technology. And so many people will call me, and ask about plans, and find the websites very difficult to manage to figure out what the plans are, that the carriers often don't explain it very clearly to them. They are told they need a huge plan when actually, if I talk to them a bit more about what they're using it for they might not need that one.
4662 And even for me to go through with them, I find it very confusing. The websites are confusing. They're not as accessible as they should be. It isn't easy to figure out.
4663 And I don't, I guess, just within my experience personally, and also with the people I try to help navigate it, it's really not -- it's confusing all the time, and I never seem to even get my handle on it even though I'm looking at them quite regularly.
4664 So really it isn't clear-cut, and when you call, you don't always get clear answers and good support about what to do. So I think it's really not easy.
4665 MR. RAJABIUN: And for substantive evidence on the transparency, I highly recommend you look at the submissions to the mobile code of -- the mobile codes -- wireless code review that's upcoming, and also the review of the CCTS proceeding that was last year. We went in extreme detail on the extent to which this idea of transparency operates in the market and what value it has.
4666 COMMISSIONER DUPRAS: Thank you.
4667 Finally, I will leave you with the last word.
4668 If you can elaborate your position with respect to allowing zero-rating for public goods services in the case we allow DPP?
4669 MR. RAJABIUN: I guess this has been our official position because we have to discuss it, and as I mentioned, that there is various ways of approaching it. But at this point, then for public services you would have to create a separate special service line for that and then mandate the operators to deliver that. This will include emergency, healthcare, maybe if you want include education if you want to be very advanced and forward-looking about it into this. But again, as you see, trying to track this will become very complicated.
4670 So we -- I guess our position would be, be very careful of how you approach it.
4671 COMMISSIONER DUPRAS: Okay. Well, thank you very much.
4672 THE CHAIRPERSON: Thank you.
4673 Commissioner Vennard?
4674 COMMISSIONER VENNARD: Good morning, and thank you for coming to talk to us today.
4675 I have a question that has to do with innovation for disabled Canadians.
4676 One of the things that we're looking at and taking into consideration is innovation coming from what's referred to as the "edge".
4677 Can you just comment, either by example, or in a general term, whichever one you're more comfortable with, on the role of innovation for disabled Canadians? In other words, where is the research being done? Where are the new products coming from? Is it commercially? Is it from university-based research? Can you give us an idea of where the future lies for you in terms of innovation?
4678 MR. TIBBS: I'll start with that and I'm sure that people will have something to add as well. But I think it's coming from all of those angles. Some of that innovation is coming from commercial interests, but some of that innovation is also coming from, really, independent developers.
4679 The introduction of Smart Phones and "I" devices and the App Store, or Google Playstore on the Android side has opened up a new channel of marketplace that never existed before. And a lot of the apps that people with disabilities rely on are not being developed by big multi-national companies, a lot of them are being developed by individuals or small teams that have identified a particular need and set out to solve that. Kim probably has some examples of that.
4680 But they’re apps like the Be My Eyes which let a blind person take a picture or a video of something and ask a sighted volunteer somewhere else in the world to describe it or provide some information about it. That didn’t come out of a Microsoft or out of a Google that was an independent project.
4681 There are some research institutes based in universities that are also developing new applications. There’s a team at McGill that just released another way finding or GPS navigation tool. And so these things are coming from all sides.
4682 MS. KILPATRIC: Yeah. I agree with Anthony. I’ll give you a few examples. That app, Be My Eyes, which allows you to make a video call to a sighted volunteer, was developed by a blind gentleman in Denmark, I believe, who said he wanted his friends to come over for a beer, not to tell him about everything he needed to know around his house. So he wanted to independently identify things with someone to help him when he needed it.
4683 At Carleton there’s something too called the READ Initiative which is instrumental in getting students from various faculties to think about accessibility. I’ve gone there several times to present to engineering classes and to –- they will ask me what my needs are and they start to try to develop projects based on speaking to the people with disabilities.
4684 Because sometimes what happens with innovation is people without disabilities have great ideas that they think we need and they develop something and then give it to us and we say, “Well actually, we don’t need that. What we really need is this other thing.”
4685 And so it’s starting to improve where people come to us first. From the blindness perspective, I mean, Gary with no other types of disability apps, if you want to see, there’s a website called AppleVIS.com on the Apple side, which means that they talk about accessible apps and developers come on and ask questions and blind people beta test them. So there are those things.
4686 The big companies also are becoming more interested and Apple was kind of a flagship in accessibility built in to devices so that we don’t have to pay extra for technologies. But I see a lot of it coming from -- I recently got an app that was developed by a Grade 12 student in Ontario. It’s a wonderful object identification app which he developed just out of interest and some relatives he had who had low vision. So it’s a very exciting time to be in this world of expanding innovation.
4687 But I think the most interesting innovations seem to come from within the disability community or from small app developers that take the time to ask us, and also from the post-secondary people learning about accessibility from the ground up.
4688 I had a summer student last year who’s in computer science. He said they had maybe one half hour about accessibility in his courses but now he knows a lot and he’s developing apps for me and other people. So I think it’s really impressive that it’s coming from the grassroots, I guess I would say, more than the bigger companies.
4689 MR. BIRCH: I have to comment as well. I’ve been involved in the area of technology and innovating technology for people with disabilities for over 30 years. And it’s actually a good question. I think the answer is certainly all areas. A number of really good points have been made. I’ll try not to replicate them.
4690 There’s been a lot of -- one of the issues I talk a lot about is there’s been a lot of interesting mainstream technologies that come online, but they haven’t had the forethought of accessibility. So they come online and then the disability community has to scramble to try to figure out a way of how do we take advantage of those emerging technologies.
4691 So another part that I’m very involved with is try to get industry to think about accessibility as they’re developing new innovation so that we’re not trying to retrofit and fix things. And the rate of change of technology is so fast that the retrofit model is almost useless nowadays.
4692 So there’s a real importance that we get out in front of innovation and encourage it and regulate it if we need to, to make sure that new innovations, wherever they’re coming from, have a disability lens on them so that they’re either easily made accessible and/or made accessible right out of the box, so to speak.
4693 And innovation comes from the grassroots, it comes from big big companies, it comes from not for profits that are working day to day front -- frontline with people with disabilities like the Neil Squire Society. You know, there’s been a lot of interesting innovation because of open soft -- software applications now.
4694 There’s a whole move towards open hardware as well using maker communities, et cetera. So there’s a tremendous amount of potential and interesting innovation out there. It needs to be tapped in a way that includes users with disabilities so that the innovations are actually useful to people with disabilities and that all new emerging technologies have the disability lens on them.
4695 COMMISSIONER VENNARD: Okay. That was my question. Thank you for sharing your thoughts.
4696 THE CHAIRPERSON: Well, thank you very much. I’ve looked around and apparently we have no further questions for you. So thank you very much for participating in this hearing and obviously you will be participating in the subsequent written phases of this proceeding. So thank you very much.
4697 So we’ll not take a break, but we will switch out the panels and hear from the next intervenor, which I believe is OpenMedia. Is that correct, Madam Secretary? Yes?
4698 THE SECRETARY: Yes, that’s correct. Thank you.
4699 --- (SHORT PAUSE/COURTE PAUSE)
4700 THE CHAIRPERSON: So order please. We really didn’t adjourn. We’re just moving.
4701 And so our -- the presenters from OpenMedia, I’d ask you to take your place and present yourselves and ---
--- (SHORT PAUSE)
4702 THE CHAIRPERSON: And please go ahead when you’re ready.
4703 MS. KHOO: Good morning, Commissioners and Commission staff. Before we begin, we wish to acknowledge that we are on unceded Algonquin territory and recognize that acknowledgement is only a start towards reconciliation.
4704 My name is Cynthia Khoo and I’m external counsel to OpenMedia.
4705 My colleagues and I commend the Commission for taking on the critical issues in this hearing, and especially for directly engaging with tech-savvy, informed Canadians on the record. Holding one’s own in Reddit is no mean feat.
4706 MS. TRIBE: My name is Laura Tribe, and I am the Executive Director of OpenMedia. We are a community-based organization that works to keep the internet open and affordable, empowering people to build a more connected and collaborative world.
4707 Listening to our pro-internet community while working toward this goal has made us overwhelmingly aware that for Canadians to participate in today’s digital society, they require affordable and equitable, neutral access to data for the content and applications of their choice.
4708 MS. ANDERSON: As an access -- my name is Katy Anderson. As an access-focused Digital Rights Specialist at OpenMedia, I hear from average Canadians every day about their challenges, such as data caps and differential pricing. Internet users across Canada have made it clear to us they reject these practices and are depending on the Commission to prioritize consumer protection and the public interest in its determinations.
4709 MR. TABISH: My name is Josh Tabish, and I’m the Campaigns Director at OpenMedia. On behalf of our panel, I would like to extend my thanks and appreciation to the members of OpenMedia’s community, whose voices we have the privilege of presenting to you today. In fact, many of them are here in the audience right now. You may recognize the shade of blue the room has turned. We also would like to thank OpenMedia’s amazing staff, who have contributed tremendously for us to be here today.
4710 MS. KHOO: Commissioners, this hearing has covered much ground over this past week. Today, OpenMedia hopes to narrow the issues for you into three simple requests.
4711 First, listen to Canadians.Over 56,000 internet users have called for eliminating data caps and banning zero-rating. As you’ve heard this week, they are joined by public interest groups and Canada’s largest cable company alike. This remarkable consensus would seem to provide an inordinately clear compass to the Commission in deciding what is truly best for Canadian telecommunications going forward.
4712 Second, aim higher for Canada’s future.Whether by banning zero rating or listening to users’ pleas to eliminate data caps, the Commission has an opportunity to drive internet service providers to reinvigorate their investments in network capacity. Aiming higher means doing what is necessary to galvanize industry towards building a genuinely world-class telecommunications system.
4713 Third, protect innovation for all. Banning zero rating through an ex anteframework would safeguard everyday creators and innovation from the edge, while enabling the Commission to retain regulatory flexibility. This approach ensures that all manner of innovators, large and small, are able to compete on a more fair and meritocratic basis.
4714 I will now hand the floor to Laura.
4715 MS. TRIBE: OpenMedia’s first message to the Commission is this: listen to Canadians. Over the course of this proceeding, Canadians on the public record have made clear that as far as they are concerned, when it comes to internet plans, data caps are always in scope. Understanding this is key to understanding citizens’ views on zero rating. They told the Commission this through individual interventions, Reddit, and OpenMedia’s Internet Voice Tool. As of yesterday, over 52,000 Canadians have signed a petition to eliminate data caps in addition to banning zero-rating, reinforcing net neutrality rules, and improving transparency and enforcement in the ITMP Framework.
4716 When OpenMedia invited Canadians to express their views to the Commission on these topics, over 6,000 comments flowed in. We encourage anyone interested in reading the informed and passionate views of our pro-internet community to visit
4717 openmedia.org/datacaps. Data caps and zero rating are without doubt an issue that Canadians care and feel strongly about.
4718 For example, Wilma Green from Estevan, Saskatchewan, said, "What an opportunity for the CRTC to stand up to telecom Giants on our behalf. For a lot of us users, it’s an honest struggle. We rely on internet services as everyone does, but overage fees are a constant stressor financially. Give us the benefit of stronger enforcement of rules, no zero-rating data & strong net neutrality."
4719 You will hear more from users like Wilma throughout our presentation.
4720 MS. ANDERSON: The Commission’s laudable Reddit initiative resulted in similar views and adamancy from Canadians. The Commission asked, “What do you think are the benefits of differential pricing?” On a whole, Reddit responded, none, negligible, or would only benefit providers. User “xhiggy” said, “This will amount to large companies determining what the poor can afford to read and watch.” And “hanexar” warned, “If zero-rating package goes unregulated, we will also have a -- we will have cable-like Internet in a few years.”
4721 Reddit users on the record also support a ban on zero rating. User “ayjee” wrote, “Step in by banning it. Please do not do half measures, this is too important.” And user “Staticn0ise” said, “Do not allow differential pricing. It is the worst thing that could happen to our internet. Instead, remove the overly restrictive data caps.”
4722 As media headlines and other parties this week have noted, the approximately 1200 comments on Reddit were overwhelmingly critical of differential pricing, many of which also denounced data caps. Combined with the internet users we heard from, that makes approximately 56,000 Canadians asking the Commission to take action.
4723 Thus, when it comes to zero rating, the Commission has two camps before it. In one, you have 56,000 engaged Canadians, 75 individual interventions, public interest and civil society groups, independent academics, small ISPs, internet broadcasters, and Rogers Communications, Canada’s largest cable and mobile wireless company.
4724 In the other camp, you have a mere handful of ISPs, who are fighting for a practice that even its purported beneficiaries have shown no interest in defending at this proceeding.
4725 Who will the Commission listen to? We hope this particular decision is clear. Canada’s internet users and the integrity of our telecommunications system depends on it.
4726 MS. TRIBE: OpenMedia’s second message to the Commission today is this, aim higher for Canada’s future.
4727 Rather than allowing ISPs to demand ever increasing sacrifices from Canadians to remain connected, the Commission should instead demand more of Canada’s ISPs. In sharing their views regarding internet data plans, users across the country have made one thing undeniable. Data caps are inherently relevant to differential pricing practices.
4728 Given that zero rating can only exist due to data caps, it stands to reason that Canadians would want to see the Commission resolve this root problem before considering unfair practices that would entrench it. One way to do this is through incentivizing more aggressive network investment among Canada’s largest ISPs.
4729 Whether from the perspective of people’s everyday struggles, international comparisons, or limits on innovation, data caps are actively holding Canadians back. To invest in our country and its citizens, we must first invest in our networks. Falling short on this leads to frustration by users like Erica Procunier from Toronto, Ontario, who says, “Canadians are not allowed to compete globally within a data cap system. The giant telcom companies will continue to make record profits off of Canadians and fail to re-invest in infrastructure because they are allowed to do so.”
4730 To achieve a world-class telecommunications system, the Commission must implement enforceable policies that will incentivize ISPs to build out and up, rather than keep citizens down.
4731 MR. TABISH: Data caps are especially frustrating to subscribers as they often appear to be for little legitimate purpose, and zero rating further calls this purpose into question.
4732 Max Hussey from Chesley, Ontario, had this to say, “Data is not a non-renewable resource that requires capping. In today's digital landscape, where accessibility to the internet is nearly a requirement for day-to-day living, the idea of data capping or manipulation is nothing more than a cash grab.”
4733 Regarding network congestion as justifying current data practices, internet service providers have yet to substantiate anything with concrete evidence on the public record. Indeed, Xplornet yesterday told us that for them, data caps are foremost a marketing technique, not a matter of network management, but an economics-driven offering built through their marketing group.
4734 Earlier this week, we heard that Sandvine, a leading traffic management and equipment manufacturer said, “they felt that feel data caps effectively -- do not effectively manage congestion.”
4735 Meanwhile, industry counterparts like T-Mobile and Netflix in the United States have begun moving away from or outright opposing blunt data caps in response to consumer demand or in filings with the FCC.
4736 Regulators, industry insiders, and researchers have stated or implied that the base cost of transporting internet data is as low as a few pennies per gigabyte. Non-profit ISPs that operate near cost while still growing their operations charge much lower rates for much more or unlimited data.
4737 ISPs in Canada exclusively possess the best evidence to show they are not using data caps to simply upgrade revenues in lieu of upgrading networks. However, they refuse to show this evidence and expect us to take them at their word, even while they arbitrarily zero rate music and remove caps for IPTV.
4738 Canada’s internet service providers cannot have it both ways. The time has come to call at least one of their bluffs.
4739 MS. ANDERSON: What we do have evidence for is that data caps harm consumers. This is key to understanding why Canadians oppose zero rating, which are predicated on preserving data caps.
4740 For example, Anne Lacoste from Aylesford, Nova Scotia shared, quote:
4741 "I am the caregiver to a permanently injured veteran and to keep up with his needs I require unlimited data abilities on the internet. Right now it's costing more than I can afford yet I can't afford not to have it."
4742 Between mental transaction costs and hypersensitivity to hitting limits, data caps cause internet users to oversuppress their usage for fear of punitive overage views.
4743 As Vincent Laurin from Lemoyne, Quebec said, quote:
4744 "There is a point where people suffer and panic over going over data, and people who can't afford it usually need it more."
4745 Diffraction analysis was able to demonstrate that one-fifth of penalized customers at a mid-sized North American ISP could not possibly have contributed to disruptive network congestion.
4746 Similarly, Videotron's wireless data plans punish lower tier subscribers more harshly than higher tier subscribers in light of unlimited music.
4747 In an internet services market as concentrated as Canada’s, people cannot vote with their feet or their money.
4748 Jennifer Massie from Red Deer, Alberta told us, quote:
4749 "TV without data can literally make or break a student. We all want the best for our kids but I personally can't afford large data packages. I feel like a prisoner."
4750 The top ISP's in Canada control approximately 90 percent of the retail wireline and wireless markets, both of which continue to shrink with the recent losses of MTS, WIND and Mobilicity. Lack of real competition means that artificial scarcity and sheer expense of data impact Canadians even more. Four-player provinces like Quebec, Manitoba and Saskatchewan show that data does not have to be that scarce or that expensive.
4751 To everyday citizens like Anne Hill from Charlotte, New Brunswick, quote:
4752 "It seems as though the internet providers own the roads of communication. They can get together and charge whatever they want; a complete monopoly."
4753 MS. KHOO: In 2009, the Commission legitimized data caps as an economic internet traffic management practice under the ITMP framework because they purportedly linked internet service rates to user consumption for the sake of managing network congestion.
4754 The intervening years, and the record of this proceeding, have now shown that link to be tenuous. This may be why wireless data caps have risen and wireline data caps have disappeared elsewhere around the world.
4755 While it's true that data caps have also risen in Canada, they clearly have not kept pace with demand. Differential pricing would worsen the situation by freezing data caps where they are or otherwise prolong the inhibiting effects on Canada's internet users and digital economy. Meanwhile, such outdated internet plans would perpetuate the stress, panic and oversuppressed usage that caps evoke in those who rely on data every day.
4756 In light of this, Open Media recommends that the Commission revisit the legitimacy of data caps under the ITMP framework. Prohibiting ISP's use of this blunt approach would bring internet data plans more into line with the Section 7 policy objectives while restoring suppressed market forces such as consumer demand and meaningful incentives to compete.
4757 The Commission can and should aim higher for Canadians by shaping a future where ISP's are compelled to rise to the occasion of users skyrocketing demand through robust investment in network capacity and an internet service quality.
4758 MS. TRIBE: In our intervention, OpenMedia asked whose innovation warrants protection. To us, and we hope to the Commission, the answer is everyone's.
4759 Our third message to the Commission is this, protect innovation for all. Zero rating and similar practices shield dominant players from fair competition, and if unleashed, would turn the public forum of the internet into privatized enclosure. The internet would be reduced to a little more than Cable 2.0, which, as we heard yesterday, even some broadcasters reject. This is exactly the wrong direction in which to take the backbone of Canada's digital society whose defining characteristic of common carriage made possible the previously unimaginable for so many.
4760 Mariella Villalobos from Calgary, Alberta put it best:
4761 "The internet has become a utility almost as necessary to modern life as electricity or water and, as such, should remain neutral and as accessible as possible. If we allow private companies free reign to parcel it off and create differences in access or speed to different websites and content, then we open the door to a future where the very information available to us is based on financial gain and access and where these companies become gatekeepers of truth and information."
4762 MR. TABISH: Make no mistake, zero rating and similar practices will result in gatekeeping. This occurs regardless of good intentions. Rogers Communications itself stated that DPP's are anti-competitive and, quote:
4763 "Do give ISP's the ability to act as gatekeepers in every case."
4764 In unlimited music, Videotron deliberately excluded radio stations and rejected an unnamed service for unknown reasons.
4765 There is also no guarantee that newer small entrants will benefit. On the contrary, small ISP's such as Tbaytel have said they do not even have the capacity to implement DPP's and the record of this proceeding suggests that content or app providers are ambivalent at best.
4766 Meanwhile, every day Canadians and future innovators will lose out. For competition and innovation, zero rating represents a race to the bottom, where ISP's chase low hanging fruit when they instead be planting new trees, less the entire orchard wither.
4767 Banning zero rating will promote genuine competition and investment in network quality and internet services. Digital fuel monitors showed that across the OECD zero rating will -- is correlated with lower data caps and higher prices.
4768 Conversely, banning zero rating will lower prices for consumers and give them more data. For example, when faced with strong net neutrality rules, a ban on zero rating and meaningful enforcement, KPN in the Netherlands doubled its data ceilings while prices stayed the same, slashing the price of data to one-fifth of the year before.
4769 Similarly, a Free Press report found that network investment in the U.S. increased after the FCC implemented its open internet order, rather than stalling or decreasing, as providers said it would.
4770 Similar patterns have played out here in Canada in the wholesale services context, and prohibiting zero rating would likewise only advance the development of Canadian telecommunications.
4771 MS. ANDERSON: By creating a genuine level playing field for all potential innovators, the Commission would force the major internet service provides in Canada to do something that otherwise seems rare and difficult, compete on the quality of the internet itself. Without the ability to rely on content partnerships as a crutch, ISP's would have no choice but to compete within their actual line of business providing high quality, high speed, reliable internet connectivity.
4772 This would involve investing in differentiators inherent to their core function such as price, speed, contract clarity, or guaranteed minimum service rather than turning the internet access market into a content popularity contest.
4773 As Andrei Arkhanguelski from Toronto, Ontario said, quote:
4774 "I'm tired of paying more than I should because neither player in the market has an incentive to truly compete with each other. Please come up with a political will and solve this issue once and for all."
4775 MS. KHOO: This Commission has the opportunity right now to solve this issue for Andrei and preserve net neutrality for all Canadians.
4776 To do this, OpenMedia recommends that the Commission incentivize meaningful investment and genuine competition by banning zero rating.
4777 Proposals that match key elements of Bell Mobile TV should be considered automatic violations of Section 27(2) on the strength of that decision. Exceptions that have to obtain pre-approval by meeting an ex ante test under an expanded ITMP framework.
4778 Only an ex ante process would truly protect consumers and the public interest. It is one thing for the average Canadian to post a comment online and quite another to gather the evidence, law and procedure to launch an ITMP complaint or Part 1 against the derelict ISP.
4779 And ex ante approach also provides regulatory certainty and prevents provided exploitation of legal grey areas furthering the Section 7 policy objectives. However, the Commission does still retain regulatory flexibility by determining exceptions on a case-by-case basis. The only difference from the ex post approach is that any risk now justly lies with those best positioned to bear it. The ISP is who would benefit from inducing the risk into the system and imposing negative extranalities onto the rest of us.
4780 Lastly OpenMedia urges the Commission to remember one key fact that many seem to have overlooked in this proceeding, zero rating is not the only way. The future of Canadian telecommunications and innovation does not rest on the shoulders of zero rating. On the contrary, it rests on rising above such cheap substitutions for meaningful competition. If ISP's want to innovate, there are countless paths open to them that do not come with the same risks and collateral damage that zero rating does. Let ISP's innovate but on terms that create a win/win situation for all not one where ISP's win and Canadians lose.
4781 In closing, OpenMedia hopes the Commission takes its community's three messages to heart; listen to Canadians, aim higher for Canada's future and protect innovation for all.
4782 Thank you very much. We are happy to take your questions.
4783 THE CHAIR: Thank you very much for your presentation and for being here this morning.
4784 I'm going to start us off with questions. But I think it's useful to remind people that when we ask questions here we're just testing and unpacking your position. And certainly asking a question is not equivalent to making a decision.
4785 So let me start with your -- a few questions on your oral presentation this morning. I notice, you know, you’re urging us to listen to Canadians. Is it your view that we’re not listening to Canadians?
4786 MS. KHOO: We just wanted to make sure.
4787 THE CHAIRPERSON: Right. So if you -- in the end, after listening to all the evidence and weighing it after this hearing and further stages, and let’s say we don’t agree fully with your position, do you equate that as not listening to Canadians?
4788 MS. ANDERSON: Well, we’ve heard from our community time and time again that they want an end to data caps, so whatever the decision is that’s what we’ve been hearing from Canadians every day and for years.
4789 THE CHAIRPERSON: I’m not suggesting that that’s not what you’re saying. What I’m saying is have we somehow failed in our statutory duties if in the end of the day we don’t agree with everything you advocate for?
4790 MS. TRIBE: No. What we are coming here to say when we say listen to Canadians is to recognize that we are representing a large community of Canadians and trying to bring their voices to this Commission. We’ve also seen a lot of great work from the Commission to try and expand your own reach to Canadian, which, as we mentioned in our oral remarks, venturing into Reddit is scary territory and very new and we really commend that as well.
4791 And we recognize that the Commission has some difficult decisions before it and you are trying to balance the needs of the system as well as the needs of Canadians.
4792 But I think that we’re hearing a lot of really loud voices from the ISP’s and what we want to make sure is that they are not overshadowing the voices of the individual users at the end of the day. So that is our ask to you.
4793 Thank you.
4794 THE CHAIRPERSON: Fair enough.
4795 Paragraph 26 you -- and I’m quoting here:
4796 “While it’s true that data caps have also risen in Canada, they have clearly not kept pace with demand.”
4797 What would be the correct pace, in your view?
4798 MR. TABISH: One of the challenges that we find is the mere existence of data caps distort market demand, and we worry that that cuts against the statutory objectives and public policy objectives of the Telecommunications Act and the commission who enforces it.
4799 Supressing demand through data caps or distorting demand through zero rating schemes, to me, and to our community, suggest that market forces are not necessarily working the way they ought to. They are, in fact, not keeping pace with actual real world demand. And the existence of data caps to do that -- or the existence of data caps thus undermines the incentives for the management of our large ISP’s to invest in network capacity that keeps pace with that.
4800 So I suppose the answer to your question is we need policies that set up our providers -- our telecommunications providers in a highly concentrated market to keep pace with real world demand, not distorted, not suppressive, and help Canada’s offerings catch up with our global counterparts.
4801 MS. ANDERSON: I think we saw yesterday an example of services not keeping up with demand when Rogers said that people with unlimited plans often use three to four times the amount of data that people -- with people that have caps on their plans.
4802 THE CHAIRPERSON: Is that surprising though?
4803 MS. ANDERSON: I think you’re going to find some users that know they’re going to be heavy users and that go for the unlimited plan, but hearing from Canadian’s time and time again we hear them saying that they’re self-censoring how they use the internet and they’re really worried about overage fees and so they’re really concerned about what they’re doing online both on their phone and at home.
4804 THE CHAIRPERSON: Right. You see ---
4805 MS. ANDERSON: If ---
4806 THE CHAIRPERSON: --- I’m trying to be pragmatic about, you know, potential outcomes here. We’re gathering some evidence as we go along about, you know, what has happened historically with data caps over time and there’s a price component as well. You may have heard some discussions about that.
4807 But I’m seeing here some suggesting that we haven’t kept pace, and I’m saying to myself okay, well, if -- following your request, if the Commission were to set some sort of test as to what the trend line ought to be how do we do that in practical terms.
4808 MS. KHOO: To answer your earlier question about is this surprising, no, it’s not surprising that they increase three to four times. And that’s kind of part of it, right. Maybe when the internet first started, when the ITMP framework was first done, maybe it was surprising at that point that oh, users really like the internet, they’re using a lot of data, we can’t keep up, but now -- and I think we heard Rogers or another ISP say yesterday they can forecast that demand. Someone said it was almost linear growth. So they can start to predict now and build and invest for that increase in capacity.
4809 As for what the pace actually is, I feel like there needs to be more information on the record to say that, because we know that the pace isn’t enough because that’s what we’re hearing from everyday users, from people who are suffering under data caps who are saying they’re paying too much and they’re still not getting what they need to fulfil everyday functions, just as you heard from that just now.
4810 So we know that the pace is too low. We have the CMR report saying that 40 percent growth in usage, 44 percent growth in usage. So it would be worth it to see if data caps have kept up with that for example. But to give a precise number I think would be harder when we are not privy to detailed financial statements, for instance, of the companies.
4811 And I believe Laura has something to add.
4812 MS. TRIBE: I wasn’t trying to cut you off. It’s okay.
4813 I think what Josh and my colleagues are trying to get at is that where we struggle with trying to give an answer to that is we don’t know how to measure demand while demand is being supressed, and so where we’re trying to go with this is -- and I know it’s not always OpenMedia’s thing to be considered pragmatic, but the actual pragmatic way to test this is to allow people to use the internet freely and figure out what that demand is, and if there needs to be traffic management protocols at that point we can look at what that looks like but right now we see no evidence that that’s actually necessary.
4814 THE CHAIRPERSON: Fair enough.
4815 Paragraph 36 you talk about the Bell Mobile TV decision and then you say there should be automatic violations of Section 27(2) on the strength of that decision. Help me understand, what do you mean by automatic violations? Would an ISP not at least have an opportunity to make -- once the burden is reversed, an opportunity to make a case to counter the automatic violation, or are you saying we don’t -- it’s just -- we stop there?
4816 MS. KHOO: I think for the sake of procedural efficiency, it does make sense to stop there because we already have this decision.
4817 And again, this is a very -- Bell Mobile TV, as we’ve seen with Videotron afterwards, describes a narrow case that can be applied to broader cases, but if somebody were to apply a program where they were, for instance, zero rating their own content under these facts, then that has already been decided under the facts of Bell Mobile TV, so why would you have to bring everyone in and bring yourselves in to go through that process again. However, if something was slightly different, then in that case we would go to the broader ex ante framework that we’re suggesting.
4818 THE CHAIRPERSON: Facts are very volatile. The fact that we would -- it would be very difficult to imagine that the facts are completely identical. And I’m just wondering -- from the tail end of your answer I took it that your view would be that it would be even more consistent with the approach the Commission has made in the past is to reverse the onus when there seems to be a discrimination of some sort and then it’s up to the ISP to possibly prove on a balance of probabilities that the discrimination or -- is not otherwise undue or unreasonable.
4819 MS. KHOO: That’s true. So perhaps to clarify further, if a pattern matched Bell Mobile TV then I think that automatic violation we meant that the company should look at Bell Mobile TV and say “Oh, what we’re trying to propose look an awful lot like Bell Mobile TV” and if the framework is in place at that point these guidelines are set out they should -- then ideally they should be able to look to the guidelines and decide for themselves. The Commission would likely find this to violate Section 27(2).
4820 But, you’re right, in terms of the broader sense, the general framework would be under the ex ante framework where they would have a chance to fulfil that burden of justifying.
4821 THE CHAIRPERSON: Right. So I’m going to do like I -- thank you for that. I’m going to do what I did with Rogers and others and start off with data caps and then move on to DPP’s.
4822 So my first question would be that since unlimited data offerings are widely available, albeit sometimes at a higher price, why would the CRTC have to intervene on data caps? Consumers have the choices they need in the marketplace, do they not?
4823 MS. KHOO: Consumers do have choices but I think the question is are they good choices. So have to slip between the wireline and wireless again.
4824 On the wireline, it's true, many ISPs do have unlimited data, including the incumbents, but they're quite expensive. And the I think Chair mentioned the other day when you were asking about lower tiers and do not -- do those not provide choices. It's a question of how you come at it.
4825 Because right now, it seems like what's happening is the ISPs say, well these lower tiers will disappear, but they've started -- you set the lowest price point as an artificial (inaudible), wherein you set what the lowest price point is and then that gives you license to build on top of that, because if you're getting more you should get more. Whereas what we're saying, is the highest price is already too much.
4826 And if you were to incentivize more competition, incentivize more investment, then you should be able to bring that top price down, and then once you have that top price as low as it's possible to go, then at that point, if you want to give consumer choice, you would tack on lower tiers under that.
4827 So for example, in the United Kingdom, I think you can get an unlimited plan for maybe £20, £30, for instance, which is about $50, $60 -- $50 Canadian, maybe. So it would -- if we get a plan in Canada that's unlimited, say Blue Sky's plan, $25 for unlimited data, because it's an investment, and network's capacity and competition has pushed the price down to that point, then at that point maybe they can say, okay, well if you want to cap, then 50 gigabytes for $2 a month. But we're never going to get to that point if we always start with the lowest point where they can just say, no, it's actually going to be $60 a month and we're going to go up from there.
4828 THE CHAIRPERSON: Okay, fair enough.
4829 That is a rather significant change of how things have been unfolding, and I wonder if indeed that's the way you want us to go. Are you indirectly asking us to de‑forebear from retail Internet regulation? In other words, reintroduce retail Internet regulation?
4830 MS. KHOO: I can say that we are not asking for a re‑regulation of retail Internet rates. And so the numbers -- I pulled them out of thin air as an example to show the movement and how the numbers work relative to each other, but that is what -- that's the effect that we want of investing -- of incentivizing more investment and enforcing policies, such as not allowing zero-rating to incent competitors to (inaudible) to compete more such that the market forces themselves would bring data caps -- would eventually lift data caps and bring prices down.
4831 MS. TRIBE: Can I just to add ---
4832 THE CHAIRPERSON: Sure.
4833 MS. TRIBE: --- to your original question about there already being some available unlimited options, and that is true, particularly on wireline.
4834 I think what we're hearing a lot from our community is that those are not affordable options to them, and they disproportionally allow those in the upper income brackets to have unlimited access while harming those with lower income to try and make choices, s we heard also in the previous BSO hearing between dinner and getting their kids' homework.
4835 What we are looking for is trying to make an equitable playing field for all Canadians to not only get online as a technicality of having access to their Internet, but also to have equal access to participate in the online community.
4836 THE CHAIRPERSON: Thank you.
4837 I'm going to get to DPPs in a second. I'm still parked on data caps.
4838 I'm trying to understand how you want us to operationalize your concerns in light of provisions of the Telecommunication Act, the fact that we, for the most part, there's a little bit of an exception up North, but for the most part have forborne from retail price regulation.
4839 MS. KHOO: To speak -- actually, first to add to what we were saying earlier. That in terms of the numbers, I just wanted to add, and this is already on the record, that in terms of the price -- the limited options for wireline that are on -– available right now, this kind of goes to your earlier question about what that pace would be.
4840 So for example, National Capital Freenet is a community ISP in Ottawa, and they offer unlimited usage for about $50 a month. If there's a cap, it's about $40 for the under 350 gigabytes, whereas Bell offers, the last time we checked in our intervention, it's about $65 for about 75 gigabyte cap. And so when you see that difference, that's something that makes us think, well, why is Bell not keeping pace when it seems like the small community ISP is.
4841 As for operationalize ---
4842 THE CHAIRPERSON: But isn't the -- and I'll get back because you aren't actually answering my question.
4843 But in your example, isn't the answer for the reasonable consumer, then, to go to the lesser price? That's how markets work, is it not?
4844 MS. KHOO: It would be, yes, perhaps. Even though they both operate in Ottawa, they may be, for instance, regionally restricted.
4845 MR. TABISH: One of the big challenges, wireless is the easier example, because the national providers, Bell, Rogers, Telus, don't offer unlimited plans. We did a survey of the market over the summer, and it's not -- it doesn't exist. The flanker brands, Chatter, I believe, has an unlimited option.
4846 But where you see unlimited plans would be, you know, the example of MTS, admittedly, once you hit the cap they begin throttling, but they're transparent about that, and if it's less punitive than the traditional cap and charge approach, and thus, better for our -- the interests of our community.
4847 In terms of implementation, I think there's a wide range of tools available to the Commission to make that happen, and we can elaborate on what that implementation strategy would look like in our final replies.
4848 MS. KHOO: Or I was going to add to that question of operationalizing.
4849 So when we suggested we visit data caps under the ITMP framework, maybe in fact that's what should happen. Maybe there should be a proceeding as a result of this proceeding to look at data caps in and of themselves, gather that evidence, gather the network investment statistics, gather traffic management flows, get all of that actual hard data. Get the investment data. Get the base cost data.
4850 Because this is all in a black box right now and that's what data caps all ultimately go to, right. What is the cost of a gigabyte? And that's something we don't know because it hasn't been put on the public record.
4851 So that might be the first step is to actually get that hard data to see if there's any justification, what extent to justification. Maybe there -- we know that smaller ISPs, for instance, and competitive ISPs do operate under different conditions because they have to, themselves, buy data from the incumbent TSPs, so maybe there would also be a difference in implementation there.
4852 But if you're looking for ways to start, then that might be a starting point, is just first gathering the information and then investigating whether they're justified. And if you find that they're not, the way that they're being used right now, at that point doing something about them.
4853 THE CHAIRPERSON: Right, and I take it in that sort of investigation we'd also look at what impact it might have on network congestion, both in terms of the wireless and the wireline network?
4854 MS. KHOO: Absolutely.
4855 THE CHAIRPERSON: And I guess we'd also look at what impact it might have if we were to prohibit or constrain data caps on the general price that Canadians would pay for either wireless or wireline data. Is that correct?
4856 MS. KHOO: Yes, the price as -- both short-term and in the long-term.
4857 MR. TABISH: The question of price is an interesting one. And there is a conflation that's happened amongst some of the intervenors who have presented before you between data caps and zero-rating, on the one hand and market -- choice in the market and centralized -- centralization concentration.
4858 The price issue is a competitive issue, and on the record of other proceedings, we have made suggestions for how we might improve that. Our work on wholesale wireline is an example of that. Our advocacy around MDNO access for wireless networks in the wholesale market is an example of that. The material we -- the arguments we put forward during the BSO hearing around a mandated basic Internet package with 5/5 symmetrical speeds.
4859 So the choice question and the competition question in terms of service offerings, we feel we've placed quite a bit on the record of the proceedings of this Commission. In terms of data caps, though, you know, we're looking for implementation solutions that get data caps -- that ensure data caps disappear on wireline Internet, and that affordable, unlimited options are available to all Canadians on the wireless to keep pace with. And how we get there, we are steadfastly, I think, ecumenical about (inaudible).
4860 THE CHAIRPERSON: Right.
4861 But the idea of a further inquiry would also look at issues around what impact it would have on the level of investments, both on the wireless and wireline?
4862 MS. KHOO: Yes, ideally, and then that would also answer the earlier question about what should the pace be. Because if they're going -- if they're not fulfilling the potential in terms of capital expenditures, capital intensity, then you would know that and you would be able to take action.
4863 MR. TABISH: So if we could see that data we'd be in a better position to answer that question.
4864 THE CHAIRPERSON: Understood.
4865 And implicit in your position, obviously, is that you recognize that the network configurations and the realities between wireless and wireline means that the evolution of those networks might be at a different pace?
4866 MS. KHOO: Yeah, for sure, and that's why we recognize that. We think that it's reasonable to ask for unlimited data on wireline as there is about this. But we acknowledge that on wireless they may require more increase, there may be different circumstances and the solution might be different too. So for instance, more spectrum options because we know that’s a limiting factor.
4867 THE CHAIRPERSON: Right. And ---
4868 MS. ANDERSON: And we’d also like to note for the record, just about -- even though wireless networks may be behind, I think it’s really important to look for the future. In your communications monitoring report it was really interesting to see that year over year the 40 percent growth in people using their mobile phones, and also considered that mobile phones are often the go to option for low income people who maybe don’t have the choice to use both a mobile phone and home internet. So while the networks might be not as advanced as wireline, I think it’s really important just to note that for the future it’s really important that we look at them.
4869 THE CHAIRPERSON: Right. And with respect to wireless, the market -- and you’ve introduced this notion of a high floor, and have you given some thoughts on how that could be determined or what data points would be required to figure out what that high floor should be?
4870 MS. KHOO: I think many people have given thought to what that high floor should be, and most of that is on the record of the basic telecommunication services proceeding last year. So for instance, last year OpenMedia suggested minimum requirements. PIAC, leading their coalition, also suggested a number of factors that on the record of that proceeding, I believe people suggested around 200 to 200 gigabits per month, and that was based on a number of factors such as Cisco data, household usage statistics, communications monitoring reports. So there are many factors that you can draw upon to extrapolate what would be a reasonable ceiling.
4871 THE CHAIRPERSON: Okay. And I take it that -- is it a floor or a ceiling?
4872 MS. KHOO: You're right, it would be -- for us it's one thing -- it would be a floor ---
4873 THE CHAIRPERSON: Floor, yes.
4874 MS. KHOO: --- because it would be a minimum that they're offered.
4875 THE CHAIRPERSON: Right.
4876 MS. KHOO: And the one thing additional to note is that it would be -- when that calculation is done, it would be at that snapshot in time, but then it should also rise each year again to keep pace with rising demand.
4877 THE CHAIRPERSON: Right, so it would change over time. And you believe that market forces would be insufficient to -- even if you were to do a starting off floor, you don’t think the market forces would be sufficient?
4878 MS. KHOO: To clarify, do you mean once you set ---
4879 THE CHAIRPERSON: For that floor to naturally evolve to a higher level.
4880 MS. KHOO: I think based on the current state of the market and the current state of competition, we’ve seen that they're not sufficient.
4881 THE CHAIRPERSON: Right.
4882 MS. KHOO: And so we are reluctant to place more trust in them going forward without that.
4883 THE CHAIRPERSON: Right. And this goes back to my -- one of my original questions about what ought to be the rate of change over time, and I think you will address that perhaps in your final arguments.
4884 Okay, thank you.
4885 Let me move now to DPP issues. Now, clearly you’ve put in your data cap submissions a clear segmentation in the markets between wireless and wireline. Would it be logical then -- to follow your classification -- that in fact with respect to DPP, we might take a different approach for wireless and wireline in terms of those issues?
4886 MR. TABISH: No.
4887 THE CHAIRPERSON: For instance ---
4888 MR. TABISH: I'm sorry.
4889 THE CHAIRPERSON: Okay, I was -- well that’s clear then.
4890 THE CHAIRPERSON: I was going to unpack it a little bit because one could ban it in one case or allow it in one case or vice versa; right?
4891 MR. TABISH: Yeah. And I apologize for interrupting you, I got excited.
4892 THE CHAIRPERSON: No, it’s okay, it’s efficient.
4893 MR. TABISH: I came all the way from Vancouver so ---
4894 MR. TABISH: The -- no, we want regulatory symmetry across both wireless and wireline. We want assurance to Canadians, to innovators, to new services, that we will not see any type of gate keeping or content favouritism, the type that’s been discussed before you across our networks. The internet is the internet and we need policies that support that.
4895 THE CHAIRPERSON: Right.
4896 MS. TRIBE: I think just to add our sort of underlying premise and principle for why we would treat wireline and wireless the same. It really comes down to the device are connecting to the internet through -- and the network you're using to do so should not in any way alter the content you are able to access in any way.
4897 THE CHAIRPERSON: Okay. And in your comments on the Videotron unlimited music file, it seems to suggest that you believe that there's an unfairness, that it’s only available to premium subscribers. Would your concerns about DPPs be lessened in any way if they were available to all subscribers?
4898 MS. KHOO: No.
4899 THE CHAIRPERSON: Clear. Could you unpack the reasons for that?
4900 MS. KHOO: Sure. To elaborate, no, our concerns would not be alleviated, because the fact that they were only offered on premium plans, that’s just an aggravating factor. That makes it even worse because it belies their rationale of helping lower income people, helping people who wouldn’t be able to access as much data otherwise, because you have to be able to afford those premium plans to begin with to even have access to that unlimited music program.
4901 And because in that -- on that record, PIAC calculated how much overage you would have to pay for listening for average hours of music in a month. And the lower income tiers or the lower subscriber tiers had to pay much more than the premium tiers when presumably they would be least able to afford it.
4902 Now, if you were to let all people access them, then that would remove that particular aggravating factor, but you still wouldn’t remove all of the concerns to deal with competitive harm. Both -- there would be unjust discrimination in reaching the people who did opt for that zero-rating program and the consumers who didn’t. There would be unjust discrimination towards all the music providers that were eligible in the program versus all -- to be in the program versus all of the ones who weren’t. And we know there's at least one or two programs who tried and didn’t make it into Videotron’s program, and that’s not even to mention all of the radio broadcasters who were excluded outright.
4903 So, in terms of all of the broader concerns with zero rating that many other intervenors have talked about this week and that are also in our interventions, those would all still remain even if zero rating was available across different plans.
4904 MR. TABISH: And it undermines the arguments that proponents of zero rating make when they say, “Look, this is about trying to bring greater access to low income people. This is about trying to bring greater access to people who can only afford lower end plans.” In the Videotron case, it looks an awful lot like a strategy to increase average revenue per user, instead of bringing more value to lower income potential customers.
4905 THE CHAIRPERSON: Okay. Well, let me keep going down the road and test your principled approach here a little bit more. Because one could use DPPs for social objectives, helping young students access an app that has a learning component to it; encouraging low income households to adopt digital platforms. What's your position on DPPs that have that as their outcomes?
4906 MR. TABISH: Increasing adoption is a very important goal for this Commission and for Canada. And we have laid out again in other hearings ways to do that, ways to foster a more competitive environment. For years we’ve heard Canadians say, “I want access to greater choice in a decentralized market” to distill it down.
4907 There are competitive ways to do that, to encourage a greater range of providers to bring cost down and bring everybody online. What we worry is that carving out exemptions and allowing differential pricing disproportionately puts -- again, puts ISPs in the position of being gate keepers and doesn’t necessarily fit with the goal to bring all Canadians online and raise -- as the old saying goes, “A rising tide lifts all boats”, and so that’s our -- that’s our goal.
4908 MS. TRIBE: I think that there are a lot of really noble social causes that people can use the internet for, and that’s usually why zero rating is heralded for the all great value we can add, but those are benefits of using the internet. And what we are trying to do is not put ISPs in the position of being able to choose -- or the Commission in the position of choosing -- what is a social cause that is appropriate or what is not. But letting those users decide what actually is the most critical way for them to use that and to benefit from that.
4909 MS. KHOO: And to speak to the idea of zero rating for social objectives further, there are again zero -- I think the key message here is zero rating is not the only way. This is something that the ISPs have happened to come up with, but it’s not the only thing that they might come up with.
4910 If we go away and the result of this proceeding is, “You can't zero rate anymore”, I doubt that they're just kind of going to shrug and then lie down. Like they will find other ways to innovate, because it’s good for their business and they want to give consumers what they want and we want that too. We just want to make sure that they're giving consumers what they want in a way that doesn’t have negative externalities and other harms that come with this.
4911 So in terms of social -- achieving social objectives, as Laura said, those are all very good objectives, but they come with harms and there are other ways to achieve those goals. So for instance, in the example of a student accessing an app, why is it necessary to zero rate that specific app?
4912 If they really cared about the students, maybe they could calculate, well, okay, an app is going to take this much data. We’ll just give all students this bucket of data that they can use for whatever they want. And in that case, it would be -- it would still be on the level of bandwidth and quality of service and not -- it wouldn’t be content based. The content based access isn’t necessary to helping people. People just need data. But you don’t have to give it to them with that particular string attached.
4913 So it’s like I believe the independent broadcaster said yesterday the internet already includes everything. So why would you implement a policy that would allow people to foreclose on specific things so that someone would have only part of something when it’s the same amount of data to have everything because they would only be choosing what they wanted.
4914 MR. TABISH: Differential pricing sure looks innovative, makes for great marketing in brochures. But real innovation in this market, true innovation in this market is lowering costs, investing in networks and increasing the quality of the core service, not billing gimmicks from the likes of Canada’s incumbents.
4915 THE CHAIRPERSON: Let me keep going down the road of what might be potential exceptions. Do you think customer account administration should be allowed under DPP?
4916 MS. KHOO: That one we said we should be -- is fine to be allowed, and we included that in our intervention and our framework because we see it more of an, for lack of a better term, an administrative purpose. And it’s something that’s inherently tied to your service.
4917 So, for instance, if I’m with a certain telecommunications provider and they provide -- they zero rate access to -- they zero rate that data it takes to access my bill, they’re -- as far as I know, there are no third party competitors that would help me access my bill with this provider. Perhaps if we went down the line and a market happened to rise up for that the situation might be different, but that doesn’t seem to be the case right now.
4918 THE CHAIRPERSON: Sorry for this question, but wouldn’t a more principled approach be to say no even in that case you shouldn’t allow it because it is interference with content?
4919 MS. TRIBE: Sure. But I think what we’re trying to get out with that -- I mean, our position on DPP actually does say that if we had access to the data we wouldn’t need these exemptions anyway.
4920 THE CHAIRPERSON: Right.
4921 MS. TRIBE: And I think this is one way where we’re coming at it to say, okay, I guess, if you really need it. But ultimately, we do still believe that if people have the available data that they need, their administrative costs with their own telecom provider should be such a nominal amount of what they’re spending and using their data for that this is really not a core focus of what us or the ISPs are looking for with DPP.
4922 THE CHAIRPERSON: The risk, though, is that when you start allowing one exception it becomes a precedent for other exceptions. So what is of the nature of this particular one which you’re allowing a crack to open that distinguishes it from other potential ideas?
4923 MR. TABISH: If we end data caps, then we don’t have to make an exception would be the first point I would make. And the second one is, we -- people who are hitting their data caps and being blocked from their ability to use their telecommunications devices and services, we don’t need to kick them when they’re down. So end data caps or carve out a very, very, very, very narrow exception.
4924 MS. KHOO: So to distinguish why administrative functions might be different from others, a large part of the principle -- of this principle that we’re basing our intervention on is are there competitive harms, either within the ISP market or downstream externalities. And so on that principle, we don’t think that administrative functions raise those regulatory concerns because there aren’t -- there’s no third party market for those administrative functions of checking your cell phone bill with a specific provider.
4925 THE CHAIRPERSON: Right. And I take it your position is consistent whether it’s zero rating, less than zero or sponsored data, in all cases you would ---
4926 MS. KHOO: Specifically for administrative share and customer share functions?
4927 THE CHAIRPERSON: No, generally.
4928 MR. TABISH: We oppose all, all the forms.
4929 THE CHAIRPERSON: Regardless of ---
4930 MS. KHOO: Because we think they all raise similar regulatory concerns and similar dynamics of harming the market, harming innovation.
4931 THE CHAIRPERSON: What do you say to those that say, well, discount practices are widely available in Canada in a variety of markets today, why -- what’s different here?
4932 MS. KHOO: What’s different is that this is the telecommunications market and that’s subject to special policies, special laws, a special act. So we’ve seen, and other interveners have mentioned as well, a lot of analogies to movie tickets, to groceries, to vacation packages. And the difference is that all of those things are commodities and all of those things are arguably not as essential to everyday living as the internet has become today.
4933 They aren’t regulated industries, for the most part, but telecommunications is. There are the section 7 policy objectives that they’re beholden to. There’s the common carriage principle and there’s a reason for all of that.
4934 So that’s why you can discount say movie tickets, for instance, why you can discount sweaters. But internet -- the internet is not movie tickets and sweaters. It’s something that people rely on for their jobs, for health, for schooling, every day. And so it’s subject to a much higher threshold of when you’re looking at -- when you’re looking at meddling with the underlying principles and its structural -- the way that it’s set up in terms of common carriage, it’s subject to a much higher threshold before anyone should be allowed to disrupt that.
4935 MR. TABISH: The other issue, and this has come up a bit in the discussions around 27(6), is you can give people a discount without changing the core purpose or function of the service. Ten dollars ($10) off the open internet is A-okay for students. But changing that core function to discount it is not the same thing. So zero rating fundamentally alters that purpose.
4936 THE CHAIRPERSON: So you would agree perhaps with Rogers -- I’m just naming them because they offer a free subscription to certain streaming services. In your mind, that is inappropriate practice?
4937 MS. KHOO: That -- we also have some concerns about that, but it’s slightly to -- it’s to a slightly lesser extent because it does at least go to the content itself. If somebody accesses one of those subscriptions, they’re still using the data to get to it. And that’s the difference. It’s that line between access and content.
4938 THE CHAIRPERSON: Okay.
4939 MR. TABISH: We do have competitive concerns about that though, how those services are being privileged.
4940 THE CHAIRPERSON: Unpack that a little bit?
4941 MR. TABISH: So the -- in that case, the core service is access to the wide open internet.
4942 THE CHAIRPERSON: M’hm.
4943 MR. TABISH: Getting discounted access to the wide open internet is A-okay because we’re talking about the principle of common carriage that underlies that. When we see sponsored deals -- like I think it was the Spotify example, right? Like the Spotify example, we see certain services being privileged over others. So while -- so in this case, you know, it’s -- I admit this is a tricky one and I think Cynthia’s hesitation is -- speaks to that.
4944 But we’re talking about -- we need to be talking about telecommunication services and not applications, private services. Not the content necessarily. We need to be talking about the principle of common carriage.
4945 THE CHAIRPERSON: Right. And in your submission you’ve been talking about sometimes common carrier, sometimes gatekeeper. Do you think the concepts, the principles associated with that are equivalent?
4946 MR. TABISH: Yes, yes.
4947 THE CHAIRPERSON: And would you agree that in Canada those principles of common carriage as they apply to ISPs are largely or entirely codified in section 36 and 27(2)?
4948 MS. KHOO: Yes.
4949 MR. TABISH: Yes.
4950 THE CHAIRPERSON: You know, DPPs are sometimes used by non-dominant players. And one could argue that in a sense, at least in the wireless market, a company like Videotron is a new entrant. You don’t think to encourage the development of a longer term sustainable dynamic marketplace that it might be beneficial to allow entrants to be engaged in DPP practices?
4951 MR. TABISH: No. Rogers talked about the costs associated with implementing DPP services. I think the figure was tens of millions? Is that correct? Tens of millions?
4952 MS. KHOO: Per DPP.
4953 MR. TABISH: That seems like a stretch for new entrants.
4954 MS. KHOO: And to elaborate, so we don’t agree that it would help either long term or short term because, first off, we heard from Tbaytel, we heard from BCBA say -- and perhaps even CNOC, some of the smaller providers, if you imagine five person, mom and pop ISPs, they won’t even be able to take advantage of this practice if it’s allowed.
4955 Second of all, for the ones who are taking advantage of it, it doesn’t even the playing field if large incumbents like Bell, for instance, and Mobile TV are also able to do it. So unless you’re talking about doing something like only tiny ISPs and tiny content providers, tiny app developers are allowed to do this and the large ones are not allowed to do it, then otherwise it doesn’t really make sense because then all of them would be leveraging and then you would just end up with the same relative status as before. The other reason that on the long term this wouldn’t work is because to enhance competition sustainably -- is that once -- so if you start foreclosing on the open internet, once one of them does it, then others will start to even if they don’t want to.
4956 So for instance, we saw the example of Netflix. Netflix has been very vocal in terms of net neutrality. They’ve fought data caps and zero-rating at the FCC, or argued against them. But in Australia they started zero-rating and there was a lot of backlash against them and they said, “Well, no. We still disagree with zero-rating but we don’t have a choice because we have to compete in Australia, and everyone is zero-rating, so we have to zero-rate too.”
4957 And we’ve seen for interest TekSavvy on the record of this proceeding said they’re not considering it at this point. But if the market changes such that everyone starts doing it, then they may have to take a second look and see. And if that happens, once everyone starts zero-rating, then again, you end up where you were before, in terms of where each carrier is, and the competitive position relative to each other.
4958 But with the -- now with the added harm of them having started to foreclose and to slice up the internet, because they’ve all decided to partner with some sort of content to bundle with something and that would be to the detriment of all the downstream markets. So you’re not really going to be helping competition and meanwhile, you’re going to be harming it when it comes from the edge and foreclosing on future innovation. So on the whole it just seems like the harms vastly outweigh what potential benefits there might be.
4959 MR. TABISH: We’re also trying to help out the Commission here, because the regulatory asymmetry that would be introduced by giving small, non-incumbents one set of rules, and incumbents another set of rules, in the case of DPP, would -- I think our friends at Bell would definitely have some thoughts about that. And I worry about the appeal process and the litigation risks that come with that. So avoiding -- beyond that pragmatic concern, regulatory asymmetry is not necessarily needed here, I think.
4960 THE CHAIRPERSON: Yes. But the Commission always does what it believes to be the right thing under its legislative mandate, regardless of threats.
4961 MS. KHOO: And we’re very glad of that.
4962 MS. TRIBE: I think that the, sort of, underlying principle, aside from the regulatory asymmetry and those problems is, even if we allowed DPP practices for smaller incumbent providers to try and increase market choice, it still conflates content and carriage to some extent. Which at the end of the day, common carriage really is a principle that we think is fundamental to an open internet.
4963 THE CHAIRPERSON: Right. So the notion that some parties have brought forward, that there might be broad classes of content providers that would be treated, I guess, in a basket and they could be zero-rated, or somehow another DPP could apply to them in a non-discriminatory way. We’ve got the example of music, perhaps it needs to be all streaming services, not just music services. Regardless of that, conceptually that allows the end users to decide who’s in or out. So why would you be against that?
4964 MR. TABISH: There’s at least two fatal flaws to that argument. The first is who’s to say what a class of services is? You teased this out in some of your questions earlier in the proceeding. What is YouTube? Is it a video streaming service? Is it an audio streaming service? Is it a live streaming service?
4965 And the second is, a Section 36 violation under the ITMP framework kicks in because as soon as the user hits their data cap, everything else is effectively blocked. And so -- other than those service that have been exempted. And so I think that approach, the class based approach, dies on the table.
4966 MS. KHOO: To add more to that, there are a couple reasons that the class-based approach won’t work. The first one is that even if you’re basing be class, so all video, all music, it would still have detrimental effects on how people use the internet. So for instance, if all consumption based services are zero-rated for instance such as streaming music, streaming video, that’s one thing. But then what will happen to creation based services? So Podcast creation, uploading streaming services, creating videos, and distributing them around the internet.
4967 We’ve seen and we mentioned in our intervention too, there’s a rising proportion of people who are starting to contribute to the internet and not just consume, but to actually create and participate, and mobilize. And so -- because this is one of the things that the internet enables.
4968 So one of our concerns is that, if you allow zero-rating, then the ISPs will go for low-hanging fruit. They zero-rate consumptive services and then that’s going to weigh the internet towards passive consumption as opposed to active participate, which ideally is what the internet is best used for, what it has enabled over the past decade or so.
4969 The next point is that broad classed based zero-rating, it’s simply not workable. I think many -- so something I’ve been struck by over this proceeding, it seems like people who support zero-rating and people who oppose zero-rating seem to find it unworkable. So whether it’s broad class based -- so people who want to zero-rate specific services, for instance, they say broad class based doesn’t work because how would you know what’s in which class? People who are against zero-rating also say the same thing.
4970 So Facebook is used for video, for messages, for music. YouTube is used for music, for video. How would you know what falls into what class? Vaxination Informatique mentioned that the -- he looked, 78 protocols or something for video alone, and is that in Canada or North America alone? So for example the internet is borderless, right? So if you’re looking at streaming music services in Romania, or in China, how are those services going to know to apply to -- for Videotron’s Unlimited Music, for instance?
4971 And this also actually implicates Section 36, because when you’re looking at controlling or influencing the meaning or purpose of content, say that this is allowed, and say that Videotron included YouTube and its music service. Over time is this going to cause people to think of YouTube as a music service and then thus influence the purpose of YouTube, where they think, “Oh YouTube, that’s about music, it’s not about video, it’s not about parody or political satire. I use this for music because it’s in this unlimited music service.” So -- which is kind of a more subtle, less tangible point, but it’s still an effect that could happen.
4972 THE CHAIRPERSON: Okay. I just have a few more questions here. Bell has suggested that we should step cautiously in this area because of the advent of the internet of things.
4973 MS. TRIBE: Yes.
4974 THE CHAIRPERSON: Do you have views on that position?
4975 MS. TRIBE: Yes, we do. I think that our first concern with that, or interest in that, is that we agree. The internet of things holds a lot of potential for us. What we are unclear on and I’m -- maybe my colleagues can elaborate -- but what I’m unclear on is how that justifies differential pricing packages. I still think that if we look for zero-rating internet of things content, or uses, we’re looking at the same premise of service providers determining what content should or shouldn’t be privileged online.
4976 We think that there’s a lot of great potential in the internet of things, but maybe Cynthia can elaborate on why we’re not entirely certain how it applies here.
4977 MS. KHOO: Sure, thanks. We were actually a little bit surprised by the seemingly heavy emphasis that Bell put on the internet of things in their presentation, because it seems like there wasn’t that much emphasis on it on the record, up to the hearings. And we know the Commission asked about it in the interrogatories, but the vast majority of internet service providers responded on the basis that basically, they weren’t engaging with anything to do at the intersection of zero-rating and the internet of things. Most of them didn’t know of anything that was happening in that area.
4978 So it seems like this is something that, it’s in the air and people are aware of it and there’s a lot of news. But it’s not necessarily something that -- it’s still in its early stages and it itself is also emergent and it’s worth noting that this emerged despite that lack of zero-rating to date. It’s already happening and it’s happened because of the open internet.
4979 So what Bell said about being careful, that works both ways. We should be careful and not foreclose on things that could emerge from the internet of things.
4980 The second point is that, based on how the internet of this worked, it’s machine to machine. So it’s actually -- again, as the Commission and parties pointed out yesterday, with as on Kindle for instance, it’s on the wholesale level and so it doesn’t even actually involve this customer-ized peer relationship which is what we’re talking about in terms of differential pricing practices right now.
4981 THE CHAIRPERSON: And I take it from earlier comments that you don’t buy into those that are arguing that DPPs are a means of innovation?
4982 MS. TRIBE: No. I think it’s exactly the opposite. We would argue that it definitely suppresses innovation. If you look at the internet of things, I couldn’t even give you a number of how many devices could potentially be connected through the internet of things.
4983 And when we look at differential pricing packages for these kinds of services, that immediately puts any new entrant into this market, as a potential tool or device to be connected at a disadvantage, which suppresses innovation in this incredibly interesting and growing innovative market. So we would argue that it actually implicitly, and explicitly, harms innovation in that way.
4984 MS. KHOO: I’m glad you asked that question because when you asked about what the definition of innovation is, the key thing to focus on is what is -- an innovation is? What is it innovation in? So I don’t think we can deny that zero-rating is a new thing. But it depends in what context.
4985 So you asked for the definition of innovation and, it just so happens, Bell actually provided quite a decent one in their intervention. They first cited Merriam-Webster saying it’s a new idea, device or method. Okay, so true, zero rating is that. And then they provided a more extensive definition saying that innovation has five characteristics, relative advantage, compatibility, complexity, trialability and observability.
4986 So if you look at zero rating as a marketing tool -- and again, earlier this week someone said zero rating seems to be innovation in marketing -- then sure it’s a new way to market their services and products and it may be a better way to market then before. It does make your product look appealing in the moment, looked at in isolation before you then look at the broader picture and realize all the broader harms that it brings.
4987 But if you’re looking at innovation in telecommunications, innovation and internet service quality, then it doesn’t fulfil any of these criteria at all. It’s not an advantage to the open internet. It’s not compatible with existing values, like net neutrality and common carriage, or meeting the social and economic requirements of Canadians. It’s not -- it doesn’t -- it’s not simple. So it’s actually really complex. It’s difficult to understand and use.
4988 Even though Sandvine said that it’s for transparency, that’s not the case, because there’s evidence -- the Alliance for Affordable Internet surveyed 1,000 people in eight different developing countries and looking at the emerging mobile market and they found that people found zero rating more complicated, which actually makes sense on a common sense level, because if you’re just surfing the internet you’re not really looking at what the underlining technical specifications every website is in every site that you’re using, so there’s a lot of potential there for error, for getting bill shock at the end of the day because you miscategorized something, you thought it was zero rating but it wasn’t.
4989 And in terms of trialability and observability, that actually we do have where countries in Europe tried zero rating and we saw it did not work out for the consumers there. Countries with zero rating increased -- they implemented zero rating at the same time that they lowered data caps. And they also in the Netherlands when they banned zero rating immediately the provider there, who had its own video service, thought oh, well, with our low data caps we can’t zero rate our own video service, how are people going to watch our videos, and practically overnight, in a week they doubled their data caps and slashed their prices to one-fifth of what the data prices were the year before.
4990 So we have already seen these effects that -- with marketing maybe, but in telecommunications -- and that’s what the app says, it’s innovation in telecommunications. It’s not at all. So why would we give up what we would have to give up with the open internet for what at the end of the day is really just another marketing tactic.
4991 MR. TABISH: In short, zero rating entrenches incumbency.
4992 THE CHAIRPERSON: Are you saying that data caps -- getting back to an answer you were giving earlier -- somehow engages Section 36? Did I misunderstand that?
4993 MS. TRIBE: No. I ---
4994 MS. KHOO: We’re saying zero rating does.
4995 THE CHAIRPERSON: Zero rating engages Section 36?
4996 MS. TRIBE: Yeah, when a user hits their data cap, they are effectively blocked from all content other than the zero rated content without being financially penalized for accessing the rest of that content.
4997 THE CHAIRPERSON: Right.
4998 MS. TRIBE: So then it’s applied across the board. Without differential pricing packages it doesn’t apply because that is them using the internet to that capacity. When suddenly zero rating is starting to differentiate between that content that is where the data cap comes into play with a differential pricing package.
4999 THE CHAIRPERSON: Okay. Would you be willing to undertake to unpack that a little bit more?
5000 MR. TABISH: We’d be happy to do that.
5001 MS. KHOO: To clarify, to undertake how zero rating engages Section 36?
5002 THE CHAIRPERSON: That’s correct, yeah, if you could. The 14th of November please.
5003 MS. KHOO: Yes.
5005 THE CHAIRPERSON: Vice-Chair Menzies, has one or two questions for you.
5006 COMMISSIONER MENZIES: Well, that was going to be my question. So I might ask for a Coles Notes version of it, because I was just -- or I’ll ask it this way instead. Others have made the point that zero rating or other DPP’s can’t -- are obviously not inconsistent with Section 36, but also they point to services such as 1-800 services offered through telephony historically and currently as equivalent to that. So I guess what I’d like to do is hear your argument about -- or your response to their argument that this is -- there’s nothing to see here folks, this is just the same as 1-800 and that the price -- the cost of a product has never been fundamental to its meaning or purpose in the past and that is what we should be working on when we look at items such as this.
5007 MR. TABISH: The first thing I’ll say is very level, which is -- and we heard this being discussed ---
5008 COMMISSIONER MENZIES: You can keep it there because the Chairman needs you to take it down to the ---
5009 MR. TABISH: Okay. Sure.
5010 We heard this discussed during Barbara Cherry’s discussion a couple days ago. It’s -- first off, it’s tempting to want to import the regulatory regime of other services onto the internet. We see this happen all the time. Is the internet like a voice was a question; is the internet like broadcasting is a question, and the short answer is the internet’s like the internet and so it needs policies that recognize that. It’s decentralized nature requires it.
5011 The 1-800 number example falls apart when you realize that 1-800 numbers are available to everybody, not specific subscribers. And where we get in trouble is when we start saying that 1-800 numbers should be available to everybody but data services shouldn’t necessarily. That cuts against a lot of our objectives and a lot of our communities’ goals.
5012 So with Section 36, we need to respect common carriage. We need to recognize that data services of today are very worthy of equal treatment. And when 36 is engaged under the ITMP framework, because low income people especially are being blocked from data services when they hit their limit under a DPP arrangement, that we are seeing blocking, we are seeing censorship, we are seeing -- we are keeping people from the services they need and -- yeah.
5013 COMMISSIONER MENZIES: Okay. Just on that, just -- and this will be my last point, or your last point, with me anyway. If price is a barrier -- if you believe that the data cap -- the cost of exceeding your data cap offends Section 36 and creates a distortion there, why doesn’t actually the cost of a subscription to the internet do the same thing? What’s the difference between the data cap ceiling -- the cost of exceeding your data cap and the cost of actually accessing the basic service?
5014 MS. KHOO: To clarify, we don’t think that the cost of exceeding your data cap in the absence of zero rating implicates Section 36. It’s exceeding your data cap in the presence of zero rating, because in that case there’s a distinction between the content. It’s not accessing the content at all. It’s if you have -- if Spotify is zero rated, once you exceed your data cap you access Spotify and everything else is blocked, and that’s why Section 36 is engaged.
5015 COMMISSIONER MENZIES: Okay. Thank you very much. I look forward to the unpacked version.
5016 MR. TABISH: Oh, sorry, I would just tack onto that because 36 is concerned about the purpose of telecommunications services, whereas accessing the service at all is a different question.
5017 COMMISSIONER MENZIES: Yeah, the meaning and the -- the meaning or the purpose, right, and that’s ---
5018 MR. TABISH: Yeah, the purpose or the meaning.
5019 COMMISSIONER MENZIES: That’s why I was just trying to get your view on that because we’ve heard the views of others.
5020 MS. KHOO: And earlier you had asked about the distinction between voice and internet. Was that one of your questions?
5021 COMMISSIONER MENZIES: Well, I wanted your response to the arguments from others that essentially zero rating is no different than a 1-800 number ---
5022 MS. KHOO: Right. And it’s ---
5023 COMMISSIONER MENZIES: --- which has never been -- which has always been considered to be of benefit to consumers and has been in the past.
5024 I mean, I’ll leave it -- you have made the point, as others have, that because the internet is not telecommunications in that sense. Although, for us, we don’t have an internet act we just have a Telecommunications Act.
5025 MS. KHOO: Maybe we should.
5026 But I just wanted to add with respect to voice and internet, one of the reasons that it’s different is because it’s where the content is relative to the access.
5027 So when you use a telephone it’s very clear which part is the access, that is the telephone line, and which part is the content, that’s the person that you’re calling at the end or the business you’re calling at the end, and the content already exists outside of the network. So by the time you pick up your phone you already know what the destination is. You know who you’re calling or what you’re calling because they exist outside of the phone line.
5028 But the internet isn’t like that at all. All of the content exists within the internet. It exists within the line. So you can’t access it until you have that connection.
5029 So the way ---
5030 COMMISSIONER MENZIES: No, I understand, and we’ll get the full version in the undertaking.
5031 Thanks very much.
5032 THE CHAIRPERSON: Thank you very much. Those are our questions for you. Thank you.
5033 And we’re adjourned until 11:45. Thank you very much.
5034 MS. KHOO: Thank you.
--- Upon recessing at 11:32 a.m.
--- Upon resuming at 11:47 a.m.
5035 THE CHAIRPERSON: À l’ordre. Order please.
5036 Madame la secrétaire, s’il-vous-plaît.
5037 THE SECRETARY: Thank you, Mr. Chairman.
5038 We will now hear the presentation by Devin Lindsay, appearing by Skype from B.C. Mr. Lindsay?
5039 MR. LINDSAY: Hello?
5040 THE SECRETARY: Can you see and hear us?
5041 MR. LINDSAY: I cannot see you. I could until I switched tabs. There we go, now I can see you.
5042 THE SECRETARY: You can see us now? You can see and hear us?
5043 THE CHAIRPERSON: Are you able to hear and see us now, Mr. Lindsay? Yes?
5044 THE SECRETARY: Can you increase your mic? We can’t really hear you. We can’t hear you.
5045 THE CHAIRPERSON: I think they’re retrying the connection.
5046 THE SECRETARY: Hi, Mr. Lindsay, can you see and hear us now? We still can’t hear you.
5047 THE CHAIRPERSON: We can’t hear you on our end for some reason. Can you try again, Mr. Lindsay? No, no sound.
5048 THE SECRETARY: Is it on? Is your mic on?
5049 THE CHAIRPERSON: No, not coming through on our end.
--- (SHORT PAUSE)
5050 THE CHAIRPERSON: All right, so it would appear that Mr. Lindsay’s connection isn’t working right now so, Madam Secretary, I think we’ll proceed with TELUS at this point.
5051 Okay, so if the folks from TELUS could come to the table that would be grand.
5052 There’s the faster Internet and then there’s the faster hearing, isn’t there? So as you’re trying to get up to speed here.
5053 So when you’re ready just identify your panel and please go ahead. Do you have your panel; is everybody there? Okay, there you go.
5054 MR. SCHMIDT: Okay, it would appear that I’m seven minutes shy of saying, “Good afternoon, Mr. Chairman.” So I’m going to say -- which I had expected to do this after lunch -- good morning, Mr. Chairman, Vice-Chair Menzies, Commissioners.
5055 I am Stephen Schmidt, Vice-President Telecom Policy and Chief Regulatory Legal Counsel at TELUS. With me today in our panel are some of my colleagues from TELUS.
5056 Starting at my far left, Mark Freedman, Director Content Solutions; and Ann Mainville-Neeson, Vice-President Broadcasting Policy and Regulatory Affairs. On my right Jennifer Simpson, Senior Regulatory Legal Counsel; Nazim Benhadid, Vice-President Network Planning and Engineering; Mehrzad Ghassemi, Director of Mobility Marketing; and Dr. Jeffrey Eisenach, Managing Director and Co-chair Communications, Media, and Internet Practice NERA Economic Consulting.
5057 Dr. Eisenach holds a PhD in Economics from the University of Virginia and has served as adjunct professor at George Mason University and Harvard University. Dr. Eisenach has served as an expert before the CRTC and the FCC, as well as regulators in other jurisdictions. He has worked as an economist and consultant for over 30 years, and has published over 100 papers and books on economics and regulated industries.
5058 We have three key points to make to you today. First, differential pricing is widespread across most developed countries, and in many industries including the Internet ecosystem.
5059 Second, differential pricing encourages competition and innovation, and enhances consumer welfare. Third, safeguards are necessary to prevent competitive harm from vertically integrated broadcasting companies. But otherwise, the Commission should adopt a flexible case-by-case approach to differential pricing oversight.
5060 Differential pricing practices are widespread across many industries in most developed countries. For example, passengers who book airline tickets closer to departure are frequently charged a higher price for the same seat on the same flight than those who book well in advance.
5061 Movie theatres often charge seniors less than others to see the exact same movie at the exact same time. Grocery stores sell the same product at two different prices depending on whether the customer has a coupon.
5062 In each of these cases, the business with differential pricing plans is able to more efficiently spread the fixed cost of service across customers, thereby increasing output and lowering prices for all consumers.
5063 For example, if airlines had to sell each seat on a plane for the same price then the cheapest tickets would likely go up in price. Not only would fewer people buy tickets on that flight, but with more empty seats and thus fewer customers over whom to spread the fixed cost of running the flight the airline would be left with no choice but to further raise prices for the remaining customers. As a result, fewer people would take the flight and consumers would be worse off.
5064 Differential pricing practices also lie at the heart of the Telecommunications Act. Section 25(1) of the Act provides that tariffs filed with the Commission must specify the rate or the maximum or minimum rate or both to be charged for a service. In other words, the central rate-setting provision of the Act expressly contemplates a range of rates for the exact same service.
5065 Subsection 27(2) of the Act also presumes differences in treatment by expressly permitting price discrimination provided it is not unjust, undue, or unreasonable.
5066 True to the Act, the Commission has authorized or permitted differential pricing for many services during its history. The Commission approved differences in pricing for urban versus rural primary exchange services and differences in pricing for business and residential primary exchange service. Toll-free long distance is simply an older version of what the Commission now calls “sponsored data”. The recipient of the voice traffic pays for the transmission of the call just like a content provider pays for the transmission of the data associated with using a particular application.
5067 In setting rates under section 25 of the Act and its predecessor provisions, the Commission has approved different rates for the same service based on a variety of factors, including time of day for long-distance service, population density and loop length, rate bans for primary exchange service, and distance for interexchange private line service.
5068 The critical point here is not that these services are completely analogous to internet services, but rather that the differential pricing of telecommunications service is not new. It has a long history in the Commission’s own practice and indeed in its enabling legislation.
5069 Differential pricing practices are also commonplace and accepted in many other network industries. For example, a newspaper publisher may offer its newspaper to readers at below-cost rates or even free if the increased readership and scale will attract greater revenues from advertisers. Over-the-air television and radio stations are free to viewers and listeners because their revenues come from advertisers. A number of websites are offered free to consumers, again, with revenues covered by advertisers.
5070 Let there be no mistake, this is sponsored data. The readers, listeners, and viewers get the content for free or at a reduced cost because the newspaper, television station, radio station, or websites’ revenues are provided by advertisers.
5071 Zero rating is also common in the internet ecosystem. As Dr. Eisenach explains in his report, 34 of the 35 OECD countries have at least one mobile wireless provider that offers a differential pricing plan and 26 of the 35 OECD countries have at least one mobile wireless provider that offers discounted or zero-rated data.
5072 Some parties have suggested that the real underlying issue in the proceeding is the existence of data caps. And it is true that if all customers purchased unlimited flat-rate data plans there would be no room for zero-rating or sponsored data.
5073 But unlimited data comes at a price. Strictly speaking, Telus does not have any data caps. We do not turn off anyone’s internet access no matter how much data they use. What we do is match our pricing to the amount of data that people use. This allows us to keep prices low for people who use the internet comparatively little.
5074 If we were to force all customers to purchase flat-rate, unlimited data plans, we would expect two things to occur. First, since everybody would pay the same amount regardless of how much data they use, we would see comparatively light users subsidize comparatively heavy users. Second, since cheaper data plans would be eliminated, fewer people would likely use the internet overall, and to the extent that the number of customers declined, we would be left with fewer users over whom to spread the fixed costs of our network and we would be forced to increase prices accordingly. Simply put, eliminating data caps or, more accurately, forcing all users onto flat-rate, unlimited data plans, would only leave the heaviest internet users better off.
5075 Dr. Eisenach?
5076 DR. EISENACH: Differential pricing practices promote consumer welfare in at least three ways: by enhancing competition, taking advantage of network effects, and promoting innovation.
5077 First with respect to competition, firms and dynamic markets compete to create products that differentiate them from competing firms.
5078 This is especially true for new entrants. Consider the case of Vidéotron’s unlimited music program. Vidéotron is a new entrant and relatively small player in the Canadian mobile wireless space. By offering this new program, Vidéotron was able to differentiate itself from its more established competitors. The more that new entrants and smaller actors are able to differentiate themselves from their entrenched rivals, the more competition is fostered and the better the outcomes are for consumers.
5079 Second, both online content providers and carriers operate in markets with strong network effects, by which I mean that the value of a network to any given customer increases with the addition of every new customer.
5080 This means that growing participation, in this case internet adoption, is in the interest of consumers, carriers, and society generally. It also shows why differential pricing is not about shifting consumers from one carrier to another, but rather about increasing the overall number of customers. Critically, while the differential pricing offer that induces a new customer to join the network may only be associated with one application or type of application, the network effects that results from adding a new subscriber benefit the entire ecosystem through this virtuous cycle.
5081 Third, with respect to innovation, both content providers and carriers operate in industries with high fixed costs, including research and development and physical infrastructure. Since differential pricing practices increase the size of the market, they allow both carriers and content providers to spread those fixed costs over a larger number of consumers. This process has produced and will continue to produce newer and better services at stable or falling prices throughout the internet ecosystem.
5082 MR. SCHMIDT: Thank you, Dr. Eisenach.
5083 The Telecommunications Act reflects a parliamentary assumption that outcomes generated by competitive markets are consistent with the key substantive requirements of the Act, including that rates be just and reasonable and free from unjust discrimination. This conclusion flows from section 34, which directs the Commission to forebear from regulation, where competition is sufficient, to protect the interests of users.
5084 Where the Commission sees practices that are consistent with a healthy and functioning market, it can be satisfied that the requirements of 27(2) are being met. Where the Commission observes signs of a market that is not competitive, it may be justified in taking further action under various provisions, including section 24 and subsections 27(1) and 27(2) as appropriate. But the threshold or screening question needs to focus on whether there is competition sufficient to protect the interests of users.
5085 The Commission itself has acknowledged this requirement in its decisions about foreborne internet services, including its 2009 ITMP policy and its 2013 decision to revisit retailed internet forbearance in part for Northwestel.
5086 Critically, this is not to say that no instance of differential pricing will ever violate the Telecommunications Act. Instances involving vertical integration of broadcasting content are a notable exception.
5087 It remains, however, that by and large there is nothing on the record in this proceeding to show that differential pricing practices, including zero-rating and sponsored data, are harmful to competition or consumers. On the contrary, the evidence is that they are beneficial.
5088 The Commission should address these practices through flexible case-by-case oversight under the Telecommunications Act. This is the regime that the Commission has followed since it first exercised its forbearance powers in respect of internet services, and it has been successful for good reason. This is also consistent with the route that the FCC has chosen to follow in the United States. This case-by-case approach allows the Commission to support and foster dynamic innovation and adaptation to the rapid pace of technological, economic, and social change that affects the internet ecosystem and exhibits an appropriate degree of humility about our collective ability to predict the future.
5089 Differential pricing practices are also entirely consistent with section 36 of the Telecommunications Act and the concept of net neutrality. Section 36 prohibits carriers from controlling the content, influencing their meaning, or influencing the purpose of telecommunications. There is no mention of rates in this provision of the Act and there is no justificationo of practical necessity for implying such a requirement into section 36.
5090 It is difficult to see that rates charged for a telecommunications service could influence what a particular communication means, influence the content of a communication, or influence the purpose behind that communication.
5091 Differential pricing is not at odds with a traditional understanding of net neutrality because it does not entail the blocking or throttling of any content, and it does not restrict a consumer from accessing the content of his or her choice. Nor do such practices foreclose competition from small content providers; on the contrary, such pricing helps smaller content providers and smaller carriers gain a foothold in a competitive market.
5092 MS. MAINVILLE-NEESON: Thanks, Stephen.
5093 While differential pricing practices generally enhance consumer welfare, this only holds true where there is no incentive and opportunity to abuse market power.
5094 Vertically integrated communications companies, namely those that own and control both programming services and network access services, have market power. The Commission has established this fact in numerous broadcasting decisions over the last few years.
5095 The Commission has also found that vertical integration in the broadcasting industry creates the incentive and opportunity for behaviour that is harmful to competition, and ultimately, also harmful to consumers and innovation.
5096 Because of this, the Commission has established a comprehensive vertical integration framework, and this framework contains a broad range of measures designed to prevent the potential for the harm to competition and innovation. Differential pricing practices in a context of vertical integration, if not checked, threaten to undo the safeguards that the framework established.
5097 If a vertically integrated company zero rates or discounts the data for its own affiliated broadcasting services, it is giving a significant advantage to its own programming services, while subjecting other programming services to a significant disadvantage.
5098 Whereas it might be argued that a similar advantage ensues when any broadcasting service is zero rated by any other provider, there is a difference. The difference, and the concern, lies in the fact that for the vertically integrated company it’s a pocket-to-pocket transaction where the cost of zero rating or discounting the data is annulled by the benefit to the affiliated programming service.
5099 Indeed, not only does the zero rated programming services benefit from greater advertising revenue, it is likely also to extort greater wholesale fees for the service.
5100 ISP and wireless competitors to the vertically integrated company could end up paying for the advantage the vertically integrated company gives itself through negotiations for higher wholesale fees for the broadband and mobile rights for the programming service because the vertically integrated company would argue greater audience result as a reach -- as a result of the reach of its own zero rating.
5101 Accordingly, in keeping with the Commission’s finding, the vertical integration in relation to broadcasting services creates the incentive and opportunity for abuse of market power, and the Commission’s recognition that safeguards are necessary to prevent harm to competition, the Commission to prohibit vertically integrated firms from zero rating or discounting the data in respect of their affiliated broadcasting services.
5103 MR. SCHMIDT: Thank you, Ann.
5104 In conclusion, the Commission should proceed as follows:
5105 First; the Commission should continue the approach it has followed for the past 20 years of forbearance from the regulation of retail internet prices. It should engage in flexible case-by-case oversight under the Telecommunications Act.
5106 Second; the Commission should prohibit vertically integrated firms from zero rating or discounting data in respect of their affiliated broadcasting services consistent with past findings that these firms possess market power in the television market. Combined, this approach will remain true to the Telecommunications Act and the policy direction, promote innovation, drive internet use, and benefit consumers.
5107 Thank you very much for the opportunity to speak with you today. We look forward to the opportunity to respond to any questions you may have.
5108 THE CHAIRPERSON: Thank you very much for that. I’ll put you in the hands of Commissioner MacDonald.
5109 COMMISSIONER MacDONALD: Welcome. One of the advantages of appearing on day four is that none of my questions should come as a galloping shock to any of you. So what I’m going to do is I’m going to start out by trying to understand the specifics of your network, how you manage your network, before I move on to the issues of differential pricing.
5110 In your comments this morning at paragraph -- or this afternoon at paragraph 14, you said that you don’t have data caps, strictly speaking. So I’m -- and you try to match up your customers with the plan or the package that best suits their usage. Can you unpack that for me a little bit?
5111 MR. SCHMIDT: My colleague, Nazim, will begin.
5112 MR. GHASSEMI: Actually I’ll take that question. So it’s -- my name is Mehrzad Ghassemi, Director of Pricing.
5113 So we have a number of data buckets that we all them or allotments where customers are able to choose the data that’s suitable for them.
5114 If they use more or are nearing, you know, the end of that data allotment, we would notify them. So at 90 percent of their data allotment and even at 100 percent we would notify them through a text message that, “You are now, you know, getting near the maximum of your data allotment, and if you would like you can purchase more data.”
5115 So we don’t necessary cap people or stop them from using. They’re free to purchase more. And, in fact, every month if they want they can purchase less or more, whatever their needs is for that particular month, we don’t lock them in.
5116 COMMISSIONER MacDONALD: So although there’s no cap per se, there is a mechanism in place whereby if they exceed their allotted amount, either they can throttle back their usage or they can compensate you financially?
5117 MR. GHASSEMI: Correct.
5118 COMMISSIONER MacDONALD: And if a customer is routinely going over that package limit, is that okay? It’s up to them? It’s fine if they’re okay paying the overage, or do you in any way force them to a higher package that perhaps is more in keeping with their historic data usage?
5119 MR. GHASSEMI: We wouldn’t force. We would notify them. Again, we would get in contact with them. We would let them know that, you know, you -- “If there are numerous instances where you’re incurring overages. Would you like to take a bigger data package?” And, you know, we would have a conversation with the needs that they have and if those needs are being met.
5120 COMMISSIONER MacDONALD: And I assume all of those comments relate to your -- just to your wireline services?
5121 MR. GHASSEMI: Sorry; I should clarify, that’s strictly to the wireless services.
5122 COMMISSIONER MacDONALD: Strictly to the wireless service?
5123 MR. GHASSEMI: Yeah.
5124 COMMISSIONER MacDONALD: What about on the wireline side?
5125 MR. GHASSEMI: It’s the same scenario.
5126 COMMISSIONER MacDONALD: The same scenario? Is that the way you’ve always been structured on both the wireline and the wireless side, or has that -- or has your business model changed over the last few years? Did you once have caps where now you don’t, strictly speaking, have a cap?
5127 MR. BENHADID: The structure has evolved over time. We’ve always had some fort -- some form of allotment. I guess the big difference is that in the wireline world, we’ve introduced, over time, the option of an unlimited add-on that doesn’t exist on the wireless side.
5128 And our ability -- or the means in the way we notify our customers have also evolved over time as our, you know, technology and systems and all of that evolved with it. But the intent was always to -- or as much as possible, to notify, inform, and be transparent about usage.
5129 COMMISSIONER MacDONALD: And what would the allotment typically be between your lower-end package versus the Cadillac package that you may have on the market?
5130 MR. GHASSEMI: Is that for wireless or wireline? Sorry.
5131 COMMISSIONER MacDONALD: Thank you. I need a response for both, actually.
5132 MR. GHASSEMI: So for wireless, I can speak to that. So for wireless using Ontario as an example, the smallest data bucket that’s currently in market is 1 gigabyte, and I believe the largest is either 40 or 60 gigabytes.
5133 MS. SIMPSON: And using British Columbia as an example, the smallest is 150 gigabits and we go up to a terabit for wireline.
5134 COMMISSIONER MacDONALD: Okay. With both of your networks, I mean obviously you’re monitoring them constantly, trying to address any issues of congestion that may occur. How do you technically do that?
5135 MR. BENHADID: So we have a capacity management process supported by tools and resources that are dedicated to this. And we use a few means to monitor the capacity on a note-by-note basis.
5136 And when I say note, it goes to the granular level of a sell side sector, a DSLAM for DSL lines and OLT for PON lines. And we watch current usage, trend on -- over several periods of time, forecasted growth, and we infer from all this data a forecasted exhaust date and we take action to remediate the capacity and provide the capacity ahead of time. Our engineering goal, then, congruent with our customer first strategy is to ensure that customers have access to the resources they need at the level of quality that we and they expect at any time.
5137 COMMISSIONER MacDONALD: And when you're doing this monitoring, at what level do the alarms go off and say, okay, now it's time to trigger an upgrade? If you're routinely hitting, just to choose a number, 70 percent of your available capacity, is that when an upgrade is given the green light?
5138 MR. BENHADID: It depends. So it's very note-specific. Not all upgrades take the same time or the same resources. So we factor, if I can all it, a T‑minus parameter into this.
5139 So for example, something that takes six months to remediate, because it's a very long, you know, and complex build, we would infer again from our data that in this case we need to start moving at 60 percent. Something that takes a month we might start moving at 90 percent.
5140 The goal is not necessarily based on when do we start but when is it ready. And everything we do is reversed versus that date.
5141 COMMISSIONER MacDONALD: So when you're establishing those timelines and reverse engineering everything, do you do that based on the technology that you have deployed, or do you do that based on more of a geographical assessment?
5142 MR. BENHADID: It's a combination of both. So technology, because not all technologies have the same capacity nor the same elasticity in terms of capacity upgrades. Geography is one that thing that we consider. All operational parameters that help us define what is the right thing to do at the right time.
5143 COMMISSIONER MacDONALD: And when upgrades are required or when congestion occurs, does that typically happen and from a -- in the last mile component of the delivery of the service, or is it more a transport issue?
5144 MR. BENHADID: So we upgrade both. As you can imagine, you know, every week we have activities on both last mile and, you know, core or transport; however, we have less flexibility on the access side, if that's where your question is leading.
5145 COMMISSIONER MacDONALD: So do transport upgrades take longer to execute on?
5146 MR. BENHADID: They take longer, but you have more flexibility in a sense. You have more options; I guess that's what I'm trying to say, but yes.
5147 COMMISSIONER MacDONALD: From a rural/urban split standpoint, where did you typically see the most congestion happening? Is it in the cities where there's more users, or are you able to plan for that better, or is it in the more rural areas who may be more dependent on that connection for their connectivity to the world?
5148 MR. BENHADID: It depends. We've seen -- we've had congestion, you know, concerns that we had to deal with in both rural and urban. They provide or they present us with different challenges.
5149 If I wanted to, you know, simplify just for the sake of the discussion. In urban, typically you'd have to add a lot of capacity very, very frequently, and there's a challenge that comes with that. In rural, or remote, the challenge is because of, you know, the distance, the cost to build to those locations, but also because of the customer distribution, we've had challenges there as well. But I can't say that it's a dry cut between one or the other because we've invested in both heavily for congestion.
5150 COMMISSIONER MacDONALD: And the same, I understand the technology may be different, but the same types of lead times, the same internal process that you would go through would be the same on both your wireline and your wireless networks?
5151 MR. BENHADID: They would be similar, yes.
5152 COMMISSIONER MacDONALD: Okay.
5153 The Commission said in the ITMP framework that some measures are required to manage Internet traffic on ISP networks at certain points and times. And I'm just wondering if you could elaborate for me and what your thought is on what those points and times are when it's required?
5154 MR. BENHADID: Well, it depends on the way the network is engineered and for what quality of service or quality of experience, but typically, there is a busy period on wireline and on wireless that are different, and that if sufficient capacity wasn't provided ahead of time, would require some sort of congestion management technique. You know, deep packet inspection and a ferry allocation of bandwidth would be one of them.
5155 In our case, our objective -- foundational objective is to avoid congestion at all cost. I believe we've invoked ITMP once in a situation where we had congestion issues that were complex enough that it took us time to address them, and in that case, it was very appropriate to have the option to use those means.
5156 MS. SIMPSON: Just to be clear on ITMPs. We apply them in some geographic areas. That's disclosed on our website.
5157 MR. BENHADID: Yeah.
5158 MS. SIMPSON: I don't have a list in front of me, forgive me. And we do do some with regard to our wireless provision of video services, which is again disclosed to our customers.
5159 COMMISSIONER MacDONALD: Okay.
5160 With respect to the compare between wireless and wireline, you mentioned that the peak usage hours differ between the two. What would be the peak usage periods on both services?
5161 MR. BENHADID: So on aggregate, our peak goes from 4:00 or 5:00 p.m. to 11:00 p.m., midnight, something like that. But what we observe is that on the wireless side, and it's natural because users have the ability to use, you know, their data as they move, the difference between, you know -- I guess what I'm trying to say is that we see high -- relatively high usage throughout the day.
5162 On the wireline, we see a more contrasted usage in that, you know, prime time period. And we know that, you know, some of our -- the majority of our mobility users would offload to Wi‑Fi at some point, and we think that we see that on the wireline side. A portion of the traffic is actually wireless traffic.
5163 COMMISSIONER MacDONALD: So wireless traffic picks up when people wake up and continues, and -- all throughout the day ---
5164 MR. BENHADID: Yes.
5165 COMMISSIONER MacDONALD: --- perhaps decreases when they get home?
5166 MR. BENHADID: Slightly, and then -- yeah.
5167 COMMISSIONER MacDONALD: Okay, and then a portion of that wireline traffic, then, at that point is by virtue of the fact that people are connecting their wireless devices to their home and their ---
5168 MR. BENHADID: To their Wi‑Fi, yes.
5169 COMMISSIONER MacDONALD: Okay.
5170 Have those patterns changed at all over time as people have changed their usage habits online?
5171 MR. BENHADID: I would say, yes. So I can give you maybe an example to illustrate.
5172 Before the video streaming, and all of that, you know, one of our biggest concern in terms of network capacity and usage was, as it was mentioned previously in the hearing, BitTorrent type traffic. Today, it's very, very small. Today, video -- live video is 50 to 60 percent of our traffic in the busiest time.
5173 So we have seen –- because there's a substitution of, you know, media consumption or, not a substitution but a transfer into tablets and all of that, we see a lot of video traffic and the user behaviour is influenced by that.
5174 COMMISSIONER MacDONALD: Okay.
5175 Do you offer unlimited packages today?
5176 MR. BENHADID: On the wireline side, yes, unlimited add‑ons.
5177 COMMISSIONER MacDONALD: Wireline, not wireless?
5178 MR. BENHADID: Wireline, not wireless.
5179 COMMISSIONER MacDONALD: Okay.
5180 Obviously, a goal of all communications companies, all companies in general, is to maximize profits, and some would argue that data caps, although you don't have them, although you do have different tier packages, are one way to do that by charging customers overage or forcing them to a more expensive package. So I won't ask this question in the context of a data cap, I'll ask it in the context of an unlimited service.
5181 If, on the wireline side, all of your Internet subscribers were only given the option of an unlimited service, what impact would that have on the price? I know you said it would go up, not down, but can you quantify that for me?
5182 MR. BENHADID: I wouldn't be able to quantify exactly how the price would go up, but I am convinced that it would go up because at the end of the day, we're very, very careful how we size our network. Because there's -- in both worlds there is a relationship between cost, speed, usage, and all of that, and you design for a specific customer experience. So you could design for a customer experience because it’s your company’s strategy that says, you know what, I’ll give you as much as you can eat for a very low price at a certain quality. In our case, it’s very, very important to us, to our overall strategy, the quality of the experience.
5183 So if we were unlimited and we wanted to maintain the same quality of experience, we’d have to significantly increase our network investment and seek return through pricing for those investments.
5184 COMMISSIONER MacDONALD: And which subset of your customers would be most impacted by that decision? Is it the ones prescribing to a smaller package or is it the ones that would already be a more of your Cadillac solution?
5185 MR. SCHMIDT: I think, as we said in our opening statement, it would be the lighter users who at the end would be disadvantaged by the move to an unlimited plan because they would be paying for a bigger plan than they needed in fact in the circumstances.
5186 COMMISSIONER MacDONALD: And would that answer be consistent on both the wireline and the wireless side? Not going unlimited on wireless, but say a 100 percent increase to the -- to your current data allotments?
5187 MR. BENHADID: Yes, except that it would be exacerbated on the wireless side because the overall bandwidth or spectrum available to share is significantly lower than the wireline side.
5188 COMMISSIONER MacDONALD: We heard from Sandvine a couple of days ago and one of the things that their presenter said was the more users you have on a network, obviously, the more profitable it becomes. I get that. But they also said that the more internet that people use, the lower the cost to actually provide that internet.
5189 Can you share your thoughts with me on that? It would seem to be -- I mean, obviously, you have fixed costs, but it would seem to be counterintuitive because if people were using more you need to invest more in upgrades.
5190 MR. BENHADID: There’s a step function model to consider. So we have a fixed cost for a certain bandwidth. And within that bandwidth what -- I think what Sandvine put forward is valid. The more -- you need -- if you are able to maximize the use of that bandwidth at a price that is economically, you know, appealing, then yes, you’ll increase usage and all of that.
5191 But then you reach a limit and then you need to invest in another step function for the incremental usage. And that incremental usage, because it’s not priced for it, I guess, or for the second tier of fixed price, you’d get into a situation where now I need to recoup the cost of the step function.
5192 That’s the way I’d see it. I don’t know if my colleagues have -- would have something else.
5193 COMMISSIONER MacDONALD: One of the other things that Sandvine touched upon was their perception that from a service provider standpoint, from a network management standpoint, it was much easier to engage in differential pricing practices for different applications or different content than it would be to technically and financially execute on a potential upgrade that would be required to offer unlimited to all customers. Can you unpack that for me a little bit?
5194 MR. BENHADID: I’m not sure what they meant actually.
5195 COMMISSIONER MacDONALD: Okay.
5196 Obviously, I know from reading the media that Telus is investing significantly in network expansion and network upgrades. And I take your point that you don’t strictly speaking have data caps. But there is a perception out there among many Canadians that despite network investments they’re not seeing -- that that network investment is not translating to increases in their data allotments or plans becoming -- even the plans that you offer becoming more rich and more robust.
5197 Can you comment on that standpoint?
5198 MS. SIMPSON: Well, I can comment from the wireline perspective. So actually, from the wireline perspective, we did increase our buckets overall in the last year, in approximately the spring. All our buckets with regard to our allotments on each one of our data services up to 150, they were increased by 50 gigabits across the board.
5199 MR. SCHMIDT: And on the wireline side what you’d see sort of graphically is increasing usage and allotments over time but not a correspondingly as steep increase in price, so in the result you’re seeing really a declining cost per meg or a declining cost per gig over time. People are using their networks more and more and more, but the price is not necessarily tracking up at the same rate.
5200 COMMISSIONER MacDONALD: Okay. We’ve asked this of other providers, would you be able to outline -- to undertake to provide a timeline over say the last five years of all of the changes you’ve made to data allowances in your different packages for both wireline and wireless?
5201 MR. SCHMIDT: We will do so subject to the availability of the data.
5202 COMMISSIONER MacDONALD: Okay.
5203 MR. SCHMIDT: Absolutely.
5204 COMMISSIONER MacDONALD: And you can do that by November the 14th?
5205 MR. SCHMIDT: Yes, sir.
5206 COMMISSIONER MacDONALD: Perfect. Thank you.
5208 COMMISSIONER MacDONALD: Have the costs to upgrade these networks both on wireline and wireless decreased over time as technological -- as technology gets better and more robust does the price go down?
5209 MR. BENHADID: Yes, so the price per unit of traffic transported has gone down, absolutely. You know, Moore’s law, every one of us is, you know, more efficient year over year and there are, you know, economies of scales happening there. However, the total volume of traffic that we transport is increasing faster than the cost reduction of the infrastructure.
5210 And maybe just to give you a proxy, we’ve -- the increase of traffic we’re forecasting for next year is the total traffic we’ve transported in 2013. So it’s -- although the price is going down through technology evolution, the usage is going up faster.
5211 COMMISSIONER MacDONALD: And how do customers end up seeing that on their end bill, they’re -- today they’re getting more for the same? They’re getting more for more? They’re getting more for less?
5212 MR. BENHADID: They’re getting -- well, I think we made the point that data allotment on both wireline and wireless have gone up. So the cost per unit of traffic consumed overall is going down, but I think that’s something that you will be able to see in our undertaking.
5213 COMMISSIONER MacDONALD: Perfect. Thank you.
5214 When you’re making decisions about increasing your wireline or your wireless packages, making them more attractive to customers, obviously there’s a technical element to that and I get that there’s a marketing element to that because -- and competitive element because you’re trying to compete with the other players in the market. How much of that final decision ends up being a technical one or falling into the category of we need to do this just to compete and remain competitive?
5215 MR. BENHADID: I think it depends on a case-by-case basis, but what I can tell you is that the technical feasibility related to the quality of the experience of the average user is a big, big part of the decision.
5216 MS. SIMPSON: Yeah, there are a number of factors for both wireline and wireless that we would consider. And they include looking at subscriber usage, what is happening with regard to our network, the number of subscribers who might share an account with regard to wireless, the cost of providing the data of course, as my colleague has pointed out, network capacity, and as well as competitive pressures. Those would all be factors that go into the decision.
5217 COMMISSIONER MacDONALD: So assuming there’s no technical problem or financial impediment to carrying on with some of those upgrades, how do you measure your customer’s want and need for those upgrades? Is it based on complaints you receive? Is it based on lost opportunities? Is it based on churn?
5218 MR. GHASSEMI: All of the above. We also have info sessions with customers. We actually talk to our customers. We ask, we engage in panels and things like that, like similar to you guys doing here. We do surveys. We look at usage patterns. We do look at complaints. We talk to our front lines as well, so our stores and our reps and the conversations that they’re having with customers. So we take all that into consideration.
5219 COMMISSIONER MacDONALD: Internet usage is growing and CISCO recently issued a report saying that between 2015 and 2020 they’re projecting a compound annual growth rate of 22 percent in internet traffic. And if they’re talking about just the peak hours, that number grows to 32 percent compounded annual growth. Is that in line with your own internal projections?
5220 MR. BENHADID: That is, yes.
5221 COMMISSIONER MacDONALD: Okay. I already addressed a couple of my questions.
5222 With respect to internet growth, I get that more devices are being connected to the internet. We’re in a world now of automated homes, internet of things. Typically, a lot of those new applications and new uses are relatively low bandwidth in comparison to other popular applications online.
5223 So, even for a high-end user at -- I think about myself as an example, I can only spend so much time online, I can only download so many videos. At some point I’m going to tap out and stop buying more connected devices for my home. Where do you see over the long time -- over the long term that usage trend going?
5224 MR. BENHADID: So in every -- I can give you a personal opinion in my time in the industry. Every time we thought, “You know what, we’re reaching the peak”, something new happened in terms of -- and I’ll give you the example of Netflix, right. So the introduction of Netflix was a dramatic change to all traffic pattern, all traffic projections and all of that.
5225 So, I don’t think we can or I don’t think I’d be comfortable to presume that we’re going to reach, you know, a plateau or something like that. What I do know is that everybody is getting ready for the next wave of wireless technology, 5G technology, you know, fibre-type speeds on a wireless device. And we believe that that will, you know, if all resources are available, spectrum and all of that, that will start a new wave of crazy growth, and crazy being the technical term here.
5226 COMMISSIONER MacDONALD: You obviously monitor your customers’ usage very closely, because you're sending them alerts when they get to 90 percent and having conversations with them around changing their plan. But typically speaking, how much of someone’s allotment in your case would the average customer typically use?
5227 We heard from Xplornet earlier in the week and they said that generally people use about -- at least for them -- 70 percent of their data cap; Rogers -- I don’t remember the number -- said something similar. What would your perception be for both wireless and wireline?
5228 MR. GHASSEMI: I would say on the wireless side I think it’s competitively sensitive, so we’d be happy to disclose that to you guys ---
5229 COMMISSIONER MacDONALD: Okay.
5230 MR. GHASSEMI: --- if we could take that away.
5231 COMMISSIONER MacDONALD: Perfect.
5232 MR. SCHMIDT: To the degree that that could be -- well, I guess we’ll extract an undertaking from the transcript on that and ---
5233 COMMISSIONER MacDONALD: Okay.
5234 MR. SCHMIDT: --- respond. Thank you.
5235 COMMISSIONER MacDONALD: Thank you.
5237 THE CHAIRPERSON: And you can talk to legal counsel to clarify that ---
5238 MR. SCHMIDT: Okay, thank you.
5239 THE CHAIRPERSON: --- at some point. Thank you.
5240 COMMISSIONER MacDONALD: I’d also be interested to see that number or that range for your unlimited customers as well, because it gets back to my previous question about at some point people can only use so much, no matter how much I like Netflix and logging on to download interventions from fine people like yourselves, I can only use so much.
5241 Whatever that number ends up being for your customers, do you have any data around how much of that is customers right -- and you and customers rightsizing your plans based on their needs, versus a fear on the part of the customer about them going over -- about them receiving that notification that you're at 90 percent on the seventh day of the month instead of the 25th day of the month?
5242 MR. SCHMIDT: I don’t know if my Business Unit colleagues want to add to this, but I -- in other context, we’ve filed information in confidence, including the BTS proceeding, and what we can say directionally is there's actually a pretty good fit in our wireline customer base between usage and plans overages is comparatively rare. We take proactive efforts to put people on -- situate people on the right plan certainly in the wireline world. So it’s a small problem we’re talking about at the minimum, is what I could say directionally.
5243 COMMISSIONER MacDONALD: Okay.
5244 MR. GHASSEMI: And I -- it is a concern of customers, and I think we’ve taken a number of measures and we continue to do so. You know, we talked about notifications, letting them know, the ability to block their data if they need to, you know, having multiple different plans. And so, we, you know, we’ve gone as far as making our notifications real time, right. So previously one of the complaints was, “Well, you do notify me, but it’s four hours delayed and I’m already into overages.” And we invested heavily in a real time platform to actually let customers know basically on the spot that this is where you're at, and here’s the options available to you. And so, it is a concern of customers and we listen and we, you know, we’re making a number of steps to help address that.
5245 COMMISSIONER MacDONALD: And to whom does that notification go? Does it go to the account holder or is there a risk that the 13-year old upstairs can click yes, and keep on surfing?
5246 MR. GHASSEMI: So the notification -- if it’s a shared account where there's multiple subscribers, the notification in terms of your usage would go to everybody to let you know as a family or how many people are on the line, “You guys are all, you know, here’s where you're at.” And the ability to unblock, which I think was what you're asking, or the ability to ---
5247 COMMISSIONER MacDONALD: M'hm.
5248 MR. GHASSEMI: --- purchase more data, that’s up to the account holder to designate who can and who can't. So a 13-year old can't buy a phone from us directly, it’s -- they have to do it with their parent, and so we don’t actually know if you're -- like if it's a 13-year old or it's the parent or they’ve given the phone, so the parent or the owner of the account if they notify and tell us -- they need to tell us who is the actual person who’s the account holder and has the responsibility, and we set it so that only they can make those changes.
5249 COMMISSIONER MacDONALD: Okay.
5250 MR. GHASSEMI: And they could do that themselves as well online.
5251 COMMISSIONER MacDONALD: Okay. Back to an earlier point around how much people actually use in relation to how much they could use on their plan and you're going to provide your details. But if I go back to Xplornet’s example that customers generally use about 20 percent of their -- sorry, about 70 percent of their allotted data, that still leaves 30 percent on the table that goes unused on a monthly basis. Given that there's still 30 percent on the table, why zero rate some content if they're already not reaching their maximum?
5252 MR. SCHMIDT: Yeah, I’m not sure if the analogy from a satellite network to our network is apposite, so it's a little bit challenging for us to answer that. And in any event, the amount of zero rating we’re doing is so de minimis in these early days. We zero rate roaming notifications because the Commission requires us to; we zero rate firmware over-the-air updates for handsets. So, it’s such a small amount of activity, it’s not consequential in network terms, and our facts may be different at the end of the day on our network than Xplornet’s.
5253 COMMISSIONER MacDONALD: Fair enough. That’s a small amount of traffic, but ---
5254 MR. SCHMIDT: Yeah.
5255 COMMISSIONER MacDONALD: --- it has the potential to be a very large amount of traffic if your plan that comes out in two years says that we’re going to -- that you're going to zero rate Netflix, Facebook and some other thing, that could end up being a very significant chunk of your available capacity. So why go down that road if people are not even using their full data allotment today?
5256 MR. BENHADID: So -- maybe I can take this, so the first thing I’d like to maybe clarify, is the fact that we wouldn’t consider zero rating something if our network analysis tells us that it’s going to be harmful to the majority or the average user experience. We would do it in a very careful way in a manner that it wouldn’t.
5257 But if I go back to your comment, I mean it’s hard to -- it’s hard to know if the customer who’s at 70 percent -- if I use that number just to illustrate the point and since it’s there -- wouldn’t have restricted themselves because in theory what they would have wanted is virtual reality or 4K and -- or any type of traffic that someone can make appealing to them through one way or another and increase -- increase usage.
5258 So I don’t think there's anyone who can make really -- with so little data -- a direct link between how much of the bucket is used versus if there was something that was zero rated, would it be consumed into that buffer or not. And there are users for sure that get to the 100 percent, there are users at 10 percent, that 70 percent is just an average.
5259 DR. EISENACH: And if I could just very briefly add the point, one way I would ask you to consider thinking about zero rating is not so much in terms of averages, but rather in terms of choice. So to look at an average and say, “The average customer is using 70 percent of their usage, well what bucket are they in and what would they like to do? What would draw them? What would attract them to be a consumer to a different carrier? What would make them happy? What would create value for them?”
5260 So for some customers that may be the ability to stream an unlimited amount of data and of music and use very little of other things. That may or may not increase the overall usage on the network, but it gives the customer the assurance that they can -- that particular customer with that particular set of preferences -- the ability to choose -- to make a choice they didn’t have before.
5261 So overall here, I think it's very important to realize that what's happening in this market is the offering to consumers of a choice, not the imposition of a single business model. And so again, just in general, I think averages can be misleading.
5262 COMMISSIONER MacDONALD: So to continue down that vein, in -- from your standpoint, do you view DPPs like zero-rating of streaming music as just an ability to provide assurance to customers that know you can do as much of this as you want because streaming music is something you want to do and you're not going to have to worry about getting dinged with an extra bill at the end of the month? Is it about explaining data in a way that people actually understand?
5263 DR. EISENACH: Well, I think that's part of it, and so I think what part of the -- I think the conversation we've been having, I think people do worry about going over their data limits. I've worried about that in the last month. So I think it is a concern that people have. For somebody for whom streaming music is an important thing, I think the ability to know that you do that and not run over your limit can be an important thing. So I think that's one of the aspects of zero-rating that consumers find attractive.
5264 COMMISSIONER MacDONALD: So if I were a TELUS customer and you come out with a new package that allows me to take advantage of zero-rating on let's say Netflix and Facebook and one other thing, isn't there a concern that if you're doing that, and you're offloading -- well, not offloading that traffic -- it's still on your network -- but exempting that from my allowance that the next iteration of the plan may be for you to lower my data allowance or my allotment in a given plan?
5265 MR. GHASSEMI: So I think it would -- again, it goes back to choice. So if we were to do that, if you were a customer of ours -- which I hope you are -- we would then say ---
5266 UNKNOWN SPEAKER: Business card.
5267 MR. GHASSEMI: The choice is yours, right, so then that's why we have different allotment sizes. So if we were to provide you with zero-rated -- I think the example used is music and Netflix and things like that -- and that is the majority of your usage and you only need, you know, a smaller amount of data for the other things you do, then I think it's actually to your advantage to step down and choose a smaller bucket and pay less for that service and pay for, you know, the things that you value, right? So it's -- it really comes back down to choice.
5268 So I think having smaller caps -- smaller caps typically go with smaller prices, right? So you get to save money on that end and spend the money on the Netflix, the things that you really value.
5269 MR. SCHMIDT: To add to that point -- and our undertaking will -- about data allotments and pricing terms will speak to this more vividly -- but the whole sort of direction of network usage and plans, you know, has been more and more and more and more and more, and the -- just the basic trend line is up. It would be surprising to see a plan actually sort of reversing that fundamental trend line, and we're going to give you less so ---
5270 DR. EISENACH: Well, just to add one factual point -- because I think there may have been some confusion about this earlier in the hearing that I was listening to. So T-Mobile is now offering an unlimited plan, but they're still offering their simple choice plan, so they're still offering several different buckets of different numbers of -- amounts of gigabits, and with that, unlimited streaming of music and video, so the Binge On and the Music Freedom programs, you may have heard, have gone away. In fact, they're still there and offered to T-Mobile consumers as a choice.
5271 One interesting thing about the unlimited plan is -- that I think goes to the kind of almost infinite variety of network management and product offerings that carriers are putting forward -- if you buy the T-Mobile unlimited plan, one of the things you'll notice now fairly prominently displayed on their website is that your tethering -- if you want to use data on your cell phone to tether to your laptop -- that's limited to 3G speeds on the unlimited plan.
5272 So they're -- and the point is not that that's necessarily a good thing or a bad thing. The point is that that's an aspect of the product that you're buying from T-Mobile. They're telling you that up front, so you have the choice of buying what you want, including with T-Mobile unlimited or just unlimited voice -- unlimited music and video.
5273 MR. BENHADID: And maybe just to add two points. If we were to do what you described -- which we don’t have plans right, you know, at this moment, but let's say hypothetically, two things would need to happen. Number 1, we would need to be able to accommodate this predicted bandwidth usage across the base for a zero-rated service without, you know, hurting the remainder of our base and our growth and all of that. And we would do that in a manner or in the attempt to attract and keep customers. So anything we would do that would, you know, upset you as a customer, would lead you to go look at competition or whatever, would not be to our benefit. So I think that's the rational argument around we wouldn't do something (stupid).
5274 COMMISSIONER MacDONALD: To put the shoe on the other foot for a moment, if I'm getting the benefit of all of these things that are now zero-rated, I now may very well be able to move to a cheaper plan, so how is that good for TELUS as a service provider with, you know, financial obligations and targets that you're trying to meet?
5275 MR. SCHMIDT: I'll start and my colleague will correct me. To the degree that all of these practices in general are -- you know, innovative pricing practices attract more customers to our network, we're distributing our fixed costs across more customers and you're able to lower our price overall, it's all good. Having more customers to spread your fixed costs across is a good thing. So even if they're switching plans, you're attracting new people through offers and you're sort of net net better off.
5276 MR. BENHADID: Yeah, and we can do that today, right? We have a variety of plans and you know, depending on your usage in a specific month, you can go up or down, more or less revenue, and this is, you know, how it should be. You have the choice to get the service that works best for you from the provider that better fits your needs.
5277 MR. GHASSEMI: And ultimately, our, you know, our goal is to get more customers, right? So if we are offering a service that you value and we gain more customers, then, you know, our revenues will go up just by the nature of having more customers. So we wouldn't do things to hurt the bottom line, but it's where you balance giving and offering the customers value and are willing to pay for, and balancing that out with what's happening in the market. And if we were to, you know, do things that are detrimental to customers to their earlier point, the customers would just leave us, right? So it's a balancing act of all those factors.
5278 COMMISSIONER MacDONALD: So to switch back to wireless for a second -- and we've heard earlier that obviously wireless and wireline are very different, there's different considerations, the data allotments are very different on each product, and I'm sure wireless providers, not just in Canada face those same challenges and constraints.
5279 But I did see that T-Mobile -- because you often cite them -- is offering unlimited plans on wireless. What prevents you from doing something similar?
5280 MR. BENHADID: So from our perspective, every carrier, you know, who owns spectrum assets -- I'll speak to wireless, since that's your question -- has to solve the same kind of equation. So the outcome is quality of the experience and the variables are price, speed, usage, and so on and so forth. And every carrier, even in Canada, has a different value proposition, in terms of quality or quality of experience, and there's, you know, all kinds of means to measure that, all technical, you know: latency speed, packet loss, jitter, and all kinds of things.
5281 In our case, we believe that the way we design the network for the quality we expect the average user to have, an unlimited offer would be bad for the customers, because either we'd have to invest, you know, insane amounts of money -- and we wouldn't even have the time actually within a normal year to do that -- or -- and our price would have to go up. So every carrier has the choice of the bundles they offer, based on the outcome they expect.
5282 COMMISSIONER MacDONALD: Okay, just a couple more questions on data caps. We talked earlier about peak usage, knowing that's different from -- sorry, I said caps -- allotment. Obviously, that -- the peak usage times, as we were discussing, differs between wireless and wireline. But why are those allotments calculated on a monthly basis versus on a time-of-day basis?
5283 MR. BENHADID: Can you just elaborate one more on the time? Is your thought why isn't it different, like, during the night or things like that?
5284 COMMISSIONER MacDONALD: Well, if we know that traffic is very low between let's say midnight and 6:00 a.m., and there's no congestion on the network, the pipes are relatively free, why count that at all? Why not, within the package or the allotment, why not just include the peak hours when there could be congestion or when you need to manage your network?
5285 MR. BENHADID: Okay, yeah, I understand the question.
5286 So I'll start with the wireless network and then I'll go back to the wireline network.
5287 There's a few things to consider. Number one, because the capacity is much smaller as an absolute in laws of physics there is a concern that anything unlimited during the might create, you know, congestion off peak hours. But the way we, you know, the way we look at is we want to have something relatively simple and we want to make sure, again, that we maintain a quality of experience.
5288 So on the wireless side, we see this as a risk. You know, 10 users or 5 users could crash a sector during the night if it was unlimited for them and if they had no constraint.
5289 On the wireline side, what I want to say is first of all, it depends on traffic or traffic patterns of customers. So what we see in our network is that traffic during the night is typically BitTorrent-type traffic, and that's a very, very small, you know, subset of our base. So there are -- and it too be very complex, even for the customer. So you know, we -- I think we've all had experiences at the time where you could have unlimited calling from four, from five, from six, from seven, it's a complex thing to manage daily.
5290 We believe that the fact that there's unlimited add‑on on the wireline addresses the needs of our base that needs to have, you know, bandwidth available all the time at a very high rate. We believe that for the majority of our users, from what we see, they would want to use it during the day. And it was mentioned previously in this hearing, the example of a dishwasher, I believe, and I think it's a very valid example.
5291 MR. SCHMIDT: I could add one item.
5292 Data caps, or allotments, these types of plans, are a relatively simple and cognitively accessible way of matching the consumption of data to prices. If you look in other network industries, like electricity, there is movements towards smart metering and billing at peak, and it's very, very dynamic. That peak may change every day, the pricing may change constantly, and it may be just sort of infeasible for the customer to understand it, frankly.
5293 So you know, decisions are made to also make it transparent, to also make it simple. There is -- this matches consumption to pricing in some way in an understandable way.
5294 COMMISSIONER MacDONALD: Well, and speaking of consumption, I've kept everyone here long enough for the lines in the food court to finally die down. So that's a logical break in my questions before we continue if we want to break.
5295 THE CHAIRPERSON: Yeah, I think it's probably wise to take a one‑hour break.
5296 So we'll adjourn until 2 o'clock, and then continue.
5297 MR. SCHMIDT: Thank you.
5298 THE CHAIRPERSON: So if you could be there at 2 o'clock it's much appreciated.
5299 MR. SCHMIDT: Thank you.
5300 THE CHAIRPERSON: We can continue at that point.
5301 MR. SCHMIDT: Thank you.
5302 LE PRÉSIDENT: Nous sommes ajournés jusqu’à deux heures -- 14 heures, pardon.
--- Upon recessing at 1:00 p.m.
--- Upon resuming at 2:00 p.m.
5303 THE CHAIRPERSON: Order, please.
5304 À l’ordre s’il vous plait.
5305 So Commissioner MacDonald will continue the questioning.
5306 COMMISSIONER MacDONALD: Welcome back, now that everyone is full, and alert, and energetic.
5307 I'd like to move away from data plans and allowances and go to a statement that you made, actually, the first statement you made in your second intervention from September, and it was that, to quote:
5308 "Differential pricing practices are widespread throughout nearly every industry in nearly every country in the world". (As read)
5309 And some of the examples you provided are plane tickets or seniors' discounts and things like that.
5310 So I take that point, but would you not agree that unlike many other industries the telecom industry is subject to regulation as common carriers in furtherance of the policy objectives as laid out by the Government of Canada, the Parliament?
5311 MR. SCHMIDT: I agree that it is a regulated industry. If you're asking me to go to the next step and assert whether I agree that it is -- you know, there's a legal tradition called common carriage in the U.S. that attaches to telecommunications carriers there, and if you're asking me if it attaches in this country, I wouldn't agree with that next proposition, but it's a highly-regulated industry.
5312 COMMISSIONER MacDONALD: So you're suggesting that pricing practices and the way a store or a movie theatre, for example, would present their offering is appropriate in the context of telecom?
5313 MR. SCHMIDT: The -- to the degree that the -- you've withdrawn your powers under 27.1 or 27.2, the pricing would look in this space no different than in any other part of the industry, the economy. To the degree that you retain those powers in whole or part, it is different from the rest of the economy.
5314 COMMISSIONER MacDONALD: Also in your second intervention, you state that:
5315 "Some parties argue that differential pricing in a new phenomenon in the Internet ecosystem." (As read)
5316 You go on:
5317 "Rogers, in particular, introduces a report by Wall Communications that attempts to demonstrate that zero-rating, in particular, is relatively -- is rarely seen across the globe. However, this report suffers a number of flaws. In reality, zero-rating and differential pricing practices are widespread across developed countries". (As read)
5318 Can you outline specifically why you disagree with the Wall Report?
5319 DR. EISENACH: So I think that question's probably directed at me. So we did a survey of 35 countries, as compared to the 8 that were surveyed by the Wall Report, and I would just make two points very, very quickly and then I'm happy to follow up.
5320 But the first is when you look at the 35 countries, 26 of those countries, or 74 percent of them, have a zero-rating practice; 34 of the 35 have some form of differential pricing practice defined exactly the same way as the Wall Study defined those terms. So when you look more broadly, you see in fact that zero-rating practices are very commonplace on the basis of if you look at them by country.
5321 The second point that I want to make that I think is also important and it comes back to the point I made briefly this morning is about choice. Conversely, and this was the point that emphasized in Rogers' interpretation of the Wall Report, a relatively small percentage of carriers have zero-rating. So if you look at most countries, they're like Canada, where you have a carrier or two, more often than not a new entrant or a maverick offering a zero-rating plan, and the other carrier is not offering zero-rating plan. So in virtually all countries, 100 percent of the 35 countries that we looked at consumers have the option of not choosing zero-rating.
5322 COMMISSIONER MacDONALD: Why is it that you feel that the 35 countries that you looked at are more representative or form a better comparison when we're trying to compare Canada to other countries? Because when I -- in these proceedings, we're often trying to compare ourselves to others, and more often than not, we end up comparing ourselves to one of the G7 countries or to Australia, knowing that there are similar geographic and population challenges as there are here in Canada?
5323 DR. EISENACH: Well, two points. Our results actually mirrored perfectly the results in the Wall Report, they were just -- they just had a smaller sample. So in fact, 75 percent of the countries looked at in the Wall Report had zero-rating, but only a much smaller, I think about 25 percentage -- percent of the carriers had zero-rating.
5324 So Rogers, I think, in their interpretation of the Wall Report emphasized the fact that relatively few carriers do zero-rating and didn't bring out the fact that almost all countries have zero-rating. So it's just a question of interpretation.
5325 I think when you're looking at the 35 OACD countries, you're looking at comparable countries, some of them smaller, but certainly, if you look at the precedents that are being referred to in this proceeding, people are looking at countries all over Europe. You'll hear about the Netherlands, you'll hear about Slovenia, you'll hear about other OACD countries, so I think that’s a reasonable expansion of the base.
5326 COMMISSIONNER MacDONALD: When you say that your findings mirror the Wall Report, to what are you actually referring?
5327 Is it a similar percentage based on number of countries, number of subscribers, number of ISPs that --
5328 DR. EISENACH: Right.
5329 COMMISSIONNER MacDONALD: -- you’re drawing that comparison?
5330 DR. EISENACH: Give me one second just to find the paragraph. It’s in my second report and ---
5331 So the Wall Report found out of 41 operators surveyed, that in the –- in the 8 countries that they looked at that 9 of those offered discounted or zero-rated data, so that was 22 percent.
5332 They also found that at the 8 countries that they looked at, 75 of them offered -– 75 percent of them, 6, offered zero-rating.
5333 So 75 –- 6 of the 8 countries they looked at had zero-rating plans, at least 1 carrier and 9 of the 41 carriers that they looked at had zero-rating.
5334 So their take-away from that is zero-rating is very rare because only 22 percent of carriers zero-rate, but what you had to comb through the fine print to find, which we did, is that there was at least 1 carrier offering zero-rating in 6 of the 8 G7 plus 1 countries they looked at.
5335 And then that was totally, completely validated, when you expanded the sample you got exactly -– essentially exactly the same percentages.
5336 COMMISSIONNER MacDONALD: And is that because one carrier may be operating over multiple countries?
5337 DR. EISENACH: Typically not. I mean it -– that may be the case in some cases, but if you look at the OACD countries -– even where you have carriers that are owned by the same parent company they tend to operate.
5338 So the fact that you’re owned by Vodafone doesn’t mean you’re offering the same plans in Spain as you would be in England, for example.
5339 COMMISSIONNER MacDONALD: You also state differential pricing is also pervasive in telecommunications in Canada. Are you predominantly referring to voice services when you’re making that statement?
5340 DR. EISENACH: Tell me where that statement is because I’m ---
5341 MR. SCHMIDT: I think that’s a Telus statement you’re referring to --
5342 COMMISSIONNER MacDONALD: Yes.
5343 MR. SCHMIDT: -- as opposed to a Dr. Eisenach statement.
5344 Frankly we’re referring to it across all classes of service. If you think of differential pricing in general, like from the TNC as the offering of the same service at different prices to different consumers, we have hundreds and thousands of rating plans across our wireless and wireline platforms, for example, to offer data services. I mean that a lot of the plans are grandfathered.
5345 You know voice service is offered at all sorts of the -– the basic same service is offered on all sorts of price points in the market depending on where you live, whether you’re a business customer or a residential customer, et cetera.
5346 So there’s lots of bases of differentiation. A lot of it has been frankly required in the past by the Commission.
5347 It’s price discrimination has been –- or you know, differences in treatment have been a very central tool in the traditional regulators toolbox around the world. Making sure rural people paid less for primary exchange service than urban did.
5348 You know, making sure businesses paid more for primary exchange service than residential customers did. So it’s an important tool; it features in a lot of places.
5349 COMMISSIONNER MacDONALD: And I take that point especially from a financial standpoint and what customers actually pay, but are things like zero-rating not a little bit different, because it provides the opportunity for a service provider to pick and choose what they want to zero-rate, versus ensuring that rural or remote Canadians have access to a fairly priced telephone line.
5350 We’ve said okay it needs to be affordable, but we’re not going to interfere in the content of that telephone call.
5351 MR. SCHMIDT: It’s a good question. I’d start by distinguishing differential pricing sort of in general at the retail level, like different price points and promotions and packages for the same service.
5352 I think and hope that is uncontroversial and rather we’re focusing on the things that raise perhaps more genuine concerns or at least merit a more searching conversation here, so zero-rating and sponsored data.
5353 You know, we’ve urged you in our opening statement and in our submissions to have regard to other industries because you can see analogies.
5354 The purpose of seeing those analogies isn’t to say that radio or credit cards or some other network industry is exactly the same as the internet, but that the practices are normal in two-sided platform markets, like zero-rating for over the air T.V. or radio, and they are uncontroversial in those settings.
5355 So at least we should say we’re not looking at something -– we’re not on a terra incognita. It’s not the first time on earth in fact that we’ve seen these practices, so we maybe should approach them with less alarm but still care.
5356 COMMISSIONNER MacDONALD: Fair enough. I guess the point and with things like zero-rating and sponsored data -– I’m trying to wrap my head around do programs like that make your telecom service less expensive or does it actually make the content that you choose less expensive?
5357 MR. SCHMIDT: To the degree that these are differentiation or entry strategies, so if I flip it over to the video channel -- because it’s maybe a real anchoring and a real example helps.
5358 To the degree that it’s expanding their customer base and it appeared to be -– there was a lot of uptake on the promotion, it would be making our service on average more affordable by spreading the costs over more subscribers. So that -– that’s okay.
5359 COMMISSIONNER MacDONALD: But is it making their service more affordable or is it making access to that content more affordable?
5360 And I think there is a fine -– a fine distinction there, because if it’s to make a service provider’s service more affordable a provider could lower their rates or increase their caps, versus making for example streaming service more readily available and less expensive or Netflix less expensive or what have you.
5361 MR. SCHMIDT: Well I think it’s both. You’re not offering it if people aren’t -– you’re presumably hoping to get uptake and you’re presumably hoping to have customers regard it as attractive. So I guess I’d have to say it may be both. I think you’re right to ask it on both sides.
5362 DR. EISENACH: If I could maybe just jump in for a second to address this?
5363 So this question of discrimination on the basis of content I think is a very serious question.
5364 I have not seen yet the first piece of evidence of any differential pricing scheme being associated with any political speech of any kind.
5365 There’s just no instance in which that’s been occurred or credibly alleged to have occurred and I think if that did occur that would be an instance of public policy concern, but so far it hasn’t existed. So empirically I think you have to take that into account.
5366 Secondly, let me be very careful to say I’m not an attorney. I actually teach at a law school and teach regulated industries, but I don’t have a view on common carriage and the laws that apply to ISPs in Canada obviously.
5367 But if you look at analogous instances of quote, unquote, gatekeepers, so forms with you know very significant capacity to influence the kinds of content that people see, you know a good example is Amazon.
5368 Now I understand Amazon does not in the united -– does not in Canada offer Prime Video, but in the United States Amazon offers Prime Video and some videos are free and some videos are -– you pay money for.
5369 Amazon does offer sales on books. Indeed there when I sign up for my kindle there are a number of books that I get for free on Amazon. They are zero-rated.
5370 And Amazon I would assert has as much market power over its customers. Once you’ve paid that $70 and you’re hooked into Prime you’re an Amazon customer for the year.
5371 So you know at that point Amazon, you know, clearly has the capacity in the same sense that seems to sow concern, opponents of differential pricing to influence on the margin what people may want to see and yet it’s not a concern.
5372 So if ISPs are just different because legally they’re in a different category, there’s nothing we can do about that, I understand that.
5373 But from a kind of stepping up a step to what is the public policy concern, it’s very difficult to understand why ISPs would be a concern and Amazon wouldn’t be a concern.
5374 COMMISSIONNER MacDONALD: Well and notwithstanding, you know, regulation that’s in place, but to go back to your analogy about political statements, that’s something that we’ve talked about.
5375 The Chairman and Vice-Chair have asked that question of others and I could never hope to match their eloquence but surely you would think that concern is justified if an ISP were serving as a gatekeeper enabling -- and enabling one political party or one political viewpoint from making that -- that could have very right-wing or very left-wing views making that content more accessible and thereby discouraging individuals looking at other content.
5376 MR. EISENACH: Absolutely. I think that would be a concern. And my only point is, I am not aware of any instance anywhere in the world where that’s been -- where that’s occurred or even been credibly alleged. And honestly, I think -- I mean, my interpretation of that as an economist is that, you know, that’s a good way to make half your customers mad.
5377 And so if you’re a profit making firm, you know, getting engaged in that sort of thing would probably not be profit maximizing.
5378 MR. SCHMIDT: I would add that we are in a tender place. We are dealing with infrastructures, with expressive content, but over the air radio has it too, free newspapers are charged, newspapers have it too, but we are in a tender place.
5379 And the only comment I would add was it’s just not clear that a price alone will actually, you know, block, influence the content purpose or meaning of it.
5380 So can network practices of some type engage freedom of expression issues? Absolutely. Can the price alone? That seems more doubtful.
5381 COMMISSIONER MacDONALD: And that’s one of the areas where I struggle because if DPPs were just on premium plans, as an example, perhaps those individuals are less price sensitive and are willing to go and search out that other zero-rated content or sponsored content. But to the extent that one of the “benefits” of differential pricing is that it makes services more affordable for low income Canadians, for the most vulnerable, I would think that that zero rating has a very strong correlation to what activities they may be undertaking online. And perhaps you can speak from your area of expertise.
5382 MR. EISENACH: Well, I guess I would just say when I look at the very kind of uncompromising or absolutist position that’s taken by opponents of zero rating, it’s -- it is very difficult I think to understand how Videotron’s choice to zero rate Spotify but not Apple Music is impinging on anyone’s political expressions.
5383 So I think when you look at the reality of zero rating, what you see is decisions which are essentially and fundamentally commercial decisions. You wouldn’t worry about 20 years ago Tower Music having sales for, you know, having a sale on one artist’s music and not on another artist’s music. It just wouldn’t come up as a free speech issue. And I don’t think in a world where all of these services have essentially complete playlists, 30 -- 40 plus million now individual songs on Spotify and Apple and on the big services. You’re simply not impinging on people’s choice. That’s the first point.
5384 The second point that I don’t want to get lost, zero rating is not ubiquitous anywhere. Non-zero-rated plans are available everywhere. And low volume, inexpensive non-zero-rated plans are available everywhere. So no one -- if it were the case that zero rating were being adopted, as was intimated this morning I think by one of the speakers, that the -- I think it was said, you know, the carriers get together and partner and make decisions together and so forth. My understanding is that would be a violation of the competition laws. I don’t think that is what happens. And, in fact, again, the evidence is that zero rating is present most places but only by one or two carriers in the market.
5385 MR. SCHMIDT: I’d add and we fully acknowledge your concerns. You’re in a tender place. You’re engaging all sorts of values, whether they’re economic values, they’re engineering issues. There are charter values, free speech issues, et cetera. The FCC in looking at this in their 2015 open internet order specifically about sponsored data and zero rating acknowledge both the possible benefits and some of the significant potential perils. And said, in weighing the balance we’re going to permit this but we’re going to watch it under roughly the equivalent of our 27(1) and 27(2) standard. So we’ll permit it but sort of watchfully.
5386 And so we’re not minimizing that there may be, you know, a host of countervailing concerns, but there’s benefits too. And then in the balance the FCC said let’s permit it and watch, effectively.
5387 MR. EISENACH: So the BEREC statement also bears on this. And BEREC in the statement that came out very recently said:
5388 “When assessing whether an ISP limits the exercise of rights of end-users, [regulatory authorities] should consider to what extent end-users’ choice is restricted by the [...] commercial and technical conditions or [...] commercial practices of the ISP. It is not the case that every factor affecting end-users’ choices should [necessarily] be considered to limit the exercise of end-users’ rights...”
5389 And I think that’s a -- and I think BEREC’s position was correctly interpreted as being sceptical of zero rating. But even in that instance they did not suggest that it ought to be banned in all circumstances, and certainly not on the grounds of freedom of expression issues.
5390 COMMISSIONER MacDONALD: So moving on from that argument but still on the topic of harm, in paragraph 11 of your second intervention September you said:
5391 “Harm to competitors is only a relative concern where it arises because of harm to competition. Protecting competitors at the expense of consumers is not a legitimate goal.” (As read)
5392 When you’re talking about competition, are you just referring to competition between ISPs?
5393 MR. SCHMIDT: I’m going to let the economist answer that.
5394 MR. EISENACH: No, I think the evidence is that zero rating fosters competition throughout the internet ecosystem. So it gives application and content providers a new and different way to market themselves to consumers. Just as it gives consumers a choice, it’s giving competitors in the content and application space a choice as well.
5395 COMMISSIONER MacDONALD: So, speaking of the application providers or the content owners, would you say that they are impacted either positively or negatively by an ISP’s decision to zero rate that offering?
5396 MR. EISENACH: Well, I think they’re two -- so I think here’s where you start to have to peel back the layers of complexity and I don’t want to take up too much time, but I would just say it depends a little bit on the nature of the program.
5397 So in a sponsored data program, you have the opportunity for the ISP and the content provider to be sharing in whatever the effects of the content of the conduct are.
5398 So in that circumstance, you could certainly imagine a dominant content or application provider going to an ISP and saying, let’s do a deal, you know. You’ve got a big market share here in Canada. I want to make sure that competitors aren’t successful in entering this market. I’d like to pay you a lot of money in order to exclude competitors from the market. Why don’t we do a deal and I’m going to make some monopoly profits by keeping people out and you’re going to -- and I’m going to share some of that money with you and we’ll both be better off and we’ll make sure we stifle competition.
5399 That -- I think that’s a legit concern. I haven’t seen that happen anyplace, but is it possible that that could happen? I think things like that have happened in the internet ecosystem in the past. I think the poster child case is Microsoft doing things like that.
5400 So it’s certainly possible you could imagine something like that happening. It just hasn’t so far actually seemed to happen.
5401 I think the more common case is that a -- is that an ISP says we’ll zero rate anybody who shows up and meets these, you know, what are portrayed by some of the opponent’s very draconian -- the standards. In fact, there are standards to make sure that the system works; that technically it works. Anybody who shows up and wants to be part of our zero-rating program, we’re happy to have you. And that’s an opportunity for application and content providers to get attention.
5402 And I don’t want to suggest that sponsored data example is always a bad one. When you look at sponsored data, the companies that testify before the FCC on sponsored data plans were new entrants who said we would -- we need to have the ability to market ourselves in this way.
5403 So it’s why I think you really have to look at these things on a case-by-case or instance-by-instance basis.
5404 COMMISSIONER MacDONALD: But generally you would be of the view that an app provider or a content owner would benefit from having their service zero rated by an ISP? It would be a good thing versus a bad thing for that company?
5405 MR. EISENBACH: Absolutely.
5406 MR. SCHMIDT: And we’ll enunciate one exception to that proposition. So that go -- in the telecom space we agree. In the broadcasting -- highly regulated Canadian broadcasting system we have a different perspective on affiliated content.
5407 MS. MAINVILLE: Right. I mean we’ve indicated that one of the clear concerns that we have, and we believe that you should take measures against, is where there’s vertical integration. In that instance there is a clear example where that the programming service benefits from being zero-rated by its parent company, or its affiliated distribution undertaking, whether it’s an ISP, a wireless service provider, or the BDU. And for that reason, yes, there is that opportunity to foreclose a competition in the programming services market.
5408 So we are concerned about that, and that’s one example that is, you know, Dr. Eisenach was somewhat referring to, that it’s possible and it is happening in the Canadian marketplace.
5409 COMMISSIONER MacDONALD: So the VI example is a good one and we’re going to get there. Just one last question with respect to how these arrangements would actually be set up with content providers and application providers. Xplornet, when they were here suggested that that would be easy to do. That Xplornet could just make a decision to zero-rate Crave TV was the example they used, and they wouldn’t even need to talk to Bell about it. I’m neither a lawyer nor an engineer, so I don’t know whether that’s possible legally or technically. So perhaps you can comment on that?
5410 MS. MAINVILLE-NEESON: Well, Crave TV is a service that’s offered direct to consumer. So while certainly Telus would -- buys programming rights for mobile and broadband platforms, when we offer Crave on our Optik TV platform, for example, even if it’s the Optik on the go, in that instance we’d need to have a negotiation with Bell Media, the owner of Crave TV.
5411 However, the decision to zero-rate, should it be made -- and there’s perhaps less incentive to do so because it would be extremely popular and perhaps not quite the business model that Nazim would be approving -- but it’s something that ultimately we wouldn’t need the permission from Bell media. It’s not a rights issue, it’s simply our decision to forgo the revenues on the data side and instead zero-rate as a packaging option for our customers; something that they would choose as opposed to choosing one of those other buckets of unspecified data.
5412 COMMISSIONER MacDONALD: So if we did go down the route of zero-rating and sponsored data, a lot of intervenors have suggested that it should be opened up to an entire class, entire class of content. And I’m just wondering if you can speak briefly to what that class of content, or various classes of content, should look like and how do we ensure that that class is -- takes into account or encompasses as much of the content or as many of the applications that are out there as possible?
5413 DR. EISENACH: Now, I want to ask you to -- I understand that seems very appealing on the face of it and kind of in the framework as it’s been presented to you. Let me ask you to consider this example.
5414 The dominant provider of cloud storage services in much of the world is Dropbox. We’ve all heard of that. In Slovenia, Dropbox has had a ninety-some -- very high market share. The local ISP in Slovenia decided that it wanted to help sponsor entry of a competitor to Dropbox, creating choice; right? And a sponsored entry is a concept in competition law that often in -- in platform markets one type of firm will have an incentive of -- to create greater competition in a neighbouring market, or another part of the space.
5415 So in this case you have an ISP that is helping a new entrant come in and disrupt an incumbent monopolist by zero-rating that new entrant. So is it good public policy, I’d ask you, to say to that ISP, “If you’re going to do something for this new entrant, you’ve got to do the same thing for the incumbent.” Thereby, making it impossible for the ISP to help create more competition in the market for cloud services. So you can take that example and extend it anywhere. I don’t think it’s good public policy.
5416 COMMISSIONER MacDONALD: But doesn’t that example also serve as an example of an ISP performing a gate-keeping function? They are choosing that alternative to Dropbox to introduce and to zero-rate for their customers. So they are making a choice. They are ---
5417 DR. EISENACH: Just as ISPs made a choice, for example, to help Apple introduce the iPhone in 2007, to the great benefit of all of us, or as Verizon and other carriers went out and worked with Google in order to help Google introduce the Android operating system as a competitor to what had -- was then becoming the dominant player in Apple.
5418 So, you know, I don’t think -- I think if that carrier said -- remember we’re talking about pricing here and not blocking; right? I think if the carrier said, “We’re going to degrade the performance of Dropbox.” That would be a net neutrality issue. I think if the carrier said, “We’re going to block your access to Dropbox.” That would be a net neutrality issue.
5419 If the carrier said, “We’re going to have a sale on a new competitor to Dropbox.” The only market that’s being affected there is a market which is dominated by a monopolist incumbent. Why would we not be for having more competition in that market?
5420 COMMISSIONER MacDONALD: So -- okay. That’s an example of trying to bring more competition to the market. Along that same thought, what if that -- to use your same Dropbox example, that competitor to Dropbox made an application to an ISP and wanted their data to be sponsored, or wanted to be zero-rated. Should the ISP have the ability to say no and deny them the ability to be zero-rated through that ISP?
5421 DR. EISENACH: Sure. And you know, one thing I think that I note, particularly in Professor van Schewick’s statement, is that she says repeatedly that ISPs are doing this zero-rating in such a way as to identify popular applications and make them more available to their customers. And I keep asking myself is, would she prefer that they adopt the unpopular ones that their customers wouldn’t like?
5422 The point being that ISPs -- the whole framework that opponents to zero-rating put forward is one in which ISPs are seeking to better serve their customers by offering them a more attractive package of services. So if the ISP believes that its customer -- more customers would choose it because it offered a package that had a free alternative, or zero-rated alternative to Dropbox, it’s doing that because some customers would value that service. It’s the essence of creating value. It’s the essence of innovation.
5423 COMMISSIONER MacDONALD: And I don’t deny that some consumers would see great benefit in that. I mean we all like -- we all like free stuff. But then how does that relate to the goal of that alternative to Dropbox that may be -- you know it may -- well, it may be a different application, it may be an edge provider. How do they get -- how do they get into the system? How do they get in front of the eyeballs of consumers?
5424 DR. EISENACH: Well ---
5425 COMMISSIONER MacDONALD: If they’re being denied entry?
5426 DR. EISENACH: So you know, I cite some examples in my second report, I think. So every start up, every entity, new business, has the challenge of getting itself in front of consumers. If you are trying to present yourself on YouTube or trying to get more traffic driven to your website, there are places you can go to hire consultants. There are techniquies you can do to increase your visibility in Google search ratings. People expend resources in order to get their customers in front of consumers, and particularly in network industries where tipping is so prevalent.
5427 People invest a lot of resources in doing that, you know, the online music services all claim to be losing money today and none of them has shown actually -- Pandora showed a quarter of gap traditionally accounted for profits. But the reason that they’re not showing a profit is that they’re all subsidizing at option; right? They’re all -- they all are pricing because they’re trying to attract more consumers to their systems in order to capture economies of scale, and scope, and network effects.
5428 So this phenomenon of trying to get yourself in front of customers, trying to achieve critical mass, is pervasive throughout the internet ecosystem and it’s part of the business. It’s part of business acumen.
5429 COMMISSIONER MacDONALD: I get that it’s part of the business and on day one of starting Facebook, or day one of starting Netflix, they had a very steep hill to climb. But they were not -- at that time they didn’t have the benefit of having their logo on every ISP’s website in the country or the ability to zero-rate. So doesn’t it make that hill even steeper to climb?
5430 DR. EISENACH: Well, so here’s where I think you have to look at purpose and affect; right? If Facebook is another good example of a very dominant firm, it has a very large market share. And I've written on this topic for Facebook, I’ve submitted an intervention before TRAI on the subject for Facebook. If Facebook were engaging in the kind of conduct I described a couple of minutes ago where it was going to ISPs and saying, “We’ll pay you money and you make us exclusive, don’t allow other social networks to operate”, that would be a subject worthy of -- worthy of examination.
5431 But again, that kind of conduct we don’t see in this space. We don’t see -- and it’s -- it’s so important to understand that the firms that are -- particularly the ones doing sponsored data are almost in every case startups. The firms that are engaging in zero rating on the ISP side, are in almost every case the second or third or fourth carrier in the market and the mavericks, the new entrants.
5432 COMMISSIONER MacDONALD: You had stated at paragraph 18 of your September submission:
5433 “Consumers decide for themselves what applications are popular and what applications they want to pay less for.”
5434 Bell however, stated that the purpose of zero rating and sponsored data is to stimulate consumption and introduce consumers to content that they might otherwise not discover.
5435 DR. EISENACH: Yeah, I don’t think those are ---
5436 COMMISSIONER MacDONALD: The two don’t seem to go hand in hand.
5437 DR. EISENACH: Yeah, I don’t think those were inconsistent. So, if I go to the grocery store and there's a sale on Heinz soup but not on Campbell soup and I choose Heinz soup because it's on sale; does that mean I didn’t exercise a choice? Of course all firms lower prices with the intention of winning customers, and that’s because customers like lower prices. So to say, you know, “They chose it because it was cheaper and therefore that’s somehow bad”, is not an economic concept anyway.
5438 COMMISSIONER MacDONALD: Do you believe that ISPs are common carriers?
5439 DR. EISENACH: Are you asking me?
5440 COMMISSIONER MacDONALD: Yeah.
5441 MR. SCHMIDT: To the degree -- again, I touched on this a little bit earlier.
5442 COMMISSIONER MacDONALD: M'hm.
5443 MR. SCHMIDT: I mean to the degree that folks here have been suggesting that U.S. common law legal tradition about common carriage and telecommunications’ carriers is imported here; no, Canada has a different common law tradition. But in any event, it's almost, you know, I respectfully submit not a relevant conversation.
5444 All the powers and principles you need to dispose of this case are there in your Act, whatever we want to call them, common carriage, public utility law, a banana. And so, you know, you have a plentitude of powers to deal with all the issues that you might be worried about here.
5445 COMMISSIONER MacDONALD: So -- okay, I’ll ask it a different way. Let’s assume we believe ISPs are common carriers, do you think it’s appropriate for those common carriers to have influence on choice and content?
5446 MR. SCHMIDT: Accepting your premise -- because I have to accept your premise in the question -- I mean 36 in the Act speaks to this, and to the degree that they are actually “influencing” content ---
5447 Within the meaning of that section, they're violating the Act.
5448 Our submission is that price alone isn't doing that.
5449 COMMISSIONER MacDONALD: Okay. So, is it appropriate for a common carrier to be pricing not based on the quality of the telecommunication service that they're providing, but to price their service based on the content that a consumer is consuming?
5450 MR. SCHMIDT: In a forborne market where the Commission has, you know, surrendered its control over pricing, it’s likely okay to price on any number of bases, providing they don’t somehow, you know, offend the Charter or legal or whatever. But you have a broad basis and a broad range of factors that will set your prices.
5451 COMMISSIONER MacDONALD: In Sandvine’s intervention they mentioned the concept of an opt-in and opt-out for all customers if we were to allow zero rating and sponsored data. Do you think it would be appropriate to insist that each consumer is allowed an opt-in or opt-out?
5452 MR. SCHMIDT: I’m not sure if we’ve expressed a view on that today. At the minimum there should be a fundamental transparency. They should know what they're getting into, and that is typically well provided for because this is rating and it’s in plans and it’s on invoices, so at the minimum they should be aware of it. And I'm not sure if we, you know, have a view beyond that at this point.
5453 COMMISSIONER MacDONALD: With respect to the VI issue, because you spent a lot of time on your interventions discussing that, can you flush that out to me? Are you telling me that an ISP -- a VI should never be allowed to zero rate their own content or just that if they choose to zero rate their own content, they would have to make -- they would have to structure agreements with -- or allow the other service providers to also zero rate that content? So if Bell were to zero rate Crave, would they also have to allow you to zero rate Crave or Rogers or whoever?
5454 MS. MAINVILLE-NEESON: So, as we discussed earlier, Commissioner MacDonald, there is no requirement to have an agreement with Bell Media in order for Telus to zero rate Crave. The decision to zero rate anything on our networks is Telus’s. And so, to the extent that we choose not to or we choose to match, that would be a decision of Telus.
5455 The concern that we have is if -- when Bell chooses to zero rate its own affiliated service, like CraveTV, it’s giving its affiliated service, Crave TV, that programming service, a preference that will have an impact on the competitiveness of the market for other programming services. Those other services -- we heard from IBG yesterday for example -- that also want to survive in the online world and might find that very difficult to do if there is a preference to a service like Crave.
5456 How that impacts Telus then, is we’re in the business of being able to offer as much contents to our customers as possible, the most choice, and so to the extent that the decision to do that pocket-to-pocket transaction from Bell to Bell Media to not use real dollars ultimately, whereas the decision by Telus to match would actually be using real dollars, out of pocket money for us to advantage CraveTV in that way, the danger then is that we’re affecting that competitiveness of other programming services and we’re then disadvantaged where CraveTV becomes extremely dominant. And where we do buy rights for Crave, for example if we decide to put it on our video on demand service, there the popularity of the service will ultimately raise the wholesale fees that we would have to pay for the service where we do purchase rights.
5457 COMMISSIONER MacDONALD: But that’s largely a business decision on the part of Telus if they choose to zero rate or not. So why should -- why should Telus making a business decision not to zero rate Crave mean that Bell can't do it?
5458 MS. MAINVILLE-NEESON: Because for Bell it becomes that pocket-to-pocket transaction where they have an unnatural incentive, they're not tempered by the same discussions that we had here with my colleague Nazim on the impact that it would have on our business to zero rate. They're willing to forego some money on their distribution business in order to advantage their programming business. The same economics would not exist for any other provider.
5459 And it’s for these reasons that the Commission has made numerous other rules under the broadcasting -- in the broadcasting industry, because of these unnatural incentives, right. The idea that they can increase the price of their wholesale rate and make it -- or even provide themselves exclusives to disadvantage other distributors, these are all realities that when you have a vertically integrated firm, there are unnatural incentives that exist in between the distribution side, the network access side and the programming side.
5460 And with those unnatural incentives, you have the ability to foreclose the market for your competitors and you have every incentive to do so. And that’s the danger that we suggest the Commission needs to prevent in order to maintain that diversity of voices throughout a new ecosystem of programming on the internet.
5461 COMMISSIONER MacDONALD: Then should we only allow small ISPs to zero rate and engage in sponsored data and eliminate the -- I won't use the term “VIs”, I’ll use the larger service providers of which Telus would be one?
5462 MS. MAINVILLE-NEESON: No, we would disagree with that, because the issue is not between large and small providers. The issue is where there is an unnatural incentive, and that only exists where there is that joint ownership and control where you have that pocket-to-pocket transaction. And none – that doesn't exist between Telus and any other programming service. So whether we're big or small is actually the -- completely irrelevant consideration. It's the -- that incentive of joint ownership.
5463 And it's for those reasons, as well, for example, where the Commission has made a rule specific to vertically integrated firms that they must carry independent services in their packages, they must distribute more independent service to match a certain carriage ratio for their own affiliated services and their -- and other independent services. That rule doesn't apply to Telus, even though we are a large distributor, right, because there is no incentive for us not to carry various services. That incentive only exists for vertically integrated firms.
5464 COMMISSIONER MacDONALD: Other than the VI issue, do you see any potential DPP practices that would, or can you envision any that would violate the Telecommunications Act?
5465 MS. MAINVILLE-NEESON: No, I think it really is an issue of providing choice, and Telus has, you know, been at the forefront of choice in programming services offered. That's one of the reasons that, you know, in stock TV we indicated we had one of the, you know, smallest, basic packages, and theme packs, and dollar cart services.
5466 We want to provide choice to our customers and that extends to various marketing practices. How can we offer and meet the needs of my customers -- and my colleague, Mehrzad, can speak to that as well, as can Mark -- on the -- you know, we offer a variety of different packages that, you know, where should we choose, and whether it's for promotion or just to meet the needs.
5467 So if it was, you know, taking the very real example of Videotron's streaming music, clearly, it's a success in the market. They seem to indicate that they're doing very well with that service. They're meeting the needs of their customers. Should we find that we too have that segment of customers that we would like to serve better and that that would better serve their needs, I don't see that as offending the Telecommunications Act.
5468 The issues don't arise of any undue preferential or disadvantage, any harm to competition simply because some services are priced differently, when any other provider could, you know, if they can't negotiate a programming service, can't negotiate with a vertically integrated firm, for example. They could come to us and come to a mutually beneficial arrangement.
5469 This happens all the time. When you look at what we choose to offer in, you know, in larger packages of television services, for example. What we chose to offer in our essentials, which was always very -- a very small package.
5470 But we did include a few new programming services that we were the first to launch, and we decided we're going to put them in essentials because there is a benefit to consumers in getting this new service, testing it out against other competitive services. And in return, they had that benefit of getting before -- in front of more eyeballs and getting known as a service. So when there's that quid pro quo, I can't imagine why that wouldn't also happen in the ISP platform.
5471 COMMISSIONER MacDONALD: Okay, thank you.
5472 I promise you we are circling the runway on this.
5473 Rogers' proposal, in their intervention, is somewhat out of step with the other larger providers. Would you care to comment on your thoughts about the two criteria that they put forward?
5474 MS. MAINVILLE-NEESON: I'm not sure -- to start, I might ask my colleagues to comment on the criteria. But the one thing that I did want to note with respect to Rogers' presentation, and it kind of is top of mind for me, was their distinguishing between zero-rating being, you know, a very big concern and yet offering free subscriptions to their affiliated, or non‑affiliated programming services not being.
5475 So when they give away Game Centre Live, which is one of their own properties, that also has issues on the value of their other programming services being the same content as offered as Sportsnet, for example which is, of course, something we'll discuss in the -- another hearing at the end of the month. But that's definitely one of the issues that we have.
5476 Did you want to address them first?
5477 MR. SCHMIDT: So just refreshing my memory of their two criterion here.
5478 I guess my reaction to this is it's, you know, uniformity of charges, for example. It's requiring equality of treatment that has never been required at common law and isn't required under your act, which expressly contemplates differences in treatment. So it's -- in a propriate remedy to a 27.2 issue, to my mind, it's asking you to do something else not supported by 27.2, you know, requiring absolutely cast iron line of uniform or equal treatment.
5479 So I find it a bit startling. It doesn't look like the kind of competitive markets that you see every day in telecommunications. And kind of counterintuitively, in the most fast-moving, dynamic, competitive space you have, the Internet, they're asking you to put in place something that looks a lot like tariffing from 50 or 100 years ago, just absolute uniformity. So I find it counterintuitive.
5480 MS. MAINVILLE-NEESON: And I find it's a lost opportunity, right, when you completely outlaw a practice, which can be beneficial to some consumers. Some consumers love, you know, unlimited music. We're seeing it, you know, the proof is in the pudding if, in fact, it's attracting subscribers to Videotron service.
5481 So some subscribers are definitely enjoying it, and at some point, other -- many other ISPs may choose to do things with different services as well. Why would we preclude the flexibility to offer such services in the market where there -- that some consumers want, where there is no proof otherwise that there is harm to the market?
5482 We know there's harm where there is vertical integration, but when there is -- in other instances there may not be. Of course, we've had -- you know, Stephen will talk of the case-by-case, there -- nothing precludes the Commission from investigating any specific situation, but ---
5483 MR. SCHMIDT: Dr. Eisenach wants to addition a point, I think.
5484 DR. EISENACH: Just very briefly. The -- you know, the concept in -- and I trust, enforcement, I think regulatory policy in general is Type 1 versus Type 2 error. And so Type 1 error involves failing to identify harmful conduct and stop it. Type 2 error involves banning beneficial conduct, right. So the question is sort of the breadth of the rules.
5485 What we see here is a market in which all of the conduct that we can observe is beneficial. It's not to say that there may not be the potential for harmful conduct, but all of the conduct that we observe is companies offering consumers a choice of a product with a lower price, or a different flavour that they like in attracting more consumers into the market. So that's the argument in favour of the antithesis of what Rogers proposes, right.
5486 So what Rogers proposes is a rule that says everything is banned unless you come and ask for permission. The alternative is a rule that says everything permitted is permitted unless it looks like it might be harmful. And in this case, I just don't think it's a close call which of those two approaches makes the most sense from an economic perspective, at least.
5487 COMMISSIONER MacDONALD: Just one final question and I'll hand you back over to my colleagues.
5488 You use the term, you say that DPPs serve to grow the Internet ecosystem, increase use, and enhance customer welfare. And I'm just wondering if you can define for me what you mean by grow the Internet ecosystem. Do you mean bringing on more subscribers that are not -– sorry, getting people to use the Internet who are not using it today? Do you mean promoting people moving between ISPs, or do you mean that this actually fosters the creation of more apps and more content?
5489 DR. EISENACH: All of the above. So in the Internet, all of these different modules. I think of an Internet service is one that's comprised of content, communications, devices, and applications. Those four things come together. A device to access it through, applications that make it work an operating system, the content that you're looking for at the end day, and the communications that allow you to get to that content. You put those four things together.
5490 All four of those markets are heavily affected by both network effects and economies of scale. Every customer who joins the system adds value, not only by allowing you to defray the costs -- the high-fixed costs of all of those things across more customers, but also because there is more value in having more people in the system. Facebook is far more valuable by virtue of the fact every time someone joins Facebook; Facebook becomes more valuable to everybody else on Facebook.
5491 So that phenomenon is pervasive throughout the ecosystem. So when just looking at the ISP aspect of it, I think someone said, well, you know, we're already saturated in Canada. About 75 percent, I think, of Canadians have Smartphones. That means 25 percent don't. About 80 percent, I think, of Canadians are regular internet users. About 20 percent aren’t. So there’s still room to go just on the subscriber front.
5492 But, beyond that, when we bring somebody new into the Eka System and add a listener to Spotify, Spotify becomes cheaper for everybody because Spotify is now reaching more consumers and selling more advertising. So -- and that then becomes beneficial for everybody all the way on up through the Eka System, including the songwriters and artists who live off of Spotify royalties. So the entire Eka System is benefited by that growth. And the only reason companies are doing it is because they believe it attracts consumers.
5493 COMMISSIONER MacDONALD: Perhaps a competitor to Spotify wouldn’t be -- their situation wouldn’t be improved by that.
5494 But those are my questions and I’ll hand you back over to the Chairman.
5495 THE CHAIRPERSON: Vice-Chair Menzies, please?
5496 COMMISSIONER MENZIES: Thank you.
5497 I want to talk about something a little different just for a little context. Everything you’ve talked about -- a little bit of my impression -- you can dispossess me of this notion -- for the last two hours has reminded me of being in a BDU licence renewal hearing. Everything -- the discussion from your end seems to have implied that you have a -- you’re entitled to a commercial interest in the content that’s carried on the internet and how to monetize that in different ways and that sort of stuff.
5498 So I’m going to ask -- before I do, I’m going to ask you about net neutrality, because I haven’t even heard the word spoken and I think this is a large part of what this hearing is about. And so I’m going to ask you your definition of it, but to frame that, I’m going to read you a couple quotes.
5499 Now, so the World Wide Web was invented about 27 years ago. It was not patented. There are no royalties charged. It was intended to be a place where people could get connectivity with no strings attached. Not some strings where competition meets competition law strings. No strings attached. No patent. No royalties.
5500 So I’ll give you three quotes. One from this summer from -- they’re all from Sir Tim Berners-Lee who invented it on that basis and on those principles, right. So this is a discussion about those principles and whether you believe they’re still relevant. Some do.
5501 So this is about the European discussion this summer:
5502 “The internet has become the critical infrastructure of our time for our daily life, for our economy, for our democracy. Strong guidelines will be needed to protect the future of competition, innovation and creative expression. They will ensure that every European, no matter the colour of their skin or the size of their wallets, has an equal chance to innovate, compete, speak, organize and connect online.”
5503 And there’s another one that goes back to -- that I’ll read, the second quote:
5504 “When I designed the World Wide Web I built it as an open platform to foster collaboration and innovation. The Web evolved into a powerful and ubiquitous platform because I was able to build it on an open network that treated all packets of information equally. The principle of net neutrality has kept the internet a free and open space since its inception.”
5505 And the final one in this -- what’s turning into be a bit of a sermon, I agree, but this is from about a year ago speaking in Britain to public policy makers. He told the meeting that, quote:
5506 “Every customer should be able to access every service and every service should be able to access every customer. The Web has grown so fast precisely because we have had two independent markets, one for connectivity and the other for content and applications.”
5507 So what is your view of net neutrality and that view that there should be two independent markets that should not be crossing with each other, one for connectivity, which is what you have, and the other for content and applications, some of which you have in a different role?
5508 MR. SCHMIDT: I’ll start the answer, and Dr. Eisenach may or may not wish to add, and my colleague Ann may or may not wish to add.
5509 There’s a spectrum of definitions of net neutrality out there from the loose to the very strident and prohibitive. And if we kind of look to what the FCC has done as the kind of primary global locusts of this policy conversation and the kind of city on the hill that we watch for a variety of reasons from a communications policy perspective, they’ve said, you know, what’s net neutrality, no blocking of content, no throttling of content, no paid prioritization and you can access the legal content of your choice on the device of your choice.
5510 I think we’re all there in this proceeding. The type of pricing we’re talking about doesn’t seem to engage those issues. The FCC has said it doesn’t offend net neutrality. They’ve taken a kind of a careful -- a watchful posture, while permitted, and will watch.
5511 So from that perspective, looking at it through the lens of their definition, I don’t think we have a net neutrality issue. I’m not minimizing the concern.
5512 COMMISSIONER MENZIES: I’m actually trying to get at what you believe net neutrality is. I know what the FCC thinks. I’m just curious to know what you think.
5513 MR. SCHMIDT: I think that comports roughly with our sense of what it stands for.
5514 As to your specific question of the -- of content and carriage being in separate houses, I mean, it’s not. You know, factually we have a very integrated media and communications companies now, whether it’s in the broadcasting space or otherwise, and that’s just kind of the world we find ourselves in of significant integration.
5515 MS. MAINVILLE-NEESON: Perhaps I might just add to Stephen’s comments that while ultimately we -- ISP’s are in the carriage business but we’re also competitors with many other ISP’s who are also in the carriage business and looking for ways to differentiate ourselves through our customers.
5516 So it’s in that way that in looking to offer certain services, which we know -- you know, we just know our value to customers, that type of differential pricing is not blocking the content, it’s not preventing content. So it’s very unlike the BDU situation where we’re choosing, and if we choose not to carry a specific service our customers cannot access it. That’s not the case at all with an ISP, right, and so -- and differential pricing practices do not affect that at all.
5517 COMMISSIONER MENZIES: But isn’t that part of the concern, though, that you will move -- you will try to differentiate yourself in terms of content, where you’ll take a world of abundance and you’ll turn it into a world of scarcity, and the scarcity will include the most popular things and not everybody will therefore have the same access. I mean, it can turn legally.
5518 But the broader concern from an industrial framework is that you will begin using content to differentiate yourself when for years Canada has built a really excellent communication system, by all accounts, because you’ve been -- because the area in which you’ve had to compete on is quality of network, right, to a certain extent price, and access -- I mean, data volumes have gone up. The fact that Canadians consume as much as they do is unknown perhaps, but it would seem fair to say it has to do with in some part to their nature and the other part they consume that much because they can because there’s that much capacity.
5519 So, as a regulator, shouldn’t we be concerned that you would take your focus off competing in terms of quality of network and just push it onto creating this different scenario which challenges traditional concepts of net neutrality?
5520 DR. EISENACH: Two points I guess. One is, I think it’s important to just recognize even at this proceeding that the question of what net neutrality means has divided the pro net neutrality community.
5521 So the Centre for Democracy and Technology, for example, I think submitted an intervention here in which they were supportive of some aspects of zero rating even though they’ve been very pro net neutrality. And, in general, Facebook is probably the most significant supporter in the corporate world of net neutrality and the leading proponent of zero rating.
5522 So I don’t think that there is a single accepted definition even within proponents of net neutrality of what it means.
5523 The second point is, you know, I think competition among carriers has always been a little bit more -- a little richer than you suggest. Carriers, for example, have always competed on having the best handsets. They’ve competed on bundling various kinds of content on having applications of various kinds.
5524 There was a long time where people thought that the world was going to be a walled garden world in which you got all of your applications over your cell phone for your map applications and so forth, carriers were competing in content and applications even at that point. So the effort among carriers to differentiate themselves is not new.
5525 And thirdly, and maybe most importantly, I would urge you to look at this from a public policy or consumer welfare perspective as opposed to one of absolutist principles. I agree that there is a potential for harmful discrimination in this context, as there is throughout the internet ecosystem. But when you look at the conduct which is actually occurring, to give consumers who like to listen to lots of music an opportunity to do so more cheaply can’t offend a principle that I can think of in any meaningful way if there is some philosophical basis for why that is wrong, I’m just not aware of what it is.
5526 COMMISSIONER MENZIES: Okay. I would just say that that -- that the quotes I made said this should be this and this should be that and they shall not cross, so that’s the way it goes.
5527 And yes, I understand the argument about that you should just let markets go, but there’s always a limit to that. Markets work great until somebody starts printing money; right? And then you have to have some rules.
5528 MR. EISENACH: Commissioner, I’m -- just to be very clear, I’m not in any way opposed to rules in this space. And I agree the potential for harmful conduct is there. The question is do you start with a band that says none of this conduct, even the conduct which is manifestly beneficial.
5529 COMMISSIONER MENZIES: Okay. I won’t drag it out. I was just going back that this is how it started and we got here successfully with those principles. And I’m -- and that’s the conundrum as to whether abandoning those principles makes the world a better place or does not. So thank you. Those are my questions.
5530 THE CHAIRPERSON: Commissioner Vennard, please.
5531 COMMISSIONER VENNARD: Okay. Interesting discussion for sure.
5532 I want to back up a little bit and talk a bit about, of course, content, because that seems to be the thing that we’re focussed on right now. And I want to take you back -- this question is going to be deliberately vague. I want to go back to the model that you set out in your report and the model of the internet as an ecosystem with all the different parts in it.
5533 And the language that we’ve been using and the thinking that we’ve been doing, including in your report, is all the language of a commercial space. And the internet is not just a commercial space. And the products there are not just commercial products. We also have our culture. We have cultural products. We have dynamics which maybe don’t follow the marketplace in the same way that a commercial product would.
5534 So my question to you is -- I guess I’ve got two questions really. First one is how do our cultural products fit into your model and do they, because your whole report is premised on basically that commercial space? And do you see our cultural products as being the same as a commercial product?
5535 MR. EISENACH: I think there’s -- and this is really personal opinion, but I do spend a lot of time thinking about these issues in terms of the broader internet. So I think there is -- there clearly are cultural issues implicated by the internet. And the extent I think, you know, we said earlier I think if it were to be the case that differential pricing were to be shown to be having a negative impact on cultural interests one way or another that that would be a legitimate concern for the government, whether for the CRTC or for some other aspect of the government I don’t know. But I think that’s certainly a legitimate public policy concern.
5536 I think countries wish to preserve and protect and promote their cultures. I think those cultures to a significant extent depend upon and live in the online space. I think the challenge of figuring out how to do that is difficult that it’s one the countries all over the world are challenged by.
5537 And but bringing all of that back at a very high level issue back to the issue at hand here, I don’t again see empirical evidence of differential pricing impinging on those issues, you know, in a meaningful way. If they did, that’d be a case to be brought. And I don’t mean necessarily an enforcement case or a formal legal case, but a public policy case to be made. I don’t think it’s been -- as far as I know, it hasn’t been made.
5538 COMMISSIONER VENNARD: Well, that’s one of the things that we’re really dealing with here is the fact that we don’t have a whole lot of evidence in any direction on anything.
5539 So let’s be a little more specific. Do you see your -- do you see cultural products fitting into your model, the one that you’re putting in your report, in the same way that you do a commercial product? And does it fit in there? And if so, are you trying to put the, you know, the square peg into the round hole or where do you see -- how does that work?
5540 Because we don’t -- you’re right. We don’t know. I’m not suggesting that we know and I’m not suggesting there should be evidence for it either. We’re, you know, we’re kind of kicking around ideas here about how to go about looking at things and viewing things.
5541 MR. EISENACH: Yeah, I -- so I think you have the commercial and then you have what I guess I referred to as public goods. And, you know, both of those are economic concepts. A private good is one where the benefits go to the parties and a public good is one where they’re externalities, you know, larger benefits to the society overall that aren’t captured in the marketplace or the price mechanism. I think economics certainly contemplates both of those.
5542 In terms of the analysis here, I think the analysis does bear on -- certainly the framework is capable of answering the question -- asking and answering the question is some harm being done to cultural interests. And -- because something is a public good or is a cultural interest doesn’t mean that you can’t ask and answer the question is that content somehow being discriminated against in a way that’s harmful. So, yes, I think you can ask and answer that question.
5543 Again, as I look at it, as I look, for example, at Videotron’s service, Videotron’s service is extremely broad with new services and little tiny services as well as big ones. Pandora’s not there because Pandora’s not in Canada. But if you look at the breadth of services which are offered on Videotron, it’s hard to say this is discriminating in some -- indeed there’re Canadian cultural services that are part of the Videotron zero-rating program. And my understanding of the Videotron’s zero-rating program is it’s open to all comers.
5544 So if cultural interests in Canada want to be part of it, my understanding is that’s a -- you know, that’s an option.
5545 COMMISSIONER VENNARD: So you don’t see them -- you see them as being pretty much the same thing, a commercial product and a cultural product?
5546 MR. EISENACH: No, I think a cultural product is -- I think as I understand the way you’re defining it, a cultural product is one which has a social benefit above and beyond the private ---
5547 COMMISSIONER VENNARD: It’s an -- I’m looking at it in terms of an expression of our culture.
5548 MR. EISENACH: Right.
5549 COMMISSIONER VENNARD: Right.
5550 MR. EISENACH: I understand that. And I -- you know, I’ve testified a little bit in broadcasting matters here and I understand and sympathize with that set of public policy objectives. What I don’t see in this case, I haven’t seen evidence that that set of public policy objectives is being harmed in any way by the differential pricing practices in the market, nor am I -- nor do I see that as I look around the world.
5551 COMMISSIONER VENNARD: So in -- within model -- I’ll just go back to your model again. So within your model, you think both a cultural product and a commercial product follow those same dynamics that you set out there?
5552 MR. EISENACH: Well ---
5553 COMMISSIONER VENNARD: Because you go on to talk about competition and so on. And in the cultural space -- the commercial space is one thing. We understand how that works and competition and so on and so forth. But in the cultural space, then sometimes there has to be an approach of promotion, for example ---
5554 MR. EISENACH: Sure.
5555 COMMISSIONER VENNARD: --- rather than competition. They have to be actively promoted. And we consider in -- within society that there are some things that are of value in and of themselves. They don’t have to have a dollar value. So how can these things compete in this commercial space that will be according to this model, as I read your model and understand it, governed and driven and motivated by commercial interests and money? How do those two things match up? How do ---
5556 MR. EISENACH: Well, so let’s think about how we might analyze that; right? So one question would be let’s assume that someone started zero rating a video and CBC went to the firm that was doing that and said, “We’d like to be among your video rated offerings.” And the firm said, “Sorry, you know, don’t have room for you. Indeed, we don’t do public broadcasting.” That would be a subject of concern I would think to Canadians and to Canada and that would be a discriminatory practice that would be worthy of being looked at. So that would be one threshold.
5557 Now, another threshold is the government might say we have policies in the broadcasting space where we actively promote cultural content -- Canadian cultural content -- and we want to extend those policies into the internet space. And that’s not a question that I can -- I can -- could help you analyze that as an economist, what might be effectrive in doing that. But I can't tell you whether that ---
5558 COMMISSIONER VENNARD: Certainly in terms ---
5559 DR. EISENACH: --- whether that’s the right thing to do or not.
5560 COMMISSIONER VENNARD: --- but certainly in terms of economic principles, would you say that -- to that I’m not expecting you to have the answer, but you are the expert in the economic realm that we’re talking about right now. How do those dynamics work, do they work the same for those two things or is there something that we should be aware of that is -- that is different?
5561 DR. EISENACH: Well, you know, I think the -- I guess one thing that I would say that I think is, you know, worthy of taking into account, I think Canadian cultural interests on balance are served by increased internet adoption and increased content use.
5562 So in general, I think having more people online, having more people having access to content -- again, if there was a -- I think the kind of network effects that kick in are network affects that cultural programs need to also exploit. So, you know, I think having, you know, having Canadian cultural content taking the opportunity to take advantage of differential pricing programs of zero rating and to benefit from those.
5563 So, as an economist, my first threshold is this, there's some discrimination against those. And if they were, I think that’s worth -- first blush would be that’s probably not a good idea. If there's not discrimination, then the next question becomes should there be something in the nature of subsidy or support or discrimination in favour of? And that’s a public policy issue for Canadians.
5564 MS. MAINVILLE-NEESON: Commissioner Vennard, if I could add ---
5565 COMMISSIONER VENNARD: Sure.
5566 MS. MAINVILLE-NEESON: --- I think Telus’ model that we presented whereby we allow differential pricing generally as a practice, actually supports cultural objectives and cultural products. For example -- and I think it’s important to, you know, look at concrete things that if you were to impose a, you know, an outright ban on differential pricing, you would miss out on opportunities to be able to promote Canadian culture.
5567 So for example, when Canada Day comes around, we usually do special menus on our video on demand service for Canadian movies. At the same time, on our set-top box for optic TV, we have many apps. And one of the applications -- and of course access to these apps is subject to data pricing -- one of those apps is the National Film Board.
5568 What if we were -- we wanted to offer a promotion whereby around Canada Day we want to offer zero rating for the National Film Board application, if you were to make this outright ban in this proceeding, these types of opportunities would be precluded and that would be very unfortunate. We know that the Minister of Canadian Heritage right now is looking at many different things to promote cultural objectives, and of course Telus is a big participant in that, because although we don’t own programming services, we do believe that there are important issues at stake with respect to our culture.
5569 And I think that you have a very important decision before you, and I'm glad you're asking this question, because ultimately there are some goals that can be achieved with -- by providing opportunities for promotion of our culture.
5570 COMMISSIONER VENNARD: Yeah, that’s true and that would go along with social goals as well, possibly access to health care, that sort of thing too, so there are -- definitely are other pieces. The main point I was making is that it needs to -- we need to think beyond the commercial space, that’s our role.
5571 Any other comments anybody wants to make on that? No. Okay, thank you.
5572 THE CHAIRPERSON: I do think Commissioner Vennard asked a very good question and I'm not sure you’ve actually seized the point. I think she’s making the point that the internet is part of a marketplace of ideas, which cannot necessarily be analyzed always to an economic lens. That’s not to say that certain cultural goods and services aren’t goods and services, but they're often time more than that. In French civil law we often refer to things that are “hors de commerce”, by their nature they cannot be traded.
5573 And as she was asking questions, I was thinking of a comment Marie Laberge, a Quebec author made at one point, she said -- and she said this in a context of Canada moving towards and ratifying as a fundamental principle in Canada the cultural diversity, the convention at UNESCO ---
5574 MS. MAINVILLE-NEESON: M'hm.
5575 THE CHAIRPERSON: --- that commerce is to the verb to have “avoir” what culture is to the verb to be “être”. There are two things at play here. And I think that’s the point the Vice-chair was making and Commissioner Vennard was saying, is that there are things at play that circulate on the internet which are not just goods and services.
5576 MS. MAINVILLE-NEESON: We absolutely agree with that.
5577 THE CHAIRPERSON: And culture and cultural expression and the thoughts of a filmmaker, a book writer or other cultural expressions sometimes have a price associated with the package within which it comes, but the ideas are free. Would you agree with that?
5578 MR. SCHMIDT: So -- I mean my lawyer’s response that the economic view is by no means exhaustive of the analyses that you can undertake or indeed are required to undertake under the Telecommunications Act. It a broader conversation for sure and a broader analysis.
5579 THE CHAIRPERSON: So, just a few final questions and you’ll be off the stand soon.
5580 Would you agree that the cost of zero rating content -- that lost revenue or that aspect of offering that -- will have to be recovered from the delivery of other services?
5581 MR. SCHMIDT: I'm going to let Doctor Eisenach briefly answer that.
5582 DR. EISENACH: No, and the reason is what zero rating ---
5583 THE CHAIRPERSON: It’s coming from the shareholders’ pockets, is it?
5584 DR. EISENACH: No, because the cost of zero rating is balanced by the benefit of having additional subscribers. We’re not -- we’re not doing this to give some -- without -- because we’re not trying to maximize revenues or profits. So what we’re doing when we’re zero rating is we’re finding somebody who wouldn’t be a customer of ours and we’re offering him a flavour that they can't find elsewhere in the market. They like pink shirt, t-shirts, everybody else is offering blue. By offering them pink, what we’re doing is we’re bringing him in and we’re charging him more than -- we’re still charging him more than it cost us to provide the service or we wouldn’t be doing it. And that additional margin, we’re taking back and spreading over all of the other customers and are able to reduce their average cost and price. So zero rating is not stealing from Peter to pay Paul, in my view.
5585 THE CHAIRPERSON: Well, we’ll weigh that perspective.
5586 Ms. Mainville-Neeson, you said earlier we -- and I'm quoting here, I think I got it right, we can check in the transcript, but I’m pretty sure I wrote it almost contemporaneously, so I’m pretty sure, “We know there is harm in vertical integration.” And I was struck by that because then you put it in juxtaposition of what Videotron was saying that customers might actually enjoy the unlimited music.
5587 One could say the same thing about vertically integrated content, that let’s say Bell might offer, they may actually enjoy it. Yet, you’ve come to the conclusion that there is harm in vertical integration. If you were consistent with your perspective, wouldn’t it require at least an analysis as to whether or not it’s undue or unreasonable before we come to that conclusion? Yet, you’ve declared, “We know that there is harm.”
5588 MS. MAINVILLE-NEESON: It’s because of the -- that pocket-to-pocket transaction, so -- which is not existent in the Videotron case, right. So it’s not everything that a vertically integrated firm might do, but rather when they zero rate their own affiliated programming services, and that’s not the case for Videotron.
5589 The harm that ensues is because their decision-making in zero rating their own affiliated programming services is not tempered by all of those other criteria that my colleague Nazim was talking about, where the impact on the network, the impact -- rather, it is something where they know that they can subsidize internally in order to impact the marketplace for other programming services, and they provide that advantage to their own programming service. And so, it’s for ---
5590 THE CHAIRPERSON: But we do not have a Part I application other than Videotron in front of us right now. So you're saying that vertically integrated content -- you're coming to that conclusion in a speculative way; are you not?
5591 MS. MAINVILLE-NEESON: Well, the -- given the decisions that have been made already on the publications.
5592 THE CHAIRPERSON: But you agree, we do not have a -- I mean that one's closed -- we do not ---
5593 MS. MAINVILLE-NEESON: Yeah.
5594 THE CHAIRPERSON: --- currently have a Part 1. So you, when you say that vertical integration, we know it has harm, you're extrapolating. You're -- it's a speculating ---
5595 MS. MAINVILLE-NEESON: I'm extrapolating from the decisions under the Broadcasting Act, for sure.
5596 THE CHAIRPERSON: Right, so why wouldn't it be appropriate for the Commission to also look at likely conduct and speculatively say that it's more likely than not that particularly -- a particular differential pricing practice would also more likely be offside than not; and therefore, having what Rogers is calling ex ante guidelines?
5597 MS. MAINVILLE-NEESON: It seems that the facts are very different when they involve vertical integration. We've seen that under the Broadcasting Act with all the numerous proceedings that happened there and the rules that have been made -- in place.
5598 THE CHAIRPERSON: Or a telecom player.
5599 MS. MAINVILLE-NEESON: Of course, understanding that.
5600 But the -- many of the same incentives and the same opportunities, which the Commission has rightly chosen to prohibit all together under the Broadcasting Act, they should do so and make that determination here under the Telecom Act because the very same incentive and opportunities are being transposed into these ---
5601 THE CHAIRPERSON: Right, so my point is if we're able to do that in this case, why can't we do it in other cases where we also might find and conclude that a particular practice is speculatively more likely to cause harm than not and provide a guideline, therefore.
5602 MS. MAINVILLE-NEESON: And I don't believe our position is that we're entirely opposed to guidelines. Rather, we're -- we do believe that, and you might consider it a guideline, that we consider that vertically integrated zero-rating of affiliated broadcasting services, that's a problem.
5603 THE CHAIRPERSON: Right, so ---
5604 MS. MAINVILLE-NEESON: Determine that first, and then others you would choose.
5605 THE CHAIRPERSON: You would agree with me that it -- to be consistent, if you're saying that there could be a speculative guideline associated with vertical integration, at least it would be intellectually consistent to say that there could be in other circumstances?
5606 MS. MAINVILLE-NEESON: There absolutely could be, and we've mentioned case-by-case -- the Commission may have other instances that it is currently considering. You only have one application in front of you, but you are in a hearing where you're asking many questions and there might be other instances that you're thinking about. We only see the concern right now with respect to vertical integration.
5607 MR. SCHMIDT: To add very briefly to that. The provision of guidelines on the telecom side isn't inconsistent with our case with the basic posture of permission for the activities, subject to guidance. That's not incompatible with the position you're advocating.
5608 THE CHAIRPERSON: And in fact, and one of the guidelines could be we're likely not to like something. It could be on the negative side as well, right?
5609 MR. SCHMIDT: Yeah, and you can give positive guidance as well. You know, you already ordered the zero-rating of roaming notifications, for example. There's probably a couple of flavours of zero-rating that don't raise concerns and the positives could be articulated ---
5610 THE CHAIRPERSON: Right.
5611 MR. SCHMIDT: --- in addition to the concerns.
5612 THE CHAIRPERSON: There might be two baskets. Yeah, okay.
5613 I don't know if it's because we're not hearing each other, but I'm going to ask it as clearly as I can. Is Telus a common carrier in Canadian law when it acts as an ISP?
5614 MR. SCHMIDT: I'm surely going to get in trouble for this one when I get back to the office, but we -- the Act says telecommunications is a common carrier. Are we caught by the Act? Absolutely. Are we subject to all the provisions 27.1, you know, from A to Z?
5615 THE CHAIRPERSON: Yeah.
5616 MR. SCHMIDT: Absolutely.
5617 THE CHAIRPERSON: But you see, 36 and 27.2 refer to Canadian carriers.
5618 MR. SCHMIDT: Right.
5619 THE CHAIRPERSON: The definition of Canadian carrier is -- means a telecommunications common carrier. It doesn't say a banana.
5620 MR. SCHMIDT: Right.
5621 THE CHAIRPERSON: It doesn't say utility.
5622 MR. SCHMIDT: Right.
5623 THE CHAIRPERSON: It says a telecommunication common carrier.
5624 MR. SCHMIDT: I'm with you so far, yeah.
5625 THE CHAIRPERSON: So I'm not seeing why you're dancing around and not ---
5626 MR. SCHMIDT: I'm not dancing around. I'm going to be very direct. It does -- there is the -- you go back to 1875 to a case named Baxter and Dominion Telegraph, they reject the idea that telecommunications carriers are akin to common carriers in the country.
5627 We have a different legal tradition in the U.S. Yes, telecommunications, common carriers -- telecommunications providers are common carriers in the U.S. Our legal tradition has developed differently. The obligations that attached at common law hinge on monopoly, then a duty to serve, a just and reasonable rates, subject to no unjust discrimination.
5628 It's different from the U.S. It hinges on monopoly. We may have less stringent equal treatment obligations as well.
5629 THE CHAIRPERSON: But the fact remains that when Parliament adopted that definition, they didn't use a telecommunication banana. They said a telecommunication common carrier.
5630 MR. SCHMIDT: Parliament didn't adopt, you know, U.S. common law concepts, however.
5631 THE CHAIRPERSON: I'm not saying you. I said -- my question was is Telus a common carrier in Canadian law when it acts as an ISP.
5632 MR. SCHMIDT: We absolutely are. We fall within that term in the Act.
5633 THE CHAIRPERSON: Okay. Thank you. That's a clearer answer of which I was looking for, for a little while. Okay.
5634 MR. SCHMIDT: It may be evident that I didn't understand the first five versions.
5635 THE CHAIRPERSON: Well, maybe we didn't ask it correctly, but you're here in Canada, and I was not asking about the FCC's definition.
5636 MR. SCHMIDT: But I got it. Kind of like at home. I finally understood it on number five.
5637 THE CHAIRPERSON: Yeah. If you want to have -- if you want to do business in the States, good luck to you, but we were just asking the question in Canada.
5638 MR. SCHMIDT: Thank you.
5639 THE CHAIRPERSON: I believe those are our questions. Just making sure. Yes, thank you very much.
5640 MR. SCHMIDT: Thank you.
5641 THE CHAIRPERSON: So 3:30. We will do the next presenters on Skype, and take the break after that.
5642 THE SECRETARY: Thank you, Mr. Chairman.
5643 THE CHAIRPERSON: Yes, thank you. Go ahead.
5644 THE SECRETARY: We will now proceed with Mr. Devin Lindsay, appearing by Skype from B.C.
5645 --- (A short pause/Courte pause)
5646 THE CHAIRPERSON: Okay, invariably a little technical problems. We'll just take a 10‑minute break until 3:45, a little bit more than 10 minutes, but anyways, we'll come back at 3:45.
--- Upon recessing at 3:32 p.m.
--- Upon resuming at 3:45 p.m.
5647 THE CHAIRPERSON: All right, Madam Secretary, let's try Mr. Lindsay one more time.
5648 THE SECRETARY: We will now hear the presentation by Mr. Devin Lindsay, appearing by teleconference from B.C.
5649 Mr. Lindsay, do you hear us?
5650 MR. LINDSAY: Yes, I do.
5651 THE SECRETARY: You may begin your presentation, and you have five minutes. Thank you.
5652 MR. LINDSAY: All right.
5653 MR. LINDSAY: Well, I'd like to express my sincere gratitude for the diligence being shown by the Commission this week in trying to developing its clear understanding of the needs to address a real challenge in its role as a telecommunications regulator, and I'm honoured to be part of it.
5654 I'm speaking to rural challenges, which I'm quite familiar with, and my presentation's not exclusive to rural in the sense that city traffic between a great big city and another great big city flows in and out of rural communities, as -- sorry. It should be able to flow in and out of communities as easily as it flows through them. And so I think that forbearance has failed here in a certain extent on the edge of the network.
5655 So I think that due in part to the forbearance and then subsequent events, there has been some harm to competition, and this is my own experience, sort of not in the telecommunications competition, but in competition more generally, due to the business models that have been adopted for innovating, sort to speak, in telecommunications marketing.
5656 So the real purpose of this intervention is to do with zero-rating and differential pricing, and my perspective is the lens that I look through things at is through a strong technology lens, where I’m thinking of the packets, and the wires, and the medium, and the transmits, the requests, the sends.
5657 And I also -– I’m looking at it from a net neutrality point of view, but much stronger than I’ve heard from many of the other presenters this week, in that I make little differentiation between a consumer and a content provider.
5658 And so I believe where there’s differential pricing between access by a provider as opposed to a consumer in a small area, a rural area, that in itself is a real challenge.
5659 And so even though there’s been mandated access to the access portion of carriers’ networks, there’s still that question of what’s just beyond the access.
5660 And so in an area where fibre optics, you know, were run in British Columbia by BC Tel, you know, 20 years ago and you’ve got dedicated fibre, as you heard from one of the presenters a couple of days ago, Broadband whatever it is and sort of saying this is dedicated fibre optic run at huge expense a long way.
5661 And all that’s coming out of that fibre is 30 megabits per second and you’ve got no competition and yes there’s many ISP choices, but they don’t -– there’s no real differentiation in what they’re providing and there’s no opportunity for delivery of applications in these communities.
5662 And so I really think that it’s the Commission’s challenge to figure out how to convince the carriers to be really looking at the technical ITMPs that are preferred in the frameworks.
5663 And for –- as I’ve heard people say, there was a person speaking to disabilities this morning and the need for a very -– need for a prioritized traffic, but in the sense that it’s reliable traffic and at least a little bit of that needs to be available all the time, you know, regardless of whether it’s busy.
5664 Because when things do get saturated and things do stop working that’s when things do need to still work, like a voice call for example and the technical challenges today have been amazing.
5665 Five minutes is probably going to be not even enough time to really start what I’d like to actually discuss, but it’s just really sort of -- looking at it through a real technical lens I see many solutions that are overlooked.
5666 And I just don’t know -– what I’d really like the Commission to maybe help with or maybe I could help the Commission, is to figure out how to have those -– have a forum for some of these issues to be addressed more directly.
5667 I’m a firm supporter of Open Media’s presentation and stuff, but I still do believe that there’s a gap that is particularly evident in rural areas between the backbones.
5668 Where from, you know, a purely technical perspective I see fairly inexpensive equipment connecting communities to communities; you know?
5669 That is so much more practical, but it’s behind that ISP retail access level and you know there have been questions asking the carriers to provide some more information on what their costs are and what they’re infrastructure sort of is and so forth, but it’s -– I think that’s really necessary, because you have this vertical integration of wholesale internet providers or transit providers and you have competing foreign transit providers advertising, you know, rates of 20 cents per megabit, per second.
5670 And you have people, you know, paying for 30 megabits, hundreds and hundreds of dollars, trying to serve their communities and -- so there’s some real challenges that need to be addressed.
5671 And just sort of, like, waiting for the next thing, waiting for 5G, waiting for this is harmful when there could be technical solutions that are being overlooked, because there’s so much focused on the marketing.
5672 And, you know, that’s sort of what I consider to be artificial competition between wholesale providers.
5673 Some of it is legitimate and some of them, you know, provide great value, but it seems like they’re always at a bit of a disadvantage in that they’re not part of that -– that sort of backbone.
5674 And you have municipal networks being built, but they need to be connected together and their needs to be a way -- the Commission really needs to take a serious approach to go like ‘okay well there’s fibre, it’s been sitting there for 20 years let’s just use it’.
5675 And that –- mandating things like that will really open up the potential for actual competition at the edge of the network which is something that’s very up and coming.
5676 And, you know, you can throw internet of things, buzz words at it or IPV6 sort of things, but it’s where computer to computer traffic and the speed of your local network becomes very important.
5677 Right now traffic that I send can go all the way to the other side of the country, around the country and back, faster than it can go to the two blocks, you know?
5678 And so for municipalities to be able to go like all right we want to solve this -– we want to really have the best network that we can have, there needs to be some mechanism for that to happen where it’s not all right you need to cough up with, you know, $20,000 per person in your community to, you know, come up with some big piece of equipment that’s been, you know, chosen as the piece of equipment.
5679 And that’s something that hasn’t been mentioned this week, but as one of the roles of the CRTC in terms of approving equipment, you know, this -– a lot of these things happen sort of without enough transparency, I think.
5680 That could be just that I’m not in -– in the right loop, but -–-
5681 So I did, you know, I did want to -– just really I mentioned in my -– I kind of diverged because of the time limit from the five minutes ---
5682 THE SECRETARY: Hi ---
5683 MR. LINDSAY: Yes?
5684 THE SECRETARY: Hi, Mr. Lindsay, you have about one minute left. If you could please conclude your presentation, thank you.
5685 MR. LINDSAY: All right, thanks.
5686 All right so what I see is differential pricing existing already and -– but it’s not obvious, you know, where it’s actually existing.
5687 And I don’t know that even small ISPs are aware -– as aware of the bottlenecks that are being artificially imposed on them, in my view.
5688 And I’d just like to say it would be nice to be able to change that and I’m happy to answer any questions that -– on this.
5689 Sorry, I’ve been following all week and there’s been so much salient, you know, perspective from a very technical point of view in terms of just -– so encouraging these technical IMPs rather than the economic ITMPs which are -– don’t address some of the issues that need to be addressed. That’s my opinion, thank you.
5690 THE CHAIRPERSON: Well thank you very much, Mr. Lindsay. Commissioner Vennard might have one or two questions for you.
5691 COMMISSIONER VENNARD: Hello, Mr. Lindsay. Thank you very much for participating in our hearing and thanks for trying to connect with us over Skype as well. You must have a lot of patience to have been waiting all day. So hopefully one day we’ll be able to see you -- actually see you in person or at least the Skype version of you.
5692 You’ve provided us with a lot of comments and you’ve given us a fairly lengthy written submission as well. I don’t have any questions for you. And I would just like to say thank you very much for your efforts and participating with us.
5693 MR. LINDSAY: All right.
5694 THE CHAIRPERSON: Thank you very much, Mr. Lindsay.
5695 I’m looking, polling my other Commissioners, and apparently your position does not require further questions. So thank you very much for having participated in our hearing.
5696 MR. LINDSAY: All right.
5697 Thank you.
5698 THE CHAIRPERSON: Thank you.
5699 MR. LINDSAY: Have a good day.
5700 LE PRÉSIDENT: Madame la secrétaire?
5701 LA SECRÉTAIRE: Merci monsieur président.
5702 I would not invite TekSavvy Solutions Inc. to come forward.
5703 Thank you.
--- (SHORT PAUSE)
5704 THE SECRETARY: Please introduce yourselves, and you have 20 minutes for your presentation.
5705 Thank you.
5706 MR. ABRAMSON: Thank you.
5707 Mr. Chairman, Commissioners and Commission staff, good afternoon. I’m Bram Abramson, Chief Legal and Regulatory Officer for TekSavvy. To my left is Janet Lo, Director, Consumer Agreements. To her left is Jean Lamoureux, Director, Product Management. He helps build and price our internet access packages. To my right is Melanie Howard, Director, Sales and Service. Her team support and talk with our customers about the use of their internet access packages every day.
5708 This afternoon we’ll talk to you about our experience with caps, our understanding of what the law requires and allows you to do, our view of what your policy therefore ought to be, and the two recommendations we’ve made in light of that view, a net neutrality code and consumer transparency recommendations.
5709 THE SECRETARY: Excuse me. Can you please put your mic on and you can begin again.
5710 Thank you.
5711 MR. LAMOUREUX: There we go.
5712 TekSavvy is a telecom provider that serves about 300,000 homes. In the last mile we’ve reached most of them through the wholesale network access and a handful over fixed wireless that we deploy where there isn’t already an existing last mile path. We are strong network neutrality advocates and we are tightly consumer focused.
5713 A strong net neutrality advocacy means two things. First, as you know, wholesale network access is configured in the Canadian market as a layer-three internet protocol service and not as a layer-two network service over which we could run our own end-to-end internet protocol traffic.
5714 So we have fought to advocate that wholesale network access be net neutral. That is a big part of your ITMP policy which addresses the relationship between primary and secondary ISP’s.
5715 Second, on the retail side, we do not discriminate, or prefer, or nudge through price signals based on traffic source, content, content type, or destination.
5716 Our tight consumer focus has led us to institute both capped plans and time of day differential pricing practices or DPP’s. Our capped plans reflect our cost of doing business, including last mile costs. Especially in a capital intensive sector like telecommunications, that cost isn’t the marginal cost of additional edge bandwidth. It’s the long run incremental costs as reflected in the tariff rates whose ceiling is established by the Commission.
5717 Capped plans let customers who use less internet avoid cross-subsidizing those who use more. However, there’s a difference, our caps aren’t really caps they’re more like half caps. That’s because they apply only one way, to downloads and not uploads, and they apply from 8:00 a.m. to 2:00 a.m. not from the off peak 2:00 a.m. to 8:00 a.m. period. That’s the differential pricing practice.
5718 Now, our half caps have changed over time. First, our only plan was unlimited. Eventually it made more sense to make the capital investments necessary to meet our bandwidth. So we added a 75 gig a month plan, that was our small, and a 300 gig plan, our medium size. Later that small doubled to 150 gigs and the medium grew to 400 gigs. In response to very vocal consumer demand we added an extra small 40 gig a month plan as well.
5719 MS. HOWARD: We imposed a half cap rather than a full cap because it’s all we need as a congestion management tool. Do our customers favour differential pricing practices? Well, they’d definitely rather get something for free then pay for that same thing.
5720 And that’s what this hearing -- if that’s what this hearing were about then it would be easy, but we know that that’s not what this hearing is about. As Rogers pointed out yesterday, these things are connected.
5721 First, some traffic agnostic DPP’s are about congestion management and others are pure price differentiation.
5722 Second, different ISP’s experience different peaks and have different customer mixes.
5723 Third, especially in a market with higher barriers to entry, like mobile, zero rating particular content might be a way of avoiding higher caps or lower prices.
5724 Now, I want to be clear, our customers like our half cap offering, they like our net neutrality, and that’s why they come to us. It’s also why we had a hard time getting our heads around this proceeding. It’s one thing for us to limit DPP’s to skinny half caps and push net neutrality as far as we can, it’s another thing for you, the CRTC, to ask whether you should require everyone to do that. We recognize that not every consumer thinks like our customers do and we want to be able to continue to differentiate ourselves in the market.
5725 MR. ABRAMSON: That brings us to the Telecommunications Act. There’s a very interesting and important debate that’s emerged in this proceeding. As we understand it, it goes something like this.
5726 The Commission forbore from tariffing retail internet access a while ago for three reasons, intense rivalry, few entry barriers and the ready availability of underlying transmission facilities which are tariffed.
5727 That forbearance found given those three market characteristics there was enough competition that user’s interests would be protected even if retail internet access wasn’t tariffed. However, Section 27(2) and of course Section 36 remained in force and intact.
5728 The question now before you is whether, read together, those two provisions give you a responsibility to subordinate the kind of competition that can exist for internet access to a kind of common carriage principle.
5729 In other words, internet access is forborne from tariffing but it’s still a telecommunication service whose providers should be held under the Telecom Act to be acting as common carriers as opposed to contract carriers.
5730 We would submit to you that the answer is yes, these provisions do give you that responsibility.
5731 Certainly that ability and responsibility would be clearer if the Canadian government had revised Section 27(2) and Section 36 in the way that they did under Section 24.1, which is akin to how the Telecommunication Policy Review Panel more than a decade ago suggested that things be done changing the term “Canadian carrier” to telecommunications service provider. A Canadian government whose commitment to net neutrality matches what we have heard recently in ministerial statements would and will surely do so.
5732 But the more important policy question is where regardless a common carriage principle shines through 27(2) and Section 36, both of which Section 47 of the Act of course requires you to read through the policy objectives in Section 7.
5733 Is it undue to discriminate against any customer seeking service upon a reasonable demand willing and able to pay the established price however set? And that’s something I extracted from a definition of common carrier that I found. Yes, we think it is subject to reasonable advantages exemplified by those in Section 27(6) which talk, as you know, about the carrier’s own customers -- employees, I should say, and so on.
5734 Is it undue to arrange for the transmission or reception of content in a way that takes part in the selection, origination, or packaging of that content? That’s harder. We think that in some circumstances it surely does. And in particular, there are a few circumstances to be worried about that we think do help indicate at least how far you ought to go.
5735 First, even if you have vigorous competition you might -- for Internet access, you might be worried about “crowding out”; the idea that if everyone moves to zero-rating, then the net-neutral Internet slowly recedes in importance in the marketplace. From a policy standpoint, slow crowding-out is a harm to the kind of edge innovation the Internet has made possible, and that Sir Tim Berners-Lee described.
5736 Second, let’s say you had less-than-vigorous competition, and the market were characterized by a fairly tight oligopoly. In those circumstances, a switch to zero-rating by a large player or two has the capacity to actually change the market, change what the service looks like for many consumers. In other words, fast crowding-out.
5737 And third, vertical tying. We’re certainly not the first to raise the issue of platform exclusivity and content-based discrimination.
5738 MS. LO: All of this has led us to two proposals. One is a Net Neutrality Code, and the other is a transparency rule.
5739 I’ll begin with the Net Neutrality Code.
5740 In our submissions we called for the Commission to take the ITMP Framework, add a portion on DPPs, and set out the result as a clear, easy-to-find Net Neutrality Code.
5741 The Net Neutrality Code would serve as an ex ante set of rules. Those who violate the Code would be subject to ex post enforcement, just like any other ruleset.
5742 Some have suggested to you this week that it is not easy. Some have, in their second written interventions and then later this week -- earlier this week, have proposed principles or guidelines, or codes of their own.
5743 We have heard them and agree. We suggest that you add a supplementary phase to this proceeding, or convene a follow-on paper proceeding. The supplementary phase or follow-on proceeding would set out principles to be met and ask parties to draft and even collaborate on drafting proposed Net Neutrality Code that meet those principles.
5744 However, there are four principles that the DPP components of any Net Neutrality Code ought to address.
5745 First, market power. Where a player has market power, and they institute a zero-rating scheme, they have the influence to actually change the nature of the service and move the market. This is the fast-crowding scenario that Brown described earlier. So a player with market power should not be able to zero-rate content without continuing also to offer a non-zero-rated, net-neutral scheme for similar levels of traffic use.
5746 Second, gatekeeping. We agree that, as a matter of consumer policy and good practice, any zero-rating scheme ought to be straight with customers as to how it works. Well, the more editorial and algorithmic discretion, and the more procedural and financial hurdles involved, the more the practice should be deemed off-side. Transparent, objective criteria that limit the access provider’s discretion should be required to be published and adhered to. That’s the very nature of common carriage.
5747 Third, self-dealing, platform exclusivity, and content-specific exclusivity. The zero-rating of particular applications or content over others, as opposed to classes of traffic or applications, is surely undue. Locking applications or content to a particular broadband or wireless provider -- in other words, platform exclusivity -- is surely undue. Locking one’s own or someone else’s content up in a way that impairs other ISPs’ ability to enter into similar affiliation agreements is surely undue. We’d go further and challenge any content selection, origination, or packaging: Affiliation agreements don’t sound like common carriage. But those are surely starting points.
5748 Fourth, configuration risks. DPPs rely on the ability to inspect and treat different traffic differently. In some cases, they centralize authentication and traffic management. These configurations heighten privacy risks. A Net Neutrality Code that addresses DPPs as ITMPs should say that any DPP that unduly heightens privacy risks is offside. And, of course, section 7, paragraph (i) of the Act assigns the Commission special requirements in this regard.
5749 Now, these are not the elements of a Net Neutrality Code’s DPP provisions, but they are the principles that such provisions ought to address.
5750 Our second recommendation is simple. End-users ought to have the means to know how much data they’ve used, even when it’s zero-rated.
5751 In TekSavvy’s MyAccount portal, we provide end-users with tools to review, and to export, the raw data showing how much half-capped, as well as uncapped, data that they’ve used. Mr. Chairman, Commissioners, all providers ought to do this.
5752 Consumers ought to be able to know what they’re getting for what they pay. They ought to be able to compare it to other plans available on the market. And the Commission’s monitoring team ought to be able to collect and compare that data in order to continue to do their very important job of tracking the state of competition for telecommunication services.
5753 MR. ABRAMSON: Those are our recommendations.
5754 To conclude, a quick word on innovation. The term’s been bandied around a lot. In particular, the Internet has been portrayed as a bit of a golden goose that brings edge innovation. Harm net neutrality, and you run the risk of killing that golden goose.
5755 We think that edge innovation is about the ability to change the rules and do things differently without asking permission and without waiting on someone else. It’s the ability to create facts on the grounds and show, rather than tell, people what works. It’s one thing to devise a new idea or thing, or improve an existing idea or thing; classic innovation. But your job, Commission, is to regulate in order to ensure that you continue to promote innovation in a platform environment where vertical time is possible, where market power at one level can foreclose innovation at a related level. That job is harder.
5756 The recommendations we’ve made are, we feel, within that spirit. We’d be glad to discuss them with you.
5757 THE CHAIRPERSON: Thank you very much. I’m going to start us off.
5758 You’re obviously a party or affiliated with CNOC, so I just want to know if your position is largely the same in all respects as CNOC’s one; if not, if what way does it differ?
5759 MR. ABRAMSON: It’s a very good question.
5760 CNOC’s, I think, submissions focused on a different area. CNOC obviously has a responsibility to represent a large group of Internet access providers with different business models. And they focused on the ability, I suppose -- and I don’t want to put words in CNOC’s mouth, the ability to -- for ISPs to -- for ISPs to choose different business models.
5761 We’ve gone at it, I would say, from the other side, which is to say; that’s fine, but what are the limits on those business models? What should not be allowed with respect to common carriage? And, you know, I guess that’s an important difference. I’m not here to criticize CNOC’s position. We focused on the importance of net neutrality and we’re not convinced that different practices in respect of content are easily justified within a common carriage framework.
5762 THE CHAIRPERSON: Right. It strikes me that one of the distinguishing aspects is your notion of a Net Neutrality Code, however, which I did not see in their solutions. Is that correct?
5763 MR. ABRAMSON: I think as a practical matter that’s correct.
5764 THE CHAIRPERSON: Now, paragraph 27 today you’re saying that we should run further proceedings inspired by recent events. It just seems to me that we’re probably in the seventh inning of the seventh game. Why wouldn’t you want to undertake to come up with a draft that others could comment on?
5765 MR. ABRAMSON: That is an undertaking we’d be happy to make and that would certainly shorten things.
5766 THE CHAIRPERSON: Okay.
5767 MR. ABRAMSON: We’d agree.
5768 THE CHAIRPERSON: Because we know that -- I mean, I obviously follow-up proceedings do great business for the unemployed consultants. In fact, we probably could call it the unemployed consultant relief proceeding, but the fact remains that if it’s an important issue we rather would like to get on with it.
5769 Do you think you could meet that by 14th November?
5770 MR. ABRAMSON: We’d be happy to. Of course, it wouldn’t have been our place to show up and propose to submit new evidence but we’re happy to do that.
5771 THE CHAIRPERSON: Well, it’s not evidence; it’s a proposal. I wouldn’t see it as evidence. I think it’s more of a proposal to deal with the very issue that’s before us but by doing it in the undertaking of 14 November, other people will be able to comment and reflect on it. And I may have ruined some people’s weekends here.
5772 MR. ABRAMSON: We so undertake.
5774 THE CHAIRPERSON: Okay, thank you.
5775 Many non-incumbents, or competitors -- I’m not quite sure what to call them anymore; competitive ISPs offer unlimited retail Internet. You call it somewhat differently but there's an aspect of it. And they’re generally not vertically integrated.
5776 Why shouldn’t the Commission permit those non-incumbents to offer DPPs?
5777 MR. ABRAMSON: So I’ll focus on content-specific DPPs. I think that ---
5778 THE CHAIRPERSON: Well, I think -- yeah, okay. Sure.
5779 MR. ABRAMSON: I think content -- I mean, we do content diagnostic DPPs. We think many of them are fine; time of day pricing is great and so on.
5780 THE CHAIRPERSON: Fair enough.
5781 MR. ABRAMSON: In terms of zero rating particular content, why shouldn’t independent ISPs that aren’t vertically integrated be allowed to do that? First of all, we’re -- you know, we’ve articulated our view or some of views of the common carriage principle, and we’re not convinced that that kind of involvement and selection, origination and packaging of content is in the spirit of the kind of idea of common carriage that we hope inspired 27(2) and section 36. So that’s a first reason.
5782 And the second reason I think is simply, you know, it -- by stepping across that line -- in other words, why would it be a good idea to respect that sort of idea of common carriage? We think that it serves the section 7, you know, the policies in the Act for the reasons we set out and I think PX set out and many others did to encourage vigorous competition in carriage as opposed to content.
5783 You know, we think that once you start to see a marketplace characterized by competition that involves locking in or nudging through price signals and so on, different forms of content, you’re getting into a marketplace that may not serve the policies of the Act in the same way.
5784 And that as a side and perhaps a third reason, by the way, is one in which it is very difficult to sustain competition. Content -- you know, I guess I can imagine affiliation agreements and all the rest of it just as one has in the BDU environment, but of course, we don’t have the built up history as we do within the television sector. And I think we’d begin to see an internet that would begin to look a little bit like -- or less like the internet of the past, less like the net neutral internet and more like something like cable television.
5785 And ultimately, I suppose our view is that that doesn’t serve the public interest, you know, for the reasons that we said. We think that a net neutral internet does encourage edge innovation. We are worried about that golden goose and we’d like to see it continue.
5786 So we don’t think it’s in the best interests of the policy set out in section 7 and the Act.
5787 THE CHAIRPERSON: Okay. So by the same token, if allowing an ISP who’s competitive rather than an incumbent -- if he had been an incumbent, something might be unduly discriminatory in the offering because of a certain amount of market power. But you’re saying that notwithstanding the absence of market power, the common carrier principles still bring you to a conclusion that there should be some content agnostic principle applied.
5788 MR. ABRAMSON: We -- I want to be careful. We think it’s the preferable outcome. We haven’t taken a strong view on whether you ought to positively say no to all content-specific DPPs even in the absence of market power. And we sort of said, look, at least this much is certainly offside and perhaps even getting into a world in which ISPs are entering into affiliation agreements is also offside common carriage. I think we’re in that second zone.
5789 THE CHAIRPERSON: Right.
5790 MR. ABRAMSON: We don’t feel as strongly about it because it’s more of a pure policy issue I guess I would say as opposed to also engaging questions of market power.
5791 THE CHAIRPERSON: Right.
5792 MR. ABRAMSON: So perhaps it’s less clear than the one which does engage questions of market power. But I suppose that, yes, our view is that it will be a marketplace that is impoverished once competition begins to go in that direction.
5793 THE CHAIRPERSON: How do you feel about Rogers’ two principles? Is -- are there -- is that a position you would support? I guess we’ll see in your draft.
5794 MR. ABRAMSON: I suppose so. From memory, Rogers’ two principles involved subjecting all traffic to standard data charges. That was sort of one of the two and it was at the heart of it. And I suppose what they were asking you to do was to require that all traffic be treated that way on, you know, fixed and mobile networks. We’re still thinking about that.
5795 To us, it does seem like a strong position to take to simply say Canada is a country that has outlawed all such practices. And it’s one that we ---
5796 THE CHAIRPERSON: Well, I’m not sure they were going quite that far. I think they were saying it was a strong ex ante guiding principle that once you put it in guiding principle terms it means that there’s wiggle room. But the burden of proof gets shifted to those that are advocating that particular practice.
5797 MR. ABRAMSON: Understood. And, you know, one thing -- and I heard the BC Broadband Association talk about regulatory burden and how small providers, you know, if there’s a point of obligatory passage to the regulatory before engaging in a business practice, I can see how that might advantage those with regulatory departments as large incumbents and TekSavvy have and disadvantage smaller -- even smaller providers. THE CHAIRPERSON: M’hm.
5798 MR. ABRAMSON: At the same time, we -- again, we recognize the value in orienting the marketplace towards competition over carriage rather than over content affiliated carriage. And so it’s one we’d want to think about.
5799 THE CHAIRPERSON: Okay. Albeit that it was on an interim basis, back in October the Commission did set much lower interim rates for CBB. In light of that change, what impact does that have on TekSavvy or could it have on TekSavvy, I guess would be a better way to ask the question, in terms of offering DPPs?
5800 MR. ABRAMSON: It’s hard to -- in terms of offering DPPs, I mean, I guess I want to take that in two parts. Well, three parts.
5801 First of all, there’s a very simply preliminary part which is to say that, you know, it’s hard to understate the impact that we believe it will have should rates come in around where they are now, as compared to where they were in the past.
5802 We appeared before the Commission in the Talk TV proceeding a little while ago now saying we’d love to get into the IPTV business but we didn’t think that rates were at a place that would have allowed us to do so and provide a high quality secure product. That may change with the kinds of rates that we’re discussing. And as a result, our relationship to the content business would be more like Telus’ perhaps and less like ours is now. So that’s the second part.
5803 The third part though is about how to put content-specific DPPs into the mix. And, you know, our view at present, and it’s one that we stated in our filings, although it was before the decision that you mentioned, was that we didn’t see any value in DPPs that were content-specific. And, in fact, we don’t think it’s a good idea. We see ourselves as a carrier of bits. And once you get into the BDU game, you’re a little bit more than that. But we don’t want to be too much more than that. And so we don’t have any real interest in DPPs at this time.
5804 There is a coda to my three points, which is it’s something that we’ve debated back and forth and it’s not always clear. When one talks about DPPs, one can almost address it in two different ways. One is with regard to the traffic within the access pipe ---
5805 THE CHAIRPERSON: Right.
5806 MR. ABRAMSON: --- and the other is with regard to the traffic within the access pipe that is destined to the internet. We don’t zero rate any of the content within our access pipe at present. That consists of two services: internet and voice services.
5807 Now, when our subscribers -- or when we have a subscriber to both internet access and voice services, and it’s our Tek Talk, that is to say our voice over IP product, we don’t zero rate that traffic. On the other hand, that traffic does not go to the internet. It comes through the access pipe across the point of interconnection to the TekSavvy network and then we peel it off to our voice switch.
5808 So at present within the access pipe there’s no zero rating. Obviously ---
5809 THE CHAIRPERSON: Is it even a DPP as we’ve defined it in the notes of consultation?
5810 MR. ABRAMSON: No.
5811 THE CHAIRPERSON: Even if you had done a differential pricing you mean?
5812 MR. ABRAMSON: Oh, well, that’s the question. We don’t know and happily at present we don’t need to know.
5813 THE CHAIRPERSON: Right.
5814 MR. ABRAMSON: Because we treat it the same either way.
5815 THE CHAIRPERSON: Right. Unhappily we do.
5816 MR. ABRAMSON: Well, and that brings me to, you know, clearly if we get into IPTV, it similarly will, of course, not be over the internet, but it will be within that same access pipe encapsulated in internet protocol. And perhaps unlike the architecture of an incumbent IPTVs that do not use wholesale network access, we will not have the ability to multicast to create separate VLANs. And so it’ll all be within the same access pipe.
5817 And so there are interesting questions that arise as to whether, you know, it is a DPP to treat that traffic differently or not.
5818 I suppose that the view that we’ve heard is that DPPs are about internet traffic, not about internet protocol traffic within the pipe. And on balance, that’s likely the better view, but it’s one that, to be honest, has generated a lot of discussion ---
5819 THE CHAIRPERSON: Right.
5820 MR. ABRAMSON: --- on our side.
5821 THE CHAIRPERSON: And as I said, we did provide sort of a notion of what a DPP was in the notes of consultation.
5822 MR. ABRAMSON: Yeah.
5823 THE CHAIRPERSON: You might want to look at that.
5824 So you’ve used the expression “gatekeeping” in your submissions and your presentation this morning. Is it the same thing as common carrier principles in your view?
5825 MR. ABRAMSON: Apologies. I’m just looking for the context. I want to make sure I don’t misspeak.
5826 THE CHAIRPERSON: Well, here in the presentation you use it at paragraph 30.
5827 MR. ABRAMSON: Yeah.
5828 THE CHAIRPERSON: I guess it’s a -- I’m wondering if you’re using it in more of a vernacular sort of way that we, in fact, what we more properly should be talking about is the common carrier aspect.
5829 MR. ABRAMSON: It’s a good point.
5830 In a way, I mean, these things certainly intersect. The common carrier, your principle, as we've articulated, and as you've been articulating it during this proceeding and other -- in response to other intervenors, and so on, is a set of principles.
5831 Here we've tried, I suppose to articulate one piece of it, which is to say the kind of -- look any content specific DPP involves some form of editorial choice, well some form of choice.
5832 THE CHAIRPERSON: Right.
5833 MR. ABRAMSON: I don't know what everyone wants to call it. I call it editorial choice. I'm sure ---
5834 THE CHAIRPERSON: Others call it publication-type choices, a publisher's choice, right.
5835 MR. ABRAMSON: Fair enough.
5836 Our view is simply that there's a whole range, there's a whole spectrum along which those choices may be exercised. On the one end, one may say, look I've made a deal with three music providers, and that's my choice, and we're done. One may say a little bit further along the spectrum, well, three, but if anyone wants to also be part of the program they should get in touch and we'll see. And it could be a very cumbersome pro. We might not know who to approach, and so on; you may not know the criteria.
5837 And then I suppose all the way at the other end of the spectrum would be an API, and applications programming interface, that would allow anyone to simply configure something and automatically be included in the zero-rating scheme. And clearly, the degree of discretion, you know, along that spectrum really goes from very great to very little. You know, does one set the rules out and simply apply them, or does one continue to apply discretion all the way through.
5838 That's, I suppose, what you meant by gatekeeping, and I suppose we say that's the very nature of common carriage, and so I think you're right. But I guess it's a particular articulation of the character of common carriage with respect to DPPs that we wanted to really put our finger on. Is what does it mean to say it's open to everyone?
5839 THE CHAIRPERSON: Right.
5840 MR. ABRAMSON: You know, it's not always enough. One must know the details.
5841 THE CHAIRPERSON: And I take it, TekSavvy sees itself as a common carrier?
5842 MR. ABRAMSON: Well, we're a Canadian carrier, so we're a telecommunications common carrier under the Act.
5843 THE CHAIRPERSON: Right. Everybody goes back to that, and it just seems to me that Parliament actually in the definition uses the word "common carrier". They didn't use the word "undertaking", which they could have, which they did, broadly, in the Broadcasting Act context, which was adopted almost concurrently.
5844 MR. ABRAMSON: I agree. I ---
5845 THE CHAIRPERSON: It can't be an accident. It wasn't called a banana, as I said earlier.
5846 MR. ABRAMSON: Yeah.
5847 THE CHAIRPERSON: It was called a common carrier. Surely it means something. It was meant to import something into the Act.
5848 MR. ABRAMSON: I would like to agree, and it makes sense to me that it was meant to be part of the tradition of talking about common carriage in a non‑discriminatory way. It's not written in the Act that -- you know, the Act provides very little guidance on this topic.
5849 THE CHAIRPERSON: Right.
5850 MR. ABRAMSON: And I don't know of jurisprudence. To be honest, I haven't ---
5851 THE CHAIRPERSON: Right.
5852 MR. ABRAMSON: --- you know, gone on an exhaustive research.
5853 THE CHAIRPERSON: But perhaps we don't need to even ask the question because to the extent you fit within the category the codification that would otherwise apply to a common carrier, I would put to you, and tell me if you disagree, was largely found at 27.2 and 36.
5854 MR. ABRAMSON: We agree completely.
5855 THE CHAIRPERSON: Yeah, okay.
5856 And what role does the policy direction or competition law apply in that context?
5857 MR. ABRAMSON: It's a tricky question, but I suppose, you know, our -- my first reaction would be that -- well, there's the policy direction of competition, the principles of competition alone, and then there's the Competition Act.
5858 I would say first of all, broadly, the Act says, look, their policy -- there's the Canadian Telecommunications policy objectives, set out at Section 7. They're to be met, and everything that the Commission does is to be consistent with those policy objectives.
5859 THE CHAIRPERSON: Right.
5860 MR. ABRAMSON: And I think that those policy objectives form a policy, a goal for the market that may not be identical with what economists, you know, always refer to as consumer welfare or a -- or -- well, or use a variety of terms to describe the goals of competition policy.
5861 So I think that it creates a specialized domain in which, look, and we know in the various sections that relate to forbearance. If it is not necessary to regulate in order to achieve the policy objectives to protect the users of -- to protect the interests of users, and so on, then it's not necessary to regulate. But at all times those interests, that necessity, is to be dictated by whether or not the policies are met. And that's a difficult balancing job that the Commission as an expert agency is charged with reviewing, in our view.
5862 THE CHAIRPERSON: M'hm.
5863 A blunter way of asking would be in a Section 36 analysis, because it allows the Commission to authorize it, whether, were we to turn our minds to it, do we also have to turn our minds to the policy direction?
5864 MR. ABRAMSON: That's one I'd want to take offline and just make sure I was reading the Act properly.
5865 THE CHAIRPERSON: Okay.
5866 MR. ABRAMSON: I mean, I know that the policy direction is more than a sentence or two, and it says a lot of things.
5867 THE CHAIRPERSON: All right. Do you want to do that for an undertaking?
5868 MR. ABRAMSON: Yes.
5869 THE CHAIRPERSON: Okay, great. Thank you.
5871 THE CHAIRPERSON: Some parties have suggested that one way to get around this is to define broad categories of apps or other content; therefore, it decreases the risk that a content supplier gets unfairly excluded. And in fact, what it does, according to them, is that the end user decides what succeeds, what gets picked up.
5872 Do you have a view on that?
5873 MR. ABRAMSON: I want to make -- first, I just want to make sure I understand the question.
5874 You talked about broad categories, but the end user choosing. Do you mean broad categories of content like music is zero-rated or the end user making the choice as to the end user?
5875 THE CHAIRPERSON: I was trying to stay away from that because I have another question on that because there is a debate as to whether that category is broad enough.
5876 But let's say, you know, that it was a category, X, Sandvine had some categories and others.
5877 MR. ABRAMSON: Right.
5878 THE CHAIRPERSON: But if you define it broadly enough you get down to a problem at one point. Because somebody -- either the marketplace will define that category and then somebody will get us to decide -- I guess we become the gatekeepers; won't that be lovely -- and/or alternatively, that, you know, there is a broad consensus as to what the broad category ought to be.
5879 But what it does is anybody who thinks they fit that very broad category gets in or can ask to get in, and so the ISP is not really making a decision other than creating a category.
5880 MR. ABRAMSON: You know, it's a difficult question. We've, I think, are on a little bit of ambivalence on some of this in terms of it's not as bad but how bad is it. That's the kind of ambivalence I refer to reflects that.
5881 You know, certainly, look, and as a small ISP and as a part of an association of small ISPs, we recognize that, you know, there's always an attempt to differentiate yourself, especially when there are very powerful competitors around. That said, you know, if we had a marketplace in which certain ISPs became specialists in a certain content category, and another in another category, again, I think we'd end up with a marketplace, which to a much greater extent, was focused on particular types of content tied to carriers rather than on innovating with respect to carriage and surrounding services, like customer support themselves.
5882 THE CHAIRPERSON: Right.
5883 MR. ABRAMSON: And I suppose our view is that that sort of market is less than optimal and is -- does not serve the telecommunications policy objectives in as good a way.
5884 And so the harm is certainly less than one -- you know, again, that engages market power and that really moves things as to what the Internet is or could be. In other words, it starts to crowd out the net neutral Internet, and that's always, you know, we would submit, the overriding question to be answered.
5885 But we certainly still do see some harms there and it's certainly what we're thinking about and will be continuing to think about all weekend.
5886 THE CHAIRPERSON: Right, but you're not to the point where you would say that that's a good idea; and therefore, you wouldn't -- would you be prepared to provide some principles that would define what a broad category would be? Or are you so against the idea of going down that road that you can't even entertain that idea?
5887 MR. ABRAMSON: We -- we're -- we don't think of ourselves as dogmatic, and so I suppose we certainly entertain the idea. We'll certainly think more about principles as to how one might flesh it out. I don't know if my colleague, Janet Lo, wants to add something on this point.
5888 MS. LO: Yeah, I was just sort of thinking back to one of the principles that we proposed, which was around gatekeeping. And as Bram mentioned, the thinking is that the more we can sort of take an ISP's discretion out of the picture the more algorithmic we can make it.
5889 And Bram mentioned API as an example. Sort of setting out criteria in advance that are objective. I think that helps everyone. It certainly helps consumers.
5890 But I sort of struggle a little bit with the idea of broad categories because I suspect that it could be very subjective from a consumer standpoint, and that's why I think we struggle with it a little internally. But we'll certainly take it back and think about it for the draft code.
5891 THE CHAIRPERSON: Because the practical issue we have in front of us is something like music services, right? And as I've asked others, the streaming can be the base of music. You could actually have a podcast of pre‑recorded -- assuming you get the copyright, I guess, because it was a recording, but let’s not worry about that. That’s somebody else’s problem. A podcast of music that you can access, or a radio -- a broadcast radio undertaking that’s heavily music-oriented. I don’t know what you do with a sports programming that has a bit of music if that goes in or not. But I guess that illustrates the difficulty of creating categories.
5892 MR. ABRAMSON: Look, we see it as extremely difficult. It is not a simple undertaking if someone -- endeavour if someone wants to take on that endeavour. We will certainly think more about how broad categories work.
5893 I think in one of our submissions we said, look, at the most, the kinds of categories that we would more have in mind would be the categories that align with port numbers, which is to say, you know, traffic that’s tagged with a certain ---
5894 THE CHAIRPERSON: Okay.
5895 MR. ABRAMSON: --- application type, rather than subjective categories that relate to characterizing something as music or as video or whatever.
5896 But I guess I should stress, that’s not to say that we think any of those things are necessarily a -- that’s certainly not how we would choose to do business at TekSavvy, but we’re trying to think more broadly about how far the marketplace ought to be allowed to go and ---
5897 THE CHAIRPERSON: M’hm.
5898 MR. ABRAMSON: --- within the common carriage kind of rubric and that’s what we’re trying to give voice to.
5899 THE CHAIRPERSON: Have you given some thought to promotional DPPs that would be I guess time limited? Is that less of a concern or more -- or do you put it within ---
5900 MR. ABRAMSON: Promotional DPPs in respect of a particular content or?
5901 THE CHAIRPERSON: A -- well, not -- well ---
5902 MR. ABRAMSON: Or particular content categories or ---
5903 THE CHAIRPERSON: Yeah, a content category, but you only do it for a short period of time. I’m not sure what “short” is but ---
5904 MR. ABRAMSON: Yeah, I mean, I don’t -- and Janet will speak to that. She spends lots of time thinking about promotions in her legal work. But I don’t know that it changes the equation very much, at least in my view.
5906 MS. LO: It makes me wonder when we’re talking about sort of time limited DPP promotions if -- it sort of raises questions for me about whether there might be affiliation agreements involved or, you know, what’s -- where is -- how is this getting monetized? It certainly raises those types of questions, which as we’ve mentioned, would put that kind of DPP potentially more risky in our framework. So those are sort of my notional thoughts on it. But I think those are probably the biggest concerns.
5907 THE CHAIRPERSON: Okay. You’ve proposed a net neutrality code that would I guess cover ITMP and a potential DPP framework. Why do think that makes sense? It reminds me of some people saying that we should have a new Communication Act, which I’m afraid will just look like the Broadcasting Act stapled to the Telecom Act and maybe under the Radio Com Act. It’s a single Act, but it has different articles.
5908 MR. ABRAMSON: Yeah, so ---
5909 THE CHAIRPERSON: Because ITMPs it’s about managing congestion while DPPs seem to increase congestion. Or not -- consumption. Let me say that instead of congestion. I think that’s a more fair word.
5910 MR. ABRAMSON: First of all, just I agree with you about the Act. I’ve read the UK Communications Act and so on and we think that the separation that we’ve talked about between carriage and content and, you know, the common carriage principles are ones that are mirrored in the structure of the different Acts and generally that’s a good thing.
5911 With respect to ITMPs in ---
5912 THE CHAIRPERSON: It’s very funny that those that advocate bringing those two Acts together are also the policy thinkers that think everything has to go through a competition law lens, but anyhow.
5913 MR. ABRAMSON: With respect to ITMPs and DPPs, you know, I suppose we see those as much more intermingled. We’ve been listening with particular attention when people talk about their non-content-oriented differential pricing practices which is to say, you know, what they’re doing around data caps and so on.
5914 And we’ve heard a number of folks say, look, our data caps are not really about managing congestion. They’re about differentiating in the marketplace. They’re about -- and we, too, they’re about not causing users of less data to cross-subsidize users with more data, providing more affordable options. And those are not always the same thing as congestion management. These things are sometimes difficult to distinguish.
5915 We heard -- I think it was PIAC who said, look, it’s not as simply as taking the ITMPs and then stapling on something about DPPs. You actually have to go back into the ITMPs themselves and think about how these things work together.
5916 And we think that’s right. We think that at the end of the day most of our customers when they see something that smells wrong that we’re doing or that anyone else is doing will say, look, there’s a net neutrality problem here. And we want to be able to think about it and to think about what’s going on and why either it is or isn’t happening, but why they think there might be something going on.
5917 And, you know, for that, we don’t know if it’s always easy to distinguish between the kinds of rules that relate to congestion and the kinds of rules that relate to differentiation. They do overlap.
5918 THE CHAIRPERSON: At paragraph 29 you’ve said:
5919 “So a player with market power should not be able to zero rate content without continuing to also to offer a non-zero-rated net neutral scheme for similar levels of traffic use.” (As read)
5920 Could you give an example? Maybe it’s a bit too theoretical for me. Maybe if you could give me a for instance that would help us understand that.
5921 MR. ABRAMSON: We’re -- I suppose we’re worried about an environment in which, you know, low levels of data use fall under an omnibus cap, a net neutral kind of cap. But, you know, a situation in which usage that goes much beyond that needs to fall into some bucket of DPP.
5922 THE CHAIRPERSON: Okay.
5923 MR. ABRAMSON: This is really part of that crowding out thesis. And to say, look, we want to make sure that, you know, if players with market power offer a whole bunch of plans that are mostly oriented towards DPP -- which clearly isn’t the case today. Were there to be a situation in which DPPs were, you know, approved or a code which allowed for them on the part of incumbents, we’d want to say at least in such a scenario cause -- and sorry, I say incumbents and I mean those with market power of course -- cause those with market power to also have to offer net neutral packages that allow similar levels of consumption. Don’t direct all high levels of consumption towards zero-rated type plans. That would crowd out the internet.
5924 THE CHAIRPERSON: Okay. You may have heard Bell’s presentation and the emphasis they put about don’t stifle innovation, but particularly with respect to the internet of things. Have you -- well, and some parties think maybe that was just a red herring because, in fact, there’s a high likelihood or that’s the view expressed that that would be done under a special service arrangement as opposed to over the general internet. So it’s over the internet -- the other internet, I guess.
5925 Do you have views?
5926 MR. ABRAMSON: We do. I do. We do.
5927 THE CHAIRPERSON: Well, I assume what you say binds the company.
5928 MR. ABRAMSON: Yes, yes. You know, with respect to the internet of things -- so I mean, look, either it will be on a one-to-one agreement between the thing provider and the connectivity provider -- like I think the Kindle example is many time -- has been raised many times, I think they used to call it Whisper Net -- or it won’t be. If it is, then that’s fine and there’s no issue of DPPs. If it’s not, then to be honest, I see DPPs as a real danger to the internet of things.
5929 I know that in my home I’ve configured many devices with my WiFi settings. I don’t know what all of them are anymore. You know, I presume -- you know, there’s an Apple TV and all the rest of it. And those are all configured to talk directly to my WiFi and those I suppose are part of the internet of things.
5930 And there’s intense competition and an intense rivalry for all those devices because it’s a global market in combined hardware and software, and there’s a lot of innovation that’s happening. If suddenly, you know, the market began to emerge such that I was only buying devices whose maker had entered into an agreement with, you know, one of the Canadian wireless providers, then I think there’d be a lot less devices to choose from.
5931 You know, the last thing -- look -- you know, and it’s been mentioned in this proceeding, the internet of things typically does not involve large amounts of bandwidth. It involves persistent bandwidth. So we want to make sure that the internet of things devices, I would have thought as a matter of policy, have every incentive to continue to use bandwidth efficiently, to use bandwidth robustly and so on.
5932 When a direct relationship is sought that involves the handing over of connectivity with kid gloves, of course, a direct connectivity agreement makes sense for that internet of things service. But otherwise, you know, the devices that I have try and grab connectivity, try and not use too much of it, try and push any heavy use to off-peak hours. And I think those are all good things. I can buy any internet of things device and it will work with my WiFi. There doesn’t have to be a special relationship.
5933 THE CHAIRPERSON: Right. And, of course, the internet of things can include B2B applications like fleet management, restocking of vending machines that have very little to do with residential internet.
5934 MR. ABRAMSON: And those are all I guess we’d all -- we’d submit and I don’t think it’d be controversial, high classic examples of direct relationships between a connectivity provider and the internet of things user.
5935 THE CHAIRPERSON: Just my last area of questions before I turn it to my colleagues.
5936 You’ve obviously advocated for some transparency to track data. Don’t you think the cost of implementing that outweighs the benefits, as some have suggested?
5937 MR. ABRAMSON: It’s hard to answer generally because, you know, every scenario has different costs, but our experience has been that acquiring the capability to do DPP’s involves acquiring the capability to meter our bandwidth.
5938 The capability to meter our bandwidth in a responsible way is not trivial. It can be expensive and it requires specialized equipment. The same is true for DPP’s. In many cases it may be the same equipment. But it’s hard for me to imagine many scenarios in which one on the one hand has the ability to do, for instance, content oriented DPP’s and yet on the other hand one doesn’t already have the ability to meter that bandwidth.
5939 THE CHAIRPERSON: And your view is that transparency should apply to all DPP’s. Is that correct?
5940 MR. ABRAMSON: Yes.
5941 THE CHAIRPERSON: And don’t you think if there is some cost to implement -- I don’t know what your accounting -- your systems look like. Maybe they already take care of it. But that might not be the case for everyone. Would requiring this kind of transparency, if there is a cost element, not be an indirect barrier and discourage the introduction of DPP’s by the back door?
5942 MR. ABRAMSON: We -- you know, two things. First, again, we see the ability to do DPP’s as inextricably linked to the ability to meter. That’s been our experience.
5943 THE CHAIRPERSON: M’hm.
5944 MR. ABRAMSON: And certainly presented with evidence to the contrary, we would rethink our -- you know, we’d be willing to rethink our position.
5945 But second of all, with -- you know, to the extent that the ability to meter the traffic on which one is zero rating becomes a cost of engaging in zero rating that may not be a bad thing.
5946 THE CHAIRPERSON: Right. And is your estimate of what that might cost on a per DPP basis -- there’s some notion yesterday that it was in the millions.
5947 MR. ABRAMSON: We heard -- I think it was Bell I want to say ---
5948 THE CHAIRPERSON: Yes.
5949 MR. ABRAMSON: --- that submitted that the cost of engaging in DPP’s I think would be in the millions or tens of -- was it Rogers?
5950 THE CHAIRPERSON: Oh, sorry, it was Rogers. Sorry, sorry, yeah.
5951 MR. ABRAMSON: I apologize.
5952 I -- my impression is that those costs would tend to cover both again the ability to do DPP’s and the metering involved.
5953 Certainly, you know, I think Sandvine appeared, and that’s the type of thing that they sell the ability to do.
5954 THE CHAIRPERSON: M’hm.
5955 MR. ABRAMSON: Now, what would be an estimate of the cost of being able to do DPP’s and meter, you know, we’re happy to undertake to look into that.
5956 THE CHAIRPERSON: But do you have relevant experience to figure that out?
5957 MR. ABRAMSON: It’s been expensive. We have experience with that and it is not cheap.
5958 THE CHAIRPERSON: Okay. Well, if you -- that might be helpful actually if you can do that, because it certainly gives a cost base for a smaller undertaking, like yourselves.
5959 MR. ABRAMSON: And just to expand a little bit, and Janet talked a little bit about this, you know, we only had unlimited plans and then we added capped -- or half capped, as we call it, plans. And the reason we did that was because at some point there was a crossover at which the cost of being able to meter the bandwidth and sell those resulting plan gave more sense, you know, given the wholesale rates we were facing, to be perfectly honest, at the time.
5960 THE CHAIRPERSON: Right. Last question; so those transparency requirements you would implement, what, through a Section 24 condition, or is it a matter of policy?
5961 MR. ABRAMSON: I mean, I know that we’ve talked about transparency and wireless billing and the wireless code, and, you know, this has come up in other settings. Top of my head I’m not sure. I’ll undertake to include that in our submissions. I don’t want to misspeak.
5962 THE CHAIRPERSON: Shorter -- those were all our questions. Shorter question and answer here, but you’ve got a lot of homework compared to some of the other folks. Appreciate it. I think we will benefit from your reflections, as always.
5963 Thank you.
5964 MR. ABRAMSON: Thanks very much.
5965 THE CHAIRPERSON: Thank you very much.
5966 Madame la secrétaire?
5967 LA SECRÉTAIRE: Merci, Monsieur le président. J’inviterais maintenant Cogeco Communication Inc. à venir à la table.
---( SHORT PAUSE)
5968 LA SECRÉTAIRE: Veuillez s’il vous plait vous présenter, après quoi vous aurez 15 minutes pour faire votre présentation. Merci.
5969 Mme DORVAL: Monsieur le président, Madame et Messieurs les conseillers, merci de nous donner l’occasion de vous présenter le point de vue de Cogeco Communication à l’occasion de cette audience publique portant sur l’examen des pratiques de différenciation des prix se rapportant aux forfaits de données internet.
5970 Mon nom est Nathalie Dorval, Vice-présidente, Affaires réglementaires et droit d’auteur et à ma droite Michel Messier, Directeur principal, Affaires réglementaires télécommunications.
5971 Nous assistons au cours des dernières années à l’émergence de pratiques de différenciation de prix liées à la facturation des données de service internet, bien que selon les informations disponibles au dossier de la présente instance, elles sont encore peu répandues au Canada.
5972 En effet, les cas des services de Télé mobile de Bell Mobilité et Vidéotron, ainsi que le cas du programme Musique illimitée commercialisé par Vidéotron ont propulsés à l’avant des préoccupations d’ordre réglementaires à l’égard des pratiques de différenciation de prix liées à la consommation de données internet.
5973 Plus précisément ces cas ont soulevés des préoccupations de discrimination potentiellement injustes associées à ses pratiques tarifaires.
5974 Nous convenons avec le Conseil qu’il est donc tout à fait souhaitable à ce moment-ci d’examiner cette question et à notre avis d’établir des balises visant à encadrer minimalement ces pratiques innovatrices de différenciation de prix dans l’intérêt public.
5975 En fait, les pratiques de gratuité liées à la consommation de données découlant d’un ou de plusieurs sites ou applications sont, selon nous, bénéfiques pour les consommateurs.
5976 Toutefois nous convenons qu’il soit possible que certaines pratiques de différenciation de prix soient dommageables pour la vitalité du marché des services de contenu internet, constituant une source de discrimination injuste.
5977 La décision du Conseil relative aux services de télévision mobile est très indicative à cet égard.
5978 En ce sens nous partageons l’objectif du Conseil poursuivi dans la présente instance visant à établir une approche réglementaire claire et transparente à l’égard de ces pratiques.
5979 Nous espérons que l’approche adoptée par le Conseil saura, autant que possible, dissiper les incertitudes existantes en cette matière.
5980 Nous comprenons enfin qu’elle s’appliquera autant aux fournisseurs des services internet mobile qu’aux fournisseurs de services filaires.
5982 M. MESSIER: Dans un premier temps, permettez-nous de vous faire part des raisons pour lesquelles Cogeco Connexion, notre filiale Canadienne opérant à titre de fournisseur de services internet filaires, n’est pas engagé dans des pratiques de différenciation de prix en cause dans cette instance.
5983 D’une part, force est de reconnaitre que cette problématique concerne d’avantage les fournisseurs de services d’accès internet mobile.
5984 En effet, comme leur facturation est essentiellement fondée sur la consommation de données, ceux-ci sont assurément plus incités à mettre en œuvre ce type de pratique tarifaire.
5985 De plus, notons que la taille de leurs blocs de données est significativement plus petite que celles des blocs de données offertes par les fournisseurs filaires. Or comme vous le savez, Cogeco n’offre aucun service mobile.
5986 D’autre part Cogeco Connexion n’offre actuellement aucun forfait internet comportant un accès gratuit aux données découlant d’une application ou d’un ensemble d’applications particulières et n’a aucune -– aucunement l’intention d’implanter ce type de pratique dans un proche avenir.
5987 En fait, l’approche retenue par Cogeco Connexion consiste plutôt à offrir la grande majorité de ses forfaits internet en fonction de deux options tarifaires.
5988 Premièrement, pour un prix plus bas, une option comportant un bloc de données particulier à chaque forfait, s’appliquant uniformément de manière non discriminatoire à la consommation de données de l’utilisateur.
5989 Et deuxièmement une option à un prix plus élevé comportant un usage illimité de données.
5990 Cette approche tarifaire satisfait non seulement nos clients qui y trouvent un choix de services et de tarifs en fonction de leurs besoins, mais, rappelons-le, constitue également une pratique de gestion du trafic internet. En effet, appliqués dans leur ensemble, les blocs de données associés aux forfaits internet offerts par Cogeco Connexion permettent de minimiser la congestion au sein du réseau, d'offrir un service internet de qualité et de livrer les vitesses commercialisées.
5991 De plus, comme l'a déjà reconnu le Conseil dans la politique réglementaire concernant les pratiques de gestion du trafic internet, soulignons que les pratiques de nature économique ne sont généralement pas considérées injustement discriminatoires lorsqu’elles lient les tarifs des services internet à la consommation de l'utilisateur final de manière transparente et uniforme.
5992 Malgré ce faible intérêt pour les pratiques de différenciation de prix liées à la consommation de données internet, Cogeco est toutefois d'avis que l'approche réglementaire découlant de la présente instance devrait permettre aux innovations en cette matière de proliférer. Bien balisées, ces pratiques devraient être reconnues comme une source de rivalité concurrentielle dans le marché des services d'accès internet au bénéfice des consommateurs.
5993 Pour ce faire, Cogeco croit en une approche réglementaire minimaliste fondée premièrement, sur l'adoption de lignes directrices permettant, sans approbation préalable, de guider les FSI -- fournisseurs internet -- dans la mise en œuvre des pratiques de différenciation de prix appropriées; deuxièmement, aussi sur la possibilité d’un recours permettant d'en appeler, au cas par cas, auprès du Conseil en vertu de l'article 27(2) de la Loi sur les télécommunications.
5994 Nous soumettons que ces lignes directrices devraient être simples et s'appuyer sur des principes d'ouverture, de non-priorisation et de transparence.
5995 Ainsi, de manière générale, lorsqu'un FSI introduit la gratuité de consommation de données pour une application de contenu internet, celui-ci devrait être tenu d'offrir aux mêmes conditions, de manière transparente et sans frais, cette gratuité à l'ensemble des fournisseurs d’applications de contenu qui appartiennent à une même catégorie de service et qui en font la demande.
5996 Pour être clair, toute pratique de différenciation de prix liée à la consommation de données visant à favoriser, via une entente d’exclusivité, un ou quelques fournisseurs de contenu internet, affiliés ou non, devrait être interdite. De telles pratiques comportent un risque trop élevé de discrimination injuste envers les autres fournisseurs concurrents d’une même catégorie de service ou d’application.
5997 Cependant, lorsque la gratuité de données offerte par un FSI concerne un site ou une application qui ne soulève pas de préoccupation concurrentielle, tel que l’accès à une application permettant de mettre à jour le système d’opération de son appareil mobile ou de vérifier sa consommation de données, nous sommes d’avis que cette gratuité devrait être autorisée d’emblée.
5998 De même, lorsqu’un FSI désire offrir gratuitement à ses utilisateurs la consommation de données liée à une application ou à un site particulier à caractère social, tel que le service relais vidéo, nous sommes d’avis que ce type de différenciation de prix est peu susceptible de créer une discrimination injuste envers d’autres fournisseurs de contenu internet, et donc devrait également être autorisé d’emblée. Par contre, en aucun cas cela ne devrait être obligatoire. Une telle initiative doit plutôt être laissée à la discrétion de chaque FSI.
5999 Enfin, de manière transparente et facilement accessible à tous les consommateurs, le FSI devrait être tenu de rendre disponible sur son propre site internet toutes les modalités de service s'appliquant à l'accès aux applications ou aux sites internet dont la consommation de données est gratuite.
6000 Finalement, en aucun cas, le FSI devrait être autorisé à prioriser sur son réseau le trafic de données internet des services pour lesquels il offre gratuitement la consommation de données.
6001 Mme DORVAL: En conclusion, nous croyons que l’établissement de telles balises permettrait de favoriser la mise en œuvre de pratiques innovatrices de différenciation de prix en cette matière et de laisser place au libre jeu du marché.
6002 Nous sommes d’avis qu’une telle approche réglementaire établirait un équilibre entre l’importance de préserver la capacité d’innover des FSI, pour mieux servir les consommateurs, tout en offrant certaines garanties que la mise en œuvre de ces pratiques de différenciation de prix liées à la gratuité des données internet ne se fasse au détriment de la vitalité concurrentielle des services de contenu internet.
6003 Bien entendu, nous ne pouvons terminer cette présentation sans aborder le cas de Musique illimitée de Vidéotron, également en cause dans le cadre de cette présente instance.
6004 Selon notre compréhension, Musique illimitée est un programme associé à une offre de quelques forfaits de service mobile qui permet à ses utilisateurs d’accéder à une gamme d’applications ou d’offres de service de lecture de musique en continu pour lesquels la consommation de données est gratuite, c'est-à-dire qu’elle n’est pas comptabilisée à l’encontre du bloc de gigaoctets associé au forfait de service mobile choisi par l’utilisateur.
6005 Selon le descriptif de Musique illimitée disponible sur le site de Vidéotron, ce programme qui comprend actuellement une dizaine de fournisseurs est ouvert à tous les fournisseurs d’application de lecture de musique en continu sous licence qui en font la demande. De plus, nous notons que ce descriptif contient plusieurs explications s’adressant aux utilisateurs sur les conditions d’accès et le fonctionnement de ce programme.
6006 Enfin, nous comprenons que les flux de données des services inclus dans le programme Musique illimitée ne sont aucunement priorisés. Par conséquent, nous sommes d’avis que cette pratique de différenciation de prix est cohérente avec les lignes directrices que nous proposons et pourrait donc être autorisée.
6007 Nous vous remercions de votre écoute et sommes maintenant à votre disposition pour répondre à vos questions.
6008 LE PRÉSIDENT: Merci beaucoup pour la présentation.
6009 Monsieur le conseiller Dupras posera les questions.
6010 CONSEILLER DUPRAS: Merci.
6011 Bonne fin d’après-midi et merci d’être là. Je sais que c'était pas initialement votre idée de comparaître à cette audience, mais vous avez fait vos devoirs et je vous remercie de votre présentation aujourd'hui.
6012 Mme DORVAL: Ça nous fait plaisir d’être ici, merci.
6013 CONSEILLER DUPRAS: Bon, vous dites que vos clients sont satisfaits de vos forfaits internet, j’aimerais ça avoir une idée depuis les dernières années là, peut-être cinq ans, est-ce que les forfaits internet que vous offrez ont augmenté en terme de capacité, est-ce qui y a eu une évolution de ce côté-là?
6014 Et comme on a demandé à d’autres, si c'était possible de nous fournir l’information là-dessus par écrit pour qu’on puisse étudier ça?
6015 Mme DORVAL: Oui, tout à fait. On a écouté les discussions cette semaine et lu évidemment pas mal tout ce qui était au dossier public. Et c'est intéressant de constater à quel point on a des discussions sur les faits que -- le fait que les data caps vont réduire, vont diminuer, et nous notre expérience est complètement à l'envers de ça.
6016 Donc, au fil des dernières années nos data caps -- les data caps qui sont offerts à nos clients sont allés en augmentant de façon -- de façon régulière. Donc ça va nous faire plaisir de déposer ça au dossier public pour que vous puissiez en prendre connaissance.
6018 Mme DORVAL: Michel, veux-tu ---
6019 M. MESSIER: Peut-être en complément. Alors les data caps on les a introduit -- juste pour donner un peu d’historique et le background de notre pratique -- en fait, lorsqu’on a participé à l’instance qui a menée au -- toute la politique sur les pratiques de gestion du traffic internet, à ce moment-là on avait beaucoup de problématique avec toutes les applications, dit « bit torrent », et par la suite avec l’instance qui a été discutée on a introduit -- c'est par la suite qu’on a introduit donc en 2009-2010 environ tous les data caps.
6020 Et c'est -- graduellement on a -- notre souci nous a toujours été de faire en sorte que les data caps soient -- s’ajustent d’année en année le plus possible, en fonction de ce que l’on voit de la consommation. Et comme vous le savez, la consommation, le traffic a augmenté de façon -- une très forte croissance, donc on a des pratiques pour ajuster, faire en sorte que on a un certain niveau pour lequel on ajuste graduellement à chaque année. Et depuis deux ans, depuis 2014, on a commencé à introduire les forfaits qui sont illimités, d’où l’option actuellement qu’on offre pour tous nos forfaits de 40 mégabit et plus sur deux -- soit avec data cap ou soit illimité.
6021 CONSEILLER DUPRAS: Et ça c'est pour tous vos systèmes?
6022 M. MESSIER: C'est-à-dire y a certains systèmes encore -- petits systèmes où on offre pas les services de 40 mégabit et plus, donc y a encore une portion de notre réseau -- comme vous le savez, le réseau est très grand, donc de la Gaspésie jusqu'à Windsor. Donc y a certains services, certains systèmes qui demandent encore à être upgradé pour lesquels on n'offre pas donc le 40 méga et plus. Donc on n'offre pas ces services-là illimités.
6023 CONSEILLER DUPRAS: De vitesse mais pour la capacité...
6024 M. MESSIER: Pour la capacité, on a tous...
6025 CONSEILLER DUPRAS: ...illimitée disponible partout?
6026 M. MESSIER: Disponible partout, on offre du 40 mégabits et plus.
6027 CONSEILLER DUPRAS: Ah, d'accord. Bon alors, vous êtes pas contre et même vous pensez que ça peut être une bonne chose d'introduire des pratiques de prix différentiels pour stimuler l'innovation dans les pratiques tarifaires.
6028 Mme DORVAL: En fait, c'est assez intéressant de voir à quel point les positions sont polarisées sur le dossier public. Et ça en soi, ça nous porte à penser qu'on devrait être très prudent dans l'approche qu'on va prendre.
6029 C'est une pratique qui est naissante au Canada et qui pourrait très certainement donner lieu à des pratiques innovantes. Et pour nous, l'idée de le bannir alors que c'est... c'est si peu présent et naissant nous paraît une mesure qui serait... qui serait peut-être pas la meilleure mesure de politique publique.
6030 Donc on pense que ça pourrait être préférable de voir au cours des prochaines années comment, de façon encadrée, une politique comme ça pourrait évoluer.
6031 Et je dirais que dans le modèle qu'on a proposé qui est donc un modèle qui donnerait ouverture pour une classe d'application à tous les fournisseurs de contenu dans cette classe-là, en excluant toute entente d'exclusivité ou toute... qu'elle soit affiliée ou non, en accordant de la transparence et en ne permettant aucune priorisation comporte trois avantages.
6032 En fait, c'est que ça prévient tout d'abord les joueurs... pour les joueurs verticalement intégrés de prioriser leur propre contenu. Évidemment, si c'est ouvert à toute une classe de contenu, le contenu qui serait priorisé par un verticalement intégré en tirerait pas d'avantage puisque les autres applications de la même classe seraient également présentes.
6033 D'autre part, ça prévient une barrière à l'entrée pour les... je vais les appeler les "edge providers", donc les fournisseurs d'applications.
6034 Et finalement, en plus on est d'avis que ça décourage la pratique de data sponsorisé parce que si quelqu'un voulait payer un ISP pour pouvoir avoir un avantage pour faire prioriser son contenu en termes de décompte de data, si la même opportunité est ouverte à tous les gens dans une classe de contenu sans payer, ça crée un désincitatif naturel à payer pour être priorisé.
6035 Donc on pense qu'y a pas de modèle parfait mais que c'est peut-être le moins imparfait des modèles auxquels on a pu penser.
6036 M. MESSIER: Si je peux ajouter une chose, pour revenir à votre question très précisément, pour nous fondamentalement notre position, à la base de notre position, on a... compte tenu de la réalité qui est très peu développée au Canada sur lequel on peut se baser présentement, on pense qu'on a besoin et on est d'accord avec l'idée d'avoir une phase d'un peu d'expérimentation tout en reconnaissant qu'y a certain nombre de... donc qui serait bénéfice pour les consommateurs. Pour nous autres, c'est d'abord le premier point, la première perspective avec laquelle on a adressé cette question-là.
6037 La deuxième était plus de dire où est le problème majeur pis on pense pour nous que le problème est principalement lié aux fournisseurs de contenu, les "edge providers" comme Nathalie a dit, qui eux peuvent se retrouver dans une situation qui, si y a pas de balise de mise sur la façon de mettre en place ces pratiques-là de gratuité, pourrait effectivement avoir des conséquences de diminuer la concurrence dans le milieu.
6038 Alors, on pense que les balises qu'on a amenées peuvent jouer ce rôle-là, pis donc permettre une expérimentation ces prochaines années, quitte à réviser dans trois à cinq ans.
6039 CONSEILLER DUPRAS: Avec des balises comme celles-là où finalement tout le monde a les mêmes droits sur le contenu et où c'est certainement le contenu le plus populaire qui va être rendu gratuit pour attirer les clients, comment est-ce que les joueurs finalement peuvent se différentier avec ces pratiques-là si tout le monde peut offrir la même chose?
6040 Là je comprends que Vidéotron offre la musique mais si c'est permis, qui dit que demain Bell offrira pas exactement la même chose?
6041 Alors, je veux dire en ayant des catégories sans exclusivité avec des services les plus populaires que tout le monde va vouloir offrir pour concurrencer l'autre, comment est-ce que c'est utile pour se différencier?
6042 Mme DORVAL: Je vais commencer et laisser Michel compléter.
6043 Je pense qu'il faut essayer de voir peut-être plus largement qu'en termes seulement de contenu et je comprends pourquoi on parle beaucoup de contenu vidéo audio.
6044 Mais on est dans le domaine des télécommunications et ce genre de programme-là pourrait permettre des expérimentations dans d'autres domaines, donc permettre que ce soit des transactions bancaires des banques canadiennes qui... dont les datas sont exemptées.
6045 Je pense qu'on a une tendance à regarder ça vraiment parce que l'exemple qu'on a devant nous peut-être est un exemple de contenu mais que la pratique pourrait être associée à des éléments ou des contenus ou des applications qui ne sont pas des contenus essentiellement de... des applications de contenu vidéo ou audio.
6046 Tu veux continuer?
6047 M. MESSIER: Ben la seule chose que je voudrais rajouter, quand vous parlez de où y aurait des fournisseurs qui sont plus présents, plus populaires, pis le fait qu'un même programme pourrait être répété par d'autres ISP, je vois pas vraiment le problème qu'un même programme soit répété.
6048 Probablement certains essaieront de se démarquer parmi d'autres, mais si le même programme est répété, i reste que dans la catégorie, ce sont les fournisseurs de services de contenu qui y trouveront leur profit et aussi les consommateurs qui dans une plus large bénéficieront dans le fond de la gratuité qui sera offerte.
6049 Mais l'important justement c'est de pas faire en sorte qu'on ait un... qu'on n'ait pas de balise et puis que ce soit seulement les plus populaires et que d'autres qui essaient d'entrer et de concurrencer ne puissent pas attirer l'attention.
6050 Je pense que, en définissant une catégorie, justement les fournisseurs qui sont moins populaires mais qui sont de même nature seront... auront là probablement une certaine vitrine, une certaine visibilité qui probablement augmentera et stimulera peut-être la concurrence à ce niveau-là.
6051 CONSEILLER DUPRAS: Et là c'est aux fournisseurs d'accès internet à déterminer la catégorie?
6052 M. MESSIER: Ben nous, effectivement dans une phase d'expérimentation, on voit pas la... j'pense qu'il serait très fastidieux de vouloir s'embarquer dans une définition de toutes les catégories qui seraient permises. En autant qu'une catégorie est bien cernée et laissons justement l'initiative dans le marché évoluer. Voyons voir... en mettant un certain nombre de balises de toute façon, chacun fournisseur va définir avec une certaine attention.
6053 Y aura aussi le recours si un fournisseur ou une partie se trouve défavorisé ou mis en cause pour intervenir, on verra l'usage qui va arriver mais je pense que si... avec ces balises-là, j'pense qu'on va diminuer la possibilité d'avoir plusieurs plaintes.
6054 Et ensuite, s'il y a des plaintes de certains cas, comme le cas de Télé Mobile a déjà dans le fond une préséance, tout le monde a une certaine ligne directrice sur ce qui est permis et pas permis.
6055 Alors, si on peut définir un certain nombre de balises pis un certain nombre de cas, ben je pense que le marché aura plus de signal et sera très prudent dans la façon de designer ses catégories qui seront ouvertes à la même... en autant que ce soit de même nature.
6056 Mais on veut pas... on n'est pas d'avis qu'on devrait avoir des catégories extrêmement larges. Sinon, ce genre de pratiques-là ne naîtront pas.
6057 CONSEILLER DUPRAS: C'est ça. Ça peut être difficile.
6058 Maintenant, pour ce qui est de la résolution de conflits justement là, si un service peut faire partie d'une catégorie ou non, avez-vous des idées comment ça pourrait se régler sans que le conseil soit obligé de s'occuper de toutes et de chacune de ces... de ces demandes?
6059 Mme DORVAL: Je pense qu'une question de résolution du conflit, en vertu de la loi qu'on a, passe probablement nécessairement par une intervention du conseil. Par contre, avec les balises mises en place comme disais Michel, et un cadre de référence au fil des décisions qui se dessineraient permettrait probablement d'avoir de moins en moins de plaintes liées à des pratiques comme ça.
6060 Et encore faut-il se le dire, si y a une frénésie ou un engouement pour ce genre de pratique, on vient d'entendre TekSavvy qui dit qu'eux, i sont pas très intéressés par ce modèle-là, Cogéco n’est pas très intéressé par ce modèle-là, donc la prémisse à l’effet que ça va se développer de façon frénésique –- frénétique et qu’on va être enseveli de conflits liés à ça je ne sais pas si c’est hypothétique ou si c’est une vision réaliste de la manière dont le marché risque de se développer.
6061 CONSEILLER DUPRAS: Merci. Bon alors ici là ça serait au fournisseur d’accès internet à établir les modalités qui seraient offertes à toutes les parties pour pouvoir participer.
6062 Est-ce que on ne veut pas craindre que il y a des modalités qui ne soient pas trop restrictives et que seulement quelques parties puissent y satisfaire?
6063 Mme DORVAL: J’imagine que si les modalités sont trop restrictives il va avoir des plaintes qui vont être déposées pour que ça soit -– que ça soit analysé par le Conseil.
6064 Donc ce qu’on -– ce dont on parle dans le fond c’est un cadre, comme je pourrais dire ex ante avec des balises et ensuite de ça si quelqu’un est insatisfait ou pense qu’il est lésé, parce que son service devrais faire partie de cette catégorie-là, il devra passer par un processus de plainte en vertu de la loi sur les télécoms.
6065 CONSEILLER DUPRAS: C’est ça et pour ça peut-être que le processus ex ante il faudrait qu’il soit un peu plus -– pas -- est-ce qu’il ne faudrait pas qu’il soit un peu plus développé pour justement faire en sorte qu’on n’ait pas de recours de beaucoup de services?
6066 M. MESSIER: Bien ce que -– la proposition qu’on fait, c’est-à-dire définir des catégories, mais des catégories avec -– sur un principe d’ouverture. Il faudrait que ça soit clair.
6067 Et quand on a voulu préciser que ce qu’on ne veut pas c’est justement que les ententes se fassent sur une base d’exclusivité, que les ententes se fassent avec seulement un ou les plus populaires, pour reprendre votre expression, mais qu’elles soient ouvertes à tous et bien connues.
6068 Donc on pense qu’avec un principe comme celui-là déjà vous mettez des balises qui sont assez – peuvent être déterminantes si il y a des plaintes. Si quelqu’un -– si un fournisseur ne -– est résistant à -– il aura à démontrer que dans le fond sur la catégorie il ne voit pas la pertinence qu’un fournisseur s’inscrit à cette catégorie-là, mais je pense ça sera tout. Ça sera là qui sera la -– le nœud de l’histoire.
6069 Mais il est -– je pense qu’il est dans tout intérêt d’un fournisseur internet qui met ça, puis qui cherche à attirer -- pourquoi on fait ce genre de pratique-là?
6070 Je pense que pour un fournisseur internet, en tout cas du moins ce qu’on -– nous on pense que est l’expérience de -– du côté de Vidéotron, ça pourrait aller chercher d’avantage de clients, d’abonnés à son -– à notre service qu’on offre pour augmenter ses parts de marché. Donc il y a un intérêt là plutôt à avoir une gamme plus ouverte plutôt que d’être strictement ciblé.
6071 Alors si il y a un intérêt justement qui serait là une -– et je reviens, donc toute la question de nous ce qu’on pense le danger c’est justement d’aller justement sur un fournisseur de contenu qui est très populaire et puis là d’évacuer les autres et donc de diminuer la concurrence dans le marché des services de contenu.
6072 C’est pourquoi le principe d’ouverte on pense qu’il est fondamental.
6073 CONSEILLER DUPRAS: Parfait, merci. Bien écoutez si vous avez d’autre chose à ajouter je vous donne l’occasion. Moi je vous remercie de votre présentation. Je n’ai pas besoin de votre -– de poser d’avantage de questions. Merci.
6074 LE PRÉSIDENT: Monsieur le Vice-président?
6075 CONSEILLER MENZIES: Désoler, je dois poser mes questions en anglais.
6076 MS. DORVAL: That’s all fine with us.
6077 COMMISSIONER MENZIES: Just a quick one. In the –- in the years ahead to what extent does this represent an opening up of a new revenue stream as opposed to being able to sell new internet connections?
6078 In most of the population that -– in the majority of the population has -– is now -– has access to internet at good speeds, notwithstanding the issues in rural remote, et cetera.
6079 But it strikes me that this may be -– the growth in that area may not be as great as it was in the past and, like I said, I’m happy to be corrected, but that these sorts of opportunities in terms of differential pricing and that, et cetera, represent a new opportunity.
6080 MS. DORVAL: I personally do not see the opportunity with zero-rating. I think you could maybe get that with sponsored data, because there would be an exchange of, you know, revenue or advantage linked to that.
6081 But as we were saying I think with the model that we’re proposing you would get a disincentive to enter into a sponsored data arrangement with an ISP if you were an edge provider because the class would be open to all other edge providers that have similar applications to enter into that class. So why would you be incented to pay to get there if the other ones are getting it for free?
6082 So I don’t see a lot of opportunity for increased revenue in that system.
6083 COMMISSIONER MENZIES: In zero-rated, but you do in sponsored data?
6084 MS. DORVAL: Well not within our model, because why -– if you do have a class of application and you have a new edge provider that would like to get into that class of application and he would offer payment for that, but you as an ISP you have to offer to other edge provider the same access without payment, so why would the edge provider be incented to pay to get there?
6085 COMMISSIONER MENZIES: No you -– unless there’s money attached there’s very little incentive, I agree. Thank you.
6086 MS. DORVAL: So I don’t see a big opportunity there.
6087 COMMISSIONER MENZIES: I just wanted to get your perspective on that. Thanks very much.
6088 THE CHAIRPERSON: Vous avez mentionné que le service de Vidéotron est une façon pour eux de faire un certain marketing, puis de bâtir leur relation avec leur clientèle ou d’attirer de la nouvelle clientèle, pourquoi qu’il ne pourrait pas, je ne sais pas moi, donner un coupon de rabais chez St-Hubert ou même payer des frais d’abonnements pour Spotify plutôt que possiblement faire violence à la notion de la neutralité du net?
6089 Mme DORVAL: Je ne suis pas certaine que je suis d’accord avec la prémisse que ça fait violence à la neutralité du net dans ce sens que personne ne touche à la capacité du contenu d’entrer, personne ne touche à la capacité pour l’abonné de recevoir le contenu et personne ne touche au contenu lui-même.
6090 Donc c’est une pratique de différentiation de prix qui à mon avis ne permet pas d’intervenir ou d’influencer le contenu.
6091 Donc je ne suis pas certaine que je suis d’accord avec l’idée que ça influence ou que ça atteint ---
6092 LE PRÉSIDENT: Mais quand même ---
6093 Mme DORVAL: Ça atteint ---
6094 LE PRÉSIDENT: Quand même il y a un choix éditorial qui est fait d’inclure des services de musique en continue, mais peut-être pas un podcast bien de d’autre diffusion de musique ou encore même une de vos stations de radio?
6095 Mme DORVAL: Est-ce qu’on peut dire que c’est un choix éditorial de déterminer une classe d’application, puis ensuite de donner ouverture et laisser à tous ceux qui veulent y entrer la possibilité d’y entrer?
6096 LE PRÉSIDENT: Bien c’est clair que les entreprises de radiodiffusion ne sont pas inclues dans cette classe.
6097 Mme DORVAL: Oui, mais je pense qu’à ce moment-là il faut se demander quel est -– puis on est bien placés pour s’être posé la question est-ce que la classe est claire?
6098 C’est une classe à notre avis de musique de service -– de service de musique en continue. Est-ce que la radio est une musique de -– un service de musique en continue?
6099 Donc moi si je cherche à avoir de la musique en continue est-ce que je me -– est-ce que je me branche sur CKOI? Je pense que après ça ça devient une question de faits et d’appréciation, mais pour nous la radio et la -– un service de musique en continue ne sont pas des substituts.
6100 Et là je ne dis pas qu’ils ne sont pas concurrentiels. Je ne dis pas que -– je ne dis pas que Cogéco aimerait pas être dans le service de musique illimité.
6101 LE PRÉSIDENT: M’hm.
6102 Mme DORVAL: On aimerait ça être partout. On aimerait ça que la FM chip soit activée. On aimerait ça, mais est-ce que en vertu de la classe qui est déterminée objectivement c’est une classe de radio? On pense que non.
6103 LE PRÉSIDENT: Mais vous posez cette question-là comme un fournisseur et non pas comme un abonné potentiel qui se voit dicté à un certain niveau que un certain comportement ne compte pas contre le débit, mais un autre oui.
6104 Mme DORVAL: Mais cet abonné-là qui veut écouter CKOI il peut quand même avoir l’application de CKOI. Il continue à l’écouter. Le contenu n’est pas bloqué.
6105 LE PRÉSIDENT: Sauf ça compte contre son forfait?
6106 Mme DORVAL: Oui. Oui. Donc dans un cas il y a un avantage, il y a une promotion pour une certaine classe de service et il n’en n’a pas pour une autre.
6107 Et est-ce que quelque chose empêcherait Rogers de faire une classe pour les services de radios Canadiens? Non.
6108 C’est certain qu’on ne peut pas avoir une classe universelle qui va faire entrer tout ---
6109 LE PRÉSIDENT: Sauf que Rogers c’est dit défendeur du principe de la -– peut-être mauvais exemple-là.
6110 Mme DORVAL: Bon c’est un mauvais exemple.
6111 LE PRÉSIDENT: Oui. Ils sont arrivés à de radio canadien? Non. C'est certain qu’on peut pas avoir une classe universelle qui va ---
6112 LE PRÉSIDENT: Sauf pour Rogers ---
6113 Mme DORVAL: --- faire entrer tous ---
6114 LE PRÉSIDENT: --- qui s’est dit défendeur du principe de la -- peut-être un mauvais exemple?
6115 Mme DORVAL: C'est un mauvais exemple.
6116 LE PRÉSIDENT: Oui.
6118 LE PRÉSIDENT: Oui, ils sont arrivés à cette question-là d’un autre point de vue.
6119 Mme DORVAL: Oui, oui, vous avez raison, c'est un mauvais exemple.
6120 LE PRÉSIDENT: Mais je prends -- je comprends là ce que vous dites, que quelqu'un d’autre pourrait faire une autre classe, mais à quel point vous cessez d’être un « common carrier » -- il est trop tard dans la journée pour me rappeler des termes en français là -- plutôt que ---
6121 Mme DORVAL: On l’a cherché, c'est pas simple.
6122 LE PRÉSIDENT: C'est pas simple, oui. Bon, toujours est-il plutôt que -- ça ressemble beaucoup plus à une entreprise de télédistribution où on influence où on distribue du contenu?
6123 Mme DORVAL: Encore une fois, je pense que le principe de « common carrier » qui consiste à la connectivité et à transporter du data est pas tant affecté. Là ou un ISP dirait, « Moi je fais une classe de service de station de radio sans avoir après ça d’incidence sur quelles sont -- l’espèce de contexte éditorial où je vais décider que ça va être telle station, telle station, telle station. » Et là c'est sûr qu’on est dans les nuances.
6124 C'est pas simple, la question est pas simple, la question devant vous est compliquée. Je pense pas qui a de solution parfaite, y a pas de modèle parfait. Mais en même temps, comment en terme de politique publique qu’on peut arriver à une situation où on va permettre à des nouvelles innovations de pouvoir prendre forme sans bannir une pratique qui peut comporter des désavantages, mais qui pourrait être bénéfique dans certaines situations?
6125 LE PRÉSIDENT: M'hm.
6126 Mme DORVAL: C'est pas simple.
6127 M. MESSIER: Si je peux ajouter, une des grandes différences je pense, le principe d’ouverture est très important dans la -- comme principe qui définit les classes. Donc c'est pas le ISP qui choisit qui va faire partie de cette classe-là. Il se doit une ouverture de tous ceux qui sont -- qui offrent -- qui sont de même -- qui offrent des services de même nature. Il me semble que c'est un peu différent de ce que -- la façon dont exerce actuellement un fournisseur de -- une entreprise de distribution de services qui elle fait des arrangements et va offrir un paquet de services aux clients pour un certain prix. Et donc ---
6128 LE PRÉSIDENT: Qu’arriverait-il si la catégorie ---
6129 M. MESSIER: --- le niveau d’éditorial ---
6130 LE PRÉSIDENT: Oui?
6131 M. MESSIER: --- choisi me semble être très minime à ce ---
6132 LE PRÉSIDENT: Qu’arriverait-il si la classe définie était des services en continu de musique, mais seulement de la musique classique?
6133 Mme DORVAL: Moi je pense qu’à partir du moment où y a pas d’avantage indu, donc la personne -- l’entreprise de télécommunications qui met ça en place le fait pas en s’avantageant, et donc si cette entreprise-là a pas de services de musique classique ---
6134 LE PRÉSIDENT: Y a quand même un avantage.
6135 Mme DORVAL: Lequel?
6136 LE PRÉSIDENT: Mais ---
6137 Mme DORVAL: Y a un avantage pas pour l’entreprise elle-même, y en a une pour ses abonnés ---
6138 LE PRÉSIDENT: Y a peut-être pas un avantage ---
6139 Mme DORVAL: --- y en a ---
6140 LE PRÉSIDENT: --- par rapport à d’autres lignes d’affaires, mais y a un avantage parce que ils le font pour une raison. Ils le font pour aller chercher des clients, pour attirer, les retenir, les garder dans leur giron plutôt qu’aller vers un compétiteur. Y a quand même un avantage.
6141 Mme DORVAL: Oui, mais y a pas de -- y a pas d’avantage financier nécessairement relié à tout type de pratique qui pourrait être innovante. J’en reviens -- tout à l'heure je disais pourquoi pas zero raté (sic) les données qui sont associées avec les transactions bancaires pour les banques canadiennes?
6142 Si le ISP ne reçoit pas de contrepartie financière, de « sponsored data » pour faire ça, est-ce que ça peut pas être pour une utilité -- un service public, pour des causes sociales? Il me semble que ---
6143 LE PRÉSIDENT: Mais mettez-vous à la place de l’abonné.
6144 Mme DORVAL: Oui.
6145 LE PRÉSIDENT: L’abonné a un -- y a un désavantage parce que l’abonné qui veut pas avoir de la musique en continu -- on va rester sur cet exemple-là -- se trouve à recevoir quelque chose qui n’est pas utile pour cet abonné-là, mais n’a pas l’avantage d’avoir un autre type de contenu en continu ou même d’avoir un prix plus bas. Y a un choix qui est fait pour l’abonné.
6146 M. MESSIER: Je comprends, mais dans quelle mesure l’abonné qui fait pas ce choix se trouve pénalisé? Il n’est pas plus pénalisé. Tout simplement qu’il ne peut profiter de -- il n’a pas d’intérêt à profiter ça -- de profiter de cette offre-là parce que c'est pas un mélomane ou -- pour prendre cet exemple-là. Mais en quoi est-il vraiment pénalisé puisqu’il peut continuer d’accéder à tous les autres sites, à tous les autres au même prix?
6147 Et si il n’est pas satisfait, y a aussi dans le marché allez voir -- il peut aller voir ailleurs se trouver un forfait qui lui convient mieux. Je pense qui a quand même une possibilité de choix. Donc, ça nous apparaît vraiment comme étant -- je vois pas la -- le désavantage que l’ensemble des -- ou que les clients des fournisseurs internet qui ne sont pas intéressés par -- de profiter de ce bénéfice-là, se trouvent vraiment pénalisé.
6148 Mme DORVAL: Et là on a peu d’exemple devant nous parce que comme on le sait, c'est une pratique naissante. Donc je pense pas qu’on peut aujourd'hui réussir à imaginer toutes les pratiques qui pourraient résulter de l’autorisation de baliser -- de rentrer dans ce genre d’opération ou d’arrangement.
6149 Mais si on en revient au modèle qu’on a devant nous -- et puis là corrige moi si j’ai tort -- mais je pense que dans l’offre de Vidéotron c'est associé à un de leur produit de mobilité, donc d’un abonnement. J’imagine que si le client s’abonne à ça, c'est qui y voit de façon générale un avantage, sinon il se tournerait vers un autre forfait où ce type d’arrangement-là est pas offert.
6150 LE PRÉSIDENT: Ou il se retrouve avec ça puis il le savait pas, mais on lui a vendu ça sans lui proposer autre chose. C'est un peu -- c'est une question de philosophie, c'est l’enjeu clé dans l’audience là, mais vous avez votre point de vue. Je pense que je comprends bien votre façon de voir.
6151 Voulez-vous rajouter ---
6152 M. MESSIER: La seule chose que je voudrais ajouter, je pense que lorsqu’on prend un forfait internet, on achète un forfait internet pour avoir un accès à tout le contenu qui existe sur l’internet. Donc d'abord et avant tout, ça. Et c'est dans ce sens-là que c'est important que les règles qui ont été adoptées sur les pratiques de gestion du traffic internet continuent à s’appliquer de façon très claire, puis qui a pas de priorisation de traffic en plus là-dedans. Mais on achète d’abord -- et je pense que un consommateur qui veut souscrire et qui souscrit à un forfait internet, c'est parce qu’il veut accéder à l'ensemble.
6153 Si en plus on lui dit, « Ben, si t’aimes la musique puis tu veux aller voir, mais ça ça comptera pas », c'est comme un plus. Peut-être pour certains segments du marché qui sont visés, ils vont plus être intéressés, puis là -- donc là c'est un outil de marketing principalement pour les fournisseurs internet. Mais cet outil-là ne pénalise peu -- pas du tout tant qu’à moi les autres clients.
6154 LE PRÉSIDENT: C'est peut-être plus une question du domaine du sans fil, parce que il semble -- puis certains autres l’ont mentionné -- que dans le domaine du sans fil on semble compétitionner sur les bidules, sur les offres accessoires. Mais quand sera le jour où on compétionne sur le service de télécommunications par son prix et sa qualité -- on compétionne sur les paramètres autour plutôt qu’à l'essence même du service de télécommunications parce que j’imagine que les -- ceux qui font les analyses financières sur Bay Street paniqueraient si le coût par abonné baissait.
6155 Mme DORVAL: Comme vous le savez, on n’est pas dans la mobilité.
6156 LE PRÉSIDENT: Exactement, mais parfois vous allez sur Bay Street.
6157 Donc ce sont, je crois, nos questions pour ce soir. Merci de rester tard et merci d’être là. C’est quand même important, vous êtes une entreprise d’importance et opérez dans deux marchés, Québec-Ontario, et puis en plus dans deux marchés linguistiques, donc c'était bien de vous voir présent. Donc je vous remercie beaucoup.
6158 Mme DORVAL: Merci.
6159 LE PRÉSIDENT: Et nous -- écoutez bien attentivement, nous sommes ajournés jusqu’à 8h30 demain matin. So listen carefully, we’re starting at 8:30 tomorrow morning. Not 9 o’clock, 8:30, all right.
6160 So -- en ajournement jusqu’à 8h30. Eight thirty (8:30) tomorrow morning.
6161 Thank you.
--- Upon adjourning at 5:28 p.m./
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