Mark Goldberg

The Canadian Telecom Summit

Fox Group Dispatch

2016 ISP Summit
2016 ISP Summit
Nov 7-9, 2016

Reflecting on my back pages

I’ll be taking a little unscheduled time away for the next couple weeks for some important family time.

Unfortunately, the timing means I will be out of the country when the CRTC begins the oral phase of its “Examination of differential pricing practices related to Internet data plans.”

I have written extensively about those kinds of issues over the past few years. Links to many of those posts can be found in my piece from last week, “Differential pricing is about consumer choice.”

A variety of events have been making me think about “My Back Pages”, written by this year’s Literature Nobel Laureate Bob Dylan in 1964. In my view, the best performance of that song was when Bob Dylan joined Roger McGuinn, Tom Petty, Neil Young, Eric Clapton and George Harrison at the 30th anniversary concert in October, 1992 at Madison Square Garden. That evening gathered quite a mix of artists and I highly recommend the concert video.

Last week, I marked 36 years since I started working full time in telecommunications. By the time I started work in the fall of 1980, this composition was already 16 years old.

Ah, but I was so much older then, I’m younger than that now.

My Back Pages
Bob Dylan
Crimson flames tied through my ears
Rollin’ high and mighty traps
Pounced with fire on flaming roads
Using ideas as my maps
“We’ll meet on edges, soon,” said I
Proud ‘neath heated brow
Ah, but I was so much older then
I’m younger than that now

Half-wracked prejudice leaped forth
“Rip down all hate,” I screamed
Lies that life is black and white
Spoke from my skull. I dreamed
Romantic facts of musketeers
Foundationed deep, somehow
Ah, but I was so much older then
I’m younger than that now.

Girls’ faces formed the forward path
From phony jealousy
To memorizing politics
Of ancient history
Flung down by corpse evangelists
Unthought of, though, somehow
Ah, but I was so much older then
I’m younger than that now

A self-ordained professor’s tongue
Too serious to fool
Spouted out that liberty
Is just equality in school
“Equality,” I spoke the word
As if a wedding vow
Ah, but I was so much older then
I’m younger than that now

In a soldier’s stance, I aimed my hand
At the mongrel dogs who teach
Fearing not that I’d become my enemy
In the instant that I preach
My pathway led by confusion boats
Mutiny from stern to bow
Ah, but I was so much older then
I’m younger than that now

Yes, my guard stood hard when abstract threats
Too noble to neglect
Deceived me into thinking
I had something to protect
Good and bad, I define these terms
Quite clear, no doubt, somehow
Ah, but I was so much older then
I’m younger than that now

Should CRTC end its parallel tax system?

As Heritage Minister Joly continues to explore a range of options as part of the “Canadian Content in a Digital World Consultation,” we understand that most options are still on the table, but certain schemes – such as a “Netflix tax” – have already been ruled out.

Still, it seems extremely unlikely that there will be a new tax on internet access services, but quite possible to see the federal government apply its Goods and Services Tax (a value added sales tax) on all foreign digital services. This would align with a global trend to uniformly apply taxes on digital services – foreign and domestic. This would bring revenues into the federal finance department and then disbursements would presumably also come from the overall government budget.

The CRTC currently oversees a number of funding programs, on both the telecom and broadcasting side, that operate somewhat independently of the government’s plans and priorities.

For example, there has been an explicit subsidy regime, the National Contribution Fund, that was established to tax telecommunications services and distribute the funds to subsidize local phone service in high cost areas. Last year, the CRTC decided to allocate $5.5M from that fund in order to pay for Video Relay Service.

On the broadcast side, we have a variety of funds that tax revenues from broadcast distributors and subsidize Canadian media development, as well as a form of tax applied on broadcast acquisitions known as Tangible Benefits.

Is the CRTC administration of funding for social priorities an outdated artifact of a long past monopoly era?

When there was just one phone company and one cable company in an area, it didn’t make a difference who collected the tax revenues or who distributed those funds. Adding a few percent to the cost of monopoly communications services was a way for the government to fund related social programs without raising income or sales taxes.

But with so many sources of competition for voice and video communications, the CRTC’s taxation system is not applied uniformly. There are lots of voice services that are exempt from paying into the contribution system; there are lots of video services (such as Netflix and YouTube) that are exempt1 from funding Canadian content creation.

Why aren’t these subsidies being administered by the relevant government departments?

We have recently seen the situation with the launch of Video Relay Services where the Minister of Sport and Persons with Disabilities said:

We believe people with disabilities should be able to fully participate in Canadian life as easily as anyone else. I understand what a difference it makes in a person’s life when they have the tools they need to succeed. So I am very pleased to see the launch of Canada’s Video Relay Service. This is a big step in the right direction.

There is no question that Video Relay Service is an important tool enabling many people to participate more fully in Canadian life, and it is reassuring to see the Minister affirm the Government’s support. That makes me wonder why the funding didn’t come from the Minister’s departmental priorities. Instead, we effectively have an internet app being funded by a tax generated from legacy telecommunications services.

The CRTC funding systems depend on artificially increasing the cost of old world services, creating a further incentive for consumers to migrate to new media and internet-based substitutes that aren’t paying into the tax system. As more users migrate, the funding comes from an ever shrinking pool of people, continuing to increase the per-user charge, further fueling migration.

As the government explores changes to its tax system to deal with digital services, perhaps it is time to end the pseudo-taxes being applied and distributed by the CRTC. Let the relevant Departments and Ministries administer the social subsidies and programs and level the play ground for competing services. And why don’t we leave tax collection to the finance department.

1 The Digital Media Exemption Order (DMEO), revised last year, exempts services such as Netflix and YouTube, and hybrid services such as Crave TV and shomi, from most obligations imposed on traditional broadcasting services.

Differential pricing is about consumer choice

Why would groups that claim to represent consumers argue against the choice of services that can help save money?

I really don’t get it.

The CRTC is preparing for its “Examination of differential pricing practices related to Internet data plans,” with an oral hearing opening on October 31. Differential pricing refers to the practice by some Internet Service Providers (ISPs) to apply different metering rates to some data. Examples may be for certain types of data to be carried for free (such as customer account inquiries, anti-virus software or operating system updates, or emergency messaging) or for some applications to be flat rated (such as certain social networking apps, or some music or video programming).

Intellectually, I can somewhat understand the arguments from architectural purists who simplistically believe that all bits are the same, none should ever be blocked and all must be priced the same. I disagree with that perspective and lots of counter-examples can be identified that shatter the purity of their model to the point where their argument should be considered to be quaint and out-dated.

At the root of their argument is a view that all data plans should be unlimited and prices should be lowered to the point that limited free or flat rated plans are meaningless.

I can understand that argument. It is simplistic and impractical in the real world, but at least I can understand their argument.

But when this same argument is adopted by “consumer groups”, it confuses me.

The “Equitable Internet Coalition”, composed of the Consumers’ Association of Canada, the Council of Senior Citizens Organizations of British Columbia, the British Columbia Public Interest Advocacy Centre, the National Pensioners Federation and led by the Public Interest Advocacy Centre (“PIAC”) submitted an intervention to the CRTC that argues: data caps are an un-necessary evil; data caps are becoming more difficult to justify; data caps do not address issues of congestion; and, data caps do not ensure pricing fairness. The coalition says “differential pricing plans are not a sign of, or response to, competition, but instead they may be a symptom of a lack of competition, manifested in the existence of data caps in the first place.”

What the consumer groups failed to acknowledge is data volumes have variable incremental costs, most significantly pronounced on mobile networks; and, offering varying levels of data usage tiers (including unlimited data, in some cases) provides consumers with more options. logically, lower data usage tiers are priced at lower rates than plans that offer higher levels of data. So, when the coalition cites the United Nations Special Rapporteur on Human Rights on the importance of broadband internet access, I am confused that these representatives appear to want to remove lower cost options from the marketplace.

The coalition says “many low-income households struggle with the affordability of communications services”. With that, I completely agree. We need to find communications options that improve the affordability of communications services for low-income households. For more than 8 years, I have challenged the industry to develop sustainable solutions to help address this problem.

But, the coalition’s position, “without data caps, there would be no need for differential pricing practices” simply misses the mark. Abolishing data usage tiers results in reduced choice for consumers, reducing the ability to find lower priced options for consumers who don’t need or don’t want to pay for an unlimited plan.

Indeed, advocating to eliminate the option of various levels of data usage tiers seems to contradict a recommendation in PIAC’s July, 2016 “No Consumer Left Behind Part II” study [pdf, 3.5MB]. In Section 6, How to Solve the Affordability Problem, PIAC writes “Because affordability concerns a household’s control over their budget, affordability is also about choice which allows a household to access a service offering which meets their needs”:

Mandated service offerings can provide some assistance by offering a low-cost package based on features established by the regulator or elected officials to low-income users. However, these types of offerings do not take into account the diverse needs and levels of usage of low-income households. Rather, they tend to constrain low-income subscribers to a prescribed means of accessing and using communications services. This does not conform with the view of affordability as tied to the concepts of choice and control — low-income users should have the flexibility to choose the services and features which meet their household’s needs.

However, as communications services become more essential, mandated service offerings may — similar to the “skinny” basic television package — play a role in ensuring that a reasonably-priced entry-level package is available to all Canadians.

Let’s be clear. We can have an academic debate about the effectiveness of data tiers as a traffic management tool, but it would be absurd for the CRTC to ban such pricing models because it is a legitimate way for service providers to choose to monetize their investments: people who use more, pay more. Banning such pricing options will inevitably lead to higher prices for those who have elected to subscribe for limited data.

How can organizations claiming to represent “the interests of residential consumers, and in particular low-income groups” be acting to eliminate lower priced options for their stakeholders?

The Competition Bureau says:

Differential pricing can influence the fundamental choices that consumers make. When an Internet Service Provider (“ISP”) makes one product available at a lower cost than others, consumers may be incentivized to switch to that product. This is not always bad. In fact, discounting is an important strategy that businesses use to compete.

The Bureau says the CRTC should prevent ISPs from applying differential pricing that involves content with which the ISP is affiliated.

I have written extensively on these issues over the years:

As I wrote in 2011, “It is difficult to understand how consumers can benefit from restrictions in the types of offers available to them.”

There are other postings as well. In particular, it might be interesting to review “The state of connectivity,” posted February 29, 2016. That post describes a report released by Facebook and Analysys Mason that includes a description of key barriers to internet access.

Facebook submitted a short piece of evidence in the current proceeding, stating “Differential pricing – in particular, zero rating – is an important tool in the development of innovative offerings that can also help to address social needs such as bringing more unconnected people online.”

Facebook argues “there is no inconsistency between the core principles of net neutrality – including restrictions against operators blocking or throttling content – and permitting zero rating
arrangements.” Facebook says the CRTC should allow differential pricing arrangements to develop “using criteria that encourage innovation and protect consumers.”

While Facebook did not request the opportunity to appear at the public hearing, the Agenda indicates Facebook is scheduled for November 1.

The proceeding examining differential practices could impact the ability for service providers to innovate and offer choices to consumers.

It will be worth following.

Internet for good

TELUS has launched Internet for Good, providing low-cost internet to low income single-parent families in British Columbia. The pilot program targets households on income or disability assistance from the province.

In the coming weeks, about 18,000 single-parent families in BC will receive a coupon code in the mail that will allow them to activate internet service for $9.95 a month, with speeds of up to 25 megabits per second, with 300 GB of data. This pilot program is funded entirely by TELUS, at no cost to the government or to taxpayers.

Program participants will have access to TELUS WISE, an initiative launched just over 3 years ago to educate Canadians about Internet safety, equipping families with tools to have conversations with their children about online and smartphone safety.

TELUS is collaborating with BC Technology for Learning Society and Decoda Literacy so that families who participate in the program are equipped to access the wealth of internet resources. Through the BC Technology for Learning Society, families who cannot afford a computer will have the opportunity to purchase a refurbished desktop computer or laptop at a greatly reduced rate, and Decoda Literacy will help interested program participants enhance their digital literacy skills.

Internet for Good is a complete package: dramatic price savings on broadband internet access; low cost devices; and, training on how to make use of the internet, including safety.

As my frequent readers know, more than half of Canadian households with incomes below $30,000 don’t have home internet. Of these, 44 per cent cite cost, lack of a connected device and digital illiteracy as the barriers to their connectivity. Internet for Good joins Rogers’ Connected for Success program in trying to encourage increased adoption among disadvantaged households.

TELUS is currently working with the Alberta government, intending to expand Internet for Good before the end of the year. To get more information about Internet for Good, including details about how to qualify for the pilot program, the TELUS website has additional details.

Among the challenges for developing offers to target low income households is how to identify them. That is why Rogers launched its program for residents Toronto Community Housing, and recently expanded it to Rogers entire cable foot print in Ontario, New Brunswick and Newfoundland & Labrador, for any household living in rent-geared-to-income non-profit housing. In the case of TELUS Internet for Good, the Government of British Columbia is sending a mail-out to eligible single parents on income or disability assistance informing them about the pilot program; no personal information has been shared with TELUS.

Hopefully, other carriers will continue to develop similar programs to increase adoption in low income households across the country, one province at a time.

If only we had a national digital strategy.

Building a broadband research agenda

Last month, the National Telecommunications and Information Administration (NTIA) and the National Science Foundation (NSF) requested public comments to “inform the development of a National Broadband Research Agenda” for the United States [Formal Notice in Federal Register].

This Agenda will reflect the most significant opportunities for data collection, analysis, and research to keep pace with, and take advantage of, the massive digital changes that permeate our economy and society.

In its comments, the US Telecom Association (USTelecom) observed “33 million households (27 percent of all U.S. households) did not use the internet at
home and 26 million households—one-fifth of all households—were offline entirely, lacking a single member who used the internet from any location in 2015.”

USTelecom says “Understanding the factors that contribute to the broadband adoption gap is the key to helping close the digital divide.”

In particular, USTelecom suggests the National Broadband Research Agenda explore which types of programs to increase broadband adoption have been successful and why, as well as how such programs can be evaluated to determine effectiveness? In addition, USTelecom says further research is needed to explore methodologies used to identify non-adopters.

USTelecom asks NTIA to examine the types of initiatives that might help address the relevancy issue for those households that claim no interest or no need for internet connectivity. It also suggests that research is required to explore the role government can or should play in supporting effective broadband adoption programs?

Canada has similar needs for serious research into why people don’t subscribe to broadband. Billions of tax dollars have been spent (and hundreds of millions more are planned to be spent) to subsidize rural broadband, with virtually no government attention to low adoption among low income households. To what extent is there a need for enhanced digital literacy and is there a role for government in that effort?

The comments from all of the parties can be found on the NTIA website.

As Canada invests in its Innovation Agenda, there is a gap in understanding why nearly 1 in 6 Canadian households has no broadband connection. There is an opportunity for better understanding to emerge from a Canadian broadband research plan.