Mark Goldberg

Roadblocks for an innovation economy

An article yesterday in the Washington Post by Larry Downes says that the net neutrality debate has missed the point.

How did we get here?  Despite the doomsday scares of a technology apocalypse, the current fight over who and how to regulate the Internet is not about the future of innovation, Internet access, broadband pricing, competition, fairness, or motherhood. It’s something much less exciting, though, depending on the outcome, much more dangerous.

Downes’ conclusion, “At best, a full or partial government takeover of Internet access would almost certainly slow future network evolution” sounds similar to what I wrote in 2008 in a post called “Can net neutrality limit innovation?

Canada led the world in introducing enforceable net neutrality regulations when the CRTC introduced ITMP protocols for the implementation of internet traffic management in 2009.

Eight months earlier, in February 2009, in its Digital Britain strategy document, the UK said there was no need for net neutrality legislation. The UK was concerned that net neutrality regulation might prevent pricing innovation, differentiation of offers and serve to discourage investment in higher-speed access networks.

In its review of Mobile TV services, we see the CRTC’s regulatory forum being used to discourage precisely the kinds of pricing innovations that concerned the UK authorities. Downes wrote in his article in the Washington Post, “Just as taxicab companies are using regulators to stop Uber and Lyft, and hotels are lobbying for prohibitions on Airbnb, Netflix is using the net neutrality debate to improve its own bottom line.”

My views on Canada’s anti-spam law (CASL) are well known. I don’t think that it is a source of pride for Canada to have the democratic world’s toughest anti-spam regime. See, for example: “CASL is indefensible” and “CASL costs consumers“. As early as 2008, I warned “Worst case will see us get it wrong and introduce costs on legitimate businesses while doing nothing to stem the flow of the real garbage filling our inboxes.” In 2010, I wrote, “the bill would be better titled the Electronic Commerce Restrictions Act: it discourages many efficiencies that should be available to businesses of all sizes in reaching out to new customers.” CASL is yet another inhibitor for Canadian businesses to adopt digital technologies, and as I wrote earlier this summer, we should be wondering if CASL will limit the development of new technologies.

The CRTC’s own focus groups found that Canadians thought the Commission was “playing catch-up most of the time. The industry it regulates is changing so fast that the Commission never seems to be ahead of the change and is more reactive than proactive.”

This impression is a reality of attempting to regulate in the light-speed of our evolving digital economy.

Earlier this summer, Khosla Ventures had a “fireside chat” with Google co-founders Larry Page and Sergey Brin. They were asked “Can you imagine Google becoming a health company?” Brin replied:

Generally, health is just so heavily regulated. It’s just a painful business to be in. It’s just not necessarily how I want to spend my time. Even though we do have some health projects, and we’ll be doing that to a certain extent. But I think the regulatory burden in the U.S. is so high that think it would dissuade a lot of entrepreneurs.

The zeal with which regulators and legislators have intervened in Canada’s digital economy should be a concern to all of us. Is regulation protecting competition or competitors? Is regulation safeguarding consumers or building roadblocks for innovation?

In 2006, a Directive was sent to the CRTC [Order Issuing a Direction to the CRTC on Implementing the Canadian Telecommunications Policy Objectives]. At that time, Canada’s cabinet called for the CRTC to “rely on market forces to the maximum extent feasible as the means of achieving the telecommunications policy objectives, and when relying on regulation, use measures that are efficient and proportionate to their purpose and that interfere with the operation of competitive market forces to the minimum extent necessary to meet the policy objectives.”

Are we seeing regulatory measures from the CRTC and Industry Canada that are as “minimally intrusive and as minimally onerous as possible?”

As I wrote last year (echoing calls from two years earlier), we are long, long, long overdue for a fresh look at Canada’s telecom policy.

3 comments to Roadblocks for an innovation economy

  • The “pricing innovation” you refer to is no innovation, rather it is an anti-competitive cross subsidy. As you know these types of practices had to be removed in order to introduce long distance competition. Why should an exception be made for vertically integrated ISPs/BDUs/WSPs/Programmers today?

  • Quite an allegation to make. I recall similar pricing innovations in the early days of smart phones, like unlimited email or social media apps.

    Not anti-competitive in any way, but trying to get people to look at their devices and network connectivity in new ways.

    Check out pricing for limited mobile TV in other markets.

  • It’s fine for carriers to experiment and to innovate, but their practices can not step outside the bounds of section 27(2).

    The record of the mobile TV proceeding amply demonstrates that the carriers’ apps are delivered under similar circumstances as all other apps (i.e. they are not differentiated by separate channels/capacity). Giving preferential caps to carrier mobile TV services is not justified so long as other network access is subject to greater restriction based on the proposition that network capacity is scarce and greater use demands greater payment.

    Additionally, a cursory survey of American providers offering mobile TV services shows that their apps count toward data caps.