Mark Goldberg


www.mhgoldberg.com





Fox Group Dispatch

Zero-rating is “pro-competition” and “pro-innovation”

Zero-rating is “pro-competition” and “pro-innovation” according to FCC Chair Tom Wheeler.

In an article under a banner of “Ministry of Innovation / Business of Technology”, Ars Technica reports that Tom Wheeler praised T-Mobile’s program that exempts certain online video services from data caps, under its new Binge On service.

If anyone were to file a complaint against T-Mobile’s video exemption, Wheeler doesn’t seem likely to stop the practice.

“Its clear in the Open Internet Order that we said we are pro-competition and pro-innovation,” Wheeler said today. “Clearly this meets both of those criteria. It’s highly innovative and highly competitive.”

The CRTC is currently holding an inquiry into whether to prohibit Videotron’s “Unlimited Music” offering that exempts data metering of certain music services. In January 2015, the CRTC shut down mobile TV services from Bell and Videotron that offered video programming on the basis of flat rate charges per hour rather than charging for data consumed.

A few years ago, I wrote

It is difficult to understand how consumers can benefit from restrictions in the types of offers available to them.

How can it possibly be in the interest of end-users to have only one price structure in the marketplace?

In another post, “Zero is better than nothing“, I wrote “Consumers can benefit greatly from creative, competitive, targeted pricing plans. Regulators need to be careful imposing restrictions on the evolution of business models.” Those words came out 2 weeks before the CRTC took away choice for Canadian consumers to have mobile TV.

Banning zero rating has the result of raising prices for some consumers and lowering prices for no one.

The FCC is making it clear that it won’t stand in the way of innovative pricing models. A month ago, I asked “Does CRTC policy inhibit investment“?

Will the CRTC continue to deny Canadian service providers the opportunity to offer consumers the choices of services available to Americans?

Zero is still better than nothing

Roslyn Layton posted an article this morning “Zero rating: Who bears the cost of bans?” that is a worthwhile read.

…those who wish to ban zero rating assert that all mobile plans must be “affordable full access,” and that anything less would be robbing consumers of the complete Internet experience. But this is tantamount to mandating that everyone fly first class.

Clearly, this one-size-fits-all attitude ignores the fact that consumers have widely varying needs and preferences. In the same way that people want to pick and choose their cable channels, they want the same freedom when it comes to their Internet service.

Earlier this year, I wrote about “Intellectual purity of technology over people” and “Connecting the unconnected“, taking a look at a variety of approaches being pursued to provide introductory internet connectivity to people who cannot otherwise afford devices or broadband service.

Should carriers and applications be restricted in exploring business models that increase adoption of digital technology and services? Or, as [Facebook founder, Mark] Zuckerberg asks, will an “extreme definition of net neutrality” put “the intellectual purity of technology above people’s needs?”

A few years ago, in a piece called “Restricting trade“, I wrote “It is difficult to understand how consumers can benefit from restrictions in the types of offers available to them.”

Almost 2 million Canadian households still don’t have a broadband connection and most of them are located in urban centres. As I wrote in May, “Affordable broadband isn’t just a rural issue“.

Canada continues to have a problem with broadband adoption in low-income households, whether urban or rural, despite government programs continuing to define digital adoption as a problem framed in terms of geography, not affordability. Pricing discrimination, including zero-rating, should be considered as we recognize the challenges of broadband affordability among low-income households.

It is going to take creativity from all stakeholders to develop solutions for universal connectivity; why would we limit the options under a guise of “intellectual purity”?

Zero is better than nothing

Should service providers be allowed to offer access to certain applications for a flat rate – or free?

That is a question receiving considerable attention, thanks in part to a piece written by Harvard visiting professor Susan Crawford, who said “On the surface, it sounds great for carriers to exempt popular apps from data charges. But it’s anti-competitive, patronizing, and counter-productive.”

Uh, oh.

“Anti-competitive, patronizing, and counter-productive” sounds pretty bad. But there’s more. Professor Crawford goes on to say “Zero-rating is pernicious; it’s dangerous; it’s malignant.”

Wow. Who would even consider offering such services?

Actually, there are a lot of consumer benefits that could accrue from such services. For example, 7 years ago I suggested that Netflix might want to enter into an arrangement that is effectively the same as toll-free (1-800) calling, to reverse the charges for data usage.

Boston College law professor Dan Lyons says “Professor Crawford’s argument is premised on the notion that consumers need access to all Internet content at all times on all devices at the same price.”

He writes that offerings such as social media packages or a streaming media service help consumers. Some customers may be willing to pay $12/month for mobile Facebook access but would not pay $60/month for a broader wireless broadband plan. “Eliminating [such options] forces those customers to choose between two suboptimal choices: either pay a higher price to get services the customer is uninterested in purchasing, or go without the service the customer wants to buy.”

What about data consumption for Video Relay Services? As I wrote last January, “Could such a “toll-free” data model enable more equitable treatment of data use by Video Relay Service consumers?”

Seniors are among the least likely demographic to have a smartphone (and therefore, a data plan), but these are the people that could be among the most attractive targets for health monitoring apps. Do we really want regulations that preclude targeted pricing strategies? Should carriers be able to offer restricted flat-rate, zero-rated or sponsored data plans to encourage more widespread adoption of health monitoring applications and devices?

More than 7 years ago, I asked a similar question in relation to a toll-free model for home internet:

Are there some applications that might lend themselves to a toll-free model in order to reach the rest of the market?

For example, would home health care warrant installing a broadband connection as part of a monitoring service? The broadband access would be enabling underlying service, but the costs would be incurred by the health care agency, not the infirmed. Like toll-free calling, the application provider would pay the charges.

Your aging grandmother may have no idea that she would have a broadband connection coming into her apartment – perhaps complete with a wireless router. All she would know is that she can stay at home for routine monitoring check-ups.

Besides health care and elder-care, what other applications might “reverse-the-charges” for broadband access? Security services? Gaming? Entertainment? Energy management?

As Professor Lyons wrote,

Ultimately, it is consumers who should command policymakers’ attention – not the hypothetical “next Facebook”

Consumers can benefit greatly from creative, competitive, targeted pricing plans. Regulators need to be careful imposing restrictions on the evolution of business models.

Will Canadians see greener Internet pastures in the USA?

This commentary appears on CARTT.ca

It is almost a defining characteristic for Canadians to distinguish ourselves from our neighbors to the south. The untrained ear may think we speak English somewhat similarly, but Canadians emphatically define ourselves as “not American” while we roll-up-the-rim-to-win.

That doesn’t keep us from wishing we had American prices for gasoline, milk, eggs, airfares, clothing and alcohol. It is springtime, and it is natural for us to look wistfully at greener grass growing on the other side of the border. We can add the USA’s unlimited mobile data plans to the list, prompted by one of the first acts by Federal Communications Commission (FCC) Chair Ajit Pai of dropping an investigation into zero rating practices by US carriers. The removal of that regulation resulted in every major carrier launching an offering of unlimited data plans.

Now, Chairman Pai has teed up the restoration of the free and open internet as he recently announced his plan to restore the light touch regulatory approach that helped make the Internet great.  Not a moment too soon. New research indicates that the misguided Title II regulation in the United States and the general pro-regulatory black cloud that has hung over the FCC in recent years, has deterred some $30-40 billion of internet investment annually in the US.

Canada’s current regulatory environment is reminiscent of the Obama administration’s FCC in which the Orwellian euphemisms of “openness” and “choice” characterized greater government control. Currently, there is an official telecom policy direction requiring the Canadian Radio-television and Telecommunications Commission (CRTC) to “rely on market forces to the maximum extent feasible” 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.”  Still, a growing number of CRTC regulations (including price controls on internet access and regulating the internet) have served to reduce differentiation between service providers, such as with mobile video services, such as NFL Mobile and Bell Mobility.

The CRTC claims that its increasingly heavy hand “relies on market forces to the maximum extent feasible, seeks to remove barriers to entry, and is a measure that is efficient and proportionate to its purpose.” But it is unclear that the CRTC’s policy would survive an independent audit of compliance to certify whether its direction is consistent with market-based policy. I have written before about the cost of regulation in Canada [here and here] and have often asked, how will we measure success? We don’t know. The CRTC offers no measurement.

As one long-time observer of the Canadian regulatory scene recently asked, should we expect capital to migrate to Canada because of our improved rules? If we look at the rate of startups in Canada versus the rate in the US, should we expect that rate improve in Canada relative to US? I think not. Investment is pouring into the US as a result of a return to its pro-competition and pro-consumer approach. In spite of the net neutrality policies meant to improve innovation in Canada, Canadian entrepreneurs continue to flock the US.

In general, the world is siding with the US, not Canada, on this issue. Courts in Netherlands, Sweden, and Slovenia have struck down heavy handed net neutrality regulation and price controls that restrict zero-rating and free data policies. With any luck, the bold and much-needed moves from the FCC in the US will provide the needed example to the CRTC in Canada and help us restore internet freedom again.

Internet Freedom is certain to be among the topics discussed at The 2017 Canadian Telecom Summit on June 5-7 in Toronto.

Join in the discussion.

Have you registered yet?

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.