Last month, I wrote Competition, investment and innovation, announcing my plans for a series to highlight ways that innovations originating in the communications sector have made a positive impact on our daily lives, as part of the lead up to The 2017 Canadian Telecom Summit, which will take place June 5-7.

Starting this past Tuesday (November 1), each day at 9:00am (Toronto time) I have been highlighting an invention or innovation that has emerged from the telecom sector.

I am collecting these tweets here.

Ten years ago, I wrote a piece called “4 degrees of impersonal communications.” In it, I describe how people say things in emails that they would never say to someone over the phone. And, over the phone (especially in a voice message), we seem willing to speak in ways that one would never consider saying face-to-face.

I wrote that piece before the popularization of social media which can, in some cases, be somewhat anti-social.

Yesterday was a good example. I was asked if I was “congenitally incapable of accurately representing ppl’s views that you don’t agree with“, in response to my observation that a witness was evading answering a direct question from the CRTC.

This followed a pattern of abusive tweets that I have generally ignored for many months. He seemed surprised to have been blocked, throwing in a jab or two in response.

The miracle of modern communications allows me to follow the CRTC Differential Pricing hearing from halfway around the world, commenting and engaging with others in real time – chirping from the sidelines, as some might say.

Other than fundamental disagreements on a number of issues, I don’t know what I did to set off a history of ad hominem tirades. I have met this person exactly once, a number of years ago as we were both guests of the CRTC at a dinner in Ottawa. We sat at different tables, so I am pretty sure that I didn’t accidentally use his bread plate, or take his napkin.

There are many people with whom I engage, without either party resorting to personal attacks about each other’s integrity. I cannot and will not tolerate such.

Let me digress for a moment. As many frequent readers know, I enjoy watching football, especially the Denver Broncos. I don’t follow the sport as much as I would like to, but there are aspects of almost every game that keep me coming back every Sunday in the Fall and early Winter. At the end of each game, I like seeing the players from both sides gather on the field, shaking hands with opponents and in some cases hugging and sharing long conversations. Moments earlier, these gladiators were ferociously attacking each other, clawing with their fingernails for every inch of the field. But when the final whistle blows, they are able to remember to be civil.

There are no referees on the field in Twitter; no red flags for unsportsmanlike conduct; no personal fouls.

Some have quit Twitter after getting bullied by anti-social behaviour – it is a recognized problem on that platform. But encouraging words from some and inspirational words from others will keep me coming back, sharing my observations, adding up those inches to make a difference.

Some people may need to cut down a little on their caffeine intake and try eating more bran.

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.

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.

Notes:
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.

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:

• Restricting trade • February 10, 2011
• Zero is better than nothing • January 13, 2015
• Beginning of the end? • February 5, 2015
• Connecting the unconnected • April 20, 2015
• Intellectual purity of technology over people • May 4, 2015
• Zero is still better than nothing • August 19, 2015
• Rogers sides with PIAC • October 14, 2015
• Zero-rating is “pro-competition” and “pro-innovation” • November 19, 2015
• No such thing as a free lunch • November 24, 2015
• Removing choice for low income • January 31, 2016
• Better none than some? • February 12, 2016
• A matter of choice • September 22, 2016

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.