Information & Ethics Committee on Feb. 6th, 2018

[The Vice-Chair, Liberal, Nathaniel Erskine-Smith]

I call the meeting to order.

I apologize for being late. I had come from an all-party anti-poverty caucus meeting.

Thank you to the folks from the CRTC for joining us today to talk about net neutrality. With that, I'll start the meeting and give the floor to you.

[Christopher Seidl, Executive Director, Telecommunications, Canadian Radio-television and Telecommunications Commission]

Good morning, Mr. Chairman and honourable committee members. My name is Chris Seidl, and I am the executive director of telecommunications at the Canadian Radio-television and Telecommunications Commission. With me today is my colleague Stephen Millington, senior general counsel and executive director of the CRTC's legal sector. Thank you for giving us the opportunity to appear before you to speak about net neutrality.

As you may be aware, the CRTC is an independent administrative tribunal responsible for regulating the activities of telecommunications service providers further to the Telecommunications Act. As such, the CRTC is required to make every decision with the goal of ensuring the fulfillment of the policy objectives set out in the act.

Net neutrality is the concept that all traffic on the Internet should be given equal treatment by Internet providers, with little to no manipulation, interference, prioritization, discrimination, or preference given. This concept is enshrined in the Telecommunications Act through subsection 27(2), which prohibits unjust discrimination or undue preference, as well as section 36, which prohibits telecommunication companies from influencing the content they transmit unless they have received express authorization to do so from the CRTC. These sections of the act provide the CRTC with the tools and the flexibility to establish and enforce a net neutrality framework that is entirely appropriate and reasonable for Canada.

Interestingly, these are not new provisions. They date back to the Canadian Railway Act of 1906, when the concept of common carriage ensured that railway companies would carry all goods without discrimination. It turns out that the same principles are effective whether we're referring to cargo transported on railway cars or data carried over telecommunication networks. It is important to keep in mind that net neutrality is focused on carriage rather than content.

We mention this because the broadly-worded statutory provisions have stood the test of time and have allowed the CRTC the flexibility required to address more modern concerns. They have been able to adapt to modern technology and needs, including net neutrality.

The CRTC was one of the first regulators in the world to implement an approach to uphold net neutrality. We have taken several decisions that demonstrate our approach. Let me share with you three key ones.

The first, in 2009, created a framework against which Internet traffic management practices may be evaluated for compliance with the Telecommunications Act. Honourable members, the CRTC clearly stated that when congestion occurs, an ISP's first response should always be to invest in more network capacity.

However, we recognize that expanding and upgrading a network is not always the most practical solution. Internet service providers will, when necessary, adopt economic or technical measures to better manage the flow of traffic on their networks. They could, for example, charge extra fees for customers whose Internet usage exceeds a predefined limit or slow traffic on their networks to manage an unusual network congestion situation.

It may be of interest to the committee to note that although the CRTC permits ISPs to use technical measures to manage Internet traffic, we recognize that these measures may allow ISPs to view and collect consumers' personal information and data. Therefore, in the interest of protecting Canadians' privacy, we have put measures in place to limit ISPs' use of that personal information or data to traffic management. They may not use or disclose such information for any other purpose.

We have required ISPs to be transparent about their use of lnternet traffic management practices. Customers must be told how the practice will affect their service, including the specific impact on speeds. Should a consumer believe that their ISP is not being transparent, they may ask the CRTC to intervene. Our most recent statistics show that the CRTC received 19 complaints relating to Internet traffic management practices last year.

We have been proactive in ensuring transparency and follow-up on each of the complaints that we receive. We firmly believe that our approach is effective. For instance, when we receive complaints alleging practices or approaches that are of significant concern, we hold public consultations and deal with them in a definitive way.

Let me explain. A few years ago it came to our attention that certain companies were offering mobile wireless services that exempted their own mobile television services from their customers' standard monthly data allowance. Content from other websites or apps, on the other hand, counted against the customers' monthly data allowance. The CRTC issued a decision in 2015 in which we directed these providers to stop giving their own mobile television services an unfair advantage in the marketplace. We also required the companies in question to amend their practices. The CRTC stated that while it is supportive of the development of new means by which Canadians can access both Canadian-made and foreign audiovisual content, mobile service providers cannot do so in a discriminatory manner.

This decision was the second step we took to uphold the principle of net neutrality by ensuring that audiovisual content is made available to Canadians in a fair and open manner.

The third and most recent step we took was in regard to differential pricing. This is a practice by which providers offer the same or similar products and services to consumers at different rates. Differential pricing can occur when an Internet service provider exempts a particular application from a user's monthly mobile data plan or when an application provider enters into agreement with a service provider to exempt or discount the rate paid for data associated with that application.

In April 2017, we declared that ISPs should treat all data that flows across the networks equally. By enacting differential pricing practices, service providers are in effect influencing consumer choices of which data to consume, the result being that these practices restrict access to content over the Internet, something that the CRTC found was contrary to the Telecommunications Act. Our framework supports a fair marketplace in which ISPs compete on price, quality of service, data allowance, and innovative service offerings.

Net neutrality is an issue in other regions of the world, and has been brought to the forefront of public conversation as a result of the U.S. Federal Communications Commission's decision last December.

The members of this committee may be wondering what impact this decision will have on the CRTC's policies, Canadian ISPs or Canadians. The Federal Communications Commission's vote will not affect the way in which Internet traffic is treated in Canada. The CRTC has set out its approach to net neutrality, consistent with its powers and duties under the Telecommunications Act, and we will continue to enforce it within Canada.

By the same token, the CRTC has no jurisdiction over the way in which Internet traffic is managed outside our country. We therefore cannot comment or speculate on the effects of such a practice, nor the ways in which data will be treated by service providers in other jurisdictions.

Mr. Chairman, we hope this overview helps you understand the concrete steps taken by the CRTC to address the issue of net neutrality in Canada. The decisions taken by the CRTC, based on the powers currently in the act, combine to create an effective approach to net neutrality and ensure that Canadians always have access to the free movement of ideas.

Before concluding our remarks, we want to advise you that we may not be able to answer all the questions that you would like to ask us today. For instance, you may have read that a coalition called FairPlay recently submitted an application asking the CRTC to establish a regime that would enable ISPs to block access to websites that host pirated content. Mr. Chairman, we trust you will understand that we cannot comment on that application or any other that is currently before the CRTC.

We'd be happy to answer any questions you may have about our approach to net neutrality.

Thank you.

[The Vice-Chair, Liberal, Nathaniel Erskine-Smith]

Thanks very much for that presentation.

We'll begin our seven-minute round with Mr. Saini.

[Raj Saini, Liberal, Kitchener Centre, ON]

Good morning to both of you.

I appreciate that this is something that's relatively new. It happened in December, I believe, that the United States came to this decision, and I know there might be some questions you may be unable to answer.

If we look at the net and at the concept of net neutrality, we see that we don't live in a silo here in Canada. There's a lot of interconnectivity between the United States and Canada. There is going to be an impact here in Canada. Have you speculated in any way on what that impact would be? For example, if Netflix tomorrow decides to raise their fees in the United States, obviously we'll have a rise in fees here. Whatever happens there, there will be an impact in Canada.

Have you done any assessment of what that would be or how you would approach that going forward?

[Christopher Seidl]

Focusing on net neutrality itself, we can't control what other jurisdictions do on that, but it is a global concern. Different jurisdictions have taken different approaches.

With changes in the U.S., there obviously might be impacts on the application space and which applications will be successful and how much they might have to pay the Internet service providers in the U.S. It may raise their rates if they have to pay the ISPs down there. Whether they pass that on to other jurisdictions is up to them to decide. It won't change our approach to net neutrality in Canada and how we regulate the use of those practices in Canada.

There's no direct impact. I could see it potentially making more sense for some of those content providers to connect directly in Canada, versus transiting from other jurisdictions where the rules on net neutrality aren't as clear. You can see their having more interconnection directly into Canada, but there's been no indication that this may happen.

[Raj Saini, Liberal, Kitchener Centre, ON]

You brought up differential pricing, and you released a framework last April to assess the compliance. You mentioned subsection 27(2). This was based, I believe, on a public consultation.

[Christopher Seidl]

That's correct.

[Raj Saini, Liberal, Kitchener Centre, ON]

What conclusion did you reach? I think differential pricing is going to impact us going forward, because we have very few broadband providers in the Internet space. Therefore, they will start to produce a lot of initial content or initial apps on their own, which could foreclose on other content in other parts of the Internet. Going forward, I don't know how you're going to be able to maintain that.

[Christopher Seidl]

That's the reason we launched that process; it all started with some of the other applications. I mentioned when Vidéotron offered a set of music services with zero rating. Those services did not count toward the data cap. We looked at that and we said we didn't want this to occur otherwise and have to look at it more broadly, so we launched a public notice. We had an oral hearing in October 2016, with the decision in April 2017. We walked through all the different cases, because in subsection 27(2) the bar is unjust discrimination or undue preference, not just discriminatory preference. There has to be some effect that is not in line with the policy objectives of the act.

We found that in certain cases there may be things that are okay from a differential pricing perspective, but very few. When we looked at just accessing your bill and paying your bill online, we felt that wouldn't affect any other content providers, so that probably wouldn't be a problem. They were things that we thought were agnostic to the application, such as time-of-day data allowances with unlimited data during the midnight hours or whatever, and some counting of the daily use at other times. There still was some discrimination, but it wasn't undue, in our minds. We thought that was probably okay.

We walked through all the different types of cases, and the ones we thought were the most at issue were the application-specific ones, especially the ones through which you would prefer your own application, your own content, your own service over others when that would cause them to have a disadvantage. We obviously support a fair and open marketplace where innovation happens at all edges of the application space, from the small companies to the large.

[Raj Saini, Liberal, Kitchener Centre, ON]

I want to drill down on differential pricing, because I want to make sure that I understand. Maybe you won't be able to answer this question, because I think it's a bit more philosophical.

In the corporate space, companies will always try to gain market share. That's in any business in any environment. One of the ways you can gain market share is to make a cheaper product or offer more for the same price. Especially because of the fact that there are very limited ISP providers, you don't have a broad...you almost have a monopoly or oligopoly when it comes to broadband providers. How are they going to compete with each other and how are you going to prevent that going forward? Is this a hard-and-fast rule whereby you're going to say you cannot use data caps or free streaming with a universal...? If they produce their own service, are you going to say they can't promote their own service at the expense of foreclosing on content in another service? Going forward, how are you going to restrict that competitive nature in the environment?

[Christopher Seidl]

We don't restrict innovation, even in the application space. You can offer your own applications. We just say you can't give preference to your applications for the data by either giving it at a higher speed or not counting it toward the data the same as other applications. We focus on the transmission of the information and not on other applications. If you want to get into other services, be it home monitoring or anything else, we obviously support that and encourage the innovation, but you just can't use your position as the network provider or gatekeeper of that access to that home to give preference to your content.

[Raj Saini, Liberal, Kitchener Centre, ON]

Would that also go for sponsored data?

[Christopher Seidl]

That's correct.

[Raj Saini, Liberal, Kitchener Centre, ON]

Okay. Thank you.

[The Vice-Chair, Liberal, Nathaniel Erskine-Smith]

Thanks very much, Mr. Saini.

Our next round of questions goes to Mr. Kent.

[Peter Kent, Conservative, Thornhill, ON]

Thank you, Chair.

Thank you, gentlemen, for attending here today to discuss a matter of growing importance and relevance to Canadians that many Canadians are probably completely unaware of. I'm wondering, notwithstanding the fact that the CRTC defends net neutrality implicitly, if it is time to put that explicitly into legislation in Canada.

[Christopher Seidl]

I think it is already there. I mentioned section 36 and section 27(2) to you earlier in terms of unjust discrimination and undue preference. Really the foundation is common carriage, and those concepts are there. As I mentioned, they have stood the test of time.

It's very much a nuanced approach. Those provisions allow us to look at the issues based on the facts before us to understand where to draw the line, because it's not a black and white line. You don't want to over-regulate and over-provision that into legislation, where you don't have that flexibility to address specific cases.

We heard different solutions that potentially could come out of there, be it a social good and so forth, that might be of benefit. For example, one provider had an issue with some of the software downloads to make sure their phone supported 911, and we wanted to get that out to as many people as possible. You don't want to block that if there is a data charge. People were worried about their data cap.

Therefore, in some cases you say it doesn't really cause a problem and allow it, but we've set up clear guidelines for the industry right now.

[Peter Kent, Conservative, Thornhill, ON]

You say it's a nuanced treatment. In the FCC discussions, those advocating the removal of the 2015 regulations said they wanted to return from a heavy-handed approach to a light-touch framework. How would you characterize the CRTC handling?

[Christopher Seidl]

We are strong proponents of net neutrality. That's how we characterize ours. We still are not blocking or ex ante. They're called ex ante regulations. We have prescriptive rules that block certain treatment. We allow it to a certain level, but we give guidelines for where we think it would be onside or offside, and if any issues come before us, we'll look at them and then, based on that framework, look at the facts on the ground and the impact that the particular practice might have on the market.

[Peter Kent, Conservative, Thornhill, ON]

Given that a great amount of Canadian Internet traffic goes via the United States, what is the CRTC's capacity to monitor? Do you enforce or protect on the basis of industry information or consumer complaint?

[Christopher Seidl]

In the case of any privacy issues, as I mentioned, we have set up rules that they can't use any of their traffic management practices from a privacy perspective. In terms of information flowing outside of the country, we don't have any rules that limit that. We don't get involved in Internet peering, for example. We've let the market decide that. We only want to step in and regulate where we absolutely see a need to do that. If there's an issue that is necessary for us to look at, we'll look at it, but we haven't had to step in on that aspect.

[Peter Kent, Conservative, Thornhill, ON]

Does the CRTC meet with other regulators—not only the FCC, not only in the United States—but in Europe and beyond, to discuss these sorts of transborder issues?

[Christopher Seidl]

Yes, absolutely. There are some sets of common issues that are across borders and global in nature, and there are annual regulatory forums where regulators get together and discuss those issues. We also meet one on one with our different counterparts in other countries.

[Peter Kent, Conservative, Thornhill, ON]

But joint decisions are never considered or—

[Christopher Seidl]

No.