OTTAWA – Certain types of differential pricing should be banned because they can harm competition, stifle innovation and increase prices, said the Competition Bureau in response to the CRTC’s plan to review the controversial practice.
Differential pricing occurs when an internet service provider (ISP) charges one price for customers to consume one type of content, and another price for other types of content, a move that can influence the fundamental choices that consumers make.
In its submission to the Commission, the Bureau advocates that differential pricing where ISPs receive financial benefit from content providers for favouring their content should be prohibited. An example is where a partner company pays an ISP to allow customers to download the company’s services without having the download count toward the customer’s data limit. This could harm competition when the customer’s product choice is caused by the favourable partnership between the company and the ISP, rather than the superiority of the application, continues the submission. With the incentive removed for competing content providers to offer a superior product, product quality may decrease, and price may increase.
But the Bureau added that competition is not likely to be harmed when ISPs do not receive a financial benefit from content providers for differential pricing, for example, with zero‑rating applications.
“… (Z)ero‑rating applications that enable consumers to monitor data usage is only problematic if an ISP does so in order to favour its affiliated application versus a third party option”, the Bureau wrote. “Similarly, zero‑rating services during a particular time period is also unlikely to harm competition unless it somehow confers an advantage on affiliated content.”
Banning differential pricing of unaffiliated content may remove a competitive option for ISPs, and would accordingly be overbroad, the Bureau added.
“When an ISP favours unaffiliated content, it does so in an effort to enhance its competitive offering to entice consumers to switch to its internet services from competing services”, continues the submission. “This is competition at work.”
The Bureau also recommended that the CRTC’s regulations address factors such as quality, choice and innovation, and not just the price that consumers pay for services.
The CRTC’s review in to differential pricing practices related to Internet and wireless data plans will include a public hearing scheduled to begin on October 31, 2016.
There will be more to come on this story later this week.
