Opinion

Net Neutrality: A View from Canada

Since Federal Communications Commission Chairman Ajit Pai’s announced his intention to roll back Obama-era net neutrality regulations at the end of November, prophets of doom have been taking to the airwaves and newspapers across the United States to denounce what they see as “the end of the internet as we know it.”

The outrage has even spilled over into Canada, where Innovation Minister Navdeep Bains had to reassure his constituents that “Canada [would] continue to stand for diversity and freedom of expression” and “remain[ed] committed to the principles of net neutrality.”

Yet, the fear mongering heard on both sides of the border is overblown and unjustified. The reality is that unwinding the 2015 “open internet” order will serve both the U.S. economy and American consumers, while allowing the United States to remain a global broadband leader. And doing so will not jeopardize net neutrality principles that internet users value, such as no blocking of any traffic, no throttling and no anticompetitive prioritization.

Instead of fearing a return to a regulatory framework that gathered bipartisan support and allowed the internet to flourish for 20 years, Americans should be much wearier of the negative impact that overregulating the internet could have on the health of their broadband market. And they should look to Canada as a cautionary tale of how excessive regulation that could arise under the Obama administration’s net neutrality regime can harm the internet ecosystem.

Take, for example, mandatory network sharing. Canada has one of the most dynamic broadband markets in the world, thanks to strong competition between incumbent telecom companies and cable companies, each of which own their own broadband networks. Yet Canada’s strong broadband performance has not dampened the government’s appetite for meddling in the market. In 2015, the CRTC, Canada’s telecommunications regulator, decided to compromise Canada’s broadband leadership position by taking the unprecedented step of mandating broadband providers to share fiber-to-the-home broadband networks with resellers.

Although this well-intentioned policy was adopted with the objective of stimulating retail competition, it has dulled facilities-based providers’ incentives to invest and innovate – particularly in rural and remote areas of the country, where the costs of deploying fibre networks are the highest, and the payback periods are longer. Studies have estimated that this decision would cause a decline in the hundreds of millions of dollars in network investment in the coming years. The CRTC’s decision also stands in stark contrast with the approach taken by broadband leaders such as the United States and South Korea, which have both refused to mandate access to fiber networks.

Or, take the CRTC’s recent decision to ban zero-rating – a practice of internet providers not to charge for data used by specific applications or services – without compelling evidence of consumer or competitive harm. This required the regulator to accept the head scratching notion that giving consumers service for free is anti-consumer.  In doing so, it sanctioned a regional player, Quebec-based Videotron, which was offering an unlimited music service to its customers. Ironically, in banning this pro-consumer practice, the CRTC – which, in recent years, has been hell-bent on fostering additional competition in Canada’s telecommunications market – ended up handicapping a recent wireless entrant attempting to gain market share from incumbents.

By contrast, the FCC, under the chairmanship of Ajit Pai, has rightly refused to bar zero-rating, recognizing that the practice not only enhances consumer welfare, but also enhances broadband competition in general. Pai’s refusal to micromanage market players’ product offerings, and recognition that zero-rating plans can enhance the internet user experience, should be commended.

Over the past two decades, the United States has wisely steered clear of attempting to micromanage the internet. But many believe that Title II regulations could open the door to such policies, and the resulting uncertainty has had a chilling on the U.S. broadband market, as shown by the decline in broadband investment since these rules were adopted in 2015.

Ultimately, the real debate going on in the United States is not about whether internet providers should be allowed to block content or throttle internet connections. Everybody – including major internet providers themselves – agree that such practices are unacceptable. Rather, the debate is about whether broadband should be regulated via strict preventive rules, which have proven costly and often stifle innovation, or via a light-touch regulatory regime that can adapt to new business models and technological change. Chairman Pai, who once promised to “fire up the weed whacker” and get rid of rules that impede investment, innovation and job creation, has wisely chosen the latter approach.

 

Paul Beaudry is director of development at the University of Calgary’s School of Public Policy and an associate researcher at the Montreal Economic Institute. Martin Masse is a senior writer and editor at the Montreal Economic Institute. They both are former policy advisers to Canada’s Minister of Industry.

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