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Speech
Notes for an address
by Konrad von Finckenstein, Q.C.
Chairman, Canadian Radio-television
and Telecommunications Commission
Keynote address to the Annual Conference
of the International Institute of Communications
Montreal, Quebec
October 27, 2009
(Check against delivery)
Thank you very much.
Let me say again as your host what a pleasure it is to welcome you to the conference, to our country, and to the delightful city of Montreal.
Today, I would like to talk about the decision we announced last week on Internet traffic management practices (ITMPs). This whole subject is also known as net neutrality.
Internet traffic management: Background
The Internet is fast becoming the backbone for communication, commerce, governance, health, education and entertainment. So it is essential that our approach to Internet traffic management be clear and predictable.
We have approached the topic in a specific way: by examining the ITMPs of Internet service providers (ISPs).
There are two reasons why ISPs want to manage the traffic on their networks.
First, and most obvious: There is simply not enough bandwidth available to provide all users with top connection speeds at all times. The use of the Internet is growing exponentially. Applications like real-time video streaming make high demands on the network. New technologies like high-definition video will increase those demands. Without traffic-management measures, network congestion may impair the Internet experience of many users.
Secondly, ISPs may want to prioritize certain kinds of traffic in order to offer users a distinctive or innovative kind of service. For example, an ISP might want to develop a competitive advantage by providing a good environment for online games.
Regardless of the motive of the ISP in managing traffic, it's inevitable that some users will find that at least some of the time they are not getting the speed and responsiveness they thought they were buying.
Given the increasing role of the Internet in everyday life, this can be a real problem. It is one of the responsibilities of our Commission, as Canada's telecommunications regulator, to help Canadians communicate as efficiently as possible so that each of us can fully enjoy the potential of the Net.
Canada, I believe, is the first country to develop and implement a comprehensive regulatory approach to this issue.
CAIP complaint
We became aware of the need for such an approach last year after we received a complaint from CAIP—the Canadian Association of Internet Providers. In Canada, we have what I shall call primary ISPs, those that sell Internet services to both retail and wholesale customers. Their wholesale customers, whom I shall call secondary ISPs, in turn provide services to their own retail customers.
CAIP is an association of secondary ISPs. In their complaint, they asked us to stop one of the primary ISPs from exercising traffic-shaping or throttling practices. They claimed that these practices were unfairly degrading the level of service that their members could offer to their retail customers.
On the particular facts of the case, we ruled that the primary ISP’s practices were not unjustly discriminatory, since they were applied equally to the primary ISP's own retail customers. However, we saw that this kind of situation would be likely to arise again and again.
ITMP hearing
Accordingly, we decided that we needed a comprehensive review of the issue in order to develop a regulatory policy. We called for submissions from the industry and the general public, and we held a hearing on Internet traffic management practices. We also established an online forum where thousands of suggestions and ideas were exchanged.
From this process emerged a decision that we released last Wednesday. Today I have my first public opportunity to talk about it.
Objective
Our primary objective was twofold:
- First, to establish guidelines that encourage innovation and maximize the freedom of use of everyone involved: the ISPs, the providers of applications and, of course, the end-users of the Internet.
- Second, to respect the legitimate interests of ISPs in managing their networks. Such management of course has to be consistent with legislative constraints, including privacy.
In short, we had to find the proper balance between the users’ interests to explore the net to fullest, to experiment and to innovate, and the legitimate interests of ISPs to protect their networks from congestion.
Background points
In developing our approach, we needed to recognize the difference between wholesale and retail relationships. The secondary ISPs, who buy services wholesale, have different concerns than retail customers. There are practically no end-to-end facility-based ISPs in Canada. Nearly every primary ISP is also a secondary ISP in markets other than its home market. Hence the wholesale market is an integral part of the Canadian communications scene and we have to ensure that primary ISPs do not give themselves an undue preference.
The CAIP case I just described involved secondary ISPs who felt that the ITMPs employed by the primary ISP affected their ability to serve their end customers.
As far as the network congestion problem is concerned, the best solution is investment in network infrastructure, and that should remain the primary tool for ISPs to use.
We recognize that there is a continuing need for certain Internet traffic management practices. So what would be the best way for us to deal with them? Given the fast pace of Internet innovation and technological development, we realized it would be unwise to lay down any hard and fast rules or bright-line tests. Instead, we have chosen to develop a framework for analyzing ITMPs that can then be applied as cases come before the Commission.
Types of ITMPs
ITMPs come in two varieties: economic and technical.
An economic ITMP is one that manages traffic through monetary costs and incentives. An ISP might charge higher rates for greater bandwidth usage, or offer discounts during off-peak hours.
A technical ITMP manages traffic through technological means. An example would be throttling triggered by deep-packet inspection, or prioritizing traffic from a specific service or application.
CRTC POSITIONS
Preference for economic ITMPs
We have a strong preference for economic ITMPs, given their obvious transparency. The market can be left to manage bandwidth through the interplay of supply and demand. Users should be able to decide how much bandwidth they want or need and what they are prepared to pay for it.
Transparency
Transparency has always been one of our guiding considerations. When any ITMPs are employed, ISPs must make it clear to their customers, be they wholesale or retail, what practices they employ and what their effect will be.
Explanations in plain language
In addition, all ITMPs must be described on providers' websites in plain language, including a description of their effect.
Advance notice
To be specific, we insist that providers give their retail customers 30 days notice before implementing ITMPs.
Primary ISPs, when implementing ITMPs, must give secondary ISPs 60 days notice, because such measures may require the secondary ISPs to change their own systems and inform their customers.
FRAMEWORK OF ANALYSIS
With the above points in mind, let me outline our approach for you. When we receive a complaint about an ITMP, the key question we will ask is this: Does that practice amount to unjust discrimination or undue preference? This is a fundamental test that we can apply under our telecom legislation.
To administer that test, we will apply the following considerations.
An ITMP should be implemented only if:
- It addresses a justifiable purpose; for example, it is needed to prevent congestion, or disruption of time-sensitive programs.
- It is as narrowly tailored as possible to achieve the desired result, using the least restrictive means.
- It causes as little harm as possible to the retail customer, the application provider or the ISP that is the wholesale customer of a primary ISP.
- And it is well advertised in advance. A full explanation must be given, describing the practice and how it will affect the user.
We will also apply the framework when an ISP is seeking our prior approval to implement an ITMP.
Burden of proof
How does this work procedurally? The complainant will need to show that the practice discriminates or gives a preference. Once that is established, the onus falls on the ISP to establish that such discrimination or preference is not unjust, undue or unreasonable.
Retail market: Economic ITMPs
In general, we do not expect that economic ITMPs in the retail market will trigger complaints regarding discrimination or preference—always assuming they have been implemented transparently with the required advance notice.
Consequently we will get involved only on an ex post basis, that is, when the use of an ITMP gives rise to a complaint, which we will then adjudicate.
Retail market: Technical ITMPs
As for technical practices, we believe there is sufficient competition in retail to motivate ISPs to serve their customers with minimal restrictions. It is in their own interest to apply only those technical practices that are necessary to protect their networks and customers.
So in general the retail providers will be free to manage their networks as they see fit. As with economic ITMPs, we will intervene only on an ex post basis, in response to a complaint.
Wholesale market
The situation in the wholesale market is more complicated and requires additional scrutiny. The kind of scrutiny, and the responsibilities and requirements for the primary ISP, will vary with the situation.
Wholesale market: Economic ITMPs
For economic ITMPs, given that they are based on a commission-mandated wholesale rate, prior rate approval will continue to be required. However, any complaint as to undue discrimination or preference can be dealt with on an ex post basis.
Wholesale market: Technical ITMPs
When we apply the framework to wholesale technical ITMPs, three possible situations may arise.
- First, as a general rule, technical ITMPs can be implemented by a primary ISP without prior approval—provided they are non-preferential and non-discriminatory. We will intervene only on an ex post basis, in response to a complaint.
- Second, technical ITMPs that are more restrictive to secondary ISPs than to a primary ISP’s own retail customers raise concerns of unjust discrimination. Therefore ex ante scrutiny will be required. Approval would be given only if the terms of the framework are met and there is no other workable and reasonable solution.
- Third, even in the absence of discriminatory restrictions, there are cases in which technical ITMPs applied by primary ISPs to wholesale services may have a significant and disproportionate impact on secondary ISPs and their customers. In this case, the primary ISP has a choice: It may seek a prior Commission ruling or proceed at its own risk. If it proceeds without a prior ruling and a complaint is subsequently received, the Commission's response might well include an immediate order to cease applying the practice pending a final determination.
Summary
To sum up, then:
- Carriers should expand network capacity to the maximum extent possible rather than resorting solely to ITMPs.
- ITMPs should be employed in a transparent manner with prior notice and an explanation of what the effect of the practice will be.
- Service providers should whenever possible employ economic ITMPs and employ technical ones only as a last resort.
- There are special rules for primary ISPs to ensure that they do not use ITMPs to competitively harm secondary ISPs.
- Finally, any ITMP brought before the Commission—whether as a result of a complaint or as an application for a prior ruling—will be subject to the framework of analysis I have discussed.
I have now given you the essence of our decision. We also made determinations on two collateral issues that came up during our hearing on ITMPs. Let me quickly review them for you.
ISP carrier actions affecting content
The first issue concerns actions by ISPs that directly affect content. There is a provision in Canada's Telecommunications Act—section 36, to be precise—that requires a carrier to have the Commission's prior approval to “control the content or influence the meaning or purpose of telecommunications carried by it ...”
The slowing of non-time-sensitive traffic would generally not engage this requirement. But what if time-sensitive traffic, such as video conferencing or Voice over IP, was slowed down to the extent that the content was degraded? We have determined that this action would effectively undermine the traffic's meaning or purpose, and engage the requirement in section 36. Needless to say, outright blocking of Internet traffic would engage section 36 as well.
In our view, such disruptive actions should not be considered proper ITMPs. Such actions are fundamentally contrary to a carrier's obligation not to interfere with the traffic they carry. They will always require prior approval, which we would grant only in the most exceptional cases.
Privacy
Secondly, the whole debate on net neutrality includes concerns for privacy—concerns that we share. In our decision, we emphasized the need to apply existing privacy rules and legislation. We also require that any data collected with respect to ITMPs may be used only for that purpose, and cannot be shared under any circumstances.
Mobile wireless services
You may be wondering how our framework applies to mobile wireless services.
The wireless sector has been evolving by leaps and bounds as each new generation of handsets allows us to do more with our mobile devices. The penetration of smartphones nearly doubled in Canada last year, while the coverage of advanced wireless networks expanded to 91% of households.
Capacity on mobile wireless networks, however, is currently more limited than on wireline networks because of technological differences. So far, we have not seen any signs that would suggest that there is an issue with ITMPs. But we are keeping an eye on how ISPs are dealing with their mobile wireless traffic.
At some point down the road, we will need to review the regulatory measures that apply to wireless service providers and their use of ITMPs. Until then, we expect ISPs offering mobile broadband services to respect our framework.
Conclusion
So I hope you now have a bird’s eye view of our approach to Internet traffic management. It is our attempt to provide predictability and transparency while encouraging innovation and investment, and minimizing regulatory intervention.
It is tailored to our Canadian needs. Other countries may well adopt other approaches. I look forward to seeing their solutions, in the spirit of the exchange of best practices which is a hallmark of the IIC.
Thank you very much.
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