Competition Bureau calls for stronger protection of competition for internet service pricing

News Release

Some forms of differential pricing can harm competition, stifle innovation and increase prices

June 29, 2016 — OTTAWA, ON — Competition Bureau

The Competition Bureau has publicly released its submission to the Canadian Radio‑television and Telecommunications Commission’s (CRTC) consultation on differential pricing for wireline and wireless data plans.

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. Differential pricing can influence the fundamental choices that consumers make. In its submission to the CRTC, the Bureau considered both the price and non‑price effects that may affect consumers including quality, choice, service and innovation.

The Bureau advocates that some types of differential pricing - where ISPs receive financial benefit from content providers for favouring their content ‑ should be prohibited. The Bureau found that this type of differential pricing can harm competition, stifle innovation and increase prices for consumers.

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. With the incentive removed for competing content providers to offer a superior product, product quality may decrease, and price may increase.

However the Bureau does not advocate prohibiting all differential pricing. The Bureau found that competition is not likely to be harmed when ISPs do not receive a financial benefit from content providers for differential pricing.

The Bureau recommends that the CRTC consider using the tools available, under the Telecommunications Act, to promote competition and ensure greater consumer choice.

The Bureau also recommends that regulations address more than simply the price that consumers pay for services, including factors such as quality, choice and innovation.

Quick Facts

  • The CRTC proceeding has important implications for the benefits that competition delivers to consumers.
  • As part of its mandate, the Bureau participates in a wide range of activities to promote and advocate the benefits of a competitive marketplace.
  • Under section 125 of the Competition Act, the Commissioner has the authority to make representations to federal commissions on competition-related issues.
  • Allowing competitive forces to shape the market benefits both consumers and operators by encouraging lower prices, quality services, greater efficiency and continued innovation.

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