Net neutrality refers to a concept in which the Internet Service Providers (ISPs) offer their services equally to all users. Traditionally, the ISPs would require users to pay a certain sum of money to enjoy speedy Internet. Then, users who paid such fees would receive priority in terms of the traffic, bandwidth, and accessibility (Bid & Chatterjee, 2013). Those who did not pay for the service, on the other hand, would experience slowed Internet speeds, a situation that gave their clients a poor customer experience.
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In Canada, net neutrality policies were enacted in 2009 requiring ISPs to adopt a nondiscriminatory approach when serving their customers. Consequently, the procurers of the Internet services from the ISPs in Canada have been enjoying equal Internet speeds. Netflix is one of the online enterprises, which rely on the Internet provided by the Canadian ISPs. It largely benefited from the passing of the net neutrality laws.
The removal of the fees meant that the company’s customers would enjoy high Internet speeds for streaming its favorite TV channels without having to pay for the services (Olumhense, 2017). However, numerous scholars have questioned the effectiveness of the net neutrality concept to the extent of raising the need to research the topic. Consequently, this paper explores the concept with reference to Canada to determine its importance and effectiveness in achieving its primary goals.
The Working of Net Neutrality in Canada
Netflix is a US-based company, which offers streaming services to its customers in the country. Customers have the ability to stream award-winning TV show, movies, and documentaries using any Internet-supported device. Essentially, the company partners with the ISPs to facilitate video and TV streaming for its customers (Geist, 2015). The nature of the partnership varies from one state to the other based on the legislation present in the concerned state.
In most states in the US, Netflix is obliged to pay a certain sum of money to the Internet providers for its customers to be allowed to stream TV shows and videos. However, in Canada, companies that offer streaming services do not have to pay anything to the ISPs in exchange for the use of the Internet. The waiver of the fee in Canada is facilitated by the net neutrality regulation, which is operational in the mentioned state.
As stated previously in this paper, net neutrality refers to a concept, which requires ISPs to refrain from charging fees to customers in exchange for the Internet services. Under the policy, ISPs must embrace equality in supplying Internet services to customers (Van der Wee, Vandevelde, Verbrugge, & Pickavet, 2015). In other words, all customers must enjoy the same quality and speed of the internet services, irrespective of their financial status.
Prior to 2009 when Canada adopted the net neutrality concept, Netflix and other streaming service providers in the country would pay some fees to ISPs to enjoy high Internet speeds (Geist, 2015). Such ISPs would cut off Internet connection or slow down the streaming speed for companies that failed to pay the fee. However, after 2009, the net neutrality regulation changed the face of the Internet-based TV and video streaming since it removed all barriers to Internet access.
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Today, Netflix does not pay anything to access Internet services. It is also immune to either access denial or reduced Internet speed. The Canadian Radio-Television and Telecommunications Commission (CRTC) agency is charged with the responsibility of ensuring that the ISPs offer their services universally to all media companies (Van der Wee et al., 2015). The body receives complaints from Internet users regarding any form of access denial or any other manner of discrimination by the ISPs. Upon the receipt of such complaints, the body scrutinizes them and conducts independent investigations to ascertain the truth of the allegations. If such investigations are confirmed to be true, the body is empowered to impose fines on the concerned ISP or force it to comply with the net neutrality provision.
The net neutrality provision has had both positive and negative effects on Netflix. One of the positive impacts of the regulation is that it caused an increase in the level of the company’s profits. Before it was adopted in Canada, Netflix would pay some fees to the ISPs. Such payment would be set off against the company’s annual profits, hence increasing its operations costs while, in turn, reducing its profitability.
With the abolishment of such fees, the company achieved savings, which were converted into profits. Another positive impact of the regulation on Netflix is that it helps to improve customers’ experience all year round. In the period when the streaming service companies were required to pay a fee for the Internet services, discrimination was still evident. Companies would still experience slowed Internet, despite having paid the fee.
For example, in 2008, Netflix paid an annual fee to its ISP providers. However, it still experienced speedy throttles for the last four months immediately following the lapse of the period, which the fee covered (Olumhense, 2017). Therefore, the adoption of the net neutrality policy brought with it major benefits to the company. However, as much as the regulation was a major gain to Netflix, it also presented some challenges to the company.
Netflix and other industry players of the time were big enough. They had already established sufficient market shares to generate satisfactory profits. Therefore, the fee payable to the ISPs could not affect the company’s profits. However, new entrants would feel the pinch that would bar them from penetrating the industry. This situation reduced competition, hence favoring the existing firms. The removal of the fees paved the way for the penetration of new firms into the industry, a move that heightened competition.
Why Net Neutrality Regulation was Created
One of the reasons why the net neutrality concept was adopted in Canada is to make the Internet a public utility. As it stands now, the Internet forms the basis of modern communication, commerce, and knowledge management. Additionally, the Internet has proved to be a good tool for accessing public services and promoting education and self-care (Van der Wee et al., 2015). This observation underscores the need to ensure that it is affordable and accessible to the entire Canadian population.
Aware of the importance of the Internet in the contemporary world, Canada had to look for ways to make it (the Internet) accessible to its populace. Consequently, the Canadian government, through the CRTC, abolished discrimination against any Internet user. If the ISPs were allowed to freely regulate the Internet, perhaps some people would not be able to access it. Besides, Canada being a democratic state appreciates the need for its citizens to have access to a free media.
However, low-income earners may not afford TVs, despite having portable Internet-supported devices from which they can stream their favorite channels. This situation underscores the need to make the Internet affordable and accessible to allow the population to access media platforms. Instead of subsidizing the internet, just as many nations have done, it would be much easier to ban discrimination from ISPs.
The other possible reason why the Canadian government decided to adopt the regulation is to alleviate monopoly among online streaming companies. Before the regulation came into force, the small and medium-sized streaming service providers would face stiff competition from well-developed companies. Competition was heightened by the fact that they were required to pay some fee in exchange for the Internet usage.
The fee would reduce their profits while at the same time forcing some companies into liquidation on the grounds of unprofitability. Additionally, small companies that could not raise the fees would face discrimination in terms of low-speed Internet, which drove away their customers (Quartet Service Inc., 2017). In contrast, large firms would manage to pay the fee to enjoy high-speed Internet, a situation that led to better customer experience. This state of affairs translated into enhanced competitive advantage, which empowered them to suppress their rivals, hence creating a monopoly among the big streaming businesses. This situation is harmful in any industry. To break the monopoly, the Canadian government had to ban the fee to enable small businesses to thrive.
The other reason why the Canadian government adopted the regulation was the presence of TV and video streaming apps owned by ISPs. Initially, ISPs did not operate any TV and video streaming apps. Their operations were restricted to providing Internet services. However, as time went by, ISPs developed apps, which would compete with those offered by other companies in the industry such as Netflix (Olumhense, 2017). Given the high competition in the industry, ISPs being new entrants had to use every tool at their disposal to outsmart their rivals that included well-established firms. Such advantage would only be acquired by offering customer-centered services to improve buyers’ experience.
Consequently, the ISP companies resulted in discriminatory tactics in which their apps would receive priority over those of their rivals in terms of traffic, bandwidth, and accessibility. Perceptibly, customers are attracted to businesses that adequately satisfy their needs, regardless of the tactics used to achieve such satisfaction. In light of this view, ISPs managed to snatch customers from their rivals, owing to their ability to satisfy the prevailing streaming needs. This situation prompted firms such as Netflix to lobby for the adoption of the net neutrality policy to retain its market share against the backdrop of the heightening competition in the highly profitable industry.
Effectiveness of Net Neutrality in Canada
The effectiveness of net neutrality in Canada has sparked a heated debate among scholars who argue either for or against its efficacy. Proponents of the regulation argue that the policy is highly effective and that it will even be more effective in the future. The argument is grounded on the view that the requirement by CRTC for the abolition of discrimination will increase the number of companies in the industry.
The increase in the number of such companies will not only increase the revenues collected by the government in the long run but will also offer the citizens a wide choice of channels. It is important to note that the government taxes the income of all businesses based on their profits. An increase in the number of online streaming companies will mean a rise in taxes, a benefit that the government cannot ignore (Zelnick & Zelnick, 2013).
Therefore, the Canadian administration will fully support the regulation to maximize the annual taxes that it collects from online businesses. Besides, customers will have an increased access to the Internet and any Internet-based media at a reduced cost. As stated previously in this paper, companies had to pay a fee to the ISPs, a situation that created a monopoly.
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However, as much as the net neutrality regulation brings substantial benefits to the government and its citizens, it faces numerous challenges. The first challenge that may cause its downfall is the opposition from other American states. The national government through the Federal Communications Commission (FCC) has opposed the universal adoption of the regulation in all states (Quartet Service Inc., 2017).
Given that Canada gets much of its Internet from the US, the reluctance by the FCC to embrace the regulation may lead to its failure in Canada. However, although this reluctance is seen as a major threat to the future of the regulation in Canada, the FCC adopted the net neutrality legislation in 2017 (Quartet Service Inc., 2017). If it is implemented, it will be a major boost to Canada’s Internet regulation.
Another argument against the effectiveness of the regulation in Canada is that it deprives ISPs of their income, a situation that may drive away investors. Before the regulation was adopted, ISPs derived much income from the fees charged to users (Bid & Chatterjee, 2013). The elimination of such fees will mean that the ISPs’ revenues will be drastically reduced, hence making the business less attractive. Given that ISPs heavily rely on investors for capital, low profits will mean few depositors and hence minimal capital for the existing businesses in the TV and video streaming industry (Zelnick & Zelnick, 2013). This situation may cause monopoly in the industry, hence reversing the benefits accruing from the adoption of the regulation.
Lastly, skeptics of the view that the regulation is not effective assert that CRTC is not fully empowered to deal with net neutrality violations, which motivate ISPs to continue with such contraventions without facing the law (Olumhense, 2017). Since the regulation was adopted in 2009, CRTC has never prosecuted or fined any ISP. This situation raises the question about its effectiveness. Instead, the body insists on dialogue to solve the disputes, which arise in the course of its implementation.
Canada was the first country in the world to adopt the net neutrality regulations. The journey of enacting the legislations started in 2007 following the need to ensure that every Internet user was accorded an equal right of accessing the corresponding web-based services. The adoption of the regulation was a major boost to the TV and Video streaming industry. Before the regulation was approved, companies in the industry had to pay a certain sum of money to the ISPs to access high Internet speeds. The requirement caused a reduction in profits for businesses in the industry. It also caused some companies undergo liquidation.
Therefore, the decision to abolish the fees was a major relief to companies such as Netflix. This company relies heavily on the Internet to make money. However, the effectiveness of the regulation has attracted mixed reactions whereby some people argue that the laws are effective while others dispute the view. The supporting and opposing arguments have been discussed in details in this paper.
Bid, D., & Chatterjee, S. (2013). Exploring the different realms of net neutrality. Policy, 37(9), 794-813.
Geist, M. (2015). When it comes to net neutrality, Canada’s going at half-throttle. The Star. Web.
Olumhense, E. (2017). What the net neutrality rollback means for Netflix users. Web.
Quartet Service Inc. (2017). Net neutrality in the U.S. – what does it mean for Canadians? Web.
Van der Wee, M., Vandevelde, N., Verbrugge, S., & Pickavet, M. (2015). Evaluation of the impact of net neutrality on the profitability of telecom operators: A game-theoretic approach. Web.
Zelnick, B., & Zelnick, E. (2013). The illusion of net neutrality: Political alarmism, regulatory creep and the real threat to internet freedom. Stanford, CA: Hoover Press.