Michael Geist holds the Canada Research Chair in Internet and e-commerce law at the University of Ottawa law faculty.

Net neutrality, the long-standing principle that Internet service providers should treat all content and applications in an equal manner, faces its toughest test yet this week as the Canadian Radio-television and Telecommunications Commission, Canada's broadcast and telecommunications regulator, conducts a hearing on whether ISPs may engage in "differential pricing."

Differential pricing refers to instances in which ISPs adopt a non-neutral approach to content by charging one price for consumers to download or access some content, but a different price for other content. The issue – sometimes known as "zero rating" for cases in which ISPs do not levy any data charges for certain content – may sound technical, but it has huge implications for how Canadians access and pay for Internet services.

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Much like prior policy battles over net neutrality, the concern over differential pricing involves fears that ISPs will use their gatekeeper position to favour some content over others. In fact, given the vertical integration that brings together carriage and content at many of Canada's largest providers, the temptation to privilege their own content may be too much to resist.

The differential-pricing debate features a wide range of views, from advocacy for a largely unregulated market to requests that the CRTC mandate the elimination of data caps. The issue also creates some unlikely allies. Those arguing for an unregulated or highly permissive approach include telecom giants such as Bell and Telus, who are joined by Facebook (which has actively opposed zero-rating regulation around the world) and Canadian creator groups (who envision zero rating of Canadian content). Those opposed to differential pricing plans include many consumer groups, Rogers and some smaller ISPs.

How can the CRTC craft a policy that maintains the principles of net neutrality but avoids heavy-handed regulation? The preferred solutions at either end of the spectrum are seemingly non-starters. Consumer groups would like to see restrictions on the use of data caps, arguing that universal unlimited access eliminates the issue altogether. Yet the CRTC is unlikely to regulate pricing, particularly given fears that it could make access less affordable by increasing costs on cheaper plans.

The CRTC will also be quick to dismiss the hands-off approach. As the Competition Bureau argues in its submission, regulatory restrictions on ISPs that self-deal with their own content is necessary to ensure a competitive playing field. Moreover, opening the door to unlimited use of differential pricing plans is likely to expand the use of restrictive data caps, since more usage limits would increase the appeal of zero-rated content.

In searching for a policy that encourages ISP innovation that does not rely on leveraging the potential gatekeeper function, the commission should consider a default rule prohibiting differential pricing subject to two exceptions. First, consistent with net-neutrality principles, neutral differential pricing that does not distinguish between similar content or applications should be permitted. Examples of neutral differential pricing include differing prices based on the time of day (e.g., cheaper late-night access) or differing speeds provided that ISPs do not target specific content or application providers.

Second, there should be a public-interest exception that would allow providers to exempt data charges for emergency services or customer-service calls. The CRTC could develop a policy for expanding the list of permitted public-interest exceptions.

Updating the rules to address the emergence of differential pricing and zero rating is essential since the original net-neutrality policy was developed with different concerns in mind. With the Canadian market particularly susceptible to misuse, the CRTC should be guided by its long-standing principle that telecom regulation should restrict the ability of ISPs to determine winners and losers through their power as the Internet's gatekeepers.