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Legal and Regulatory Confusion

in the Transmission of
Unlicensed Music over P2P

A Voluntary Collective Licensing
Proposal based on the use of Internet
Traffic Management Practices

Andreas Kalogiannides

Edited by Bob Tarantino


In Society of Composers, Authors and Music Publishers of Canada v. Canadian
Association of Internet Providers, where SOCAN sought to collect royalties from Internet
Service Providers (ISPs) for their role in communicating musical works to the public by
telecommunication, Justice Binnie stated that there is no doubt that the exponential growth of
the Internet has created serious obstacles to the collection of copyright royalties.
This author
agrees with this statement and offers one of his own: copyright law should have been keeping
pace with the technological development of Internet communication and the social norms that
drive it. These statements convey the difficulties faced by the music and telecommunications
industries in assigning liability for the transmission of unlicensed copyrighted material over peer-
to-peer (P2P) networks. In the context of P2P transmissions, one of the most important issues is
the extent to which ISPs may be liable for authorizing copyright infringement of musical works.
Notwithstanding the newly-introduced Bill C-32,
the Copyright Act has not been
equipped to address the issues of distributing media content (e.g. music) in digital format over
the internet. Parliament carved out a user exception for intermediaries in the form of s.
2.4(1)(b) in the amendments to the Copyright Act in 1988 a time the Internet as we know it did
not exist which held that persons who only supply the means of telecommunication
necessary for another person to communicate are not themselves to be considered parties to an
infringing communication.
That exception, sometimes referred to as the common carrier
exception, had the effect of shielding ISPs from liability for the transmission of copyrighted
material and facilitated the making of investments in internet infrastructure and technology. In
the early years of its commercial exploitation, intervening or managing individual packets of

SOCAN v. CAIP [2004] 2 S.C.R. 427, 2004 SCC 45 at para 129 [SOCAN].
Bill C-32, An Act to Amend the Copyright Act, 3rd Sess., 40th Parl. June 2010.
Ibid SOCAN supra note 1 at 3.

traffic on the internet was technologically impossible; routers didnt have the resources to
examine traffic as it went by.
In addition to the common carrier exception, the 1988
amendments included the addition of section 3(1)(f) to communicate the work to the public by
telecommunicationand to authorize any such acts.
The 1988 Amendments further specified
that service providers who only provide the means of telecommunication necessary are
deemed not to be communicators.
The definition of telecommunication in section 2 has been
held to constitute any transmission of signs, signals, writings, images or sounds or intelligence
of any nature by wire, radio, visual, optical or other electromagnetic system.
While this
definition was intentionally designed broadly to capture future developments in communications,
its breadth has meant that Supreme Court of Canada and the Canadian Radio-television and
Telecommunications Commission (CRTC) (and to some extent the Copyright Board of Canada)
have been charged with the task of interpreting the legislatures intent in crafting the copyright
and telecommunications policy environments.
In an attempt to add some clarity and predictability to the role of ISPs in the delivery of
copyrighted musical content, this article sets out normative and technological arguments for the
creation of a new licensing framework under which ISPs may be liable for transmissions of
music over P2P networks. More specifically, this article proposes an Internet traffic
management practice (ITMP)-based voluntary collective licensing model that establishes a set of
criteria that determine when an ISP must pay a license fee for the transmission of music over
P2P networks. Essentially, the more a traffic management practice interferes with content, the
higher the license fee which would be payable to the collective music society. This article will

Somayaji, Anil. Deep Packet Inspection is Essential for Network Neutrality. Office of the Privacy Commissioner
of Canada Dec 4th 2009 <
neutrality/>. [Somayaji]
see SOCAN supra note 1 at para. 42.
Ibid at para 86.
see SOCAN supra note 1 at para. 42.

demonstrate that current ITMPs, namely ones that use Deep Packet Inspection (DPI) technology,
exert sufficient control over P2P content so as to remove themselves from protection afforded to
persons who act as mere conduits under s. 2.4(1)(b) of the Copyright Act. A thought
experiment might help illustrate this point. Suppose Canada Post had a technology that scanned
the contents of your letter to see to whom it was being sent and what was inside. Then, based on
this information, it would classify and prioritize the delivery of your mail. Imagine also that it
develops a system for prioritizing mail depending on how much of a hassle it is to deliver the
mail or the resources Canada Post would have to expend to deliver the mail. A post card from
Florida is trivial and easy to send, so it is delivered promptly, but a large birthday package is
delivered more slowly; or, perhaps a letter to your mother is deemed not as important as a letter
from your insurance company telling you that your policy has lapsed. Like ISPs, Canada Post is
the conduit through which you receive your mail and although it does not change the substantive
content of the mail, it controls the speed at which it travels. By doing so, Canada Post is
deciding for you how important this information is to you. Its meaning and purpose is decided
for you and after you have already paid for the service. Granted, Canada Post does not treat all
mail equally. It uses economic mail traffic management by offering to ship different packages
at different prices: if you want to ship a large, heavy package to New York, you will be charged
more than sending a birthday card to Vancouver. This type of discrimination is permissible
because it is done upfront, with your consent and, importantly, does not involve copyrighted
material. However, this is not the case with traffic shaping using DPI control over content is
exerted without your consent. P2P users are paying for an Internet subscription that supposedly
guarantees them the same quality of service given to non-P2P users.
The manner in which DPI technology is used invariably impacts on the legal question of
whether ISPs authorize infringing conduct and whether or not they are mere conduits for

information. If DPI allows ISPs to differentiate P2P traffic from other traffic and ISPs can
effectively see what is being transmitted in the packets, then this makes them aware that
infringing material is being passed through their pipes. ISPs maintain that they should have the
right to control the speed and delivery of the information flowing through their pipes; in effect, a
certain amount of control over how and when Internet users consume content. However, this
proposal is grounded in the idea that if ISPs exercise their ability to control content, then they are
no longer passive conduits and so cannot claim to be shielded from liability for enabling or
permitting copyright infringement and thus they should also have a license from the copyright
owner to do so.
This article will begin by outlining how ISPs shape traffic, focusing on DPI technology,
to illustrate how aggressive throttling of P2P results in interference with content. This article
takes the stance that DPI technology is neutral; it is neither good nor bad. Rather, the issue with
DPI is the extent to which it interferes with the content of a message, thereby obviating legal
protections for ISPs under s. 2.4(1)(b) of the Copyright Act. The normative framework for the
licensing model is based primarily on two decisions. This article will discuss how the Supreme
Court of Canada decision in SOCAN v. CAIP and the CRTCs decision in CAIP v. Bell have
created a contradictory legal and regulatory environment and how this dissonance has resulted in
a misunderstanding of ISPs role as gateways to the Internet. Both decisions take a position on
what constitutes ISP control over content, but they arrive at different conclusions. In SOCAN v.
CAIP, the court examined control over acts that do not relate to the content, relying on
conclusions drawn by the Copyright Board; specifically, this article will discuss how the
interpretation of sections 2.4(1)(b) and 3(1)(f) of the Copyright Act was driven by the Supreme
Courts lack of technical knowledge of telecommunications technology and P2P networks. This
will be followed by a discussion of the CRTC decision in CAIP v. Bell and CRTC Telecom

Regulatory Policy 2009-657.
In CAIP v. Bell, the CRTC interpreted control more narrowly,
equating ISP control to influence over the editorial content and meaning and purpose. This led
the CRTC to incorrectly find that the throttling of P2P traffic does not violate s. 36 of the
Telecommunications Act. The Supreme Court decisions in SOCAN v. CAIP and CAIP v. Bell,
considered in combination with the CRTC Telecom Regulatory Policy, have failed to establish a
stable framework for the evaluation of the use of internet traffic management practices as they
pertain to the degree of control over copyrighted content exerted by ISPs. This article will
conclude with a proposal for an ITMP-based voluntary collective licensing model where license
fees would be payable by ISPs to copyright owners depending on an ISPs use of intelligent
traffic management practices to manage P2P traffic. Such a system would reconcile the legal
and regulatory contradictions with respect to ISP liability for the transmission of copyrighted
music and also provide a revenue stream for copyright owners.

Internet Service Providers, DPI and P2P Technology
P2P services use the Internet infrastructure provided by ISPs to create a computer
network where users can freely exchange computer files.
In a more technical sense,
A peer-to-peer network is a type of network in which workstations may act as clients
(requesting data), servers (offering data) and/or servants (both a client and a
server). P2P technology enables the sharing of computer resources and services,
including information, files, processing cycles and storage by direct exchange
between systems (without the use of central servers).

---. Review of the Internet Traffic Management Practices of Internet Service Providers. Vol. 2009-657. Ottawa,
Canada: Canadian Radio-television and Telecommunications Commission, 2009.
[Review of ITMPs].
There are two main types of P2P technology: centralized P2P services, where a network of users can access files
stored on one central computer; and, the more common decentralized P2P services, where users access files
contained on any computer on the network.
Meeting the Challenge of Todays Evasive P2P Traffic. Waterloo, Ontario: Sandvine Incorporated, 2004.
[Sandvine] at 2

P2P applications are a double-edged sword for most ISPs: on the one hand, they are a strong
driver of subscriber accounts and contribute to consumers increasingly price-elastic attitude
towards internet subscriptions and quality of service demands;
on the other hand, however,
increasing the amount of P2P traffic can also adversely affect the service of other subscribers by
making less bandwidth available on the network for other uses, notably, time sensitive
applications like VoIP and online gaming that require constant bandwidth availability. As such,
the main disadvantage of P2P networks for ISPs is the additional cost of bandwidth consumed by
P2P applications; for example, on a typical ISP network, over 60% of the bandwidth consumed
is by P2P traffic.
There are also additional costs involved in moving data from around the
world and the over-subscription business model of ISPs - where they provide service to more
subscribers than their bandwidth can accommodate knowing that most subscribers will not use
the Internet at the same time - is rendered less effective.

P2P applications are able to consume many times their bandwidth share by opening
multiple parallel connections to many different servers (their peers) in order to maximize
download speeds;
in comparison, other applications, such as Web browsers, open only one
parallel connection to a server. Effectively, then, P2P applications take advantage of a certain
feature of internet technology, the Transport Control Protocol (TCP). TCP is the method by
which data is reliably transmitted from host to host.
TCPs encourage equitable distribution of
bandwidth by ensuring that each network application uses only one TCP connection to send data
to a given receiver.
P2P applications take advantage of this by opening hundreds of parallel

Ibid at 1.
Ibid at 2.
Ibid at 3.
Mochalski, Klaus, and Hendrik Schulze. Deep Packet Inspection: Technology, Applications and Net Neutrality.
Leipzig, Germany: Ipoque, 2009 [Ipoque White Paper] at 5.
Ibid at 6.
Ibid at 6.

server applications, allowing them to achieve maximum download speeds. Notably, TCPs do not
have an enforcement mechanism that prevents applications from opening multiple parallel server

As P2P traffic (like most other forms of Internet data communication) is designed to look
like regular Web traffic so that it can pass as quickly as possible through the networks,
have resorted to managing Internet traffic by inspecting data packets.
Some ISPs have resorted
to using Deep Packet Inspection technology to look past the outer layers of a packet file and
into the IP and TCP payloads.
DPI is used to ensure fair access to internet bandwidth and is
tailored to the needs of each network application. If the amount of bandwidth for P2P
applications is limited, then there is more bandwidth available for bandwidth sensitive
applications, such as Skype or online-gaming. DPI accomplishes this by providing either a
bandwidth guarantee or giving certain data packets priority over others. P2P applications often
try to conceal their activities through a range of evasion tactics, including using mathematical
operations to hide the true nature of the packet and spreading the identity of the information
across multiple packets which makes identifying the information type more difficult.
combat such concealment, DPI uses statistical and behavioural analyses of data flows of Internet
traffic to discern P2P traffic from other data.
Network management is considered to be the most useful at critical times of network
congestion when bandwidth is swallowed up by certain Internet users, namely the users of P2P
The counter-argument, however, is that traffic shaping practices, specifically the

see Ipoque White Paper supra note 14 at 6.
see Sandvine supra note 10 at 9-10.
Packet inspection needs to be used by ISPs for monitoring and changing traffic for the purposes of maintaining
their networks. see Somayaji supra note 4.
see Ipoque White Paper supra note 14 at 3.
see Sandvine supra note 10 at 9.
see Sandvine supra note 10 at 9.

use of DPI technology, might prejudicially impact the speed and quality of the connections of
other non-P2P users because
Shaping requires that each data packet be inspected to determine which are P2P. This
introduces significant network latency and slower processing times for all traffic, as
each packet is queued, inspected, and then queued again for transmittal. Shaping
therefore indirectly penalizes non-P2P users for the P2P traffic that is on the
network; every user on the network suffers these lags. This damages the subscriber
experience immensely. High network latency erodes the performance of services that
require real-time performance; low quality VoIP, jittery streaming video, and online
gaming hang ups leave subscribers scratching their heads and looking for

One approach is called protocol or application-agnostic bandwidth management
where ISPs
simply limit the amount of bandwidth that is available in periods of network congestion.
problem with application-agnostic bandwidth management is that bandwidth requirements differ
among various types of applications. For example, VoIP applications requires very little
bandwidth, but the bandwidth must be available at all times to ensure that the call does not keep
cutting out.

DPI helps ISPs manage their networks by understanding what is passing through them
and how to get information to its end destination. DPI has been used for many years in the
context of e-mail spam filtering, anti-virus filtering for e-mail, content caching for Web pages
and firewalls
without attracting any controversy. However, whether or not the use of DPI
technology is necessary to facilitate internet communication and reduce network traffic is
separate from the legal issue of how DPI regulates P2P traffic in the context of copyright and
telecommunications policy. This is especially so because different service providers use DPI
differently, while some do not even use it at all. Bell openly admits to using DPI technology to

Ibid at 10.
see Ipoque White Paper supra note 14 at 6.
Ibid at 6.
Ibid at 9-10.
see Ipoque White Paper supra note 14 at 3.

throttle P2P applications,
whereas Rogers does not provide very much information on its uses
of DPI, except to say that it does engage in traffic shaping;
TELUS has publicly stated that it
does not use DPI.

This presents a conundrum when trying to answer the legal question of whether the use of
DPI may amount to interference with content, thereby removing ISPs from the ambit of
protection afforded under s. 2.4(1)(b) of the Act. The interpretation of section 2.4(1)(b) in
SOCAN v. CAIP treats all ISPs in a similar fashion irrespective of how they employ DPI when,
as a practical matter, they all apply DPI differently. In effect, all ISPs benefit from the decision
in SOCAN v. CAIP because they are deemed to be Internet intermediaries who do not engage in
acts relating to the content of the communication and only provide a conduit for information;

yet, they all use the technology differently. This situation effectively creates a paradox: ISPs are
not deemed aware of what passes through their pipes for the purposes of receiving legal
protection under s. 2.4(1)(b) of the Copyright Act; yet, as a practical matter, they are aware of the
P2P traffic for the purpose of network management. Even the Recording Industry Association of
America (RIAA) has recognized that ISPs are aware of or can accurately determine what data
passes through their networks because the RIAA abandoned its legal campaign against file-
sharing and moved towards enforcing copyright infringement through ISP throttling.

Section 8.3 of Bell Canadas Terms of Service states that Customers are prohibited from using Bell Canadas
services or permitting them to be used so as to prevent a fair and proportionate use by others. For this purpose, Bell
Canada may limit use of its services as necessary see Bell Canada. Bell Canada Terms of Service. Ottawa, Canada:
Canadian Radio-television and Telecommunications Commission, 1986.
[Bell Terms of Service] at 6; see also Canadian Radio-television and Telecommunications Commission. The
Canadian Association of Internet Providers Application regarding Bell Canadas Traffic Shaping of its Wholesale
Gateway Access Service . Canadian Radio-television and Telecommunications Commission. Telecom Decision
CRTC 2008-108, 2008. [CAIP v. Bell] at para 16, 19 and 20.
Ibid at 23.
Anderson, Nate. How Canadian ISPs throttle the Internet. Ars Technica, Business. January 21, 2009
see SOCAN supra note 1 at 6.
Rosenblatt, Bill. "RIAA Drops Lawsuit Campaign " DRM Watch 2008. December 4 2009

The Supreme Court and SOCAN v. CAI P
In SOCAN v. CAIP, the Canadian Association of Internet Providers (CAIP) argued
against imposing liability for copyright infringement on ISPs, arguing that ISPs are not liable
because they do not regulate or are even in the usual case aware of the content of Internet
communications which they transmit.
The important aspect in this case was the Supreme
Courts analysis for determining whether or not ISPs are conduits for information. Section
2.4.(1)(b) of the Copyright Act provides a safe harbour for ISPs that transmit copyrighted
material through their networks. The Court held that so long as the ISP does not engage in acts
that relate to the content of the communication, i.e. whose participation is content neutral, but
confines itself to providing a conduit for information communicated by others, then it falls
within s. 2.4(1)(b).

There are several interesting things at work in the decision. First, the phrase does not
engage in acts that relate to the content of the communication is vague and not adequately
interpreted by the Supreme Court. Moreover, the Supreme Court never defines what it interprets
to be content. Perhaps the Court assumes that content refers to all content, such as music,
movies, blogs, or on-line gaming, but the Court is not clear on this issue. This is problematic
because by not defining what it considers to be content, the Supreme Courts analysis of s.
2.4(1)(b) is ignoring the most important part in interpreting s. 2.4(1)(b). At issue is the whether
or not ISPs might be liable for transmitting copyrighted content; in the context of P2P
applications, content has a particular manifestation. Admittedly, the technology of P2P
networks makes capturing this definition even more complicated: when data is transmitted over
P2P applications, digital files are fragmented into thousands of different file packets. The

see SOCAN supra note 1 at para 4.
Ibid at para. 92.

Supreme Court seemed to understand this much, relying on the Copyright Boards conclusion
that the transmission of the individual packets does indeed constitute communication of the
For example, when CAIP argued before the Copyright Board against imposing
copyright liability on ISPs on the basis that ISPs only transmitted packets of incomplete music
coded in computer language, the Board disagreed, stating that
fragmentation into packets was dictated by the technical exigencies of the internet.
While some intermediaries may not be transmitting the entire work or a substantial
part of a work, all of the packets required to communicate the work are transmitted
from the server on which the work is located to the end user. Consequently, the work
is communicated.

Thus, the Supreme Court seems to be saying that it is permissible for an ISP to carry these data
packets through their pipes, as this act alone does not relate to the content of the

However, the Supreme Court does not adequately consider this conclusion in light of how
an ISP throttles P2P traffic by slowing down the pace of content delivery over its network. Is
this also not an act that relates to the content of the communication?
The Supreme Court
does not articulate a nuanced and balanced view of how ITMPs work and how DPI, in particular,
affects the delivery of Internet content. The Supreme Court does not consider this and by
failing to do so, its interpretation of s. 2.4(1)(b) is not only incomplete, but also incompatible
with modern Internet technology. It is tempting to conclude that if the Supreme Court were to
revisit the issue again in SOCAN v. CAIP with this enlightened understanding, the decision might
be more nuanced and take into account the technological realties of internet communication.

see SOCAN supra note 1 at para. 22.
Ibid at para. 22.
Ibid at para. 92.

Moreover, the Supreme Courts failure to define content creates a tension between its
view of content and the CRTCs view of content, which will be discussed in more detail below.
The CRTC maintains a narrow definition of what constitutes control over content; its definition
is linked with editorial control and manipulation of specific content. For example, in CAIP v.
Bell, the CRTC decided that Bells traffic shaping of P2P traffic was permissible because it did
not involve any editorial control over the content of the telecommunications and does not
involve blocking any telecommunications.
In the context of P2P applications specifically, the
CRTC ruled that the fact that a transmission is delayed does not alter its meaning or purpose.

But again, as in SOCAN v. CAIP, the CRTC glosses over the real issue. In P2P networks, the
speed of the content is (or at least determines the nature of) the content because, for example, an
on-line game which is subjected to interruption as a result of delayed packet transmissions is a
game which is markedly less enjoyable to, perhaps even unplayable for, the user. The content of
the message is necessarily fragmented into data packets so that it can be transmitted using
Transmission Control Protocol (TCP) technology. It is impossible to at once argue that ISPs
throttling P2P files does not relate to the content of the communication
and also that ISPs can
delay the transmission of a P2P file without altering the meaning and purpose of its content.
The second interesting aspect of the Supreme Courts interpretation of s. 2.4(1)(b) relates
to the question of what counts as a conduit. The Supreme Courts decision relies on the
Copyright Boards definition in Tariff No. 22.A
of the attributes of a conduit; notably a lack
of actual knowledge of the infringing contents, and the impracticality (both technical and

see CAIP v. Bell supra note 28 at para 55.
Ibid at para 58.
see SOCAN supra note 1 at para. 92.
Copyright Board of Canada. SOCAN Tariff no. 22. A Statement of the Royalties to be Collected by SOCAN for
the Communication to the Public by Telecommunication, in Canada, of Musical Or Dramatico-Musical Works.
Ottawa, Canada:2008.

economic) of monitoring the vast amount of material moving through the internet.
because the court does not consider the extent to which traffic management practices interfere
with content, this definition does not delve far enough into the question of are ISPs strictly
conduits? The Supreme Court decision does not grasp that the use of ITMPs that incorporate
DPI technology to shape P2P traffic necessarily means that ISPs have (at minimum) implied
knowledge of infringing content. If ISPs use DPI technology to shape the traffic that flows
through their pipes, then they cannot be blind conduits. Traffic shaping measures that involve
the use of DPI are capable of monitoring the vast amount of material moving through the
After all, the purpose of DPI is to look past the packet headers to classify and
prioritize P2P traffic. Moreover, the reality of how P2P applications are used in practice
illustrates that the majority of P2P traffic is copyrighted material.
If ISPs are managing P2P
content, even for the purposes of relieving network congestion, how can they be seen as being
mere conduits as defined by the Supreme Court?
Furthermore, if we look at the discussion of authorization for the transmission of
copyrighted works in CCH Canadian Ltd. v. Law Society of Upper Canada
, the tension in
SOCAN v. CAIP is perhaps even more startling. In CCH, Justice McLachlin stated that there is
a presumption of non-authorization for copyright transmission that can be rebutted if it is shown
that a certain relationship or degree of control existed between the alleged authorizer and the
persons who committed the copyright infringement.
By contrast, in the SOCAN decision, the
Supreme Court said that when massive amounts of non-copyrighted material are accessible, it is
not possible to impute to the ISP an authority to download copyrighted material as opposed to

see SOCAN supra note 1 at para 101.
Ibid at 101.
P2P traffic accounts for up to 60% of total traffic on a typical residential network. see Sandvine supra note 10 at
CCH Canadian Ltd v. Law Society of Upper Canada. 2004 SCC 13, [2004] 1 S.C.R. 339 [CCH].
CCH supra note 47 at para. 38.

non-copyrighted material
(emphasis added). Is this position realistic given what is possible
through traffic management such as DPI? While the Supreme Courts reasoning might apply in
the case of host servers posting hyperlinks to copyrighted material, for example, the situation is
entirely different in the case of P2P applications that allow users to exchange copyrighted music
files. It is more than fair to impute such knowledge to ISPs because they are fully aware of what
type of material is being sent through their networks as a result of their use of ITMPs. When an
ISP slows down P2P traffic, it is exercising a degree of control over the content and
authorization can be implied because the use of DPI technology creates the requisite certain
relationship or degree of control between the P2P user and the ISP.
Conversely, it could be objected that authorization may require more than imputed
knowledge. Indeed, the Supreme Court even stated that knowledge that someone might be
using content-neutral technology to violate copyrights is not necessarily sufficient to constitute
However, the Supreme Court also makes numerous references to the idea that
authorization can be imputed through actions or interference with the content of copyrighted
works. For example, the Supreme Court wrote that authorization requires that the defendant did
give approval to, sanction, permit, favour, or encourage the infringing conduct.
Further, at
paragraph 124, Justice Binnie points out that copyright liability may well attach if activities
cease to be content neutral
(emphasis added). The reality is that traffic management practices
that use DPI are by definition not content neutral. DPI is effective precisely because it targets
specific applications and data traffic while ignoring others. As a result, the SOCAN decision

SOCAN supra note 1 at para 123.
Ibid at para. 7.
Ibid at para. 127.
Moreover, reference was made to C.B.S. Inc. v. Ames Records & Tapes Ltd, where it was held that an ISP may be
held liable because indifference, exhibited by acts of commission or omission, may reach a degree from which
authorization or permission may be inferred. It is a question of fact in each case see SOCAN supra note 1 at para.
124 and 126.

illustrates that ISPs are not liable for authorization of copyright infringement even though their
traffic management policies permit (and even encourage) control of the delivery of copyrighted
content via P2P platforms. There remains a disconnect between that legal conclusion and the
practical reality - service providers are at once both conduits and dumb pipes but also active
participants in exerting control over content.

The next section of this article discusses how the CRTC decision in CAIP v. Bell and the
Telecom Regulatory Policy CRTC 2009-657 also does not appreciate the realities of P2P
technology. Both CAIP v. Bell and the CRTCs Review of Internet Traffic Management
Practices demonstrate contradictory policy decisions that have distorted the Canadian legal
copyright and the telecommunications regulatory frameworks.
CRTC: CAI P v. Bell and Telecom Regulatory Policy CRTC 2009-657
The CRTC decision in CAIP v. Bell contains a deficient understanding of how Internet
and P2P technology works. The CRTC was incorrect in ruling that traffic shaping is the only
option that is technologically and economically suitable to address network congestion.

First, traffic shaping is not the only solution to traffic management and there are other suitable
alternatives, such as will be explained below. Secondly, as described above, traffic shaping does
amount to influence over the meaning and or purpose of P2P file-sharing communications
because control over the speed of transmission of P2P files amounts to controlling content. The
CRTC also closed the door on alternative solutions, stating that it agreed with Bell Canada's
submission that the traffic-shaping approach it has implemented is the only practical option that
is technologically and economically suitable, at this time, for addressing congestion in its DSL

see CAIP v. Bell supra note 28 at par 33.

The Commissioned noted that there is no evidence on the record regarding the
availability, feasibility or utility of alternative solutions.

More importantly to this discussion, however, is the CRTCs ruling that Bells traffic
shaping practices do not violate s. 36 of the Telecommunications Act. Under s. 36 of the
Telecommunications Act, common carriers cannot influence the meaning or purpose of the
content they transmit. The CRTC held that when Bell throttled P2P traffic by means of DPI
technology, the contents reach their intended recipients with their content unchanged,
and as
such, Bell Canada has no editorial control over the content. But that narrow approach ignores
how P2P technology actually works. (This perspective of content also does not correspond with
the Supreme Courts understanding that content transmitted over the internet is necessarily
fragmented into data packets). The decision makes the error of distinguishing between the speed
of the telecommunication and its content. This distinction does not hold in the context of P2P
where data files are necessarily fragmented and control over the speed of the download is control
over the content. Before a file can be accessed by the end-user all the data packets must have
arrived. The CRTC even noted as much, saying that even without traffic shaping practices, file-
sharing applications require time for the complete file to be transmitted before an end-user can
access it.
It is also interesting that the Commission notes that the contents of the file are
unchanged, yet concedes that the file may arrive more slowly than if traffic shaping had not
been applied.
It does matter if only 99.9% of all the data packets have reached their
destination because if the other 0.1% has not yet arrived, then the file cannot be accessed at all.
The entire file must reach the end-user before it is accessible and thus content will mean

see CAIP v. Bell supra note 28 at para. 33.
Even though the Commission did note that CAIP and others did suggest alternative traffic management
approaches for Bell. see CAIP v. Bell supra note 28 at para. 33.
Ibid at para. 54.
Ibid at para 56.
see CAIP v. Bell supra note 28 at para. 54.

something else if it takes a longer amount of time to reach the user. According to the CRTCs
reasoning, Bell could hypothetically reduce transmission speed so much so that it could take
hours (or days) to hold a VoIP conversation and that would be deemed to have had no influence
over the meaning or purpose of content.
In an era of instantaneous communication, there is a definite value in being able to access
content now as opposed to accessing it later. Reduced to Internet traffic, copyrighted music on
the internet is no different than any other form of information, like hot news or VoIP - its
meaning will be different tomorrow. As such, the decision in CAIP v Bell evidences a shallow
understanding of content and does not take into account the nature of how P2P files are
transmitted over the Internet. By analyzing s. 36 of the Telecommunications Act solely with
reference to substantive editorial interference with content, the CRTCs decision misses the
point much like the Supreme Courts decision in SOCAN. In the context of P2P applications, the
concept of control of content is broader than editorial control.

Furthermore, while the ITMP framework articulated by the CRTC in its Review of
Internet Traffic Management Practices decision (Telecom Regulatory Policy CRTC 2009-657)
aims to accomplish several laudable goals, its recommendations lack the depth required to create
a strong, predictable framework for the legal analysis of how ISPs employ ITMPs. The
Commission notes that transparency is important, specifically the principle that [w]here ITMPs
are employed, ISPs must be transparent about their use.
This is important in the context of
P2P throttling given that some ISPs use practices like DPI and others do not. But while
transparency is included as an important principle, there are no bright-line rules spelling out how
ISPs should give effect to that principle. Bright-line rules are a necessity when a common carrier

Ibid at para. 120.
see Review of ITMPs supra note 8 at 1.

might be interfering with content because, for example, consumers should have all the available
information to make informed purchasing decisions.
Also, the CRTC underscores the need for balance between encouraging new innovative
networks and managing network traffic, as laid out in the principle: When ITMPs are employed,
they must be designed to address a defined need and nothing more.
Technical approaches,
such as DPI, are prioritized over economic approaches, such as time-of-day pricing and monthly
bandwidth limits, which are likely to work very well in curbing P2P traffic. With respect to
economic alternatives to technical ITMPs, the Commission is understandably hesitant to mandate
economic approaches as the CRTC does not want to be viewed as overly interfering in the
operation of competitive market forces.
ISPs view economic approaches as too dangerous,
fearing that they will alienate customers if they do not price accordingly. As such, the ITMP
framework proposed by the Commission interferes with market forces to the minimum extent
necessary, giving ISPs the freedom to decide what approaches will work best for them.

Economic approaches can be very useful in reducing network congestion specifically caused by
P2P users. It is generally acknowledged in the industry that 20 percent of network users
generate over 80 percent of the traffic.
Most of these users are also the same people who
share files over P2P networks. Why not tax these users according to how much bandwidth they
use? Time-of-day pricing (TOD) is but one example of how economic approaches would help
reduce network congestion. Electricity providers use TOD pricing to reduce pressure on the grid
and it works well for them. Using technical traffic management practices that use DPI, such as
limiting user bandwidth or throttling P2P applications, is like the electricity company reducing
power to appliances that consume the most energy. An analogy would be to imagine having

Ibid at 1.
Ibid at para. 17.
Ibid at para. 18.
see Ipoque White Paper supra note 14 at 6.

enough energy to run a toaster and a lamp but not enough to run your energy-sucking high-
definition flat-screen television. Furthermore, it is possible that favouring technical approaches
over economic ones does not correspond to the analysis employed by the Supreme Court of
Canada in SOCAN v. CAIP. Neither does the CRTC seem to appreciate the legal force of the
Supreme Courts definition of what constitutes a conduit nor that authorization for copyright
infringement can be implied from actions that sanction, permit or encourage the infringement
and that to enjoy immunity ISPs must provide services that are content-neutral.
The biggest flaw with the recommendations contained in the Review of Internet Traffic
Management Practices is how the Oakes-like test proposed by the CRTC is only meant to
regulate violations of s. 27(2) of the Telecommunications Act.
The real issue in the context of
P2P throttling is not under s. 27(2), but rather with s. 36 of the Telecommunications Act, which
requires that telecommunications carriers must have prior Commission approval when they
control the content or influence the meaning or purpose of telecommunications they carry.

Aimed at balancing the freedom of Canadians to use the Internet for various purposes with the
legitimate interests of ISPs to manage traffic thus generated on their networks,
the CRTCs
proposed framework is a step in the right direction. The Commission goes on to state that the
ITMP framework would not be used to evaluate the use of such ITMPs
where it is alleged
that the ISP is controlling or influencing the meaning and purpose of the communication. The
crux of the issue is neither that P2P users are unjustly discriminated against nor that other users
are given undue preferential treatment. Rather, the issue is whether or not slowing down P2P
traffic amounts to controlling the content of the communication under s. 36 of the Act. (If
anything, P2P users should be discriminated against by using pricing strategies tied to specific

see Ipoque White Paper supra note 14 at 6.
see Review of ITMPs supra note 8 at para. 117.
see CAIP v. Bell, supra note 28 at para. 7.
see Review of ITMPs supra note 8 at para. 128.

threshold levels of DPI-use in traffic management.) Even when the CRTC discusses s. 36
violations, a lack of understanding of P2P technology is clear, just as the Supreme Court
struggled with similar issues in SOCAN v. CAIP. For example, the distinction between time-
sensitive and non-time sensitive content does not hold in the context of P2P traffic because
the speed of the transmission determines the content of the transmission. The CRTC framework
needs to be modified to deal with P2P throttling which involves interference with content under
s. 36, not unjust discrimination or undue preferential treatment under s. 27(2). The CRTC traffic
management framework does not reflect a nuanced understanding of the goals of Canadian
Internet policy and how traffic management practices impact content delivery over the Internet.
An ITMP-based Collective Licensing Model
In light of the fact that the CRTC appears to want to provide a fair degree of latitude to
ISPs in selecting ITMPs, the balance of this article proposes a licensing model for copyrighted
material based on the degree of traffic management. Under this model, ISPs would pay a pre-
determined license fee to a music collective society based on the degree to which they use
content-neutral traffic management practices to manage P2P traffic. The proposal focuses on
license fees for music because the Supreme Courts decision in SOCAN v. CAIP dealt with music
royalties and as music files are very easily shared over P2P networks, they have been the focus
of much of the contemporary debate on the role of copyright in Internet communication. In this
proposal, ISPs would pay a license to a centralized licensing agency that represents the various
music collectives, creating a one-stop-shop where users can obtain any and all types of
There are two advantages to a centralized licensing agency: first, ISPs would not
have the burden of identifying the rights holder for each and every song downloaded (or

Gervais, Daniel. Fragmented Copyright, Fragmented Management: Proposals to Defrag Copyright Management
(2003) 15 Canadian Journal of Law and Technology 33 [Gervais].

throttled); and second, a centralized licensing agency would ensure that consumers got access to
all the music they want. Licensee fees would be determined by the Copyright Board and would
be based on the extent to which the ITMPs used by ISPs are intelligent or use DPI technology
and aggressively shape traffic. An intelligent traffic management solution would consist of a set
of simple technological modifications to peer-assisted protocols which can provide a cost-
effective solution that can be exploited by content providers to scale and accelerate the delivery
of content to millions of users without pushing ISPs towards regulating or blocking such
The criteria for whether an ITMP is intelligent could be the following:
The extent to which it slows down the network
The extent to which the practice affects just P2P users or all subscribers
The extent to which it is costly to implement (resulting in higher retail prices to
The extent to which the practice interferes with content
Here is what the ITMP license fee structure might look like:

Rodriguez, Pablo. "Should Internet Content Providers Fear Peer-Assisted Content Distribution? UseNix
Measurement Conference 2005. Berkeley, California, October 19-21.
<>. [Rodriguez]


ITMP-based License Fee Structure

Traffic Management Practice

% of License Fee

Stateful Packet management

15% (Min. Fee)

Utilize network Caching


Bandwidth Caps


Acquiring more Bandwidth


Shape P2P traffic using DPI


Block P2P traffic


The following discussion clarifies the concepts used in the foregoing table.
Stateful Policy Management (similar to locality aware technology): Stateful policy
management is an ITMP that manages P2P traffic both on the downstream and on the
When a file is being downloaded, the P2P traffic is redirected along the
network path of least resistance, while upstream P2P activity is controlled at the same
time using P2P session management techniques.
Interestingly, stateful policy

see Sandvine supra note 10 at 11.

management is heavily DPI-dependent because packets must be inspected
intelligently and then classified and routed accordingly.
More importantly, only
P2P traffic is affected, leaving all non-P2P traffic free to pass through the network.
The ISP is essentially listening in on the P2P traffic, directing it where to go and
diverting downloads to local download points if that is possible. This technology is
locality aware, connecting P2P applications with local servers instead of servers that
might be located in another part of the world. Currently, P2P applications connect to
any server that has the file being downloaded or the server with the fastest transfer
speed (most applications allow the user to select which criteria are used). The server
might as easily be in India as it might be in a house a few kilometers away. P2P
applications just seek the best and most available TCP connections to maximize their
efficiency. Using session management, an ISP can limit the number of P2P
connections made to external users.
A study of P2P traffic management practices
conducted by Microsoft Research found that locality results in less than half the
resource requirements when compared to the client-server model.
Moreover, the
study also found that the benefits of a peer-assisted locality solution increase with the
logarithm of the number of active users.
The more P2P users, the better the system
works. Stateful Policy Management can be very useful in absorbing peak loads and
reducing the monetary impact on ISPs and content providers.
Stateful packet
management, although it involves DPI technology, is highly effective at reducing

Ibid at 12.
see Sandvine supra note 10 at 12.
see Rodriguez supra note 69 at 11.
Ibid at 13.

network congestion, reducing costs for the ISP and maintaining a very subscriber
friendly network.
Utilize Network Caching: Network caching involves ISPs maintaining copies of the
most frequently accessed P2P files on their servers.
When a file is searched by a P2P
user, this cache of popular songs would be accessed first and the user can download this
copy of the file.
Network caching minimizes some of the downstream bandwidth that
causes network congestion, although it does little to solve the problem of upstream

Bandwidth Caps: Implementing bandwidth caps means limiting a subscribers
bandwidth activity over a given period of time.
This approach is typically used in
tiered-pricing schemes and as such would be a valuable economic ITMP. However, caps
do not deal with the problem of upstream congestion (e.g. having too many users
uploading files to an ISP server or a P2P network) and lack the specificity required to
deal with P2P traffic only the entire users connection is throttled, not just P2P
Even more problematic for the average P2P user, who routinely runs a P2P
client where content is being uploaded to their servers, uploaded files are likely to eat
up all of their bandwidth, long before the user has downloaded her fair share.

Acquiring more Bandwidth: Under this category, ISPs provide more bandwidth to their
consumers by building new Internet infrastructure. Although subscribers might initially
experience higher speeds from their connections, this would likely encourage P2P

Ibid at 7.
see Sandvine supra 10 note at 7.
Ibid at 8.

congestion because more users would be able to download and at faster rates.

Therefore, this solution could easily result in delayed performance.
adding bandwidth to a network is cost prohibitive, making this a high-cost, low-benefit
solution that does not result in any increased network efficiency or optimization.

Shape P2P traffic using DPI: As discussed in this paper, P2P traffic shaping is not an
ideal solution to address network congestion. Traffic shaping involves the use of DPI,
with each incoming packet being inspected and prioritized; P2P traffic is sent last after
all other high priority traffic is sent.
This strategy is not likely to work to the extent
envisioned by the ISPs because P2P developers have found methods to deal with packet
inspection, such as: masking the true nature of the packet; context packet recognition;
and fragmenting packets to artificially split the packet identifier.
The challenge for
ISPs is that they must have practices to deal with each of these P2P tactics in turn for
traffic shaping to remain effective;
this is costly and inefficient. However, the biggest
disadvantage of traffic shaping is that it harms the user experience of all internet
subscribers, not just P2P users.
Inspecting each packet slows down the network and
each user will experience some lag.
Block P2P traffic: Blocking P2P traffic is a strategy designed to fully avoid the costs of
P2P file sharing. However, as P2P file sharing is a big driver of Internet subscriptions,
there is a very real possibility that customers will not stand for this. In this model, an

Ibid at 4.
Ibid at 6.
see Sandvine supra 10 note at 9.
Ibid at 6.


ISP that blocked all P2P traffic would not survive because customers would vote with
their feet and move to another, P2P-friendly ISP.

Under this proposal, the extent to which an ISPs traffic shaping practices interfered with t he
delivery of content would determine the license fee payable; for example, if an ISP were to
completely block all P2P traffic, it be responsible for would 100% of the set license fee. If the
ISP used network caching to store music on its servers, it would pay 25% of the set license fee.
The fee would also take in to account the ISPs subscriber share and market power. The ISPs
would file their ITMPs with the Copyright Board and keep the Board updated should they
change their traffic management practices. ISPs would also file their traffic shaping practices
with the CRTC so that there would be a public record on file.
An ITMP-based collective license model would create economic and technical incentives for
ISPs to adopt content-neutral but P2P-friendly traffic management solutions. The cost of the
license fee would simply be passed on the subscriber, adding perhaps $5 of $10 per month to a
subscribers internet fee (it is outside the scope of this paper to get into a discussion of specific
voluntary collective licensing proposals; however, several of the more prominent collective
licensing proposals, e.g. Electronic Frontier Foundations Let the Music Play white paper and
the Songwriters Association of Canadas A Proposal for the Monetization of the File-Sharing

of Music call for a license fee of between $5 and $10).
Interestingly, in its ITMP Policy
Framework, the CRTC has not even alluded to the possibility that there might be some technical
alternatives to simply throttling bandwidth. This licensing model would allow the ISPs to still
choose what ITMPs work best for them. It also would foster transparent practices because
technical approaches that use DPI would be regulated more by market forces and less by the
arbitrary whimsy of ISPs. Traffic shaping practices would be relocated into the marketplace
where subscribers are free to choose which carrier they want on the basis of their throttling
practices, increasing competition among ISPs for subscribers, forcing ISPs to disclose the
specific ITMPs they use and provide an incentive to refrain from disproportionally throttling P2P
traffic and interfering with content; because ISPs have purchased a license to use (or perhaps
more accurately, manage) the content, they could in theory shape P2P communications as
much as they want. This model would spark a natural re-organization of the market.
Undoubtedly, some ISPs would still choose to heavily manage P2P traffic using DPI technology
and would pay a higher percentage of the license fee for doing so; almost surely, this cost
increase would be passed on to Internet subscribers who use P2P services (it is safe to assume
that users who download extensively from P2P networks would be content to pay the increase).
Over time, given the continued and ubiquitous use of P2P networks, one or several ISPs might
determine that it would be profitable to offer a dedicated Internet connection package for P2P

Von Lohmann, Fred. A Better Way Forward: Voluntary Collective Licensing of Music File Sharing. San
Francisco, CA: Electronic Frontier Foundation, 2004. ; see also Songwriters and Recording Artists of Canada. A
Proposal for the Monetization of the File-Sharing of Music from the Songwriters and Recording Artists of Canada.
Toronto, Ontario: The Songwriters and Recording Artists of Canada, 2009.
<>. [SAC]; Terry Fishers entertainment tax of $27 per household
per year would be enough to cover royalties on both music and movies. see Fisher, Terry. Fisher, Terry. Promises
to Keep: Technology, Law and the Future of Entertainment. Stanford, California: Stanford University Press, 2004.


applications; one way to do this would be to develop new Internet infrastructure that would
increase bandwidth capacity (which is generally very expensive but the infrastructure costs
would be absorbed by P2P users). As such, the market for Internet subscriptions would naturally
sort itself out because heavy users of P2P networks could graduate to a separate subscription
package in a higher fee category; whereas those who do not use P2P networks might even see a
decrease in the cost of their Internet subscriptions as the ISPs investments in additional
bandwidth capacity (subsidized by P2P users) will make the service cheaper for lighter
Internet users. In theory, a P2P user could have access to a large catalogue of music at the
highest possible bandwidth speeds, as long as she pays for it. P2P users would face
discrimination in their monthly ISP bills, but not for their choice of Internet activities, further
enhancing the efficiency of the market.
This proposal also provides an ISP-controlled mechanism to compensate creators and rights
holders. Providing compelling reasons to ISPs to sit at the negotiating table with music labels,
publishers, artists and consumer electronics manufacturers has traditionally been very difficult;
in this proposal, they are in the drivers seat.
Creators and rights holders would always be
compensated for having their works distributed online as there would be a minimum license fee
payable even if an ISP did not aggressively shape traffic. The minimum license would reflect
the ISPs role in transmitting copyrighted material. By combining both economic and technical
approaches into a single framework with built-in incentives, this system could reduce the usage
of aggressive traffic management practices, compensate rights holders and encourage a free and
open Internet. ISPs who did not want to participate in the license model could choose to opt-out
in exchange for adding a 6% opt-out fee to the price charged for internet subscriptions.

Personal Conversation with Jodie Ferneyhough, Manager, Universal Music Group Publishing. Andreas
Kalogiannides. E-mail and phone conversations, 2009. [Jodie]

Having an opt-out fee would create an incentive for ISPs to stay within the model and if they
chose to opt-out the opt-out fee would prevent them from significantly undercutting other service
The most obvious problem with the proposal might be that ISPs would simply choose not to
throttle P2P traffic at all or choose the least aggressive traffic management practices that would
result in them paying only the minimum license fee. There is the concern that this would not be
enough to compensate the music industry for copyright infringement. However, even if highest
license fee was $5.00 per month per subscriber, the minimum could be set at $0.75 per month per
subscriber. (There are no figures on the number of P2P subscribers in Canada, although in 2005
where was an estimated 1.6 billion music files shared on-line in Canada
and there are
approximately 25 million internet users in Canada as of 2009.
) If we assume that 25% of all
Canadian Internet users use P2P networks with some degree of frequency and if ISPs were to pay
the minimum $0.75 license fee per subscriber, the fee payable to the collective would be
$4,687,500 per month. That is $56 million each year distributed to labels, publishers and artists.
(It is beyond the scope of this proposal to specifically suggest how this amount would be divided
between all copyright owners; however, this proposal concedes that arriving at a number
acceptable to all parties will be quite difficult.) Another issue would be that ensuring that ISPs
are honest about their use of ITMPs would require some sort of monthly reporting mechanism,
i.e. where the ISPs would run an automated program that tabulates all the instances their traffic
shaping practices were engaged. (Almost certainly ISPs keep track of this sort of information
now for internal record keeping.)

see SAC supra note 90.
"Internet Usage Statistics: The Internet Big Picture." Miniwatts Marketing Group. 2010.


Lastly, it would be tremendously hard to get all the publishers, labels and licensing
agencies on board. A collective licensing system is not likely to placate the concerns of all the
music industry players who all have different interests even though they work together and
support each other. And though this is an entirely separate and complicated issue, it is by far the
biggest pitfall of this system. One need only look to the difficulties the Songwriters Association
of Canada has had in selling its proposal to monetize file-sharing through a voluntary collective
license model.
The CRTC should be the one calling for reform of the Canadian telecommunications
industry regulations. One need only realize that the Telecommunications Act does not even
mention the word internet.
By contrast, the U.S. Telecommunications Act 1996 provides
policy direction on what the internet should be like and how regulators should encourage that
vision of the Internet.
The FCC and CRTC approach traffic management issues quite
differently. In Canada, the CRTC fully rejected the claims of CAIP et al in CAIP v. Bell.
However, in the United States, when Free Press et al launched a complaint against Comcast for
throttling P2P bandwidth, the FCC took a different approach
stating that although Comcast
asserts that its conduct is necessary to ease network congestion, we conclude that the companys
discriminatory and arbitrary practice unduly squelches the dynamic benefits of an open and
accessible Internet and does not constitute reasonable network management.
Another telling
difference between the how the CRTC and FCC approach traffic management is evidenced by

Perry, Mark, and Thomas Margoni. Interpreting Network Discrimination in the CRTC and FCC. London,
Ontario: University of Western Ontario, Faculty of Law, 2009. [Perry] at 4.
Federal Communications Commission. Formal Complaint of Free Press and Public Knowledge Against Comcast
Corporation for Secretly Degrading Peer-to-Peer Applications. Federal Communications Commission 08-183 EB-
08-IH-1518. Washington, D.C.: 2008. [FCC].

the FCCs position on network neutrality: [t]o the extent that providers choose to utilize
practices that are not application or content neutral, the risk to the open nature of the Internet is
particularly acute(emphasis added).

Given the differences between how the FCC and CRTC approach traffic management, a
collective licensing framework based on the use of ITMPs might have more political traction in
the United States. But this is not to say that the CRTC cannot or should not take another look
at its ITMP policy framework. Whether or not the CRTC might ever entertain the possibility of
such system is a different issue than whether the CRTC should take a more principled and
nuanced approach to traffic management practices in Canada. However, the most recent case
law and regulatory decisions illustrate the tensions between how the Supreme Court and the
CRTC approach the issue of liability for copyright infringement and internet traffic management.
Reconciling this tension will contribute to a stable and transparent legal and regulatory
framework for copyright and telecommunications law that can foster innovation both in P2P
technology and Internet communication.

Ibid at 31.