Appeared in the Toronto Star on October 6, 2008 as Is An Internet Tax Coming?

The emergence of cultural funding as a hot-button political issue in the current election campaign appears to have taken virtually everyone by surprise.  The roughly $50 million in cuts may be tiny in terms of the overall federal budget, yet the significant impact on the cultural community has propelled the issue onto the national stage.

While leaders debate the merits of public funding mechanisms for the arts, whoever forms the next government will quickly face a far bigger cultural funding issue that promises to make the current dispute seem like a short preview as compared to the forthcoming main attraction.  

The Canadian Radio-television and Telecommunications Commission will hold hearings on new media regulation in early 2009 and barring a change of heart, the focal point will be the prospect of a mandated levy on Internet service providers to fund new media cultural production.  

Opponents will deride the plan as a new tax, but that has not stopped cultural groups from lining up in support of such a scheme.  Earlier this year, several groups, including the Canadian Film and Television Production Association, the Alliance of Canadian Cinema, Television and Radio Artists (ACTRA), the Directors Guild of Canada, and Writers Guild of Canada, proposed a mandatory ISP contribution of 2.5 percent of broadband revenue to help fund Canadian new media content creation.  

In support, the groups released the results of a public opinion survey which they said found that "69 percent of Canadians believe that ISPs should be required to help fund the production of Canadian digital media content in the same way that cable and satellite TV providers are required to contribute a small percentage of their revenues to the production of Canadian television programs."

More recently, the CRTC commissioned Eli Noam, a Columbia University finance professor, to conduct an independent study on the issue.  Noam's report, TV or Not TV, canvassed the regulatory options as the Commission grapples with a broadcast environment that has shifted from one of scarcity to seemingly unlimited abundance.

Noam concluded that there should be regulatory harmonization between online and offline broadcast that could include public funding for the production of Canadian content. Noam's preferred funding model is "a combination of public funds; an excise tax on ISPs and carriers that would be harmonized with the existing levy on cable and satellite TV providers; and the use of spectrum sales revenues into a special trust fund."

The current discussion on cultural funding may take on greater urgency once the ISP levy takes centre stage.   There is little doubt that such a levy – which Canadians would see each month on their ISP bill – would generate strong opposition from consumers.  The various political parties may be battling to demonstrate their support for the cultural community today, yet an unpopular ISP levy would surely put those positions to the test.

The ISP levy proposal will also force regulators to show their cards on whether they believe that new Internet regulation is needed.  The Commission concluded in 1999 that the Broadcasting Act gave it the power to regulate "new media undertakings," but that given the paucity of Internet video such regulation was unnecessary.

Nearly ten years later, streaming and real-time video have become a staple of Internet use with millions of Canadians turning to their computers rather than their televisions for video news and entertainment.  While the differences between the two mediums will be obvious to a generation that lives online, some regulators may be tempted to equate television and the Internet, arguing that a harmonized regulatory approach necessitates the imposition of Canadian content requirements and cultural funding programs.

Michael Geist holds the Canada Research Chair in Internet and E-commerce Law at the University of Ottawa, Faculty of Law. He can reached at mgeist@uottawa.ca or online at www.michaelgeist.ca.