Netflix just concluded an appearance before the CRTC that resulted in a remarkably heated exchange between the regulator and the Internet video service. The discussion was very hostile with the CRTC repeatedly ordering Netflix to provide subscriber and other confidential information. Netflix expressed concern about the need to keep such information confidential, leaving CRTC Chair Jean-Pierre Blais angry that anyone would doubt the ability of the regulator to maintain the information in confidence. Netflix concern in that regard was understandable given that even confidential information submitted to the CRTC is subject to a public interest test (conversely, U.S. regulators can provide guarantees of confidentiality).
As temperatures increased, the CRTC expressed disappointment over the responses from a company that it said “that takes hundreds of millions of dollars out of Canada” and implicitly threatened to regulate the company by taking away its ability to rely on the new media exception if it did not co-operate with its orders to provide confidential information.
The exchange had the feel of a last gasp effort of a regulator to assert its relevance against a service that enjoys massive public popularity along with some fairly obvioius support from the government. The use of a regulatory threat was particularly surprising and could come back to haunt the CRTC. As I discussed in a post earlier this week, the Commission has long maintained that it has the legislative power to regulate Internet-based services, but chooses not to do so.
The threats during the hearing confirms that the CRTC believes that not only does it have the power to regulate Netflix, but that it does regulate it. It does not require the same obligations as conventional broadcasters, but it maintains that its regulatory structure allows it to order online video services to comply with information disclosure demands. But what if that regulatory power was challenged? Netflix appeared voluntarily before the Commission, but it could have refused. It could argue that it is not a broadcaster and not subject to the Broadcasting Act. In fact, it could challenge the CRTC’s orders for information, arguing it does not fall within the Canadian legislation and does not maintain a physical presence in the country. It seems unlikely that Netflix will chose to escalate the battle with the CRTC, but today’s hearing had the feeling of a prelude to a much larger regulatory and political battle.