Stop ACTA 21 by Martin Krolikowski (CC BY 2.0) https://flic.kr/p/bs3Yxp

Stop ACTA 21 by Martin Krolikowski (CC BY 2.0) https://flic.kr/p/bs3Yxp

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Regulate Everything: The CRTC Goes All-In on Internet Taxation and Regulation

For two decades, a small collection of cultural groups have been pressing the CRTC to regulate and tax the Internet. As far back as 1998, the CRTC conducted hearings on “new media” in which groups argued that the dial-up Internet was little different than conventional broadcasting and should be regulated and taxed as such. The CRTC and successive governments consistently rejected the Internet regulation drumbeat, citing obvious differences with broadcast, competing public policy objectives such as affordable access, and the benefits of competition. That changed today as the CRTC released “Harnessing Change: The Future of Programming Distribution in Canada“, a difficult-to-read digital-only report (as if PDF is not digital) in which the CRTC jumps into the Internet regulation and taxation game with both feet.

The report is the Commission’s response to Canadian Heritage Minister Melanie Joly’s report on Canadian content in a digital world, released less than a year ago which asked for a CRTC review. That report – as well as the Commission’s own Let’s Talk TV report – emphasized the benefits of the Internet and sided primarily with an export-oriented, competition focused strategy in which Canadian content and broadcasters would succeed based on the quality of their programming, not regulatory schemes designed to provide millions of dollars in support.

The CRTC has reversed that approach with a regulation-first strategy that envisions new fees attached to virtually anything related to the Internet: Internet service providers, Internet video services, and Internet audio services (wherever located) to name a few. The CRTC’s report now goes to the government, but this has the feeling of theatre with a review of telecom and broadcast legislation set to get underway with a panel that will undoubtedly include several proponents of an Internet regulation strategy. In fact, one wonders if the CRTC would not have embraced prioritization of Cancon on in the Internet if not for the government’s clear support for net neutrality.

The foundation of the CRTC report is fundamentally flawed in at least four respects. First, Canadian broadcasting regulation is essentially regulation on speech. In a world of scarcity – limited channels or spectrum – that regulation is viewed as necessary to ensure that a scarce resource is well-used. In the Internet world of abundance, the rationale for conventional broadcast regulation withers away as there are few limits to the ability for anyone to use the Internet to express themselves, whether with text, audio or video.

Yet in the CRTC’s worldview, much of this is “broadcasting” that requires regulation. The potential scope of CRTC regulation is dizzying as it states:

if legislative change is to take place, it should clearly and explicitly make any video or audio services offered in Canada and/or drawing revenue from Canadians subject to the legislation and incorporate them into the broadcasting system. This should apply to traditional and new services, whether Canadian or non-Canadian.

Is the CRTC suggesting that all podcasters that draw revenue from Canada are now subject to its regulation?  All news organizations that invariably include audio and video?  Where is the line on CRTC regulation when your scope is the Internet?

Second, there is no Canadian content emergency. Notwithstanding the doomsayers who fear that the emergence of digital services such as Netflix will result in less money for production in Canada, the most recent annual report by the Canadian Media Producers Association on the state of screen-based media production in Canada confirms that financing of Canadian television production continues to hit new heights. Last year, the total value of the sector exceeded $8 billion, over than a billion more than has been recorded over the past decade. In fact, last year everything increased: Canadian television, Canadian feature film, foreign location and service production, and broadcaster in-house production. Canadian television, which some claim is at risk due to services such as Netflix, posted the largest expenditure ever (or least over the past two decades looking back at older annual reports).

In fact, the increase in foreign investment in production in Canada is staggering. When Netflix began investing in original content in 2013, the total foreign investment (including foreign location and service production, Canadian theatrical, and Canadian television) was $2.2 billion. That number has doubled in the last five years, now standing at nearly $4.7 billion. While much of that stems from foreign location and service production that supports thousands of jobs, foreign investment in Canadian television production has also almost doubled in the last five years. The data makes it clear that Netflix isn’t a threat, it’s an opportunity with new money entering the sector.

The CRTC report isn’t based on this reality, however. Instead, it provides a handy interactive slider that shows the reduction in mandated funding for Cancon depending on how much spending drops on cable and satellite services. Its own chart shows how that aspect of funding is a small part of the overall ecosystem, but nevertheless it calls for taxation of the entire ecosystem.

Third, an Internet tax is largely premised on the argument that ISPs and Internet companies owe their revenues to the cultural content accessed by subscribers and they should therefore be required to contribute to the system much like broadcasters and broadcast distributors. In fact, the CRTC says exactly that in the report:

there are numerous services in Canada that connect Canadians to content, whether through the Internet or broadcast networks, such as cable or satellite. Demand for these services is almost wholly driven by demand for audio and video content, yet the Canadian market for this content is only supported by BDUs, television programming and radio services.

The reality, however, is that Internet use is about far more than streaming videos or listening to music. Those are obviously popular activities, but numerous studies (CIRA, Statistics Canada) point to the fact that they are not nearly as popular as communicating through messaging and social networks, electronic commerce, Internet banking, or searching for news, weather, and other information. From the integral role of the Internet in our education system to the reliance on the Internet for health information (and increasingly tele-medicine) to the massive use of the Internet for business-to-business communications, Internet use is about far more than cultural consumption. Yet the CRTC envisions the Internet as little more than cable television and wants to implement a taxation system akin to that used for cable and satellite providers.

Fourth, the CRTC suggests that the new fees will be consumer-cost neutral, with reduced broadcast fees offsetting new Internet access fees. In other words, it believes that the current consumer costs are a benchmark against which future fees can be measures and that consumers don’t get to retain the benefits of lower costs and more choice from the Internet. Rather, the CRTC views this as an opportunity to impose new fees or taxes.

There is little reason to believe that the costs won’t have an impact on Internet and wireless pricing that is already some of the highest in the world. Indeed, there is no way around the fact that an Internet tax would make access less affordable, expanding the digital divide by placing Internet connectivity beyond the financial reach of more low-income Canadians. The tax would be particularly damaging in indigenous communities.

The government itself rejected this proposal just last year on precisely the same affordability grounds:

The Committee’s recommendation to generate revenue by expanding broadcast distribution levies so that they apply to broadband distribution would conflict with the principle of affordable access. The open Internet has been a powerful enabler of innovation, driving economic growth, entrepreneurship, and social change in Canada and around the world. The future prosperity of Canadians depends on access to an open Internet where Canadians have the power to freely innovative, communicate, and access the content of their choice in accordance with Canadian laws. Therefore, the Government does not intend to expand the current levy on broadcast distribution undertakings.

The CRTC believes that there is no difference in taxing the same connection, whether used for cable broadcasts or to access the Internet. However, the two can be very different. Cable contributions can be rationalized because the only thing you can do with cable is watch programming. Not so with the Internet, yet the CRTC wants to impose taxes on both in much the same manner.

The CRTC report seemingly views the Internet as an ATM with the ability to withdraw cash from providers and services to fund Cancon or other social programs. It acts as if a reduction in mandated support from broadcasters is the end of Cancon and as if the Internet is little more than cable television rather than the most important communication system ever created. As the title of the report suggests, its recommendation to the government is that the Internet can be “harnessed” from Gatineau for its own policy purposes. The CRTC wants to convince the public it understands the digital world with its digital-first report, but as Canadians struggle to parse through the myriad of links and an unreadable presentation they find a Commission with its gaze firmly fixed in the rear view mirror.

26 Comments

  1. News flash: modern life is heavily regulated. Canadians are heavily taxed. Corporations, in theory, are asked to contribute to the common weal. Foreign businesses do businesses here by our rules, and most are quite happy to comply because of the value of our market. In return for all this, we get untold benefits and protections.

    • Frederick says:

      You mean the benefit of having no private property rights and as a result being essentially the property of the state? Some benefit.

  2. This strikes me as a power grab, pure and simple. The report reads as if the last 20 years never happened, and the Commission is trying to find a justification to control where none is needed or justified.

    Worse, the Commission is acting aggressively heavy-handed in the way it proposes regulating the Internet.

    Hopefully, the government will override this nonsense and require a common sense, net neutral position by the CRTC.

    • I’m not sure why the CRTC is involved with the internet in the first place. They are ill equipped, historically and functionally, to deal with this whole new world which cannot be likened to broadcasting nor traditional telephony. I would like to see some other more relevant organization set up for this. One which has a demonstrably arms length relationship to the CRTC.

  3. Kelly Manning says:

    Are Canada Post and Courier companies regulated when they deliver newspapers, magazines, books and digital media? The internet is more like mail and freight than like TV and Radio. Electricity is regulated more in the Public Interest than Radio and TV are. The BC Utilities Commission recently rejected a Politically motivated rate cut suggested by the NDP Administration, as bad economics.

  4. Rob McCleave says:

    1. Abolish the CRTC. Fire them all.
    2. Turn the telecoms back into utilities by forcing them to divest of any and all content production. They are to be common carriers of signal only.
    3. Introduce an internet tax, based on service speed, that goes into the same pool as the Canadian Television fund. Funding goes to content producers, who are no longer owned by the Telcos.

  5. Governments love to get control over the internet. A free flow of information can be threatening to the existing system.
    Why do we need Canadian content rules? We as Canadian don’t have the mental capacity to decide what we want to watch and listen?
    Do we have such lousy musicians and performers, that they constantly require financial subsidies? They can’t compete in a free enterprise environment?
    Why not a special tax to support shipbuilding or any other industry?
    It’s absolutely hideous that we as “free” country have the government telling us to watch 1/3 Canadian content.

    • Even better; how about a tax on broadcasting companies and rights organizations to support the internet? I’m just kidding of course, but the CRTC does make the blood boil and encourages one to imagine stupid ways of fighting back, despite the embarrassment of stooping that low.

  6. It’s hilarious what gets the redneck brigade all worked up. Tell them that organized crime runs half the country and owns a few MPs, they’ll shrug, despite all the money going into their pockets, some of it from purely illicit activities but a large part by mafia involvement in construction and other fields.

    Tell them there are companies selling unsafe foods, as we’ve seen with processed meat, and in part due to inadequate government regulation, and their attitude is likely “oh well, what can you do, I’m as healthy as a horse, I don’t care.”

    Tell them that the government might regulate the Internet the way it regulates the radio – and yes, duh, the Internet is a heck of a lot more like radio than it is like the mail (which is also heavily regulated – try sending a live (or dead) animal through the mail, or a handgun, or a chemical substance . . . – and the sky is about to fall, we have to form a militia and take back our rights.

    Tell them a foreign service provider like Netflix will have to pay Canadian tax – just like lots of American companies now have accounts with the Canadian taxman and bill the tax to you before shipping your purchase over the border – and Joseph Stalin has apparently come back to life. On that topic, you should all get one – a life – as it might take your mind off of all the injustices the CRTC subjects you to.

    • “It’s hilarious what gets the redneck brigade all worked up.”

      So you start with a complete mis-characterization and slander of the general opposition, well done.

      “Tell them that organized crime runs half the country and owns a few MPs, they’ll shrug, despite all the money going into their pockets, some of it from purely illicit activities but a large part by mafia involvement in construction and other fields.

      Tell them there are companies selling unsafe foods, as we’ve seen with processed meat, and in part due to inadequate government regulation, and their attitude is likely “oh well, what can you do, I’m as healthy as a horse, I don’t care.”

      Ah, classic whataboutism. Some people don’t care about some things that you think they should care about, they are hypocrites for caring about other things. News flash, I probably can name a hundred things that I think you should care about, does that mean that you caring about other issues also gets invalidated? Also, more mis-characterization about the general opposition.

      “Tell them that the government might regulate the Internet the way it regulates the radio – and yes, duh, the Internet is a heck of a lot more like radio than it is like the mail (which is also heavily regulated – try sending a live (or dead) animal through the mail, or a handgun, or a chemical substance . . . – and the sky is about to fall, we have to form a militia and take back our rights.”

      So your metaphor for, among other things, a blanket tax on Internet usage towards a subsidy for very specific market (a subsidy that I may add, has been reportedly misused and wasted, not surprising given the level of corruption and cronyism in the media industry) is that you can’t send certain things in the mail. What a brilliantly thought-out metaphor. Clearly you have a dizzying intellect.

      “Tell them a foreign service provider like Netflix will have to pay Canadian tax – just like lots of American companies now have accounts with the Canadian taxman and bill the tax to you before shipping your purchase over the border – and Joseph Stalin has apparently come back to life. On that topic, you should all get one – a life – as it might take your mind off of all the injustices the CRTC subjects you to.”

      I see. Cherry-pick certain points and add a fistful of hyperbole while mis-characterizing the opposition and delving heavily into strawman arguments. Well I think we can easily summarize your playbook George. It’s funny that you tell others to get a life considering how ubiquitous your diatribes are becoming in the comments here. I mean, you claim that you are an artist, so don’t think it would a better use of your time to actually do your alleged job?

      • Comments like these reek of Doug Ford and Donald Trump:

        Why do we need Canadian content rules? We as Canadian don’t have the mental capacity to decide what we want to watch and listen?

        It’s absolutely hideous that we as “free” country have the government telling us to watch 1/3 Canadian content.

        Being bullied into watching Canadian content, and having to pay for it is a sad state.

        You mean the benefit of having no private property rights and as a result being essentially the property of the state?

        • “Comments like these reek of Doug Ford and Donald Trump:”

          Cherry-pick certain points and add a fistful of hyperbole while mis-characterizing the opposition and delving heavily into strawman arguments.

          Again George, you’re a broken record.

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  9. That is funny. The CRTC is irrelevant, a government body enforcing itself on every participant regardless of interest is not getting our tax money worth. Being bullied into watching Canadian content, and having to pay for it is a sad state.

  10. Willy B. says:

    @George – It seems your comments are posted only during work hours, none on weekend. One could draw conclusion that you may be getting compensated to post here defending the CRTC.

    The Internet service should be classified as other utilities (energy and telecom), not as broadcast distribution.

    • His, presumably deliberate, mischaracterization of the people opposing the CRTC’s direction on this is also telltale. I too wonder who he represents.

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  12. Another bogus copyright infringement notice arrived from Tokyo Media Corp. Their primary purpose in using notice and notice seems to be to advertise a product that innocent internet users were not aware of before and were not consuming.

    A lot of times the notices seem to be calculated to scare people who did nothing. The business model of ACS Law and Prenda Law was to target innocent people and hope that they would pay up rather than have to pay for a bare bones or more legal defence and have their name defamed with false charges of downloading porn.

    How many people can legitimately say that they have never viewed an episode of Game of Thrones, as I can? My viewing tastes are quite different from the mainstream. Suggesting that I viewed anime is simply ridiculous.

    I am also wondering if they are simply identifying any user of torrent services as infringement and using a scatter gun approach. Bona Fide Open software such as Linux distributions and LibreOffice often have one or more torrent servers.

  13. Remember the classic RIAA Pircy Suit against a 66 year old grandmother with an apple macintosh computer? RIAA claimed that she had used kazaa to download rap music. RIAA never did explain how someone with a mac computer could run kazaa, just dropped the legal action.

    As “The Guardian” wrote in 2003: “The individual lawsuits were unbelievably counterproductive,” said Christopher Jon Sprigman, co-author of the Knockoff Economy. “The record companies basically bought themselves a huge amount of bad publicity, a few settlements and no real impact on file-sharing.”

    Fifteen years later not much has changed, except in the enterprises claiming infringement. The fact that most RIAA lawsuits were dismissed suggests that most of their claims of infringement turned out to be unfounded.

    Tanya Anderson was awarded $108,000 in legal fees for defending herself against bogus RIAA claims that she downloaded music. How many people can afford to take a chance on getting stuck with such a huge legal bill? As “Variety” wrote in 2007 “Tanya Andersen, claims the RIAA was aware of the faulty methods but has nonetheless filed lawsuits against innocent people in some cases”. Andersen’s Lawyer had claimed $300,000 in costs for her legal defence.

    The lawyer for Debbie Foster, another innocent RIAA legal action victim, was awarded $68,685 in legal costs. Most people in the USA live pay cheque to pay cheque. How many could afford to take a chance on even a bare bones legal defence against a bogus copyright infringement suit?

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  15. If Canadian content can’t stand on it’s own two feet… fire the system and hire one that can, without billing the consumer for the inept Canadian content.

    • I’m sorry the Canadian education system failed you. You should watch Weird Al’s music video “Word Crimes,” it’s fun, and you’ll learn about apostrophes and the word “it.”

      Oh, and you might try a little Cancon sometime, when you’re not at Doug Ford rallies cheering on the millionaire defender of the common Joe, you might enjoy that too.

      • Just what Canada needs, another trolling grammar cop.
        Please stop wasting valuable Canadian bandwidth with your inane rants and wild accusations and ass umption””’s.

        DO NOT REPLY George – it will NOT be read!

        p.’s. Try sit up’s, pu’sh-up’s, walking etcetera in’stead of getting your exerci’se by jumping – to outlandi’sh conclu’sion’s.

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