Montréal, QC (Maison Radio-Canada) by JasonParis (CC BY 2.0) https://flic.kr/p/9NmGLZ

Montréal, QC (Maison Radio-Canada) by JasonParis (CC BY 2.0) https://flic.kr/p/9NmGLZ

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The Internet is not an ATM: My Appearance at the Senate Transport and Communications Committee on Broadcast and Telecom Reform

Earlier this week, I appeared before the Senate Standing Committee on Transportation and Communications alongside Carleton professor Dwayne Winseck to discuss broadcast and telecom reform. The Senate study, which largely mirrors the government’s broadcast and telecommunications reform panel, is expected to run into 2019 with a broad mandate that covers everything from affordable access to net neutrality. The discussion was similarly wide ranging with discussion on the failings of the CRTC, the lack of telecom competition, and on the need for real data in assessing the impact of the Internet on the cultural sector.

My opening statement focused on the danger of treating the Internet as equivalent to the broadcast system, the realities of how the Canadian cultural sector is succeeding online, and how policy makers ought to respond the changing landscape for communications in Canada. It is posted below.

Appearance before the Senate Standing Committee on Transport and Communications, September 18, 2018

Good morning. My name is Michael Geist.  I am a law professor at the University of Ottawa, where I hold the Canada Research Chair in Internet and E-commerce Law, and I am a member of the Centre for Law, Technology, and Society. My areas of speciality include digital policy, intellectual property, privacy and the Internet. I appear in a personal capacity representing only my own views.

This committee’s study places the spotlight on an exceptionally important question: as the Internet increasingly serves as the foundation for telecommunications, broadcasting, commerce, and culture, what reforms are needed to the current communications laws and regulations? As you no doubt know, this issue is also at the heart of a current broadcast-telecom review commissioned by ISED and Canadian Heritage. I think both efforts will be valuable and I hope that there are ways to ensure synergies between them.

My opening remarks will focus on three issues: the danger of treating the Internet as equivalent to the broadcast system, the realities of how the Canadian cultural sector is succeeding online, and how policy makers ought to respond the changing landscape for communications in Canada.

1.    The Danger of Treating the Internet as Equivalent to the Broadcast System

With the remarkable popularity of services such as Netflix and YouTube, there is a widely held view that the internet has largely replaced the conventional broadcast system. Industry data suggests the business of broadcasters and broadcast distributors such as cable and satellite companies won’t end anytime soon, but it is undeniable that a growing number of Canadians access broadcast content through the internet. Yet while it may be true that the broadcasting system is (or will soon be) the internet, the internet is not the broadcasting system. Indeed, any decision to treat the internet as indistinguishable from broadcast for regulatory purposes would send us down a deeply troubling path that is likely to result in less competition, increased consumer costs, and dubious regulation.

For example, the CRTC recently issued a report maintaining that internet access is “almost wholly driven by demand for audio and video content.” However, its own data contradicted that conclusion since it also noted that 75 per cent of wireless internet traffic is not audio or video. The reality is that internet use is about far more than streaming videos or listening to music. Those are obviously popular activities, but numerous studies 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.

Why is this important?

There are several significant problems with viewing the internet through the prism of a broadcasting system. Most notably, the approach leads to the view that if (a) we regulate broadcast and (b) broadcast is now the internet, then (c) we must now regulate the internet. However, given that the internet is much more than just broadcast, such efforts would by definition regulate far more than the broadcasting sector. This is not to say that there should be no Internet related regulation.  Of course there should. However, targeted regulation is not the same as regulating the Internet as if it were the broadcast system.

2.    The realities of how the Canadian cultural sector is succeeding online

Some of the impetus for communications law reform in Canada stems from concerns that existing regulations are failing to adequately support the Canadian cultural sector and that the Internet places its future at risk. Yet the data points to a very different reality, namely that much of the sector is experiencing unprecedented growth in the Internet era without the need for a regulatory overhaul.

For example, the days of worrying whether consumers would pay for music are largely over with the Canadian music market growing much faster than the world average, streaming revenues more than doubling in 2017, the Canadian digital share of revenues of 63 per cent exceeding the global average of 50 per cent, and Canada leaping past Australia to become the 6th largest music market in the world.

In fact, since the 2012 copyright reforms, music collective SOCAN’s Internet streaming revenues have grown more than tenfold. Last year it reached nearly $50 million annually. By comparison, in 2013, Internet streaming revenues were just over $3 million.

The success story is particularly notable with respect to film and television production in Canada. According to the latest data from the Canadian Media Producers Association, the total value of the Canadian film and television sector exceeded $8 billion last year, over a billion more than has been recorded in any year 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 content production hit an all-time high last year at $3.3 billion, rising by 16.1%. Notably, the increased expenditures do not come from broadcasters. In fact, the private broadcasters now contribute only 11% of the total financing for English-language television production. Their contribution is nearly half of what it was just three years ago in an industry that is growing. Yet despite the private broadcaster decline, money is pouring into the sector from distributors, who see benefits of global markets, and foreign financing, which has grown by almost $200 million in the past four years. It should be noted, however, that the sector remains heavily supported by the public, with federal and provincial tax credits now accounting for almost 30% of financing.
The increase in foreign investment in production in Canada is staggering. When Netflix began investing in original content in 2013, 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, In sum, the data confirms that there has never been more money invested in film and television production in Canada and far from representing a threat, the digital environment has provided new opportunities for Canadians to thrive.

3.    What Next for Broadcasting and Telecommunications Legislation?

Given the risks of treating the Internet as the broadcasting system and the success of the cultural sector in Canada, what next for broadcasting and telecommunications legislation?

I’ll quickly point to five issues to consider. First, ensure affordable access for all. As the committee works through its study, it must keep in mind that all of these benefits of the Internet depend on all Canadians having affordable access. The imposition of new taxes or fees for Internet access will invariably mean that Canadians will pay more for those services. With a quarter of low income Canadians still without access – often due to affordability concerns – and Canada with some of the highest wireless prices in the world, imposing new costs would risk increasing the digital divide.

Second, maintain a level playing field through strong net neutrality rules. Existing rules have been interpreted to include net neutrality, but we would still benefit from an unequivocal legislative direction to support and enforce net neutrality. Some commentators have raised the possibility that Canadian cultural policy might benefit from zero rating Canadian content. In other words, rather than rely on net neutrality rules to ensure that Canadian content benefits from a level playing field, perhaps it would be even better to tilt the rules in favour of Cancon by mandating that domestic content not count against monthly data caps. Canadian content can compete with the best in the world and our regulatory rules should ensure a level playing field to allow it to complete fairly with content from around the world.

Third, Canadian broadcasting and telecommunications law must keep pace with the changing digital environment. Rules that grant the CRTC the power to determine which channels may operate in Canada should be repealed. Instead, the Commission should concentrate on consumer protection and marketplace competition. The consumer protection issues include regulations maintaining maximum consumer choice through pick-and-pay models, truth in advertising on communications services, and tough action against deceptive practices.

Fourth, we should reject new fees or taxes on Internet access and services. An Internet or ISP 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. As previously discussed, however, is that Internet use is about far more than streaming videos or listening to music. Governments can (and do) support the creation of Canadian content through grants, tax credits, and other subsidies, but foisting support on a monthly internet or wireless bill stretches the definition of the conventional broadcast system beyond recognition.

Fifth, we should reject calls for website or content blocking. Recent proposals  along those lines to the CRTC have been disproportionate, harmful, inconsistent with international standards, and violate Canadian norms. Indeed, website blocking would bring major costs and negative implications for freedom of expression, net neutrality, affordable and competitive consumer Internet access, and the balanced enforcement of intellectual property rights.

I look forward to your questions.

7 Comments

  1. “The Internet is not ATM” is an eye-catching title but seems to have little to do with the body of the text. ATMs are not mentioned even once and the text does not really carry the metaphor: ATMs are not treated as broadcasting systems, they have nothing to do with Canadian culture, they are not taxed or blocked. 🤷‍♂️

  2. Michael Geist’s presentation to the Senate Standing Committee is very misleading.

    1. The Danger of Treating the Internet as Equivalent to the Broadcast System

    The Internet is not a broadcasting system, but then neither are electromagnetic waves a broadcasting system. The broadcasting system, telecommunications services and other systems and services deploy electromagnetic waves, and each activity is or can be regulated in accordance with its function. Similarly, the Internet is a multi-functional instrument that serves many purposes and is subject to various laws in accordance with the purpose it serves. Broadcasting constitutes one use of the Internet, but the current definition of broadcasting in the Broadcasting Act does not encompass communicating through messaging and social networks, electronic commerce, Internet banking or searching for news, weather, and other information.

    2. The realities of how the Canadian cultural sector is succeeding online

    Most of the main impetus for broadcasting law reform in Canada stems from pressure from integrated corporate broadcasting groups and English-language conservative/libertarian thinks tanks (the Fraser Institute, the C.D. Howe Institute and the Macdonald Laurier Institute, for example) and their hangers-on. Like Michael Geist, these commentators display no knowledge of, or interest in, the French-language broadcasting sector and its particular characteristics and needs.

    While it is true that film and television production in Canada exceeded $8 billion in 2016-17, only $3.3 billion of this consisted of Canadian content. This $3.3 billion of Canadian content production in 2016-17 represents an increase of only 9,7% over the five years since 2011-12. Foreign financing of English-language production taking place in Canada has increased considerably over this period, but Michael Geist mistakenly refers to this phenomenon as foreign “investment”. In fact, the bulk of the increase is spending on location shooting and service production for US television and film in Canada. What Michael Geist calls “investment” in Canadian content is not investment but licence fees from foreign broadcasters, both public and private. Of the $381 million in foreign financing of Canadian television production in 2016-2017 that Michael Geist is cheering about, only $2 million is attributable to French-language programs. 48% of French-language television production financing came from Canadian broadcasters. What is more, Michael Geist claims that money is pouring into Canadian production from distributors. He fails to understand that Canadian distributors contribute next to nothing from their own resources. Their contribution is essentially a pass-through of anticipated or actual foreign pre-sales and distribution advances, often financed by Telefilm Canada.

    3. What Next for Broadcasting and Telecommunications Legislation?

    Why should unlicensed foreign subscription VOD services, such as Netflix, get a free ride from Canadian tax authorities and the CRTC when licensed Canadian services are continuing to make their contributions? The CRTC should expand its licensing regime to include the large digital programming undertakings operating in Canada so that they too make a contribution to our sovereignty and national identity. The time for Internet exceptionalism has passed.

  3. I like reading through an article that will make people think.

    Also, thank you for permitting me to comment!

  4. richmond2000 says:

    I agree treating the internet as a broadcaster is WRONG but
    NOBODY is “talking” about CANCON and what as Canadians we WANT to protect
    is it good enough to just want JOBS in the production sector for foreign companies producing foreign stories with foreign “values”
    or do we want to promote CANADIAN writers with a CANADIAN viewpoint and Canadian “values”

    JOBS are good and help “reelection campaigns” but if the “cost” is the Canadian identity / viewpoints

  5. The Internet is not ATM” is an eye-catching title but seems to have little to do with the body of the text. ATMs are not mentioned even once and the text does not really carry the metaphor

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