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ISP Tax May Be The Next Big Culture Funding Fight

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 or online at


  1. Michael Hennessy,TELUS
    There are a number of things wrong with such an ISP tax. First ISPs are regulated under the Telecommunications Act not the Broadcasting Act and do not distribute or control “broadcast programming” online. The CRTC cannot impose a tax under the Broadcasting Act on telecom carriers any more than it could on the Post Office. Second a tax like the current contribution to the CTF misses the economic model for content online. The issue is not about production so much as it is about sourcing sufficient venture capital to cover the substantial transport and back office costs of any popular online service. The concern about the CRTC New Media proceeding is that debate will be limited to discussions of what constitutes broadcasting online and what should be regulated.That’s the wrong debate. What is required as suggested by many is an industrial strategy that focusses on all stages of the value chain including next generation broadband investment and expansion,incentives for application development and opex for online production and streaming.To the extent some government funding is required the auction of spectrum at 700MHz provides a potential source of revenues in the billions. This revenue for an auction in 2010 is not booked by the Finance Department and could provide an economic stimulus to growing an indigenous internet economy that serves global markets.A culture tax on the internet is a path backwards. The internet subsumes culture but its much more. It is more about leveraging intellectual property,regional development and international trade.

  2. Thomas Purves says:

    So what the heck is “Canadian New Media
    So what the heck is Canadian new media? how do you fund internet content? is this grants to get the new road to avonlea youtube channel up and going? (yikes) is this funding programs for indie games companies (not a bad idea), I am a Canadian blogger, I publish “new media” content all the time can I get funded? I was also one of many canadians that produced a bunch of content on facebook and flickr last month, does that count for something?

    Or could we think of this as tiny step on the way to blanket levy copyright reform?

  3. a BIG mistake
    I’ve always has been against the CRTC and it won’t change with this.
    Internet should remain free as it’s been intended to be.

    blocked websites as well as cancom begins to appear online for canadian websites it has to stops right now. One thing I would tell is that china government allready control the internet there so do i need to say more?