0 - Netflix image by thinkaholic_me (CC BY-NC-SA 2.0) https://flic.kr/p/ewj8CZ

0 - Netflix image by thinkaholic_me (CC BY-NC-SA 2.0) https://flic.kr/p/ewj8CZ


CRTC vs. Netflix: Has Canada’s Broadcast Regulator Started a Fight It Can’t Win?

Canadian regulatory hearings are usually relatively predictable affairs with scripted presentations and well-rehearsed speaking lines to most questions. During the recent two-week Canadian Radio-television and Telecommunications Commission hearing on the future of television regulation (dubbed “TalkTV” by the CRTC), Chair Jean-Pierre Blais expressed frustration on several occasions with the unwillingness of witnesses to veer much beyond their prepared notes.

My weekly technology law column (Toronto Star version, homepage version) notes that changed on the final day of the hearing, though it was Blais that seemingly departed from the script. Netflix, the online video giant that popped up in virtually every discussion, was one of the last witnesses on the schedule. The company had submitted comments to the CRTC consultation over the summer, but had not asked for an opportunity to appear before the Commission.

After the CRTC requested that it come to Gatineau to answer questions, the company came prepared to discuss the development of its business, but chafed at the prospect of disclosing confidential information such as subscriber numbers and spending on Canadian content. Blais took great umbrage at its reluctance to disclose the information, ultimately ordering the company to comply with the information request and implying that failure to do so could result in new regulation.

The Blais – Netflix exchange made for compelling television, but it was not the first time that the CRTC found itself facing an Internet company reluctant to disclose confidential information. On the very first day of the hearing, Google, which owns YouTube, appeared and expressed similar reservations. Blais did not threaten the company with regulation, but did note that it could draw conclusions from Google’s “lack of co-operation.”

If the CRTC expected the regulatory threats to result in quick compliance, its plan backfired. Last week, Netflix responded to the CRTC’s demands by refusing to disclose certain information and – more importantly – challenging the Commission’s authority to regulate online video services.

Netflix emphasized that it appeared voluntarily before the CRTC and that the “orders are not applicable to Netflix under Canadian broadcasting law.” Google adopted a similar approach, stating that its disclosures were voluntary and that the company was not part of the Canadian broadcasting system.

The very public fight pitting the CRTC against Netflix and Google represents a stunning shift. For the past year, the Commission has been steadily moving toward dramatic reforms of Canadian broadcast regulation. Emboldened by the government’s vocal support for a consumer-oriented approach, the CRTC has paved the way for changes to the way consumers purchase television channels (mandating pick-and-pay options) and reforming many longstanding regulatory policies that created a protected marketplace which frequently prioritized creating Canadian content over commercial success.

Those changes are still likely to happen, but now it is more than just Canadian broadcasters, broadcast distributors, and creators that are facing the prospect of change.  By challenging the Commission’s authority over online video services, Netflix and Google have raised doubts about the future of the CRTC as a broadcast regulator over the fastest growing part of the market – the Internet.

The Canadian debate over the regulation of online video services is not new. The CRTC first addressed the issue in 1999 with its new media decision. It held that some online video could be considered broadcasting but that the policy goals of the Broadcasting Act would not be advanced through regulation. In other words, the CRTC said that it was legally entitled to regulate, but it chose not to do so, creating an exemption that excluded online video services from conventional broadcast regulation.

As services such as YouTube and Netflix became increasingly successful, the CRTC revisited the new media decision on several occasions. Despite pressure from some groups to establish a “contributions program” (now derisively labelled a “Netflix tax”), the CRTC maintained that new fees were not needed. Instead, it adjusted the regulatory exemption for online video providers by requiring them to disclose information to the Commission if asked.

The regulatory changes attracted little attention, but with hindsight made the current showdown over regulatory power all but inevitable. Mandatory information disclosure may seem like a minor regulatory requirement, but the bigger concern is that the CRTC put itself in the business of regulating online video. For companies such as Netflix and Google, the fear is that basic disclosures could eventually expand to promotional mandates, Canadian content requirements, and mandatory financial contributions.

With the prospect of a future court battle, the key legal question will turn on whether “broadcasting” as defined by the Broadcasting Act can be interpreted broadly to include online video services. The answer to that question is far from certain.

In 2012, the Supreme Court of Canada rejected the possibility of a CRTC-mandated fee-for-carriage for over-the-air television channels, concluding that the Commission needed to point to more than just policy objectives found in the law to support its claim to have jurisdiction to impose the new fee. Moreover, a second case ruled that Internet service providers were not “broadcast undertakings” under the Act. A similar reference on the scope of broadcasting and online video services could also lead to clear limits on the CRTC’s powers and scope of the law.

In an ideal world, the government would step in to address the issue by acknowledging that the law is now badly outdated and initiating a much-needed modernization effort. With two communications laws – the Broadcasting Act and the Telecommunications Act – Canadian law creates an artificial legal separation between broadcast and telecommunications that has been blurred by new technologies and marketplace developments.

Services such as Netflix and YouTube bear some resemblance to both broadcasting and telecommunications, yet do not fit neatly within either law. A single Communications Act could better reflect modern realities and policy priorities in a technology-neutral manner. Telecommunications and broadcast reform may garner limited political benefit, but the future success of the industries depends on it.

While some CRTC chairs have discussed the need for legislative reform, Blais has made it clear that he believes the role of the regulator is to uphold the law it is given, not lobby for the law it wants. He may be right, yet the current governing law is ill-suited to address Internet-based video services. By raising the spectre of increased regulation, the CRTC has started a fight it is unlikely to win.


  1. We are one of many families who have ditched cable TV altogether because of the high price and low quality.

    The longer the Canadian Cable & TV industry takes to provide something the public wants, the harder it will be to win us back.

    My kids are growing up not ever knowing what TV is and why you’d need channels and a schedule for anything.

    And much like the Free Official Music Videos on YouTube, the value of Video in my kids minds is pretty much $8 per month.

    Good luck selling to the next generation. You haven’t even lost them because many don’t know who you are.

  2. Netflix must also be worried about the rise of competitor sites that offer new movies and content for free. There are a milllion of them. Sometimes users can screen new release movies; the video proffered is low quality and in some cases obviously made using a concealed cam right inside the movie theatre. And so of course by watching the video you are complicit in their copyright theft. However, what ‘s more egregious, is that in many cases the 15 second video ads that run before and after the movie on these sites are from big brand Fortune 500 companies. Aviva insurance and RAID insecticide are represented here and thereby supporting the crime. I would like to know HOW do multinationals buy advertising on these sites? That is what the CRTC should be looking into… if its an ad server somewhere then shut that down. Monitor that.

    • “I would like to know HOW do multinationals buy advertising on these sites?”
      With a single question you have admitted to your ignorance of the internet. As is the problem with the CRTC.

      They do not understand the basic function of the internet, it’s business model, web based advertising, and how digital information is distributed. How can a body claiming regulatory rights over a medium, that they have time and time again proven that they do not understand, rule on it’s future. With all this said, the shining light at the end of the tunnel is that in the end Dinosaurs will die.

    • “There are a milllion of them.”

      “And so of course by watching the video you are complicit in their copyright theft.”

      “…the 15 second video ads that run before and after the movie on these sites are from big brand Fortune 500 companies.”

      “That is what the CRTC should be looking into… if its an ad server somewhere then shut that down.”

      Dave is right. You really don’t have a clue.

      “Netflix must also be worried about …” blah blah blah.

      Netflix has more subscribers worldwide than the entire population of Canada.

      If the CRTC starts “looking into” or monitoring the Internet then welcome to WW3.

      When another Harper appointee (Public Safety Minister) snoop and spy guy Vic Toews introduced the Internet ‘spy’ bill ‘Protecting Children from Internet Predators Act’ (Bill C-30) a couple of years ago , the activist/hacktivist group Anonymous went on YouTube with a nice little ‘Vic Toews – This is your life’ segment.

      It turned out that protecting children didn’t include his 16-year-old babysitter.

      This from the same guy who said that people “can either stand with us or with the child pornographers.”

      Before the French head of the culture police in this country considers monitoring the Internet he should ask Vic Toews how that felt like.

  3. Is this coincidental with Rogers attempts at a Netflix type of service? Can anyone tell me that the CRTC is not just an organisation protecting big telecom?

  4. When the prime minister states that he has no intention of interfering with Netflix what in the world does the CRTC think they are doing? Just as the CRTC seems to be doing everything it can to protect the interests of the major telcos, it seems to be the same thing for the major cable providers which are alas, the same as the cable providers.

    Is it not obvious that lobbyists have gotten the favoritism that they paid for?

    It isn’t anyone’s business in government to decide what service is provided by someone in a foreign country. Netflix is like the wind, it can’t be regulated by the CRTC. I will continue with my US Netflix account and by using VPN to circumvent any interference by those out of touch bureaucrats in the CRTC

  5. The battle sends a very clear message: present an innovative solution to consumer needs and Canadian companies will use our institutions to crush you.

    Just as Bell and Rogers FINALLY come around and introduce similar streaming services, the CRTC ratchets up the attack on Netflix. Coincidence? Hardly.

    I think an important part of the issue relates to ad dollars. Without network advertising via media platforms like TV (now Netflix) and radio (now streaming services like Songza, Rdio or Pandora), Bell & Rogers and other media companies are going to face a serious financial crunch. They’ve built their businesses on control of content and control of eyeballs for advertisers. Without either, they’re toast.

    This ultimately becomes political because the current party in charge relies very heavily on broadcast media for their ad campaigns. Expect to see a lot of politicians torn between what’s good for consumers of content and what’s good for themselves.

  6. Since when does Internet Streaming fall under the CRTC’s jurisdiction? It has absolutely NOTING to do with them. They have no right to interfere with Netflix, Youtube, etc. Netflix is a web DVD rental service. If they want to stream the DVD’s they are renting, it’s THIER business, NOT the CRTC. That’s like saying the CRTC should be allowed what kind of DVD’s are sold in this Country. Why don’t they stick their paws to the stores such as Best Buy and Future Shop? Why don’t they tell them there needs to be Canadian content sold on the shelves? Why doesn’t the CRTC enforce strict Canadian content to the Movie Theatres when films are theatrically released though out Canada? They don’t because the CRTC grants licensing to Broadcast companies that CHOOSE to broadcast through out Canada from a Canadian LOCATION. This is NOT Netflix. Internet streaming does NOT fall under the CRTC jurisdiction.

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