Canadian Heritage Minister Steven Guilbeault appeared on The West Block over the weekend in an interview that provides a strong – and disturbing – sense of where the government is headed on Internet regulation. Most problematic was the discussion on compensation from social media companies such as Facebook to news organizations for allowing their users to link to news articles. As I discussed in a post last week examining recent developments in Australia:
Facebook users post many things – photos, videos, personal updates, and links to various content online, including news articles. Those news articles do not appear in full. Rather, they are merely links that send users to the original news site. From Facebook’s perspective, there is enormous value in referring users to media sites, who benefit from advertising revenue from the visits.
Facebook has said that it will block all news sharing on its platform in Australia if the government proceeds with a mandated payment system, noting the limited value of the links and arguing that its referrals that are worth hundreds of millions to the news organizations. If Canada were to pursue the same strategy, Canadian news sites would also likely be blocked and a trade complaint under the USMCA would be a virtual certainty.
Yet despite the significant risks and survey data that this could lead to a less informed public, Guilbeault is aligning with Rupert Murdoch, the chief advocate for these payments in Australia. He characterizes non-payment as “immoral and unacceptable”, claiming that Facebook makes hundreds of millions of dollars from Canadian media content without fair compensation. This points to a showdown like the one taking place in Australia, even though Canada has announced significant support for the sector that Guilbeault has thus far largely failed to deliver.
The same interview pointed to another upcoming series of reforms focused on requiring foreign Internet companies to create Canadian content. Guilbeault says:
“We’re going to put some fairness into the Canadian regulatory system, because right now there is no fairness. We have Canadian companies that have regulatory obligations and we have international web giants that have none. And that’s unsustainable.”
Actually, what is sustaining the sector is the spending from international giants such as Netflix. According to CRTC chair Ian Scott, Netflix “is probably the biggest single contributor to the [Canadian] production sector today.” Moreover, according to data commissioned by the Broadcast and Telecommunications Legislative Review panel, Canada ranks first among peer countries with respect to television production per capita, domestic television production (ie. Cancon or equivalent domestic production) per capita, hours of television production, and employment. Last year, Ontario enjoyed a record-breaking year in production over more than $2 billion: $1.1 billion in foreign production and $1 billion on domestic productions.
While Guilbeault is expected to hand new powers to the CRTC to establish new Internet regulations and mandated payments, there is a far better approach available to the government if it remains convinced that more financial support is needed for these sectors. Rather than adopt the Internet subsidy model that runs major policy and political risks, it should ensure that the technology companies pay their fair share of taxes that will go into general revenues. There needs to be an international consensus on how to do so, but there is considerable momentum behind a fairer allocation of the tax revenues from large technology company earnings. If the government wants to use some of those revenues in cultural or media support, it is free to do so without invoking the CRTC to establish cross-subsidies that will hurt both consumers and access to information and content online.
What’s next. Restaurants demanding Facebook pay them because some Facebook user recommended their restaurant. You don’t deserve to be paid because someone recommended your website, restaurant or article. You should thank them for sending business your way.
Thankfully, we have a minority government and the first party to dust off “Netflix tax” as a policy will be punished at the polls. Expanded CRTC regulations are not needed. In fact, they should be reduced.
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