One of the more controversial aspects of Bill C-10 has proven to be the decision to remove the very first policy declaration in the Broadcasting Act as found in Section 3(1)(a): “the Canadian broadcasting system shall be effectively owned and controlled by Canadians.” Critics have unsurprisingly jumped on the issue, expressing concern that removing the ownership and control requirements will ultimately undermine claims from Canadian Heritage Minister Steven Guilbeault that the bill is essential to preserving Canadian cultural sovereignty. The Broadcasting Act blunder series continues with an examination of the issue, concluding that the critics are right and that Bill C-10 marks the beginning of the end of Canadian ownership requirements (prior posts in the Broadcasting Act Blunder series include Day 1: Why there is no Canadian Content Crisis, Day 2: What the Government Doesn’t Say About Creating a “Level Playing Field”, Day 3: Minister Guilbeault Says Bill C-10 Contains Economic Thresholds That Limit Internet Regulation. It Doesn’t, Day 4: Why Many News Sites are Captured by Bill C-10), Day 5: Narrow Exclusion of User Generated Content Services).
For years, Canada has prioritized a Canadian broadcast system with Canadian ownership requirements and Canadian content rules. With Bill C-10, the government has signalled that it believes the benefits that come from mandatory contributions from foreign companies (bearing in that the companies voluntarily invest in the market) are worth sacrificing the longstanding policy of keeping the Canadian system Canadian. Indeed, as Doug Barrett notes, after Bill C-10, there will be no reference to Canadian ownership in the Act.
Guilbeault was asked about the ownership during the first day of House of Commons debate on the bill. He responded as follows:
We cannot say that we have to make sure that the legislation and regulations apply to web giants if we do not allow this legislation and these regulations to apply to them. Paragraph 3(1)(a) is precisely what will allow us to ensure that Canadian laws and Canadian regulations apply to web giants.
Paragraph 3(1)(a) is not what ensures that Canadian companies have to be owned by Canadians. That was a CRTC decision in 1997. We are not changing anything with respect to ownership of Canadian companies. What is more, Canadian companies in the field of broadcasting will still have to obtain licences from the CRTC. Beyond the current bill, there are other safeguards against foreign acquisition of Canadian companies that my colleague, the Minister of Innovation, Science and Industry, and I have to consider. There are other safeguards for that.
This paragraph allows us to apply our laws and regulations to web giants. How else could we do this?
If Guilbeault is looking for an answer, there are many ways to apply Canadian laws (including taxation, privacy, and competition law) to Internet companies without relying on the fiction that the only way to do so is change the Broadcasting Act. Yet since Guilbeault’s preference is to reform the Broadcasting Act, he is right that Canada cannot have it both ways. It cannot argue that foreign companies must be part of – and contribute to – the Canadian system and then also argue that the system must be owned and controlled by Canadians. Either foreign companies are part of the system or they are not (for what is it worth, I would argue that they are not since Internet streaming is not part of the conventional broadcast system).
However, Guilbeault wants the government to have its cake and eat it too by removing the policy of Canadian ownership and control, but use licensing to ensure that Canadian companies retain that same control. Nearly ten years ago I argued much the same thing in an op-ed, making the case that under licensed broadcast system, companies would comply with the regulations regardless of whether they were domestic or foreign owned. Indeed, many countries have removed foreign ownership requirements given the lack of a link between domestic content requirements and domestic ownership.
Guilbeault therefore says the removal of Section 3(1)(a) is immaterial since licensing requirements still apply to broadcasters and can be used to ensure that they remain in Canadian hands. Yet the obvious trajectory of the new Canadian system is to shift away from that licensing system. The government claims it is creating a level playing field, but broadcasters in the licensed world will increasingly look at the unlicensed Internet world that is free from foreign investment restrictions and conclude that they prefer the unlicensed system.
The issue will become particularly acute when Canadian broadcasters are forced to compete with companies like Netflix and Disney for Canadian content as all participants race to meet their regulatory Cancon requirements. The disadvantages of remaining Canadian-owned will become increasingly apparent as more broadcasters surrender their licences in favour of switching to streaming-only services that remain unlicensed and have the advantage no foreign ownership limitations. The Canadian market will feature an increasingly prominent foreign ownership presence, not only in the form of foreign streamers but also Canadian-originated streamers that become foreign-controlled through new investment.
While the largest broadcasters will hold out, they will inevitably lobby the government to remove the remaining restrictions, re-surfacing old arguments about a “level playing field” and claiming that the licensed system cannot compete against unlicensed domestic and foreign streaming services that can access capital from anyone in the world. This may not happen overnight (much like the implementation of this bill), but the future is clear: Bill C-10 not only spells the end of Canadian ownership and control of the broadcasting system as a policy priority, it opens the door to its end as market reality as well.