Montreal.  2019-09-27. by Justin Trudeau https://flic.kr/p/2hoJgMm

Montreal. 2019-09-27. by Justin Trudeau https://flic.kr/p/2hoJgMm

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The Broadcasting Act Blunder, Day 20: The Case Against Bill C-10

The Broadcasting Act blunder series wraps up after a month of posts, two op-eds, and a podcast with a short summary of the case against Bill C-10.  Notwithstanding some of the rhetoric, the debate is not whether the cultural sector should be supported (it should) or whether foreign Internet streaming services should contribute to the Canadian economy (they should). Rather, the issue is whether Bill C-10 is the best way to accomplish those policy goals.

Having spent a month dissecting the bill, it will come as no surprise that I believe the bill is deeply flawed. My concerns involve six main issues: Canadian Heritage Minister Steven Guilbeault’s inaccurate descriptions of the bill and its impact, the negative effects on longstanding Canadian broadcast policy, the extensive regulatory approach, the uncertainty that comes from leaving key issues to the CRTC or a secretive policy direction, the questionable data underlying the policy, and its outlier approach compared to peer countries.

First, with all due respect, Minister Guilbeault has consistently made questionable claims about the content of the bill and how it compares to other jurisdictions. He told the House of Commons that the bill contains economic thresholds (it doesn’t), that it excludes news (it doesn’t), that it won’t affect Canadian ownership requirements (it will), that the entire process will be completed by next year (it won’t), and that it is similar to the approach implemented in Europe (it isn’t). These are not inconsequential misstatements. If Canadians are to engage in a reasoned debate about the bill, it should be based on fact, not creative or misleading interpretations of the proposal.

Second, while the Guilbeault trumpets the benefits that come from mandated payments to support Canadian content production (a benefit he massively exaggerates), he fails to acknowledge that this comes at a great cost. Longstanding Canadian bedrock broadcast policies such as Canadian ownership and control of the broadcasting system, removal of policy objectives to make “maximum use” of Canadian creative talent, and the prioritization of Canadian intellectual property are not policies that should simply be discarded when they prove inconvenient to fulfilling promises to “get money from web giants.” Yet that is precisely what Bill C-10 does without even mention of it in the briefing materials.

Third, the government’s claims that the bill does not license Internet services is deceptive in the extreme. The regulatory framework that Bill C-10 establishes is – as Andrew Coyne described it – “one of the most radical expansions of state regulation in Canadian history.” The regulatory framework that includes mandated registration, a host of conditions of operation, mandated payments, discoverability requirements, mandatory disclosure of detailed confidential information including algorithmic data, and the prospect of multi-million dollar penalties for failure to comply is an enormous regulatory edifice that will invariably lead many services to block the Canadian market altogether. Indeed, when Guilbeault says that the government is not determining what Canadians can watch, he fails to address the risk that his policies will reduce consumer choice and eliminate legal access to many services.

Fourth, for a bill that was months in the making, it is remarkable how many issues are left either to the CRTC to decide or will be part of a policy direction to the regulator that remains a secret and that will not be subject to public debate or scrutiny. Bill C-10 is a bill that leaves more questions than answers: who is subject to regulation and who is exempt, what regulation, how much to be paid, how to meet discoverability requirements, what confidential data to provide, and what counts as Canadian content are all issues left for another day. Indeed, the bill is the ultimate “trust us” with Canadians and all stakeholders denied access to the level of detail most would require to make reasonable business decisions (hence the concern that the bill will lead to less production in Canada in the short term).

Fifth, as I have consistently argued, the data simply does not support the claims from the government regarding a level playing field or the state of the industry. The regulated sector enjoys many benefits not available to Internet streaming services and the industry has enjoyed record production numbers (pre-COVID) with foreign streaming services being major contributors. While there may still be room for more regulation, painting the bill as essential for jobs (as Guilbeault has done) when there has been record investment in recent years and much of the “new” contributions are likely to involve re-purposing already planned spending is deceptive and a weak foundation for the bill.

Sixth, Bill C-10 is an outlier when compared to other countries. In the case of the U.S., it could lead to billions in tariff retaliation. In the case of the European Union, the claims that Canada follows its approach is misleading at best. A closer look reveals that after 10 years of regulatory work, less than a handful of EU member states have actually implemented the rules. Those that have done so have opted for much lower obligations with payment requirements that are a fraction of what Guilbeault has in mind. Moreover, scale matters and attempts to compare quotas intended for a market of 450 million people and 28 countries to a single country of 38 million is apples and oranges.

Given the market risks and the costs to consumers in the form of increased fees, reduced choice, and less competition, Bill C-10 needs a rewrite. There are viable alternatives that would allow the government to maintain the long-standing Canadian ownership principles and still ensure that Canada benefits from the presence of foreign streaming companies. The government could guarantee more revenues for Canadian productions from companies such as Netflix through tax policy, including the announced mandating of the collection and remission of sales taxes. It could also use existing tax credit policies that are an essential part of the production sector to mandate that recipients meet new requirements on promotion and adjust current eligibility requirements to make investment by foreign services in Canada even more attractive. Rather than seeking to shoehorn internet streamers into the broadcast system despite obvious differences and significant repercussions, it needs to rethink the evident blunders in the bill.

(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, Day 6: The Beginning of the End of Canadian Broadcast Ownership and Control Requirements, Day 7: Beware Bill C-10’s Unintended Consequences, Day 8: The Unnecessary Discoverability Requirements, Day 9: Why Use Cross-Subsidies When the Government is Rolling out Tech Tax Policies?, Day 10: Downgrading the Role of Canadians in their Own Programming, Day 11: The “Regulate Everything” Approach – Licence or Registration Required, Broadcast Reform Bill Could Spell the End of Canadian Ownership Requirements, Day 12: The “Regulate Everything” Approach – The CRTC Conditions, Day 13: The “Regulate Everything” Approach – Targeting Individual Services, Day 14: The Risk to Canadian Ownership of Intellectual Property, Day 15: Mandated Confidential Data Disclosures May Keep Companies Out of Canada, Day 16: Mandated Payments and a Reality Check on Guilbeault’s Billion Dollar Claim, The Law Bytes Podcast, Episode 73: The Broadcasting Act Blunder – Why Minister Guilbeault is Wrong, Day 17: The Uncertain Policy Directive, Day 18: The USMCA Threat That Could Lead to Billions in Retaliatory Tariffs, Day 19: The Misleading Comparison to the European Union)

13 Comments

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  2. Pingback: ● NEWS ● #MichaelGeist #canada ☞ The #BroadcastingAct Blunder, Day … | Dr. Roy Schestowitz (罗伊)

  3. I absolutely agree with you that Bill C-10 needs a rewrite given all the issues you brilliantly highlighted. I always had a bad feeling about the bill and the whole process but couldn’t put a finger on it, until you thoroughly analyzed it here. The alternatives you suggested using taxes are extremely vital. I will also add that the government should also look at other non-tax alternatives they could add to your suggestions to make Bill C-10 more robust, so that we can maintain our long-standing Canadian ownership principles as well as continually benefit from the presence of foreign streaming companies. Great article, it was quite informative and insightful. Well done.

  4. Thank goodness this blundering series is over. The issue is not whether Michael Geist is out of his depth in discussing broadcasting law and legislation (he is), but whether he has anything useful to say about Bill C-10 (many of his arguments are deeply flawed). For more detail, readers are referred to my previous comments on roughly half of his posts in this series.

    For example, contrary to what Michael Geist asserts, it is quite reasonable to say that Bill C-10 will not affect Canadian ownership requirements – because the specific rules regarding Canadian ownership in broadcasting are found in the Government of Canada’s Direction to the CRTC (Ineligibility of Non-Canadians), not in the Broadcasting Act. The Direction to the CRTC does not refer to sub-section 3(1)a) of the Act and removing this sub-section, as proposed by Bill C-10, would have no direct impact on Canadian ownership of licensed broadcasting undertakings. However, if Bill C-10 becomes law, a future government could amend the current rules governing Canadian ownership by modifying the directive without going before Parliament. Consequently, an amended Broadcasting Act should retain the wording in sub-section 3(1)a) to avoid this eventuality, an amendment which many parties are advocating.

    Similarly, Bill C-10’s proposal to remove the requirement in sub-section 3(1)f) of the Broadcasting Act to “make maximum use, and in no case less than predominant use, of Canadian creative and other resources in the creation and presentation of programming”, could easily be reversed and the wording in 3(1)f) retained, since the existing sub-section in the Broadcasting Act is sufficiently broad to exclude online undertakings from the requirement, if necessary. Once again, many parties are advocating this modification while supporting the general thrust of Bill C-10.

    Contrary to what Michael Geist seems to believe, federal and provincial tax credits, Canada Media Fund financing, and the certification of Canadian content would not be affected by Bill C-10. If, as Bill C-10 suggests, the Commission were to register non-Canadian online services and require them to offer Canadian programs, the Commission could rewrite the rules for Canadian program certification for these new players (a power it has under the existing Broadcasting Act). Of course, this rewrite would want to maintain and strengthen Canadian intellectual property in regard to programming, whose first owners are Canadian creators, but this rewrite is quite feasible. Contrary to what Michael Geist has asserted, this does not mean that the rules for access to tax credits and CMF financing would have to change. Foreign companies shooting in Canada already have access to location shooting tax credits, such as the Film or Video Production Services Tax Credit, and do not need additional financing.

    Andrew Coyne’s diatribe in the Toronto Globe and Mail is not helpful, and readers are invited to look at my response on the newspaper’s web site. In fact, Bill C-10 represents a modest expansion of Canadian broadcasting regulatory authority, mostly pertaining to the CRTC’s ability to obtain information from online programming services operating in Canada and to assess fines for regulatory non-compliance of all kinds. (Both of these proposals are modeled on language in the Telecommunications Act.) Online services are already subject to the Broadcasting Act, but up to now the CRTC has chosen not to regulate them. If anything, the definition of broadcasting in Bill C-10 is more restrictive than that in the current Broadcasting Act. If Bill C-10 passes, the CRTC will exempt the vast majority of Internet services and concentrate on bringing the major online programming services closer to the existing requirements for licensed Canadian undertakings.

    Minister Guilbault “fails to address the risk that his policies will reduce consumer choice and eliminate legal access to many services” as Michael Geist believes, because Bill C-10 will do no such thing. Why would the Minister address such unlikely outcomes? The Commission presently has very broad powers to regulate broadcasting and Bill C-10 continues in this tradition. Who is subject to broadcasting regulation and who is exempt, what regulation, how much to be paid, how to meet discoverability requirements, what confidential data to provide, and what counts as Canadian content are all issues which Bill C-10 leaves to the CRTC, as does the current Broadcasting Act. No law of general application should go into this kind of detail and Bill C-10 follows this practice.

    The briefing deck accompanying the proposed legislation contains a list of possible policy directions to the CRTC to indicate the Minister’s priorities and suggest on what issues the government might issue directions, if the CRTC does not subscribe to the agenda set out in Bill C-10. To say that the government’s policy directions would remain a secret and would not be subject to public debate or scrutiny, as Michael Geist claims, is wrong. Before implementing any such direction, the Broadcasting Act requires the government to consult with the CRTC, a relevant House of Commons committee, and the Canadian public.

    To say that “the regulated sector enjoys many benefits not available to Internet streaming services and the industry has enjoyed record production numbers (pre-COVID) with foreign streaming services being major contributors” is completely misleading. The record production numbers to which Michael Geist refers do not relate primarily to Canadian content, but rather to runaway Hollywood production by the major studios.

    Over the last five years for which data are available (2015-19), the total revenue of Canadian private sector conventional television declined from $1.8 billion to $1.6 billion. Every year, the P.B.I.T. (profit/revenue) margin was around –7%. These numbers are significant because conventional television services (including the CBC/Radio-Canada) are the primary suppliers of Canadian drama which accounts for about one half of all spending on Canadian programs. Discretionary and on-demand services have been better able to weather the storm from foreign Internet services because they depend on subscriber fees (75%), rather than advertising revenues. Even so, the total revenues of French-language discretionary and on-demand services declined from $756 million in 2015 to $706 million in 2019 — reflecting the fact that the foreign Internet services, such as Netflix, programme little French-language material and French-language viewers are switching to English-language services. This is all a part of the uneven playing field which Bill C-10 seeks to correct.

    Yes, taxation policy can contribute to general government revenues and to economic policy, but it cannot address the problems of cultural policy inherent to the provision of a public service such as broadcasting which is essential to the maintenance and enhancement of national identity and cultural sovereignty.

    • Part of the issue is people want to regulate services like Netflix but not services coming from the middle east and Asia.

    • Criticizing Michael Geist by saying he has nothing useful to say about Bill C-10 even though he is a highly respected academic in Internet and E-Commerce Law and an expert academic in technology issues is ridiculous. His views are very valid and just because you don’t agree with them there is no reason to discard them as useless. Debating an important issue does not mean shutting down views that run counter to yours. He has every right to speak his position on Bill C-10 and has done a great service to all Canadians by putting his ideas about the bill out to the public so there can be a reasonable discussion. Clarifying what the government is not saying about the bill , intentionally or not and what Canadian industry stakeholders and media want to keep quiet from the public due to self interest or other reasons.

      • Did I say that Michael Geist’s views should be shut down or that he doesn’t have a right to express himself? I said that many of his arguments are deeply flawed and that he is out of his depth in discussing broadcasting law and legislation (I should have said broadcasting law and regulation). I do not believe that those who engage in the public domain on issues outside their area of competence should be given a pass to say anything they wish. It seems to me that I have shown as much deference to Michael Geist as he has shown toward the Minister of Canadian Heritage. (p.s. I have never has any personal or professional relationship with either Michael Geist or Steven Guilbault.)

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  8. Part of the issue is people want to regulate services like Netflix but not services coming from the middle east and Asia.

    Agree with that one!!!

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