The CRTC last week released the first three of at least nine planned consultations on the implementation of Bill C-11 (I was out of the country teaching an intensive course so playing catch-up right now). The consultations focus on the broad structure of the regulatory framework, registration requirements, and transitions from the current system of exemptions to one of regulations. The timeline to participate in this consultation is extremely tight with comments due as early as June 12th for two of the consultations and June 27th for the larger regulatory framework one. As the title of this post suggests, the CRTC is adopting an approach of shoot first, aim later. The consultations suggest that there is little interest in hearing from anyone outside of the legacy groups that have long dominated CRTC hearings. Indeed, by moving forward with incredibly tight timelines, without the government’s promised policy directive, and without support for newer groups to back their participation, the documents leave the distinct impression that the Commission had surrendered its independence and already made up its mind on how to implement Bill C-11.
What to make of the consultation and the emerging regulatory framework for Internet streaming services? This post provides 11 thoughts on the Bill C-11 CRTC consultation. It is by no means comprehensive, but it highlights some of my initial concerns.
1. The CRTC’s decision to move full steam ahead without the government’s policy direction in place is an astonishing abdication of any semblance of independence. For months, Canadian Heritage Minister Pablo Rodriguez assured Canadians and parliamentarians that a forthcoming policy direction would provide guidance on legislation that left much to be decided. The CRTC’s documents suggest that either it already knows what the government is going to say or it doesn’t care. Either way, it has fleshed out the legislation and launched its consultations without the policy direction in hand. While the Commission suggests it can adjust as needed, the timelines won’t really allow for that since consultation deadlines will come before the approval of a final policy direction. This turns the entire process into a weird episode of consultation theatre in which Canadians are asked to respond to dozens of questions about Bill C-11 before the cabinet finalizes its promised guidance.
2. With short timelines, no resources or support mechanisms for new groups and entities interested in participating, and the absence of the policy direction, this is not a serious attempt to fully engage in Canadians. Despite the rhetoric of regulating platforms rather than users, the implications of these regulations for users – as creators, consumers, and cultural participants – are enormous. Yet the CRTC has established a timeline that virtually guarantees that only the well-established groups familiar with Commission practices will participate. There are no defined resources for newer groups and little time for more participatory organizations to canvass members for their thoughts. How can the CRTC claim to support public participation but leave questions on support for that participation until after consultation deadlines have concluded? This creates a myriad of problems, not the least of which is that the CRTC’s evidentiary record and participants in an in-person hearing in November will be decidedly lopsided with key voices likely missing.
3. The lack of specificity in Bill C-11 was readily apparent throughout the committee hearings, but it becomes even more obvious and troubling with these consultation documents. To pick just one of many examples, the Commission is consulting on the meaning of “social media service”:
Q5. How should the Commission define “social media service”? What, if any, criteria should be used to assess whether an online undertaking is providing a social media service?
These are important questions on which certain regulations hinge, yet the term was left undefined in Bill C-11. This was raised during the committee hearings and dismissed by the government, but the absence of even basic definitions reinforces how the bill creates a dizzying amount of uncertainty.
4. The almost unlimited scope of the bill is also on full display in the consultation. The starting point – as was raised during the hearings – is that the government is adopting the position that all audiovisual services streaming on the Internet anywhere in the world are subject to Canadian broadcasting law. The CRTC partially gets the absurdity of this approach by proposing a threshold that would exempt many services. The Conservatives repeatedly raised potential thresholds during the Bill C-11 process, but the government rejected every proposal. Instead, it has been left to the CRTC to propose a $10 million Canadian revenue threshold with an exemption for services below that number. Who will be left? That number will obviously scoop in the big players like Netflix, likely some of the niche services with decent subscriber bases, and no shortage of pornography sites.
5. While the $10 million threshold signals some appreciation for the absurdity of Canadian broadcasting law applying to every service everywhere in the world, the CRTC’s discoverability expectations do not feature similar limits. As the Globe and Mail noted, the Commission envisions establishing discoverability requirements that would apply worldwide:
In addition to the objective of creating Canadian and Indigenous content, the promotion, discoverability and distribution of Canadian and Indigenous audio and video content, both domestically and internationally, is vital for the continued success of the Canadian broadcasting industry.
It is not clear on what basis any global service would feel it appropriate to prioritize Canadian content in other markets simply because it is Canadian. As subscribers to services such as Netflix know, those services prioritize content from around the world based on user preferences. Where that content happens to be Canadian – say Schitt’s Creek – it is promoted worldwide. But if each country mandates discoverability for its own content outside its own borders, the collective regulatory effect will be to replace user preference with governmental preference, leading to an amalgam of overlapping regulations in which user feeds reflect dozens of national policies. It is not only unworkable – are services devoted to British or Korean content seriously expected to promote Canadian content – it reflects a dangerous takeover of the rights of users to watch the content of their choice.
6. The CRTC has tried to reassure concerned digital creators that users and their content is not the focus of its regulatory plans. Yet there are two important caveats. First, regulating user platforms will have the effect of regulating user content since the two are inextricably linked. When the CRTC raises the prospect of global discoverability of Canadian content that includes user content, there is a regulatory impact on that content. Second, Bill C-11 clearly leaves the door open to regulation and the Commission does not close it, couching its language with terms that do not foreclose potential regulation in the future. For example, it states:
The Commission does not intend to regulate any aspect of a social media service, nor does it intend to “prescribe” user-uploaded content on social media services for the purpose of regulating such content, as part of this proceeding.
On the issue of discoverability, it notes
the Commission does not intend, at this time, to prescribe or require an undertaking to use a certain method or tool in order to achieve desired promotion and discoverability outcomes
While it should not surprise that the CRTC does not want to be bound by limiting future regulatory approaches, no one should be under the illusion that regulating user content is off the table for good. The government insisted on keeping it in the legislation and the CRTC isn’t about to remove it.
7. The CRTC claims to be focused exclusively on online undertakings, which it is careful to say does not include users. While it clearly includes streaming services worldwide – as well as the yet-to-be defined social media services – the Commission also puts the prospect of regulating curators and aggregators on the table. The consultation asks:
What is the role of content curators and aggregators, and playlists, in assisting with promotion and discoverability?
To the extent it is thinking about playlists on the large streaming services, the question makes sense. But the reference to curators and aggregators suggests that it is thinking bigger, focused on aggregation services, review sites, and the many other intermediaries that often drive traffic to particular content. Does the CRTC believe it has the power to regulate these services? Is this services such as streaming platforms such as Roku or sites that link out to other content? The question highlights the complexity for how users engage with audio-visual content and why the notion that the government can simply regulate discoverability is far more challenging than conventional broadcast given how content is discovered and promoted online.
8. For many groups, Bill C-11 is simply about the money and the expectation that streaming services will contribute to the creation of Canadian content. The question of what actually constitutes Canadian content is left to another future consultation, but in the meantime the CRTC wants puts the question of contribution rates on the table, noting the range of requirements for other services and seeking feedback on how to characterize online undertakings:
Generally speaking, commercial radio stations with total revenues exceeding $1,250,000 are required to make basic CCD contributions of $1,000 plus 0.5% of revenues in excess of $1,250,000. Large English-language vertically integrated television groups have CPE requirements of approximately 30% of gross revenues from the previous broadcast year, while large French-language vertically integrated television groups have CPE requirements of up to 45% of gross revenues from the previous broadcast year, along with a requirement to produce original French-language programs. Licensed BDUs are generally required to contribute 4.7% of their previous broadcast year’s gross revenues relating to broadcasting activities to Canadian programming, less any allowable contribution to local expression. With this in mind, under the new contribution framework, should the overall contribution commitment of online undertakings be comparable to the existing contribution levels of traditional broadcasting undertakings? If so, which traditional broadcasting undertakings? Please explain.
While cultural lobby groups will not doubt call for 30% contributions, the reality is that no country has established that level of mandated contribution, with most adopting far smaller requirements. If CRTC were to adopt those rates, there is a serious question about whether some services would exit the market or seek significant changes to the meaning of “contribution”.
9. The CRTC consultation establishes what it describes as three types of contributions, emphasizing the flexibility in tailoring contributions to different types of services or undertakings. That “flexibility” means the CRTC will be involved in very granual decision-making about what each individual service creating a level of unprecedented regulatory involvement in payments from Internet services and how they present their content to users. The three types of contributions are described as follows:
The first category of contributions, referred to as a base requirement, could require broadcasting undertakings or ownership groups to make a financial contribution to specified funds that support Canadian artists or programming and the policy objectives outlined above.
The second category, referred to as a flexible financial requirement, could require broadcasting undertakings or ownership groups to contribute an additional amount, with undertakings choosing where to direct their contributions from among a number of options. The specific options would be the subject of a future public process as part of Step 2, but the Commission envisions that these could include direct expenditures on certain types of programming (for example, original French-language programs, programs of national interest (PNI), local news, community programs and independent productions), spending on training and internships, or additional contributions to funds.
The third category, referred to as intangible requirements, could require broadcasting undertakings or ownership groups to make additional, less quantifiable commitments to support Canadian programming and creators. Again, the specific options would be the subject of a future public process as part of Step 2, but these requirements could include specific commitments to the promotion, discoverability or prominence of Canadian or Indigenous content, the carriage of services in French, Indigenous, or other languages, maintaining a certain percentage of Canadian and Indigenous content in an on-demand catalogue, commitments to achieving public policy objectives, or other commitments proposed by an undertaking and deemed acceptable by the Commission.
The intent is that broadcasting undertakings or ownership groups could contribute to all three categories of contributions in a manner that is appropriate and reflective of their unique role in the Canadian broadcasting system.
This will represent a huge regulatory battle with the CRTC picking amongst a wide array of potential requirements. There is a significant likelihood of legal appeals or challenges arising from this process.
10. The reference to percentage requirements for on-demand catalogues deserves special mention. The CRTC’s decision to put that issue on the table (“maintaining a certain percentage of Canadian and Indigenous content in an on-demand catalogue”) could raise serious concerns. The government had emphasized discoverability of Canadian content, but mandating a quota requirement would have enormous implications for many services, who might be forced to remove foreign content to ensure that they meet the requirement. If so, the government’s insistence that will not regulate what Canadians can watch will be called into question, since the effect of the policies will be to force Internet services to remove content choices from Canadian services.
11. The consultations are notable not only for what they say, but also for what they do not. This paragraph effectively summarizes the CRTC’s view of the current landscape:
As Canadians increasingly access audio and video content through on-demand services such as Netflix, Spotify, Crave, or Apple Music, the revenues of traditional broadcasting undertakings are trending downwards. In addition, contributions stemming from tangible benefits are a less reliable source of funding as ownership transactions are hard to predict in a highly concentrated broadcasting environment. At the same time, the costs associated with the production of music by artists and the creation of video content continues to climb. This puts the financing of current funds at risk.
To read this, one would never know that last year there was a record amount of investment in film and television production in Canada. This includes both certified Canadian and foreign location production. In fact, the very notion of an environment where funding is at risk is wildly at odds with industry data that demonstrates there has never been more investment in the sector. But that reality is entirely absent from the consultations, which instead creates a fictional universe in which there is clarity from the government on its policy, there is an equal opportunity for Canadians to participate, and a legal framework in which Canadian broadcasting regulation rules the world.