The CRTC’s Bill C-11 hearings are in their third and final week as a steady stream of broadcasters and producers make their way to Gatineau to urge the Commission to force Internet streamers to hand over cash in a giant cross-industry subsidy scheme designed to support everyone from small producers to Bell’s news division. As the witnesses take turns seeking the mantle that they are facing the biggest crisis (even as there is record film and television production in Canada and broadcasters stand to be the biggest beneficiary of the Online News Act), there has been practically no interest or discussion of the risks to consumers and competition that could come from significant new regulatory costs.
I set out to change that yesterday in my appearance before the Commission. It was my first time to appear as a witness before the CRTC and I used the opportunity to emphasize the real risks of reduced competition and higher costs that can come with mandated payments that exceed global standards. Further, I argued that the Commission should not establish interim payments at all, noting that it was more appropriate to address all of the outstanding Bill C-11 regulatory questions before looking to streamers to start cutting cheques.
I think it is fair to say that my intervention met with skepticism from some Commissioners who see their role as guardians of the broadcasting system on behalf of longstanding beneficiaries with little regard for the impact on consumers or the risks to competition. The discussion provided a sense of deja vu to the Bill C-18 hearings, where MPs and Senators were similarly dismissive of the consequences of regulatory costs (we know how that turned out). In fact, in a hearing in which most witnesses have faced soft explanatory questions, I was greeted with several attempts to question the underlying premise of consumer interests in the Broadcasting Act. I welcomed the chance to make my case, but left with no illusions that this is a panel for whom it appears the only real change that excites are the new bank accounts that can be tapped to fund their policy objectives.
A video of my full appearance can be found here or by clicking on the image. My opening statement is posted below.
Appearance before Canadian Radio-Television and Telecommunications Commission, December 5, 2023
Good morning. My name is Michael Geist. I am a law professor at the University of Ottawa, where I hold the Canada Research Chair in Internet and E-commerce Law. I appear in a personal capacity representing only my own views. I was very engaged during the legislative process for Bills C-10 and later C-11 with multiple appearances before House and Senate committees. However, this is the first time I have appeared before the CRTC.
What prompted me to do so?
While many of my concerns such as discoverability, algorithmic regulation, minimum content requirements, and modernized Cancon definitions are still to come, the interests of individual Canadians deserve far more attention. I don’t pretend to represent anyone but myself, but in my research and work in the area I have developed a growing appreciation and understanding of the impact of Internet regulatory policy on competition and consumer choice.
These are all issues found in the Broadcasting Act’s policy objectives and in the government’s policy direction. Yet with a handful of notable exceptions, there are relatively few witnesses over these three weeks who speak to them. Instead, this hearing is treated by many as a cash grab to inject new funding into a myriad of policy priorities with limited discussion of the risks for consumers and competition. I’d like to highlight some of the risks and urge the Commission to prioritize public over private interests, which means putting Canadians at the centre of their communications system, as one chair once characterized it.
Despite record spending on film and television production in Canada and new Canadian legislation that will provide broadcasters with tens of millions of dollars in support of news production, I have heard many witnesses battling over whose situation is the most in crisis. I don’t think there is much doubt about who faces the biggest crisis right now. It is Canadian consumers, facing inflation, higher interest rates, and pricey communications services.
Internet streaming services are not policy ATMs that can be subject to unlimited withdrawals. As we have seen in other countries, there are consequences to new regulatory costs and mandated contributions, particularly if they are set at rates that are outliers when compared to global standards or require support for policies or activities that fall far outside the core of the streamer’s business activities.
Those consequences raise two risks. One is market exit. As I’m sure you are aware, that is precisely what has occurred with the Online News Act, where what amounts to uneconomic regulatory payments led Meta to exit existing deals and block news links, creating enormous harm for Canadians and Canadian news outlets. Last week’s announced deal with Google was clearly driven by a desire to avoid a similar outcome, yet it too will leave some outlets with less than they were receiving before the introduction of Bill C-18.
In the context of Internet streaming services, there have been cases of market exits elsewhere in light of regulatory costs. These include the Denmark experience, where mandated payments far in excess of most EU countries led to a significant reduction in domestic film and television production.
There are many services not participating in this hearing, but which provide increased choice to consumers and often serve communities that do not otherwise have domestic alternatives. Regulatory requirements or payments that could lead to market exit must be avoided with a do-no-harm prism applied to the theshholds. The $10 million threshold may work for registration and data collection, but a higher number such as $50 million – to capture the true web giants as the government often framed it – is more appropriate for mandated contributions.
The second risk involves increased costs that are ultimately passed onto consumers. I don’t doubt that the larger streaming services are positioned to contribute, though I believe that appropriate taxation measures such as the digital services tax is a better vehicle for doing so. However, experience elsewhere suggests that consumers ultimately do pay the price and the notion of free money for various policy objectives is not free but rather will be borne primarily by Canadian consumers.
I have long believed that regulatory payments or contributions were largely premised on a quid pro quo that went far beyond mere market access, which is best addressed through fair tax policies applicable to all market participants. Justifying mandated broadcaster or BDU payments is linked to regulatory policies such as mandatory carriage and simultaneous substitution that are worth hundreds of millions to the industry. But in the case of Internet streaming services, these regulatory benefits do not exist and tying companies to payments for objectives such as news that are largely disconnected from those services runs the risk of either market exit, delayed market entry for new competitors, or costs that are passed along to Canadian consumers.
Limiting the risk on increased consumer costs is essential. I believe this means falling within the 1-2% range that is common in Europe for those EU Member States that have mandated some form of payment which would ideally be implemented once the full scope of the Bill C-11 regulatory model is fully developed, not on an interim basis as currently envisioned. Further, I believe it also means avoiding mandated funding for policies or activities that have little to do with the underlying activity of a streaming service. Indeed, such an obvious cross-industry subsidy model is precisely why it is better to wait until the full regulatory framework is developed.
Thank you for the opportunity to present. I look forward to any questions.