CPAC, Geist CRTC Bill C-11 hearing, https://cpac.ca/episode?id=c2d2ca31-d052-4378-8245-f8ff6156a1c9

CPAC, Geist CRTC Bill C-11 hearing, https://cpac.ca/episode?id=c2d2ca31-d052-4378-8245-f8ff6156a1c9

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My CRTC Appearance on Bill C-11: Why Isn’t the Commission Concerned with Competition, Consumer Choice, and Affordability?

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.

CPAC, Geist CRTC Bill C-11 hearing, https://cpac.ca/episode?id=c2d2ca31-d052-4378-8245-f8ff6156a1c9

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.

13 Comments

  1. The “record film and television production in Canada” celebrated by Michael Geist is, by and large, not benefiting Canadian creative elements. It is runaway Hollywood production drawn to Canada to take advantage of the value of the Canadian dollar, as well as provincial and federal tax credits. It has little or nothing to do with Canadian content which, as I have demonstrated elsewhere in my comments on his blogs, is declining.

    Of course, it is convenient to dream about confronting all of the issues the implementation of the Online Streaming Act and the government’s policy directive with one big decision several years from now – as if everything could be solved with one big set of simultaneous equations. The same could be said of all of Parliament’s cultural, political, social and economic decisions. Unfortunately, in the real world, this is not feasible giving the urgency of the situation facing governments and their administrative agencies. That is why the CRTC is proceeding one step at time, beginning with a registration regime, and then an initial mandatory contribution from the major online broadcasting undertakings, and so on.

    The Broadcasting Act is primarily a work of cultural legislation. The economic objectives in the Act are very limited. There is, for example, no mention of “competition” in the Broadcasting Act (except in section 25 with reference to providing information to the Commissioner of Competition). There is no reference to “consumer choice”, though there is a general objective in section 3 which says the Canadian broadcasting system should “reflect and be responsive to the preferences and interests of various audiences”, among many other things.

    By its nature, the government’s recent policy direction (which represents a regressive step relative to the legislation) cannot change the Broadcasting Act, even if it makes reference to promoting competition among its many measures. The policy direction also refers to a desire to “maintain or increase” consumer choice, but only with regard to “methods for supporting discoverability, promotion and showcasing of content”.

    In his presentation to the Commission, Michael Geist confuses the Broadcasting Act with the Telecommunications Act – as do a number of former CRTC telecommunications vice-chairs. Unlike the Broadcasting Act, the Telecommunications Act has objectives such as “to enhance the efficiency and competitiveness” of Canadian telecommunications and “to respond to the economic and social requirements of users” of telecommunications services. The Telecommunications Act has no cultural objectives. As with other market-oriented libertarians, much of Michael Geist’s lobbying on Bill C-11, and now his interventions in CRTC proceedings, seem to be directed toward making over the Broadcasting Act in the image of the Telecommunications Act – but that’s not what the law says.

    • So I guess you’d be happy if those “runaway” productions ran away from Canada and took their billions back to the US.

      The Broadcasting Act has been a 50 year failure in promoting Canadian culture and now this failed model is going to be imposed on streaming services.

      Bell has admitted it can’t make money off of Cancon and wants the CRTC to force American networks to sell their content to Bell. Prior to the Cancon requirements, Canadian content consisted primarily of news and sports. Fifty years later nothing has changed.

      CTV spent $648 M on Cancon in 2022 with $443 M on news and only $41 M on drama and comedy. The Discretionary channels spent $1,518 M on Cancon with $857 M on Sports, $410 M on news and only $82 M on drama and comedy.

      And now, under the Online Streaming Act, American companies are going to decide which Canadian stories are worth telling. That should really enhance our cultural sovereignty.

      The Online Streaming Act – less choice, higher prices, and the Americanization of our cultural sovereignty. What’s not to like.

      • The Broadcasting Act has been relatively successful in showcasing Canadian culture and this should continue. You are misinformed.

        Runaway US location shooting provides income and employment to some Canadians, and no doubt it will continue to co-exist with Canadian production, as it does now. So much the better…

        For a long time, Canadian news and sports paid for itself. Because of the size of the market, high-cost Canadian drama, point-of-view documentaries, variety and children’s programming could not be amortized at home (with some exceptions for French-language programs in Québec). This has been the case for a long time. Thus developed the so-called “regulatory bargain” – broadcaster access to Canadian audiences in return for contributions to Canadian programming in the underrepresented categories (programming that was also subsidized by third party financial contributions, including those from the Canadian government). Underrepresented programming now includes local news…

        With the Broadcasting Act, as modified by the Online Streaming Act, the US web giants will have to make a contribution to the Canadian broadcasting system (from which they profit enormously) and schedule some Canadian programs. Under the existing rules, it is Canadian creators that will write, direct and perform in those programs. Again, under the existing rules, if the web giants wish to access the federal tax credits for Canadian programs, they will have to have to share the copyright in those programs with Canadian copyright holders. If they wish to access funding from the Canadian Television Fund, they will also have to ensure that Canadian creators are heavily involved in their Canadian productions…

        Once the new rules are determined by the CRTC and the dust has settled, the web giants will find it in their interest to contribute to our broadcasting system, as US companies have consistently done in the past all over the world.

        • “The Broadcasting Act has been relatively successful in showcasing Canadian culture”. I suppose this is dependent upon how you define successful. the imposition of CanCon rules basically forces Canadian content on a captive audience; particularly in OTA, cable and satellite. Where it breaks down is in the streaming arena, and the Online Streaming Act can be viewed as a means to “correct” that issue; by forcing CanCon onto streaming services it means that Canadians will be a captive audience in that delivery mechanism as well.

          The devil in the whole thing comes down to the details; will the service simply need to make available CanCon to the residents of Canada, or will it need to ensure that Canadians actually watch a certain amount of CanCon? The former is more in line with what is currently happening. But as far as “schedule some Canadian programs”, well, it is streaming, so they don’t actually schedule, just make available to you to view if you want.

          And as far as profiting enormously, I am not so sure about that, in particular on satellite and cable as a result of ad substitution. Why do you think we rarely see the US Superbowl ads here in Canada, even on the US channels? It is different from OTA TV, since we get the original signal from the US broadcaster. But with cable and satellite, if there is a licensed Canadian broadcaster it is the ads that they are broadcasting that is shown on the originating feed, even if looking at the US channel.

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        • I am not misinformed.

          CTV, Global, etc business models are built on American content. They have never shown any interest in producing original content. In fact, they are very good at coming up with excuses on why they can’t make original content. It is this attitude that results in most of their original content ending up in the bargain bin.

          Instead of striving to come up with the next Big Brother, Amazing Race or Family Feud they are satisfied with letting others create the shows and then licensing the program.

          It is a baldfaced lie that American studios do not contribute to Canada. They spend billions every year in Canada producing content and, some like CBS, have even opened studios in Canada.

          I don’t understand your obsession with Cancon. It doesn’t have any special qualities like a lot of its proponents think it does. The Cancon label is not a measure of quality, social impact or cultural importance. It just means it was made in Canada and Canadians were involved in making it. Claiming otherwise is simply a diversion to try and justify subsidies for self-important twits.

        • “The Broadcasting Act has been relatively successful in showcasing Canadian culture and this should continue.” 

          The problem I see with this statement is that it is largely founded in a different time, with very different potential market structures. We need to consider the possibility that is was successful only because there was no real alternative structures in place. 

          Up until quite recently, the broadcasters owned the channel (literally…). If you wanted to watch something, it was possible only if they had already purchased it. An incredibly small number of decision makers determined the selection of available programming. If I wanted something different – Canadian or otherwise – I had to resort to videotape, or before that, film.

          Conveniently for the Cancon regulations, the Broadcast Act already covered those doing the broadcasting – but largely because the Radio Reference decision of 1932 put them under federal jurisdiction. So – those limited number of decision makers were tasked by regulation with getting the most Canadian value out of their programming decisions. 

          That is nothing like what we have today. 

          Any Canadian old enough to use a mouse or a TV remote is now capable of making their own programming decisions. There no longer needs to be 4 channels – or 40, or 400, or even 4000. There can be 4 million channels, each programmed with a selection of what someone wants to see and hear, not what someone else thought they wanted. 

          The key problem that nobody seems to want to articulate is that all those newly capable Canadian decision makers are – from the view of the broadcasters and the CRTC – not making sufficiently Canadian decisions. They are looking for quality content, and interesting content, and if it happens to be Canadian, that is even better. But getting over that Cancon points bar is no longer enough to get your production into a solid financial state. It has to be good as well – and that has never been a Cancon requirement. 

          I like this new environment. I get to watch what I want, when I want. I get to find and pick good Canadian content and good content, and nobody else gets to make my decisions for me. My dollars go as directly as possible to the people who make good stuff. If your Canadian stuff is great, you can be on my list. If it is not – then you will not be missed. 

          We now have a vastly de-centralized system, approaching a market of producers and consumers, without a small number of decision-making distributors. Centralized decision makers no longer have the power they once had. Rather than asking how to preserve the existing centralized system, it is time to ask what a good de-centralized system would look like. Maybe a better use for those television frequencies is repurposing them for cellular-like communications, rather than sending out one signal to an ever decreasing audience.

    • “…by and large, not benefiting Canadian creative elements.” This statement is factually incorrect. I’ve worked on sets for nearly 40 years. Many of us have won Oscar’s, Emmy’s etc. the creative sector is booming. The problem is the extremely poor management here in Canada. Especially in this industry where image trumps all…

  2. Yours was a great presentation before the Commission! Hope you will make more appearances in the future.

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