TIME TO PAY THEIR SHARE
CRTC wants a tax on streamers
Canada’s broadcast regulator wants internet providers, wireless carriers and streaming services such as Netflix Inc. to pitch in for Canadian content as more consumers access music and video online, a controversial proposal that could increase internet bills.
In a report released Thursday, the Canadian Radio-television and Telecommunications Commission recommended legislation that “clearly and explicitly” requires “equitable contributions” from any audio or video service provider — whether it’s foreign or local, traditional or new — that makes money in Canada from providing access to content. Contributions would be tailored to each provider and could be non-monetary.
The report, prepared at the government’s request after months of consultation, grapples with disruption to the traditional broadcasting system. As it stands, broadcasters and television providers contribute a percentage of revenue to made-in-Canada programming. But cash from these sources has dwindled due to stagnating advertising and subscription revenues as consumers increasingly forgo television packages to access content over the internet.
Creative groups have called for internet providers to step in to fill the gap, yet internet companies argued this would be inappropriate since they’re common carriers. Some television providers called for deregulation, while others asked the CRTC to slap more regulations on Netflix.
The resulting report, titled Harnessing change: The future of programming distribution in Canada, calls for revised, “nimble” regulations that pull all players into the system. In the name of preserving funding levels for the cultural sector, the CRTC recommended broadband providers contribute one per cent of their revenue to content.
“It’s very important to remember that the growth in broadband is not being driven by email, it’s being driven by video content,” CRTC chairman Ian Scott said in an interview. “The reason those (internet service providers) are in business, virtually 70 per cent of their wireline traffic is video and audio programming, 25 per cent of the wireless traffic is video and audio programming.”
The contribution would cost less than 50 cents on an average broadband bill of $47, Scott said, adding that he thinks it’s worth it to make sure Canadian content is produced, distributed and discovered in the future.
Under the proposed funding system, television providers would contribute less than the current requirement of five per cent of revenue. Combined with funds from internet providers, the CRTC estimates the same amount of funding would be available.
Scott insists this is not an internet tax even though internet providers have not previously funded content directly. Rather, he characterized it as a redistribution of money in a system where many providers are vertically integrated.
BCE Inc. and Rogers Communications Inc., for example, operate as broadcasters, television service providers and broadband providers, so they’d pay less from one pocket and more from another. Both companies have argued vehemently against content levies on internet providers. Spokespeople from both companies said they’re reviewing the decision.
When it comes to online services such as Netflix or YouTube, the CRTC didn’t call for a portion of revenue. Rather, it said they should contribute in “appropriate ways.”
Netflix could, for example, make it easier to find Canadian content in an ocean of choices. It’s not clear how the CRTC would evaluate whether the contributions are equal.
“We need to bring everyone inside the tent, and then through binding service agreements we can establish a regulatory framework that is equitable but that ensures everyone is making a contribution to the system,” Scott said.
While the CRTC’s proposals are only suggestions — the federal government will have the final say when it reviews the telecommunications and broadcasting acts — they come despite the government’s repeated pledges not to tax Netflix or the internet.
But Michael Geist, Canada Research Chair in Internet and E-commerce Law at the University of Ottawa, said the report is “deeply flawed.”
“This is an internet tax, there really is no other way to describe it,” Geist said in an interview. “This is not just taxation, but it is widespread internet regulation.”
He questioned how the CRTC would regulate all audio and visual services that touch Canada — that could technically include news organizations from all over the world.
He also argued there’s no funding emergency, given an increase in foreign spending on locally produced content.
He said the CRTC is “fundamentally wrong ” to treat the internet as a content provider instead of the “most important communication system ever created.”
“The CRTC report seemingly views the Internet as an ATM with the ability to withdraw cash from providers and services to fund Cancon,” Geist said.
Consumer advocacy group OpenMedia worried the levy on internet service providers would be passed on to consumers.
“This proposal is a disastrous idea that will raise monthly bills and force the most vulnerable Canadians offline,” OpenMedia’s Katy Anderson stated. “Any internet tax disproportionately punishes low-income Canadians, and will inevitably worsen and deepen our digital divide.”
The Canadian Media Producers Association, however, strongly supported the report.