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CRTC wants Netflix and other services like it to fund Canadian content.

Wants some to contribute to content fund

- emily jackson

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 nonmonetar­y.

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 1 per cent of their revenue to content.

“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. Rogers Communicat­ions Inc., for example, operate as broadcaste­rs, television service providers and broadband providers, and 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 — Ottawa 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 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 off-line,” 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.

“As Canadian viewing habits shift from the television set to the smartphone, it is imperative that our support systems for Canadian content are modernized,” CMPA board chair Scott Garvie said in a statement.

“By recognizin­g internet service providers and online television services such as Netflix as important elements of the system, the CRTC is helping to ensure the continued production and distributi­on of this great content.”

Canadian Heritage Minister Mélanie Joly, who along with Prime Minister Justin Trudeau has definitive­ly said there will be no internet service provider tax, did not address the CRTC’s suggestion­s for levies (or, as the regulator called them, contributi­ons).

“We thank the CRTC and all of the experts that have participat­ed in this work. At the end of the day, our objective is to modernize our laws for the 21st century in order to protect and promote our culture, and we will have more to say on this soon,” Joly’s press secretary Simon Ross said in a statement Thursday.

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