Don’t regulate OTT, Netflix tells CRTC

The CRTC shouldn’t try to regulate Internet-based services the same way it does traditional broadcasting, Netflix Inc. said in an intervention submitted as part of the commission’s review of the future of television. The provider of over-the-top (OTT) streaming video services said the existence of video on the Internet and of TVs that connect directly to the Internet “is making it increasingly difficult to control, limit or manage, in any meaningful way, access to foreign audiovisual content or services.” Studies done for Industry Canada in 1999 and 2008 “show how problematic it would be to extend to the Internet regulatory constraints designed for traditional broadcasting: regulators or governments would have to be prepared to control or restrict citizens' access to websites,” Netflix said. “Such measures would be of dubious effectiveness,” it added. Instead, in order to compete with on-demand Internet content, broadcasters will have to “rely increasingly on their greater knowledge of local tastes and original content offerings,” the company said. As technology evolves and viewers have more access to foreign content and services, “the CRTC may want to focus attention primarily on measures that will assist broadcasters and content producers to transition successfully to the future more competitive and open distribution environment,” Netflix said. It added that Canadian broadcasters have already had some success in doing so, citing their participation in high-profile productions like Orphan Black, Vikings and The Borgias. The company said the CRTC’s past reluctance to regulate OTT services has encouraged experimentation that is likely to lead to innovation, improved consumer choice, diversity of content and better pricing. Netflix also told the CRTC that it should not be required to pay into the Canada Media Fund or make other Canadian content contributions, noting that foreign broadcasters whose channels are distributed in Canada aren’t required to make such financial contributions, and that as a foreign entity, Netflix can’t access CMF funding. “For Netflix, a contribution to the CMF would therefore amount to subsidizing productions made primarily for Bell, Rogers, Shaw/Corus and Videotron,” it said. Imposing what it called a “Netflix Tax” could lead to price increases, it warned, and said its service is already making commitments to Canadian content without being required to do so by any regulations, as its libraries include “a material proportion of Canadian content.” “When feasible, Netflix acquires Canadian content not only for Canada but internationally,” it said, citing series like Bomb Girls, Caillou and Murdoch Mysteries. While it doesn’t track the Canadian content its offers, it referred to a 2012 CRTC study that estimated Canadian programming accounts for nine per cent of its total library hours on its Canadian service. It added that its licensing of Canadian content for both domestic and foreign distribution “represents a new and valuable source of revenue for Canadian producers.” A number of entities called for Canadian content contributions from OTT services in their interventions. CBC/Radio Canada said the CRTC should require OTT services with revenues “over a specific threshold (e.g. $25 million) to contribute to the Canadian Media Fund,” and suggested those contributions match the five per cent video-on-demand (VOD) services pay. “These services benefit from other aspects of the Canadian regulatory regime — such as the generally applicable and extremely important protection provided by net neutrality — and they should not expect to enjoy these benefits without taking on the obligations borne by regulated services,” CBC said. The Canadian Media Production Association also called for what it referred to as “new media” broadcasters to finance and offer Canadian programming, and for “foreign services authorized for distribution in Canada contribute to funding the production of Canadian programming.” In its intervention, BCE Inc. proposed the creation of a new fund for big-budget productions, and said foreign OTT providers should also be required to contribute to the fund. The CRTC brought up the idea of regulating OTT services in a previous phase of its TV review, in a questionnaire released in February 2014, which followed a public consultation launched in October 2013. In its intervention, Netflix also tackled the cord-shaving phenomenon, saying that consumers could be cutting back on their TV services to due to the price of those services, which have “significantly exceeded the rate of inflation in recent years.” It said “it would appear that price increases for BDU services are a significant (perhaps determinative) factor.” The company also emphasized the importance of net neutrality. It said vertically integrated companies are able to engage in “anticompetitive behaviour vis-à-vis OTT services,” such as low data caps that include exemptions for the companies’ TV-everywhere products. “Given the state of concentration in Canada, the CRTC should be vigilant in applying its Internet Traffic Management Practices framework, and safeguards against undue discrimination or preference, under the Telecommunications Act with a view to ensuring competition and innovation in online audiovisual distribution in Canada,” Netflix said. The CRTC is currently considering a complaint against mobile-TV services offered by Bell, Rogers Communications Inc. and Quebecor Inc.’s Videotron subsidiary, which argues that exempting these services from data caps constitutes an “undue preference.” Netflix has been engaged in conflicts over net neutrality in the U.S., though CRTC rules would make attempts to impose a two-tier system more difficult in Canada, University of Ottawa law professor Michael Geist said in blog post in April. Interventions in the CRTC’s review have covered a variety of topics, including unbundling TV services and the future of over-the-air TV. Those who submitted interventions will have a chance to make their case in person on Sept. 8, when the public consultation portion of the commission’s review is set to begin. — With reporting by Anja Karadeglija at akarad@thewirereport.ca and reporting and editing by Derek Abma at dabma@thewirereport.ca

Don’t regulate OTT, Netflix tells CRTC

Broadcast | July 3, 2014

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