Inaction against VPN usage ‘may speak volumes’: lawyer

Users of Netflix Inc.’s Canadian feed who feel like watching a few episodes of 30 Rock, Louie or Les Revenants will find themselves out of luck. But in a world where Canadians know these shows are available on Netflix’ U.S. service, accessing them can be as easy as installing an app or browser extension. Perhaps it’s no wonder millions of subscribers have chosen to. According to a recent report from CBC/Radio-Canada's Media Technology Monitor, a third of Canadians subscribe to Netflix, and a third of those use the U.S. version of the service, which has a larger library of content. Duncan Stewart, Deloitte Canada’s director of technology, media and telecom research, said in a phone interview that it seems usage of virtual private networks (VPNs), which makes online users anonymous by encrypting their data transfers and running them through foreign servers, is growing among Canadians. “I would say, based on anecdotal information, that the number of people using VPNs is probably climbing and that it’s interesting it’s not necessarily the young and the tech-savvy who are using VPNs,” he said, noting that “the VPN solutions out there are relatively straightforward to use.” While The Wire Report reported as far back as 2012 that the number of people using VPNs for various purposes was increasing, it’s difficult to determine just how fast that growth is two years later. Stewart said he did not have data on their usage. While the MTM report that found a third of Canadian Netflix subscribers watch the American service, it did not have information from previous years to compare. Stewart said he was surprised to see how high the number of Canadians accessing the U.S. service was in the MTM report. “That means 10 per cent of Canadians . That’s a large number,” especially compared to the number of Canadians who have cut the cord, which was only 0.07 per cent in 2013, he noted. “Obviously, the VPN aspect, at least in Canada, appears to be extremely important.” He added that while people in other countries are also using VPNs to access Netflix content from a different geographical regions, the proportions are probably not as high as in Canada. VPNs are also used for getting around government censorship in many countries, criminal activities and activities requiring higher levels of security, Stewart noted. Using them to access Netflix “may be in a legal grey zone,” University of Ottawa law professor Michael Geist said in a recent blog post. It’s also a violation of Netflix’ terms of service, Netflix spokeswoman Jenny McCabe said in an email, noting that "we employ industry standard measures to prevent such use," though she declined to elaborate on what those measures are. Stewart noted that he hasn’t seen any cases of rightsholders pressuring law enforcement, VPN providers, Internet service providers (ISPs) or over-the-top (OTT) video service providers to cut down on VPN use. “It’s interesting because when, of course, people upload content onto a service like YouTube that is not licensed, there are takedown orders almost immediately,” he said. “There is relatively strict enforcement of geo-fencing. Interestingly, thus far, we haven’t seen much of that with VPNs and streaming video on demand.” Stewart said that may be because usage has been relatively small, and because something like that would be very difficult to enforce, noting that “it may be that it is difficult for either owners of the content, national regulators or enforcement authorities, ISPs or OTT providers to detect when a VPN is being used maliciously and when it is not.” He added that someone could be using a VPN for business purposes and watching Netflix at the same time. Howard Knopf, a copyright lawyer with Macera & Jarzyna LLP in Ottawa, said there would be legal and public perception issues around trying to regulate use of VPNs through existing Canadian copyright law. “There’s no obvious answer to the issue or the problem, if it is a problem, under the Copyright Act,” he said in a phone interview. “And if there were any attempt to use the Copyright Act to stop Canadians using VPNs, there would be good arguments against such an attempt and such an attempt would obviously be very controversial from a legal standpoint and a policy standpoint.” Knopf said he’s not aware of any campaigns against use of VPNs, and that’s because someone who is using a VPN to access American Netflix or a service like Pandora is still paying for a subscription to the service. “This is not Pirate Bay stuff,” Knopf said. “This is a system where quite a lot of money is changing hands and it’s going to creators and it’s going to rights owners.” Knopf added he’s unaware of any litigation regarding VPNs, noting “that may speak volumes in itself.” Alan Breznick, a media, telecom and technology analyst at research group Heavy Reading, said there is an argument that that could be made that use of VPNs hurts copyright owners, since buyers of that content are “buying it with the idea that only people in those territories will be able to watch their programming,” he said in a phone interview. When people use VPNs to watch content in other territories, “it potentially weakens their ability to get the price they want when they sell in other territories.” For instance, if a lot of Canadians use a VPN to watch Downton Abbey from a British broadcaster’s website, when that broadcaster “tries to sell its rights … outside the British market, it’s potentially less valuable because there are fewer people who will be served by it, because some Americans or Canadians already have access to it.” He agreed that attempts to stop usage of VPNs would draw a public backlash. “Even if you tried to enact laws about it, you probably wouldn’t look very good if you tried to do something like that, because you’re basically trying to limit people’s access to content that they can get over the Internet, and nobody wants to be seen in a position of doing that,” he said. Breznick added that broadband providers don’t want to make it easier for more people to start using VPNs by drawing more attention to the technology. While a service like Netflix gets paid even if people are using VPNs, the U.S. streaming service Hulu, which has said it would begin blocking viewers using VPNs, is in a different position, he noted. It’s owned by TV networks and, unlike Netflix, has advertising. Since it sells its American audiences to advertisers, “it doesn’t help them that they have some Canadians viewers, because they can’t make money on those Canadian viewers,” he said. He noted that those networks also sell that programming to Canadian broadcasters and that “if Canadians can use a U.S. VPN to watch Hulu in the U.S., that makes the Canadian rights less valuable.” Breznick said widespread use of VPN technology could have ramifications for the copyright system. “If enough people do it, it could bring down the geographic walls because it may not make sense to sell exclusive British, exclusive American or exclusive Canadian rights for something if so many people can get around it,” Breznick said. “So you might sell things on a worldwide basis instead.” Knopf said geographic restrictions won’t become irrelevant any time soon, but “the question is whether they will be enforceable.” He added: “If attempts are made to enforce them that are perceived as too aggressive or too oppressive, there may be political backlash, not to mention legal, because it’s not obvious that any attempt like that could even work.” — With reporting by Anja Karadeglija at akarad@thewirereport.ca and editing by Derek Abma at dabma@thewirereport.ca

Inaction against VPN usage ‘may speak volumes’: lawyer

Broadcast | July 22, 2014

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Inaction against VPN usage ‘may speak volumes’: lawyer

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