Blais threatens to revoke Netflix’ exemption order

GATINEAU, Que. — During the sometimes-contentious appearance by Netflix Inc. on the last day the CRTC’s two-week hearings on the future of television, CRTC Chairman Jean-Pierre Blais repeatedly ordered the U.S. streaming company to provide information to the commission, and at one point threatened to revoke Netflix’ digital-media exemption order if it does not comply. “You operate under an exemption order that requires you to provide information. Failure to provide information puts at risk your exemption order,” Blais said during the proceedings Friday. The comments came after the CRTC asked Corie Wright, Netflix’ director of global public policy, to provide Netflix’ Canadian subscriber numbers to the commission. “We’re having a conversation with your counsel to assure that information, that for us is actually quite commercially sensitive, that we can guarantee that it will be treated confidentially,” Wright said. Blais replied: “The CRTC protects confidential information everyday. We have lots of confidential information, like many government departments. You coming here and suggesting that we don’t treat information confidentially is actually a bit offensive.” After Wright refused to commit to providing the information, Blais called a break in the proceeding. When the panel returned, he made the comments about potentially revoking Netflix’ digital-media exemption order and said that “the commission is ordering you to provide the number of subscribers that you have currently in Canada by 5 p.m. Ottawa time Monday. The commission provides confidential treatment to that information.” In response to a question from Wright about whether the CRTC can guarantee confidentiality, Blais said: “you are not entitled to a special treatment. We are treating you like every other applicant, intervener, person who appears before the commission. The order stands.” The CRTC does not publish information provided in confidence, but it does publish a version of documents with the confidential information crossed out, and it has a process that allows the confidentiality of that information to be challenged. CRTC spokesman Denis Carmel said that, to his knowledge, this was the first time the CRTC ordered someone to provide information that they had previously refused to give. Blais continued to order Wright to provide information during the rest of her appearance, including for Netflix’ revenues in Canada, what Netflix is investing in production in Canada, and the consumption of Canadian TV shows and movies in Canada and abroad, among other questions. Streaming services like Netflix are currently exempt from regulation through the digital-media exemption order. The question of whether the CRTC could begin regulating such services has surfaced during the CRTC’s Let’s Talk TV consultation process, though it was not included in the discussion document the CRTC released that was meant to focus the conversation during the two-week hearing. While the government of Ontario was among those that called for streaming services to be regulated and be required to contribute to Canadian content, Prime Minister Stephen Harper said earlier this week the government would not allow new taxes or regulations on Internet video services. On Friday afternoon, following Netflix’ appearance, Heritage Minister Shelly Glover issued a statement reiterating that message. “We will await the report and decision from the CRTC on their Let's Talk TV study, and will not speculate on the outcome. We will determine appropriate government courses of action once the CRTC process is complete,” she said in the press release. “The CRTC has in the past declined to regulate such online services — a position that our government continues to firmly support. Our government will reject any move to reverse that position. We will not impose new regulations on Internet video.” Glover made a similar statement during the first week of hearings. Jean-Francois Mezei, a telecom consultant with Vaxination Informatique, said in a phone interview Friday that "just because you got an exemption order, doesn't mean you're not regulated.” He added that while Netflix came into the proceeding "saying they're not regulated, so the CRTC can't force us,” Blais’ response indicated that’s not the case. In a blog post Friday, University of Ottawa law professor Michal Geist also said that Blais’ threats to eliminate the exemption order Netflix operates under “confirms that the CRTC believes that not only does it have the power to regulate Netflix, but that it does regulate it. It does not require the same obligations as conventional broadcasters, but it maintains that its regulatory structure allows it to order online video services to comply with information disclosure demands.” He added that Netflix could challenge the orders for information and argue Canadian legislation doesn’t apply to it. “It seems unlikely that Netflix will choose to escalate the battle with the CRTC, but today’s hearing had the feeling of a prelude to a much larger regulatory and political battle,” Geist wrote. Netflix’ appearance was followed by the U.S. Television Coalition, which represents U.S. television stations whose signals are retransmitted in markets across Canada. It said Canadian broadcast distributors should not be able to transmit their signals for free, and that the distribution of U.S. stations should require affiliation agreements. “The Detroit stations, the Buffalo stations, we are not compensated, whereas the specialty stations, U.S. stations are. We’re looking to have that same treatment,” said Jane Marshall, associate general counsel for the Graham Media Group and part of the coalition’s panel. Blais responded that “the big difference is that the specialty stations are not over-the-air,” and said it treats the U.S. stations the same way as Canadian OTA stations. All OTA signals are treated the same way, and all specialty channels are treated the same way, Blais added. “That’s because the Copyright Act provides two bundles.” “We have no powers to amend the Copyright Act,” he said. “You’re not asking us to do it directly by amending the Copyright Act, but you’re asking us to do it de-facto, by creating some sort of regulatory regime that provides you a de-facto regulatory right, that then gets turned into a remuneration, which is a matter of copyright.” Parties that have already filed interventions in the CRTC's review of the television industry have until Oct. 3 to make a final submission. Blais said at the end of Friday's session that a decision would be issued in "due course." The CRTC's working document released last month said changes could come into effect in December 2015. — With reporting by Anja Karadeglija at akarad@thewirereport.ca, Peter Henderson at phenderson@thewirereport.ca and editing by Derek Abma at dabma@thewirereport.ca

Blais threatens to revoke Netflix’ exemption order

Broadcast | September 19, 2014

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Blais threatens to revoke Netflix’ exemption order

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