Government blamed for CRTC predicament on Netflix

The federal government’s pursuit of a consumer-driven broadcasting policy instead of a more comprehensive digital strategy has left the CRTC in a difficult position when it comes to regulating Internet video services, says at least one telecom expert. Toronto-based telecommunications consultant Mark Goldberg said the Conservatives government's approach to the communications sector has been “big on politics, light on policy,” and the consequence is the uncertainty over regulating Internet streaming services, such as Netflix and YouTube, that surfaced at the CRTC’s Let’s Talk TV hearings earlier this month. “We’ve got a Telecom Act that pre-dates streaming video and a Broadcast Act that’s older than the Telecom Act. All of this stuff pre-dates anyone even thinking of Netflix, let alone having a foreign-based service that’s in at least 25 per cent of Canadian households, by most estimates,” Goldberg told The Hill Times in an interview. “So how do we deal with that? I’d really like to think that serious thought will be given to that, not simply a knee-jerk reaction that says, ‘We can win more votes by coming out with: Don’t tax Netflix, or no Netflix tax.’” The government should conduct a communications policy review panel to study the long-term funding of Canadian cultural content and whether to merge the telecom and broadcast acts, Goldberg said. During Netflix Inc.’s appearance on Sept. 19, the hearing’s final day, CRTC Chairman Jean-Pierre Blais ordered that the company provide the commission with the number of Canadian subscribers and its spending in Canada. Netflix responded in a Sept. 22 letter that it would not provide the information, calling it “confidential and competitively sensitive” and saying the order is “not applicable to Netflix under Canadian broadcasting law.” Netflix and other streaming services are subject to the CRTC's digital-media exemption order, though the question of regulating over-the-top services (OTT) has been a hot regulatory topic in recent years and surfaced throughout the hearings. Blais told Netflix at the hearing that the commission could revoke its digital media exemption order if it did not provide the information. The Conservatives have also been criticized for making statements throughout the hearings and since that the government would not impose new regulations on over-the-top streaming services, frequently referring to them as a “Netflix tax.” In his Sept. 15 speech outlining government priorities for the fall sitting, which fell right in the middle of the CRTC hearing, Prime Minister Stephen Harper talked about “helping families and consumers” with “common-sense measures,” including “letting Canadians choose to pay for the TV channels they actually want … and by continuing to oppose any tax on services like Netflix and YouTube.” During the hearing’s first week, Heritage Minister Shelly Glover used the Ontario government’s appearance at the hearings — where it told the commission the services should be regulated and contribute to the production of Canadian content — to attack “Liberals like Kathleen Wynne and Justin Trudeau have never seen an opportunity to regulate and tax that they wouldn’t take … ” “We will not allow any moves to impose new regulations and taxes on Internet video that would create a Netflix and YouTube Tax,” her statement said. Conservatives continued this line in question period last week and Glover reiterated the same talking points on Twitter after Netflix failed to meet Blais’ Sept. 22 deadline for the filings. “It’s inappropriate for to be influenced in the midst of a proceeding by comments outside of the hearing room, especially comments coming from cabinet and, frankly, the prime minister,” Goldberg said. “Just as cabinet and the prime minister wouldn’t interfere with a court proceeding that’s underway, they really have no business sending policy directions in the midst of an open hearing,” Goldberg said. NDP heritage critic Pierre Nantel told The Hill Times the comments were “a complete betrayal” of the process, while Stéphane Dion, Liberal heritage critic, said in an interview, “It’s an interference we don’t want to mirror, and we think it’s a mistake.” Blais, whom the Conservatives appointed in 2012, has been a key player in the government’s communications policy, which has sought to appeal to consumers by reducing cellphone bills and allowing more choice in television packages. Some observers were surprised to find him “boxed in” now, with Netflix not providing the information and the government sticking to its position against regulating the services. “The Conservatives have certainly given him a lot of power to execute other parts of their telecommunications strategy, and maybe this was an issue of just getting wrapped up in the moment,” said Michele Austin, a senior adviser at Summa Strategies and former chief of staff at Industry Canada. Michael Geist, the Canada research chair in Internet and e-commerce law at the University of Ottawa and a Hill Times columnist, said in an interview that there’s been “a lot of consistency” between the CRTC and the government since Blais became chairman. This is an exception, he said. “It certainly was clear during the hearing that the chair was not happy with government comments that were being made during the hearing,” he said. “The government may have overstepped with some of the comments during the hearing.” When asked whether the Conservative government’s comments might have emboldened Netflix to not comply with Blais’ orders, Geist said, “It sure didn’t hurt.” Austin noted: “Everybody has to understand that the Conservative party’s position is grounded in data on who their voters are. It’s very clear they know what their voters want; they want a lower cellphone bill and they want choice. This should not be a surprise to anyone." “The bottom line here is election 2015 and appealing to a demographic, largely male, largely age 30 and under, largely single, who love their devices and vote Conservative.” Other parties should also be figuring out how their constituents feel about these issues, she said, adding that she wouldn’t be surprised if they find the Conservative position has broad appeal. Both Nantel and Dion said last week that they would have waited for the CRTC to release its findings from the hearings before taking a position on regulating OTT services. Goldberg was critical of the Conservative policies that have led to the CRTC’s difficult position. “It seems to be, in the mind of some, a substitute for a sound, cohesive digital policy. We need serious thought given to extremely serious issues that need more than a sound bite to explain,” he said. Nantel called it “a key moment” and said he hopes the CRTC makes a “strong statement” on Netflix, which he said should submit the requested information. “The whole issue here is the behaviour of Netflix, coming in here and saying, ‘We’re an American company, we don’t have to comply.’ Are you freeloaders or what?” he said. Globe and Mail chief political writer John Ibbitson, who’s on leave as a senior fellow at the Centre for International Governance Innovation (CIGI), said the standoff would lead to the commission’s demise. “The CRTC’s chairman was right to be upset, not simply because an American corporation displayed frank contempt for a Canadian regulatory agency (that is a thing, isn’t it?), but because at that exact moment the CRTC ceased to have any meaning as a regulator of culture. It’ll be gone in a few years, at least in its current incarnation, and Mr. Blais knows it,” Ibbitson wrote on his CIGI blog. Austin said the chairman will not likely get what he’s seeking, but that by negotiating with Netflix, he could possibly find “a common ground where something is at least submitted.” Geist said the commission might have started a battle it can’t win, but it has no choice but to fight back. The “softest” response to Netflix would be to ask the courts for a reference. “For them to do nothing on this essentially caves to the pressure. It really, I think, would undermine the position of the regulator,” he said. Still he added that there's “no political will to challenge Netflix or Google, and there isn’t any particular desire, I wouldn’t think, to come to the aid of the CRTC. For many years, politicians and political parties have been making a bit of hay by criticizing the CRTC.” — With reporting by Mark Burgess at mburgess@hilltimes.com and editing by Derek Abma at dabma@thewirereport.ca This is an edited version of a story originally published in The Hill Times on Sept. 29. For more exclusive coverage of federal politics and the federal government, go to www.hilltimes.com.

Government blamed for CRTC predicament on Netflix

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Government blamed for CRTC predicament on Netflix

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