Bell’s panel submission calls for CMF to get 20% of foreign OTT revenues

BCE Inc. wants to inject the Canada Media Fund (CMF) with a potentially significant influx of cash by forcing foreign over-the-top (OTT) services to fork over 20 per cent of their Canadian revenues to the non-profit every year. The company said it wants those foreign linear and OTT services with more than $1 billion in annual global revenues, such as Netflix Inc. and Amazon.com Inc., or making in excess of $300 million in Canada to contribute 20 per cent of their previous-year’s Canadian revenues to the CMF. The suggestion was made in Bell’s submission to the panel reviewing the country’s communications laws, which was obtained by The Wire Report on Tuesday. It also comes the week after Netflix said in its own submission that any new law should “unambiguously exclude” foreign OTT services. “There’s no justification for companies operating at this scale in the digital economy not to comply with a basic Canadian regulatory framework,” Bell said. Foreign OTT services would be allowed to commission or acquire Canadian content for their services, Bell proposed, but can’t use them to satisfy their spending obligations, and they would not be allowed to acquire exclusive Canadian OTT rights to programming made with CMF money so as not to “put creative direction in the hands of foreign companies rather than Canadians.” OTT services have been exempt from CanCon regulations under the digital media exemption order (DMEO). Canadian-owned OTT services earning over $300 million in annual revenues in Canada would also be subject to the regulation, including contributing 20 per cent to the CMF or to its Canadian programming expenditures (CPE), Bell suggested. In exchange, most other regulatory obligations, with the exception of very few, would be eliminated. Obligations including independent production rules would no longer apply, but support for local news and stations would be retained. For Canadian and foreign-owned OTT services, there would be no obligation to be licensed, no need to carry specific channels, and no rights or obligations when it comes to carrying over-the-air services. Bell’s position comes at a time when cord-cutting and cord-shaving have trimmed broadcasting contributions to the CMF, which also gets funding from the federal government. The position also reflects a more specific approach than the one outlined by a CRTC report, which recommended that OTT services contribute “equitably” to the broadcasting system -- in other words, not necessarily a financial contribution. In an earlier submission, the Canadian Media Producers Association (CMPA) said that the government should fast-track a review of the CRTC’s enforcement powers related to the regulation of OTT streaming services, citing concerns that the government’s communications review could go on longer than the tail end of the government’s five-year commitment topping-up CMF coffers. The CMPA, which previously asked the federal government to require OTT services to contribute to CanCon, declined to comment on Bell’s submission because it did not see it. The windfall emanating from Bell’s recommendation could be significant if not just for the aforementioned giants already operating in the industry, then for the increasing number of players flooding the Canadian market. Over the past couple of years, a number of those players have staked some claim to the market, including Perform Group’s Dazn and CBS Corp.’s All Access. Walt Disney Co. is making moves on OTT in the country. Smaller services include BritBox, MHz Choice, Filmatique, and Shudder have also played their hand. Netflix alone had reached Canadian revenues of $709 million US in 2018, according an estimate by Statista, and is expected to swell to over $800 million US by 2020. “Foreign-owned OTT services are also growing at a rapid rate, eroding viewing, subscriptions, and advertising for regulated Canadian services,” Bell said. To top it off, Bell said any new legislation should require those foreign services to implement a sales tax on subscription revenues. “This change would eliminate a significant competitive cost advantage that results in digital services from these foreign firms being 13% less expensive than the services offered by their Canadian counterparts,” Bell said. “The current regulatory advantages given to foreign content providers must be eliminated.” In their own submissions, the country’s other large telecoms have raised concern over OTT providers not paying their fair share. In its submission, Rogers said OTT services, foreign and domestic, should make an “appropriate and equitable” contribution, but did not specify how much, according to the submission received by this publication. The rest of Bell’s 167-page submission recommends new rules including limiting wholesale regulation, or mandated access to facilities, to cases including where there is unjust discrimination or undue preference and where significant market power decreases competition in the absence of access. In that case, Bell reiterated that it wants a regulatory framework to adopt a “presumption of competition” instead of a “presumption of regulation,” so as to “impose economic regulation only after finding that a telecommunications service provider” has significant market power. It noted mandated access hampers investment in networks. While the CRTC should make the initial findings of market power, the competition tribunal should be given the power to review that decision, the company added. The submission also reiterated previous requests from Bell to allow the ISPs to block websites that host pirated content and accelerate access to municipal infrastructure by giving the CRTC jurisdiction over those sites. — With reporting by Ahmad Hathout at ahathout@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca

Bell’s panel submission calls for CMF to get 20% of foreign OTT revenues

Broadcast | January 29, 2019

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Bell’s panel submission calls for CMF to get 20% of foreign OTT revenues

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