There’s been a lot said in the past few days about the fireworks between the CRTC and Netflix last Friday on the last day of the TalkTV public hearing. I’m going to add my two wonky cents from a content creator’s perspective. What’s at stake here for you?
First the backstory (you can find the relevant notices here). In 1999 the CRTC had a consultation on new media and as a result issued the New Media Exemption Order. In that order they stated that they had jurisdiction over new media broadcasting, they defined it, and they exempted it from regulation on the basis that exemption would foster growth and that would contribute to the objectives of the Broadcasting Act. This was 15 years ago so I think we can give them that one.
The Internet world moved quickly and there were repeated calls for the CRTC to revisit that order over the years but they did not until 2009. At that time the definition of new media broadcasting was expanded to include mobile, an undue preference provision was included and the CRTC included a provision that new media broadcasting undertakings would provide information on its activities as requested by the CRTC to allow it to monitor the development of new media broadcasting. In 2010 the CRTC decided that it would start by requiring regular reporting of new media broadcasting undertakings affiliated with licensed broadcasters. Don’t get me started on the Working Group that was struck but was completely ineffectual because of the broadcasters’ reluctance to provide meaningful reporting – yeah, I was on that one.
Then in 2012, after the 2011 fact-finding exercise on OTT services, the CRTC finally acknowledged that new media was in fact no longer new and changed the name of the order to the Exemption Order for Digital Media Broadcasting Undertakings (more commonly known as the Digital Media Exemption Order) and amended the order with four new sections: exclusivity, anti-competitive head start, obligation during dispute and dispute resolution. This was a recognition that digital media broadcasting had become real businesses with real business issues that needed to be regulated. For example, the exclusivity clause means that CTV GO cannot be offered only to Bell customers and Rogers Anyplace TV has to offer CTV as well as City channels.
So while the general public was ranting about how the CRTC had to be prevented from ‘regulating the Internet’, it very publicly was already regulating broadcasting services being offered over the Internet and mobile. The affiliated OTT services pushed back on reporting and dragged their feet on negotiations (e.g. Shaw customers had access to Global Go long before other BDU customers) but the regulation had no impact on foreign OTT such as Netflix and YouTube. [Note – they do benefit from CRTC net neutrality regulation but that’s a post for another day.]
Until this hearing. The CRTC invited Google and Netflix to appear and asked both of them for evidence to back up their statements that there was plenty of Canadian programming on YouTube and Netflix so therefore there was no need to regulate (or rather extend regulation). As newcomers to the CRTC they can be forgiven for not knowing that Blais is a stickler for backing up your big statements with facts but Netflix had the two week advantage and still came to the hearing with unsubstantiated statements. The Commission, and Blais in particular, got very angry due to the repeated refusal of Netflix to agree to deliver requested data without a ‘guarantee’ of confidentiality.
The Twitterverse went wild with accusations that Netflix was being disrespected but primarily by those who are not regular CRTC observers and do not understand the process. Netflix in fact was disrespecting the administrative tribunal that is the CRTC and its confidentiality process. I can’t do a better job than Dwayne Winseck did in his blog post so I refer you there for an explanation of the process and why Netflix was wrong.
It appears to me that as the past 15 years of CRTC regulation of OTT had no impact on Google and Netflix they ignored it. So now the CRTC is exercising its jurisdiction by requesting data and Google and Netflix have to decide whether to acknowledge the jurisdiction or fight it. Yes, the CRTC will likely grant confidentiality (they certainly have in less sensitive situations) so that really is not the issue. Google and Netflix do not want the next step of regulation. Netflix may already be dealing with this in Europe where they have to pay a Culture Ministry tax in France (an actual tax) if their annual earnings are more than 10 million Euros and the French government has either recommended or required (Commissioner Pentefountas requested clarification from Netflix) that the Netflix recommendation engine favoured French and European content. Netherlands has similar laws about favouring domestic content.
Canada is a huge market and an easy market for Google and Netflix. They have to weigh the potential aggravation and cost of complying with CRTC regulation to the revenue that they make from the Canadian market. As of publishing this post nothing has been posted publicly but CRTC staff may be reviewing it – I will update. I doubt that they will just walk away. If they do not, we could see Canadian television shows and features showing up in the recommendation engine and not relegated to the “Canadian” category that consumers have to go hunt for. And maybe, one day, we could see foreign OTT making a financial contribution to the Canadian broadcasting system that they are participating in.
[Kudos by the way to Denis McGrath for trying to explain all this to ‘free Internet’ folks one tweet at a time. Check out his feed at @heywriterboy for an impressive attempt.]
Update 6:10pm – Financial Post reporter Claire Brownell has tweeted:
Netflix on #CRTC orders: “The orders are not applicable to Netflix under Canadian broadcasting law.”
— Claire Brownell (@clabrow) September 22, 2014
The ball is now in the CRTC’s court.