The CRTC’s Wireline Wholesale Decision and the ISP Levy

I bet you didn’t think those two were related. If you’re primarily interested in broadcast policy (as I am) you probably didn’t even read the CRTC’s Wireline Wholesale Decision. I will freely admit that telecomm feels like another world and another language to me so I don’t tend to read the decisions and rely instead on the summaries in the news. Then Sasha Boersma pointed out to me Mark Goldberg’s tweet about Commissioner Raj Shoan’s dissent to the decision and I got excited and I just need to share that.

First, the decision. Wholesale wireline services are the part of their network that major telecommunications companies (e.g. Rogers, Bell) have to make available to small independent services (e.g. TekSavvy, VMedia) at a regulated fee to allow the independents to provide competitive voice, broadcast and internet services to their customers. The hearing was to review the policy framework to ensure that it contributed to competition and choice. You can read the press release here for a brief summary – the major issues are expanding the network that must be made available to include fibre and disaggregating the services so that an independent doesn’t have to take all services if they only want, for example, Internet.

Commissioner Shoan’s dissent wasn’t about those two main points but about the decision’s narrow focus on the Internet as a provider of alpha-numeric data and the missed opportunity to revamp policy, or take a first step towards revamping policy in recognition that broadcasting and telecommunications are no longer separate silos. Shoan’s position is that so much evidence was provided by intervenors that broadcasting is now part of the services that the independent providers offer to customers that the Broadcasting Act should have also applied. The world is rapidly evolving to one where there is only one pipe to the home providing all of our communications services and that is not reflected in the policy framework:

“In essence, under the current legislative framework, the Internet, through market forces, consumer use, and industry development, is evolving from a telecommunications service into a broadcasting service. The implications of this evolution are profound for not only the Commission’s regulatory frameworks, but all Canadians and the public interest.”

Commissioner Shoan breaks down Internet services into really three types of services:

  • licensed or exempt IPTV broadcasting (television channels delivered over the Internet by companies like VMedia and Zazeen)
  • exempt broadcasting delivered over the Internet (OTT services like Netflix)
  • non-broadcast Internet (websites, email etc.)

IPTV was a hot topic at the hearing with many independents looking for access to fibre to be able to provide customers with an IPTV offering. They need the bandwidth and speed. IPTV is broadcasting. Shoan’s analysis is that the Commission cannot use the Telecommunications Act to provide access to broadcasting. The Broadcasting Act must apply, specifically s. 9(1)(f):

s.9(1) Subject to this Part, the Commission may, in furtherance of its objects,

(f) require any licensee to obtain the approval of the Commission before entering into any contract with a telecommunications common carrier for the distribution of programming directly to the public using the facilities of that common carrier;

The exempt broadcasting services are exempted by the Broadcasting Act under the Digital Media Exemption Order. S. 28 of the Telecommunications Act provides an obligation on the Commission to regulate the transmission of programming over telecommunications services to guard against undue preference or unjust discrimination (i.e. incumbents favouring their services over the independents). Shoan sees a missed opportunity here to identify what would be undue preference or unjust discrimination “as high-speed networks rapidly transition to becoming predominantly video distribution platforms”. This was an opportunity to create a framework to address problems before they occur rather than after.

Now back to the ISP levy. When the CRTC reviewed the New Media Exemption Order (as it was then called) in 2009 there was a call from creator groups for the CRTC to impose an ‘ISP levy’ on ISPs who were increasingly providing consumers with access to programming without making any contribution to the creation of that programming. The levy would go to fund more programming and replace lost BDU revenues to the CMF and the other independent production funds as consumers increasingly cut or shave the cord. During the hearing the BDUs challenged the CRTC’s jurisdiction to impose such a levy and the CRTC referred the question of jurisdiction to the Federal Court of Appeal.

The Federal Court of Appeal decided in 2010 that ISPs were not broadcasters and therefore the CRTC did not have jurisdiction under the Broadcasting Act over the ISPs (and could therefore not impose a levy under that Act). The decision was appealed by the creator groups (ACTRA, CMPA, DGC, and WGC) to the Supreme Court of Canada, who agreed in 2012 based on their interpretation of the facts that ISPs were not broadcast distribution undertakings [EDIT: earlier version said ‘broadcasting’ but it is more accurate to say broadcast distribution undertakings – sorry for any confusion]. They are merely passive conduits that ‘take no part in the selection, origination, or packaging of content’.  You can find the history of the Digital Media Exemption Order and the Federal Court of Appeal decision here and the Supreme Court decision here.

Now we have a CRTC hearing where independent ISPs looked for access to fibre so that they could provide BROADCASTING services. Shoan’s dissent makes a very good case for applying the Broadcasting Act to ISPs.  [EDIT:  It has also been pointed out to me that there have been some changes in how ISPs operate including how they promote the video content they carry that could justify a re-examination of the case and to what extent they really are only passive conduits.  As well, the growth of IPTV renders the question of whether ISPs are broadcast distribution undertakings moot at least for those services.]  I’m not a telecomm lawyer so there could be flaws in the argument that I can’t see. Perhaps telecomm and broadcast people should have a conversation because Shoan’s analysis undermines the factual underpinning of the Supreme Court’s decision. If anyone is up to the cost of another reference, it could be time to challenge the Supreme Court decision or (and this is less expensive) encourage the CRTC to take a bold step toward creating a regulatory framework that better reflects the services being offered to Canadians and ensures that Canadians will continue to have the choice to watch Canadian programming on those services.

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