Broadcasting report calls for CRTC to expand mandate to include regulation of internet based content.

The Broadcast and Telecommunications Legislative Review Panel released its much anticipated report last week. The report’s recommendations call for substantially expanding the notion of what is considered broadcasting in Canada and consequently calls for a broader mandate for a renamed Canadian Radio-television and Telecommunications Commission (CRTC). The expanded mandate of the renamed CRTC would include regulatory authority over internet based services such as Netflix, Facebook and YouTube – regulatory authority it does not presently have.

The rationale behind the Panel’s recommendations is that the world of Canadian broadcasting has changed dramatically in the past 20 years and for an important part of Canadian culture to survive, the regulatory framework must be modernized and expanded.

The changes in broadcasting include the huge growth in global content available to Canadians, the growing presence of foreign companies that compete directly with Canadian broadcasters in the Canadian market, the shift by Canadians to consuming content online, the growing role of Big Data in determining the visibility of what is available (i.e. algorithmic determined visibility), and the negative economic impact of internet-based business models (e.g. Neflix, Facebook, YouTube, etc.) on Canadian broadcasting.

The panel argues that these trends raise questions concerning every aspect of the traditional framework for the Canadian broadcasting system. For example, while the abundance of content arising from the global nature of the Internet offers both more choice to consumers and greater export opportunities to Canadian creators, it also reduces the capacity of the traditional Canadian broadcasting sector to contribute to the production of Canadian content.

This happens for 2 reasons:

1. Broadcasting advertising revenues which previously supported Canadian content, are moving to internet-based companies such as Facebook and Google that are currently not covered by the Broadcasting Act and not required to provide any Canadian content or financial support for the development of Canadian content.
2. Subscription revenues from Canadian cable and satellite services, which support Canadian production, are declining as Canadians are “cutting the cord” and subscribing to internet based services – most of whom are U.S. based (e.g. Netflix, Disney Plus) and many of which, have little or no physical presence in Canada.

The report is is clear that large, foreign entertainment companies have been present in Canada for many years. However, it argues that what has changed is the ability of companies such as Netflix and YouTube to collect and use consumer data through the application of artificial intelligence to customize their offerings and be immediately responsive to changing consumer demands. This, in turn, creates a huge competitive challenge for existing Canadian broadcasters.

The panel argues that similar changes can also be seen in how Canadians are consuming news. Today, Canadians are increasingly consuming news content online. This content is available through websites provided by traditional Canadian and American newspapers, television, radio stations, through websites that package news (e.g. Reddit) and through news accessed through social media such as Facebook.

Furthermore, the news content available from these services is a mix of audio, audiovisual, and text (text comprising most of the news content found on the Toronto Star, Globe and Mail and other newspaper websites).

The panel argues that the shift in news consumption has implications for the scope of the current Broadcasting Act as the Act currently applies only to audio and audiovisual news content and does not cover text news content found in newspaper web sites, broadcast news web sites (e.g. CBC, CNN, Fox, etc.) or the giant digital platforms. Therefore, the current mandate of the CRTC doesn’t allow it to protect the economic viability of Canadian creators of digital news content from threats posed by platforms such as Facebook who are doing little, if any, original journalism but are making profits off of the journalism done by traditional Canadian newspapers and broadcast newsrooms.

The report argues with considerable evidence that Canadian print newspapers are in decline and that as legacy newspapers shift to the internet, they are forced more and more to rely on digital advertising to survive. Therefore, the fact that the foreign digital platforms are gobbling up most of the digital advertising dollars is creating a financial crisis in the newspaper industry and Canadian journalism more generally. The panel’s recommendations attempt to deal with this crisis in Canadian journalism.

Specifically, the report states that:

“The creation of and access to accurate, reliable, and trusted sources of news content have always been important components of the regulatory framework under the Broadcasting Act and are critical to a healthy democracy. Although Canadians can now access news in a variety of ways, the creation of accurate, reliable, and trusted news content is in peril. While news aggregators and sharing platforms benefit from the availability of news content on their platforms, newspapers, television, and radio outlets have seen their revenues decline significantly.”

General Recommendations

Predictably, the most controversial recommendations in the report are ones that call for internet-based companies such as Netflix and Facebook to be subject to the Broadcasting Act (and therefore obliged to contribute to Canadian content either through Canadian production or financial levies) and for a new digital  registration (not licensing) regime created and administered by the renamed CRTC.

“Under this approach, any media content undertaking with significant Canadian revenues and delivering media content by means of the Internet would be required to register,” the report says, specifying registration would apply to both foreign and domestic digital undertakings, “whether or not they have a place of business in Canada.”

The report suggests a $10-million threshold in Canadian revenues to be required for digital platform registration. Broadcasters and TV providers would continue to be licenced as they are now.

The panel said the large online platforms’ obligations to support Canadian content should vary depending on whether they are: 1)  a curation-based service — such as Netflix or BCE’s CraveTV; 2) an aggregation-based service — for example, Yahoo News; or 3) a “sharing” service, such as Facebook or Google’s YouTube.

Curation services such as Netflix would have to “devote a portion of their program budgets to Canadian programs in a manner similar to Canadian broadcasters” while aggregators and sharing services would be subject to new levies to support the creation of Canadian content. Under the panel’s proposed scheme, Internet service providers would not have to contribute to Canadian content.

The report suggests that, within the the broad framework proposed by the Panel, the CRTC would decide exactly who would contribute and based on which activities. However, the panel was clear in its recommendation that the financial contributions (levies) on aggregators and social media platforms be based on a “simple calculation of the percentage of Canadian-derived revenues.”

The levies proposed to support Canadian content would be in addition to extending the sales tax to foreign online platforms such as Netflix, which the Liberal government has said it plans to do and the panel supports. Quebec and Saskatchewan currently apply such a sales tax on streaming services.

The report also recommends that the CRTC “impose discoverability obligations on all audio or audiovisual entertainment media content undertakings, as it deems appropriate.” Again, this is in response to the increasing role that algorithms play in determining the visibility of content often making Canadian content hard to find.

News recommendations 

The report recommends that the CRTC be able to monitor and address issues concerning news content made available by means of telecommunications, regardless of format. This would include online versions of newspapers which are largely text and therefore not presently covered by the Broadcasting Act.

The report therefore calls for broadening the scope of the Broadcasting Act to include text news content distributed over the internet. As discussed above, doing so would reflect the fact that the business model for news is evolving as news is increasingly being distributed (and viewed) online and includes audio, video, and text formats.

News websites would not have to make financial contributions nor would they have to register in any way, shape or form. The whole point of the Panel’s news content recommendations is for Canadian news sites to benefit from levies placed on the large digital platforms that would be paid into a dedicated fund to support Canadian news. Under the recommended regime, the new contributions from companies like Facebook and Google would generate “sustainable funding for a wide range of news sources,” while new regulations would “ensure that creators of news are compensated for the use of their original content by online platform providers.”

More broadly, the panel recommends that the “relationship between social media platforms that share news content and the news content creators be regulated to ensure the news producers are treated fairly where there is an imbalance in negotiating power.” More specifically, the report recommends that the CRTC should regulate the economic relationship between news content producers and the platforms, including terms of trade.

The report does not recommend any CRTC authority to regulate print news media – just digital sites with a news component.

The report also recommends that news aggregators (e.g. Yahoo News) and sharing services (again, Facebook, etc.) that carry news content should also be required by the CRTC to “promote the discoverability of Canadian news content.” This could include links back to “trusted” Canadian news sources.

Finally, the report recommends that the news tax credit introduced by the Liberals should be available to broadcasters and news delivered on all platforms.

Conclusion

Predictably, there was a chorus of criticism of the report from commentators that essentially argued that Canadians should be allowed to watch what they want, and if they are not choosing to watch Canadian content, that is their legitimate choice and it is not government’s role to encourage a larger audience for Canadian content. In other words, the panel’s recommendations for new rules and expanded regulatory authority for the renamed CRTC over internet-based content are, in these critics’ view, an unnecessary intrusion on a market driven industry where Canadians simply prefer American content.

Critics also point to the fact that broadcast production levels are relatively stable in Canada and by implication, suggest that the “Canadian content” recommendations of the panel’s report are solutions in search of a problem. However, these critics generally fail to distinguish between overall production levels (much of which are productions by American entertainment giants for global audiences) and production by Canadian based and controlled content providers producing distinctively Canadian programming. Nor, as mentioned above, are such critics particularly concerned about the extent to which Canadians are actually viewing genuine Canadian content.

But there were also prominent supporters of the report who basically agree with the principle set out by its chair, Janet Yale: “If you benefit from operating in the Canadian system, you should contribute.”

The recommendations around regulating digital news content appear to be particularly contentious. The report’s recommendations to correct the fact that tech platforms such as Facebook and Google, in the panel’s words, “facilitate the sharing of content produced by other news media typically without any form of compensation to the journalists and media outlets that created the content”, have become a political hot potato.

Put bluntly, critics of the digital news regulatory regime recommended by the Panel simply do not accept the  Panel assertion that “The problem (the financial crisis in journalism) is exacerbated by the imbalance in negotiating power between the dominant platforms and the great number of creators who actually produce the news.” It goes without saying that if you do not accept the fact that there is an imbalance in negotiating power between platforms such as Google and Facebook and quality Canadian journalism, you will have no use for the panel’s news recommendations.

You would also be ignoring reality.

A subsequent Canada Fact Check post will examine the politics of these issues further and discuss other aspects of the panel’s report such as its recommendations relating to telecommunications and the future role of the CBC.