Episode 6: “A Dangerous Game to Play:” A Former CRTC Vice-Chair Speaks Out on the Commission Plan to Regulate and Tax the Internet
For the better part of two decades, Canadian cultural groups have been pressing Canada’s telecom and broadcast regulator, the CRTC, to regulate and tax the Internet. The CRTC and successive governments consistently rejected the Internet regulation drumbeat, citing obvious differences with broadcast, competing public policy objectives such as affordable access, and the benefits of competition. That changed last year when the CRTC released Harnessing Change: The Future of Programming Distribution in Canada, in which it dramatically reversed its approach. Peter Menzies, a former CRTC commissioner and Vice-Chair of Telecommunications, joins this week’s LawBytes podcast to help sort through Cancon funding, Internet regulation, and the CRTC.
CBC News, Tax on Netflix and Spotify proposed by CRTC
CBC Catherine Tait at Prime Time, @sdbcraig
CBC News, Ottawa’s fight with Netflix reignites age-old debate — what is Cancon and who should pay?
Standing Senate Committee on Transport and Communications, October 30, 2018
Canadian Heritage, Minister Joly – Creative Canada Speech / Ministre Joly – Discours Canada créatif
House of Commons, December 12, 2017
Michael Geist: This is LawBytes, a podcast with Michael Geist
CBC News: Broadcast regulator is calling on the government to tax the likes of Netflix and Spotify among others. The CRTC has proposed that such companies including Internet service providers should be forced to fund the production of Canadian content. The intention is to help compensate for the declining contribution of cable and satellite providers.
Catherine Tait, CBC President: So unbelievable to be able to experience that kind of cultural sharing. So for this we are very grateful to Netflix. However, fast forward, to what happens after imperialism. And the damage that that can do to local communities. So all I would say is let us be mindful of how it is we as Canadians respond to global companies coming into our country.
Michael Geist: For the better part of two decades Canadian cultural groups have been pressing Canada’s telecom and broadcast regulator the CRTC to regulate and tax the Internet. As far back as 1998, the CRTC conducted hearings on new media in which groups argued that the dial up internet was little different from conventional broadcasting and should be regulated and taxed as such. The CRTC and successive governments consistently rejected the internet regulation drumbeat citing obvious differences with broadcast, competing policy objectives such as affordable access, and the benefits of competition. That seemed to change last year when the CRTC released Harnessing Change: the future of programming distribution in Canada, a report that dramatically reversed its approach. The CRTC reversal highlights competing visions of Canadian content regulation and the Internet. There are those such as CBC’s Catherine Tait who have likened Netflix to a cultural imperialist that requires a regulatory response. Others look at recent data that shows that when it comes to Canadian English language fictional programming, foreign financing is now larger than the funding from broadcasters and Canada Media Fund contributions combined. As one columnist recently concluded “the evidence doesn’t back up the case that extending the paternalistic Cancon regulatory model to foreign streaming services will do anything to save Canadian culture.” To help sort through Cancon funding, internet regulation and the CRTC, I’m joined on the podcast this week by Peter Menzies, a former CRTC commissioner and vice chair of telecommunications. Peter has been a reporter, newspaper publisher, regulator, and is now the director of the Royal Saskatchewan Museum
Michael Geist: Thanks so much for joining me on the podcast.
Peter Menzies: Thanks very much. It’s a it’s a pleasure and I’m flattered to be part of this.
Michael Geist: Well you’ve been one of the the people have been really outspoken when it comes to the CRTC and cultural issues so you’re really a perfect person to come on and talk about some of the things that are taking place and I thought we’d start by focusing on what seems like a recurring issue literally years and years and years of the same kind of issue being discussed when it comes to the prospect of new sources of revenue, new fees associated with either Internet streaming services or internet services more generally to fund Cancon and so we’ve seen this issue recur sometimes talking about it in the context of a so-called Netflix tax. Other times about broadband or wireless taxes all in the name of supporting the creation of Canadian content. It was back in the news recently with new data that showed that foreign services are significantly outspending Canadian broadcasters when it comes to at least English language drama.
CBC News: Canada’s eight billion dollar production industry is booming like never before. And another studio nearby asset is under construction for another Netflix series called Lock and Key. Foreign streaming services from Netflix to Amazon to Hulu are creating jobs here. But they make no contribution to the government sponsored funds.
Michael Geist: And so I guess the question that I want to start with is there a Cancon crisis in Canada.
Peter Menzies: There’s always a Cancon crisis in Canada in the minds of some people and in the minds of some other people there is never really a Cancon crisis in Canada. So it depends how you look at it in terms of that sort of sense I mean from a person lobbying for more funding for Cancon or for a person lobbying for more funding for anything it’s always to their advantage to have a crisis ongoing. And I think that’s been part of the culture of the Cancún discussion for at least 30 years. And it really goes into our history of being of protecting ourselves against the foreigners. I’ve used the phrase couple of times we’ve built this big beautiful wall between us and the United States to protect our culture from them. And now we’re having a lot of difficulty adjusting to the idea that walls aren’t what we need.
Michael Geist: What do you think we do need I guess just to jump right in in this in this new Internet based environment.
Peter Menzies: Well I mean adaptation becomes the first thing that gives a little context about 10 years ago. It’s probably at least 10 years ago or so was that the CMPA primetime conference in Ottawa. And I think it was Glen O’Farrell. But I stand to be corrected. But I was taking some questions and that sort of stuff and I remember asking him sort of regarding the Cancon subsidy and that sort of stuff. That’s sort of at what point in the future you know 25 years 30 years 50 years 100 years sort of thing do you see Cancon being able to be sustainable on its own.
Peter Menzies: And the response was never. And I realized then that for folks inside the system it was inconceivable for them that there could be something other than the system and that was the only way they could think. I mean they’re not bad people. It’s not necessarily a bad thought. But it was a limited thought. So what we need to do is move away I believe to have a better life for Cancon producers and exploit the whole world. We’ve been trying to serve a market of 35 million people split into two languages. So you have one market really of about 25 million people and another about 10 million people. Very small markets through subsidy and done that reasonably successfully for a long time. There is an English speaking and French speaking market out there in the world that we could serve. That has hundreds of millions if not billions of people in it. And that seems to me like a real opportunity that we would ignore at our peril.
Michael Geist: The CRTC for many years and you were obviously there for many years did not want to come close to kind of regulate regulated type solutions when it came to the Internet. They obviously played a key role in structuring this Cancon support model but that was based on conventional regular broadcast in the Internet space. They really took a hands off approach dating all the way back to the 1990s with the digital media exemption essentially the power to regulate. But choosing not to. Now that seemed to change last year with a report titled Harnessing change in which the current CRTC chair Ian Scott got behind Internet taxes and I know that he insists they aren’t taxes. He talks instead about contributions to the system.
Ian Scott: We examine the future of programming distribution in Canada in our Harnessing Change report prepared at the request of government and released in May of this year. This report asks a fundamental question: what can be done to support the production, discoverability and promotion of Canadian programming. Harnessing change concludes that new innovative approaches that would engage digital players are needed.
Michael Geist: I was curious about your thoughts on the report and what sure feels like a significant reversal in policy.
Peter Menzies: Yeah it is a significant reversal on policy. I mean it it went or at least approach and philosophy.
Peter Menzies: It went from you know sort of the discoverability summit and that idea to some of the directions encouraged by the previous commission under JP Blais and and for that matter supported by the Heritage Minister in many of her statements, Minister Joly, regarding the need to prepare Canada for the future and pushing for commitments that benefit our industries.
Melanie Joly: Today I’m announcing the first of these agreements on behalf of the government of Canada and Netflix. Under this agreement Netflix will create Netflix Canada, a permanent film and television production presence here in Canada the first time that the company has done so outside the United States. And building on the strong track record of investing in shows like Anne and Alias Grace with the CBC, Travellers with Showcase, and Frontier with Discovery. They have agreed to invest a minimum of five hundred million dollars in original productions in Canada in both official languages over the next five years.
Peter Menzies: Even the title Harnessing Change indicates that you’re trying to stop something you know it’s a King Canute style approach to things we are going to harness change rather than embracing change rather than adapting to change rather than exploiting change to our benefit. There’s all kinds of different ways you could look at it. So I mean I think that that approach I find very regressive and kind of sad because you can’t stop change. As to we meddling with the Internet and content on the Internet. That’s a very very dangerous game to play. The Internet, and that speaks to how the the CRTC’s affection for the broadcasting act, which is I mean they have to you have to fulfill it. It’s your job. But in comparison to things such as the Internet and telecommunications it distorts the argument. The Internet is not broadcasting the Federal Court has ruled on that it may carry video. But I mean everybody carries video. People go live and podcast themselves at an Eric Clapton concert. The Globe and Mail has video, National Post has nothing but video on its Web site. You are interfering in areas that you don’t belong. And the Internet is far far more than video. It’s speech, it’s academia, it’s tons of things. So I’m not sure they’ve thought that through. There are ways that they can manage things. Other than that I hope.
Michael Geist: I think that’s a really important point. Both the the widespread use of video itself by a range of services that we wouldn’t think of as being broadcasters in any any real sense and the fact that the Internet is used for so much more than than just video. I mean it’s striking a lot of the conversation has been around the prospect of these taxes and what it means for internet affordability and the like. But I think you’re right to point out that we’re really talking about the prospect of pretty extensive regulation by the CRTC of almost any Internet based service that could conceivably even include podcasts like this one. And so I suppose it begs the question though is the CRTC even the right venue for this kind of discussion and debate or is that something that’s better left to Parliament to sort through.
Peter Menzies: Well it’s absolutely left to Parliament. The last I heard the government of Canada was strongly defending the notion of net neutrality which I think is terrific.
Navdeep Bains: Let me be clear our government stands to support net neutrality. Mr Speaker we support an open Internet. We support the CRTC framework for net neutrality. Mr Speaker because we know an open Internet is critical for our economy and our democracy.
Peter Menzies: It’s a notion that should be defended. I mean it’s it’s a hill worth dying on and in a sense like in the sense like that because once you start messing with that you you begin to define the Internet as if it was cable and there’s there’s a real trend that you can pick up in the discussions. It comes from within the industry. It comes from within the CRTC that this whole internet fad you know it’s just kind of like it’s just the new cable right.
Peter Menzies: And it’s not. People should have no business. I mean it’s not that it should be the Wild West. The internet should be governed like the rest of the public square is governed. I mean there are hate speech laws, there are libel laws, there are defamation laws, there’s there’s all kinds of laws, there’s sexual exploitation laws, all the laws of the land should apply to the Internet. It should not be. It doesn’t have to be a wild west zone. But when it comes to regulation through regulators such as the CRTC, its sole role should be ensuring that the content, that the role of net neutrality is respected and that and when it comes to providing fair competitor access and items like that that the public that matter to the public but most of the public doesn’t know that it matters to them.
Michael Geist: Do you have a thought as to why we’ve see the CRTC shift in this way and is it simply a matter that regulators are going to regulate. And as it feels it’s in a sense power to regulate over conventional broadcasters where it had that power largely through licensing and and a more closed system. And it feels that evaporates. It extends over to the internet although even as I ask the question I know that for a very long time the CRTC resisted doing exactly that.
Peter Menzies: I mean my sense of it right now is that it’s kind of local politics. Minister Joly was and so was the preceding CRTC chair in his last year was being attacked by the cultural lobby, a large part of which is based out of Montreal, that did not like the changes that had been made. That did not like the approach moving forward and felt more comfortable moving you know advancing the cause of you know I’m conscious of the fact that I’m know talking about a lot of people at risk of generalizing about a lot of people here.
Peter Menzies: But let me just try to say that that specific group because there’s other groups I could mention that specific group is for them it’s much easier to have the outside world changed them for their world to change. So the solution to them has always been just put a tax on Netflix and other streaming services and everything will be fine. It’ll be just like 1985. The revenue we might lose through lower cable subscriptions will be replaced by streaming subscriptions and we’re all good.
Peter Menzies: And you know they won. Minister Joly is no longer, unfortunately in my view, is no longer minister. And the harnessing change is the new approach.
Michael Geist: You know when you talk about the kind of targeting that takes place Netflix as you suggest is frequently the target in Canada and I think at least in recent memory there is no more infamous incident than when CBC president Catherine Tate spoke to an industry conference earlier this year calling Netflix a new empire.
Catherine Tait, CBC President: I was thinking about the British Empire and how if you were there and you were the viceroy of India you would feel that you were doing only good for the people of India or similarly if you were in French Africa you would think I’m educating them. I’m bringing up the bring their resources to the world and I am helping them. There was a time where cultural imperialism was absolutely accepted and in fact if yo were a history student you would be proud of the contribution that these great empire escape. I would say we are at the beginning of a new empire.
Michael Geist: The industry often has discussed Netflix really in the context or with the vision of being a threat talking about an uneven playing field with the notion that benefit that Netflix benefits from an unregulated, untaxed service unlike some of its Canadian counterparts. Although I think there’s arguments that the level playing field issues often times swing the other way there’s all sorts of benefits that the regulated sector has that Netflix doesn’t. But it’s pretty clear that it’s a framing that has certainly caught the attention of policymakers and now it would seem the CRTC. Any thoughts on what if anything the regulatory world should look like for some of these online streaming services?
Peter Menzies: Well I mean obviously they should be collecting sales tax and contributing to the Treasury’s in that manner and in fact in Saskatchewan they are collecting the PSAT now so it obviously can be done they should be contributing to society just the just the way all businesses should be.
Peter Menzies: In terms of how they should be can. And I think that contribution is fine because in my perfect world you would actually attach cultural funding from these vehicles and it would come from general revenue and that would remove the risk of the telecom world being distorted by the broadcasting world abroad where you need cultural funding it could be provided straight through the federal Treasury rather than through whatever we want to call them taxes or fees on distribution platforms. There are a group of people and I met with some when one of my in my last year at the CRTC of producers who actually were encouraging us to continue to do nothing about Netflix because in their view Netflix was providing a lot of money was investing heavily in their industry in Canada.
Peter Menzies: They liked that and they didn’t want that to be chased away for them. That was a great advantage. It provided an additional path to for their production. I met a young fellow producer also in my last year who when we talked about the new rules just sort of shrugged and said Hey when we saw them we just called the staff in and said Okay guys things have changed and we have a new.
Peter Menzies: We have a new foundation and we can’t sell it to Netflix. We don’t make it. So it changed changed everything in that regard.
Peter Menzies: So there is a there are people who want to move out into the world and take advantage of a bigger world and you can do that through streaming platforms such as Netflix and others and let’s face it there’s there’s going to be a lot more. And I’m curious to know why. I don’t quite understand why Canadians haven’t sort of taken that bull by the horns and run with it a bit more.
Michael Geist: Yeah well perhaps it does come back to your one of your very early points in this conversation about walls and the notion of a challenge in competing with a streaming service that sees itself as a global player that now quite literally has content that people really want to access and view from around the world as opposed to a country where so much of the approach has long been defined by being limited within the national borders. You state it’s up to just a moment ago that that I want to drill down on for just a moment. That was to suggest that the right way to fund Cancon or cultural priorities ought not to be the kind of subsidy model that we’ve had for many many years especially through conventional broadcast but rather through general revenues. Can you can you expand a bit on on how you see this taking place in a sense. I think it’s suggesting that we are it’s not that we ought to extend these kinds of mandated contributions or taxes to Netflix and other streaming services. It’s that we ought to get out of the business altogether of using these kinds of fees as the way that we try to fund this kind of Canadian content.
Peter Menzies: Once you attach them to the cultural side they begin and you can see this and the risk and the Harnessing Change report you begin to define them as cultural carriers rather than just carriers and agnostic. And if you see them as cultural entities then you end up messing with them. And it perverts that that all those all those principles around net neutrality and that sort of stuff. So it’s a lot easier to get rid of that risk too and it wouldn’t just mitigate it. You would eliminate that risk by creating funding just funding directly from the federal treasury. And that’s entirely possible in the grand scheme of things. The sums are not insignificant but they’re not overwhelming cultural funding when it compares to other areas is it is a fairly modest. So that’s the that’s the view I take on that.
Michael Geist: So that’s certainly one alternative and we do see more and more people arguing that if the current system is diminishing in importance given the decreasing revenues for broadcasters obviously we’re seeing more money come in from foreign unregulated players but perhaps it’s time to rethink the system as a whole. And of course that’s part of what’s taking place with the launch of the broadcast and telecommunications legislative review panel the panel that was also sort of coming out came out of Minister Joly and Minister Bains talking about the prospect of a rethink of Canadian broadcast and telecommunications laws a preliminary report is expected in June the final one in early 2020. It holds the prospect of a real overhaul or at least recommendations of an overhaul on broadcast and telecom. If you were on the panel or perhaps asked to provide it with some advice what would you say?
Peter Menzies: Well I would say we would happen to move into some of those areas and I would think that we need to be more progressive in our approach. I mean I find the current approach of this to go back to something you said.
When we talk about the system I think there’s risk in these discussions of believing that the system is the industry that the system and the industry kind of you know are all one in terms of that and I’m not ignorant of the fact that they’re very closely tied but there is a world outside this walled garden that has so much opportunity into it. You know like you can spend your time being afraid that you will lose half of your market of 25 million Anglophone Canadians to foreign invaders or you can spend your time thinking about how you could maybe grab 10 percent of a market of 800 million people. I mean there are hundred and twenty five million anglophones in India right. If you can talk to producers of content aimed at at at the Indian market and people in the Indian diaspora and you know that’s the way people get it why would I aim. You know why would I ignore that market right. It makes no sense to me whatsoever that you would have an approach that continues to be defend this small market within which nobody will ever get super rich. I get that but that we should be going out into the world and and exploring those opportunities. So that would be the broad philosophy upon which I would like. I would encourage people to look at things because otherwise we just become walled in small and we become little Canadians. And I would like us to be big Canadians.
Michael Geist: Peter thanks so much for joining me on the podcast.
Peter Menzies: Thank you Michael it’s been a pleasure and the privilege
Michael Geist: The Government’s expert panel broadcast and telecommunications legislative review panel is expected to release an interim report in late June. Its final report and recommendations are due in January 2020.
Michael Geist: That’s the Law Bytes podcast for this week. If you have comments suggestions or other feedback, write to lawbytes.com. That’s L.A. W B Y TE S at P.O. Box dot com. Follow the podcast on Twitter at @lawbytespod or Michael Geist at @mgeist. You can download the latest episodes from my Web site at Michaelgeist.ca or subscribe via RSS, at Apple podcast, Google, or Spotify. The LawBytes Podcast is produced by Gerardo LeBron Laboy. Music by the Laboy brothers: Gerardo and Jose LeBron Laboy. Credit information for the clips featured in this podcast can be found in the show notes for this episode at Michaelgeist.ca. I’m Michael Geist. Thanks for listening and see you next time.
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