By Konrad von Finckenstein
IN HIS THREE RECENT articles for Cartt.ca entitled “Why we must act now on the Yale report recommendations,” OUTtv CEO Brad Danks quite rightly points out the Canadian broadcasting is in a precarious situation.
It faces massive competition from streamers like Netflix, Disney and Amazon Prime who deliver their content to Canada over the internet. However, because of the Broadcasting Exemption Order (formerly called New Media Exemption order and before that the Digital Media Exemption Order) streamers are not subject to the Broadcasting Act. They are not even obliged to collect federal GST from their customers.
Danks therefore argues (please click here to read part I, part II and part III of his thoughts) we should quickly follow the Broadcast and Telecom Legislative Review report and enact its recommendations. The Yale report, while making many sensible suggestions, also carries too many controversial recommendations that most likely will prevent it from ever being acted upon – particularly in terms of internet, the role of the CRTC and an attempt to bring newspapers under its watch. It represents a vast overreach.
For instance, in recommendation 19 it suggests
- We recommend that the Telecommunications Act be amended to establish explicit jurisdiction over all persons and entities providing, or offering to provide, electronic communications services in Canada, even if they do not have a place of business in Canada.
On the other hand, in terms of spectrum it only suggests some minor improvements but totally ignores the excellent telecom review of 2006.
While Danks comments on other issues such as big data, concentration of ownership, vertical integration and lack of competition, he advances no comprehensive solution. His prime concern is the state of Canadian broadcasting. While the government has promised legislation in that regard, we do not know the shape of that legislation nor its reach.
Recommendations 56 to 58 say:
- We recommend that the existing licensing regime in the Broadcasting Act be accompanied by a registration regime. This would require a person carrying on a media content undertaking by means of the Internet to register unless otherwise exempt. Those carrying on a media content undertaking by means other than the Internet would continue to require a licence unless otherwise exempt.
- We recommend that to implement the new registration regime, the Broadcasting Act be amended to provide that certain powers of the CRTC in section 9 with respect to licensing also apply to registration. This includes provisions that enable the CRTC to establish classes of registrants, to amend registrations, and impose requirements — whether through conditions of registration or through regulations — on registrants, including the payment of registration fees. This would also include imposing penalties for any failure to comply with the terms and conditions of registration.
58: We recommend that the CRTC have the power to exempt any media content undertaking or classes of media content undertakings from registration in instances in which — by virtue of its specialized content or format, revenues, or otherwise — regulation is neither necessary nor appropriate to achieve media content policy objectives.
Danks also mentions recommendations 60 ,61 and 63 to elaborate his points which make his goal clear: to ensure streamers (i.e. foreign broadcasters) who are now in Canada play according to the same rules as Canadian broadcasters.
“No legislation is actually needed to achieve this result.”
Despite the recommendations, however, no legislation is actually needed to achieve this result. To obtain Danks’ goal the following steps suffice.
First, the streamers need to bear the same burdens as their Canadian counterparts. They are broadcasters and should not be treated differently just because they deliver their product over the internet instead of over the air, by satellite or cable.
The federal government should therefore direct the CRTC to amend the Exemption Order so it does not apply to any company providing (over the internet) audio or audio visual content in Canada for a fee, or for free but with commercial advertising unless they comply with exemption provisions. These exemption provisions would essentially mirror the obligations imposed on licenced broadcasters.
The Broadcasting and Telecommunications Review Panel provided a draft of such a direction at section 3.8.1 of the report, “Requiring Internet media content undertakings to contribute.”
The requirement for broadcasters to be Canadian-owned and controlled only applies to licensed broadcasters. As exempted streamers are not licensed broadcasters, they would not offend this requirement.
The revised exemption order should also ensure streamers have an establishment in Canada and are then automatically required to collect GST from their customers. Thus they are on the same footing as their Canadian counterpart, Crave TV.
Second, if the streamers have the same obligations as licensed broadcasters i.e. be obliged to spend money on Canadian shows, they should then have access to the Canadian subsidy system on the same terms as Canadian broadcasters. That means they should be eligible for funding or tax deductions under the Canadian Audio-Visual Certification Office for tax credits (CAVCO) and the Canada Media Fund (CMF), and Telefilm Canada.
This can be done by changing the regulations that govern CAVCO. The Minister of Heritage can change the regulations in consultation with the Minister of National Revenue. Once the changes are made to CAVCO, the CMF and Telefilm, which are both under the purview of the Minister of Canadian Heritage, will need to follow suit.
Making such a provision would meet the standard of “national treatment” in our trade agreement with the U.S. and, therefore, not be subject to successful challenge.
“Its provisions regarding the internet are an unnecessary overreach and would lead to both jurisdictional and constitutional challenges.”
Third in this context, it would be wise (as suggested By Richard Stursberg in his recent presentation to the IIC Canada conference and in this Cartt.ca podcast) to change the content rules which define what is Canadian. Paraphrasing Stursberg, the current regime is based on a 10-point system that awards points based on whether Canadians work in the key creative positions (writer, director, actor, etc.).
The content rules are, in effect, an employment system, rather than one based on cultural concerns. The danger arises that the streamers will commission ersatz Canadian shows. They will finance dramas and comedies that, while they are made in Canada by Canadian producers with Canadian talent, will have nothing to do with Canada. They will be American shows made by Canadians.
The U.K. has a points system that focusses on culture rather than employment. It has 35 points, 22 of which are for cultural elements (British stories, characters that are identifiably British, etc.). It’s very difficult under the U.K. system to use British taxpayers money to make ersatz British shows. U.K. production has flourished under this system, as have the export of its shows. This change, like the one described earlier, can be made by simply amending the regulations underpinning CAVCO. The CMF and TFC would be obliged to follow suit given that there are no shows or films that they finance that do not have tax credits in them.
In summary, Danks is correct saying the broadcasting system needs to be protected from the invasion of foreign streamers. However, enacting the Yale report would be the wrong way to proceed. Its provisions regarding the internet are an unnecessary overreach and would lead to both jurisdictional and constitutional challenges. They could also cause trading policy confrontation with the U.S., given the provisions of the new USCAM.
A much simpler way, not requiring legislation, being quicker and attracting far less controversy would be to adopt the three steps outlined above. It would constitute streamers as exempted broadcasters and impose essentially equivalent burdens and benefits on them as are imposed on Canadian licensed broadcasters.
Konrad von Finckenstein is a former chair of the CRTC (2007-2012)
Original artwork by Paul Lachine, Chatham, Ont.
