GATINEAU – Being exempted from regulation, CRTC chairman Jean-Pierre Blais said in 2013, is still a form of regulation. So, one shouldn’t get the sense that just because Netflix on Monday refused the Commission’s order to provide data about its Canadian users, the chairman feels he has no arrows left in his quiver.
In May 2013, during the third day of the hearing analyzing Bell Media’s second attempt to acquire Astral Media, CRTC chairman Blais said this: “I never talk about regulated and unregulated. I always talk about licensed and unlicensed for the very fact that one couldn't have exempted programming undertakings distributed over the internet or the web if we didn't have jurisdiction over it in the first place. That's the nature. And in fact, an exemption order is a form of regulation. We just don't require them to hold broadcasting licenses in the traditional sense.”
Anyone else think that quote, that particular belief that the Commission does hold sway over the likes of Netflix, which we reported on at the time (and can be found in the transcript at paragraph 4258), is pretty important, given the CRTC now appears backed into a corner by Netflix and, bizarrely, our own federal government? The Regulator’s reply to Netflix and others, we’re told by folks who should know, will likely come either Tuesday or Wednesday. It had nothing to say Monday night.
During last day of the Commission’s TV Policy Review hearing this past Friday, a day which will be long-remembered by those interested in Canadian cultural policy (i.e. almost everyone in the TV biz in Canada), Blais grew visibly angry while asking Netflix for confidential Canadian customer data which Netflix considers none of the Commission’s business – and which its director of global public policy Corie Wright, was unwilling to provide. Paraphrasing, Blais said: We gather confidential information all the time, you can trust us. Netflix’s answer: No thanks. We won’t give that info up to anyone.
After taking a cooling-off break Friday morning when he reached an impasse with a steadfast Wright, Blais returned and proceeded to order Netflix, several times, to provide the data he was seeking, by end of day Monday, noting the company operated under the CRTC’s New Media Exemption Order (which exempts Netflix and others like it from TV regs), and that exemption could be under threat if it did not comply.
Like any other Silicon Valley company however, Netflix is ultimately a data company and will give up that proprietary information to no one, including the CRTC, no matter what assurances Blais gave on Friday about the Commission’s ability to keep confidential data safe.
The company issued a statement Monday afternoon: “While Netflix has responded to a number of the CRTC's requests, we are not in a position to produce the confidential and competitively sensitive information ordered by the Commission due to ongoing confidentiality concerns. While the orders by the CRTC are not applicable to us under Canadian broadcasting law, we are always prepared to work constructively with the Commission.”
It’s worth noting that Google, which appeared on day one of the hearing back on September 8th and also got a rough ride from the chairman over data which its Canadian lawyer, Jason Kee, could not commit to producing, also did not provide much of the user data requested by the CRTC, according to sources. All of the final undertakings asked of companies during the hearing are not yet posted to the Commission’s web site.
“I never talk about regulated and unregulated. I always talk about licensed and unlicensed for the very fact that one couldn't have exempted programming undertakings distributed over the internet or the web if we didn't have jurisdiction over it in the first place. That's the nature. And in fact, an exemption order is a form of regulation. We just don't require them to hold broadcasting licenses in the traditional sense.” – Jean-Pierre Blais, CRTC, May 8, 2013
So now the CRTC faces some very difficult choices. Netflix, an American video distribution company has, according to two consumer research companies we asked who answered on condition of anonymity, somewhere between four and five million Canadian Netflix subscribers. And at $7.99/month, that’s $380 to $480 million in Canadian revenue annually.
As well, the Commission is facing a meddlesome federal government which for strictly political reasons seems on the side of an American company, Netflix, which offers a very attractive package, or bundle, of video content to Canadians, claims nearly half a billion dollars in revenue, pays no sales or income tax and employs exactly no Canadians.
Just for comparison with a Canadian entity of similar annual revenue, TSN earned $400 million in revenue in 2013, spent $150 million on Canadian content that year and employed 218 Canadians.
This incongruity also comes from a government which claims to want to somehow “require channels to be unbundled, while protecting Canadian jobs,” but also and won’t stand for anyone talking about changing anything about how Netflix operates here, even though the French government has mandated that foreign video distributors earning over 10 million Euros must pay a 2% tax on revenues which goes towards French production.
The federal government’s stance on this matter would also certainly have aided Netflix’s strong stance against providing data to the CRTC or agreeing to any direct contribution to the Canadian economy.
So what will the Commission do? End the Exemption Order? That seems unlikely, given the unprecedented interference in the form of direct instructions from the federal government. Litigate? Maybe, but that could be a lengthy process which may or may not force Netflix’s hand.
We’ll find out the next move in this chess match very soon.
