Home > Internet > No Regulatory Cherry-Picking Allowed: the CRTC vs. Netflix Clash @ the TalkTV Hearing

No Regulatory Cherry-Picking Allowed: the CRTC vs. Netflix Clash @ the TalkTV Hearing

Netflix

The final day of the CRTC’s hearing into the future of television saw a heated clash between CRTC chair Jean-Pierre Blais and online video distributor Netflix. It was a moment with few precedents, and one ripe with a myriad of fascinating questions (Netflix presentation here; CPAC coverage here).

The clash ignited when Blais’s request to Netflix’s Director of Global Public Policy, Corie Wright, to file information with the commission about the number of subscribers it has in Canada, its revenues in Canada and other information the company does not routinely disclose was met by much hesitance on Netflix’s part. As Wright repeatedly returned to concerns about confidentiality, Blais testily questioned whether Netflix did not trust the CRTC’s ability to deal fairly with companies’ request for confidentiality.

The problem, however, is that while Netflix demanded guarantees of confidentiality, it is the CRTC’s prerogative to determine whether such requests outweigh the public interest in disclosure. And in this regard, Blais refused to concede that prerogative while Netflix was equally intent on assuring confidentiality for information that it never gives out to anyone, no matter who asks.

While that may cut it when it comes to researchers and journalists, it won’t do in the context of a CRTC hearing that is, after all, a quasi-judicial proceeding with stringent legal standards about evidence. The point was made on the opening day of the “Talk TV” hearing as well when a similarly frustrated Blais encountered PR puffery from Google that hardly constituted robust evidence that could be used to shed light on anything other the company’s own interests and story that it’d like to tell the world.

This is not novel and is, indeed, well-established practice. Indeed, for all those who play in the regulatory arena, there is little more frustrating than the extensive use of the infamous hashtag (#) in instances that the CRTC has granted companies confidentiality over those who have sought disclosure. Indeed, for many, the problem is that the CRTC has been too generous in granting confidentiality over disclosure. So, to have Netflix say that it was seeking to pre-empt the question by having guarantees of confidentiality from the get go was beyond the pale, and Blais treated it as such.

So, where do these trade-offs between confidentiality and disclosure come from? Three places.

First, from the general tradition of regulated industries where the interest of the public in the matters at hand are always weighed against business demands – typically expansive – to keep their affairs private.

Second, the CRTC took up the issue in 2007 in a proceeding about just this issue where the Commission observes the following:

. . . [The CRTC] conducts its public processes in an open and transparent manner. In some instances, parties submit information in the course of proceedings for which they request confidentiality. . . . [O]ther parties to the proceeding may request public disclosure of the information. If such a request is granted, the information is put on the public record. If it is determined that the harm outweighs the public interest in disclosure, the request is denied and the information remains confidential.

Basically, Netflix was trying to force the CRTC into a corner today over this issue, and Blais was not having any of it.

Lastly, the CRTC’s Digital Media Exemption Order under which Netflix and other OTT providers operate in Canada albeit exempt from the normal requirements of the Broadcasting Act, makes it clear that such companies are required to submit information regarding their “activities in broadcasting in digital media, and such other information that is required by the Commission in order to monitor the development of broadcasting in digital media”.

Some may not like these requirements, but for the time being they are the rules of the game and having decided to play by the rules of the game since its entry into Canada in 2010, today’s hearing was not the right place for Netflix to challenge them.

We must remember that, since its first New Media Order in 1999, the CRTC has always claimed regulatory authority over television and other broadcasts delivered over the internet but has exempted them from the requirements of the Broadcast Act. It did so on grounds of technological neutrality, fostering creativity and innovation and that doing so would not prove disastrous to the Canadian “broadcast system”. In short, it is not whether the CRTC can regulate the internet broadcasting, as Michael Geist noted the other day, but will it? The answer has unambiguously been yes, the CRTC can regulate internet broadcasting, but will not for the time being. That was the answer in 1999, in 2009 and in its last statement on the matter, the Digital Media Exemption Order (2012).

Three final points. First, Netflix cannot cherry pick the elements of Canadian media and telecoms policy that serve it while cocking a snook at those elements it would rather not deal with. Netflix has been the beneficiary of the CRTC’s robust network neutrality rules, rules that apply both to wiredline telecoms and mobile wireless telecoms providers. This has been a huge benefit to Netflix, and partly on account of such measures its ability to locate its content caching equipment at Canadian telecoms and ISP providers such as Bell, Rogers, Telus and Shaw are a far cry easier in Canada than in the US. The forthcoming CRTC Mobile TV proceeding will help to determine the utility of these rules.

As Netflix does battle in the US at the FCC hearings now taking place over the future of network neutrality in that country, it would do well to recall the comparably better conditions it has in Canada. As Netflix itself noted today, Canada is its best international market and I would suggest that the combination of the CRTC’s network neutrality and light touch Digital Media Exemption Order help explain this state of affairs. As such, when the Commission asks for information and to trust that it will make the proper decision in weighing the company’s claims for confidentiality with the benefits of public disclosure, Netflix would do well to play ball.

Third, Netflix also needs to recognize that, faced with a wall of claims from incumbents for two week’s running that unregulated OTT services threaten the Canadian “television system” altogether, robust evidence could help put such self-serving claims in perspective and is just what the CRTC needs. Indeed, Netflix should meet the CRTC’s deadline for its orders for information of this Monday to help in just this regard, otherwise the CRTC will be left with much self-serving bluster about falling skies and doom and gloom.

Finally, it’s time to recognize that while I don’t personally think that Netflix should be subject to all of the requirements of the Broadcasting Act, this is no longer the days when technophiles could see the Internet as an unregulable space. Those days were always an illusion and, regardless, are over. There is a discussion to be had, and that discussion is already underway in many other countries around the world, as Netflix knows full well.

Outside Canada, the European Union’s Audiovisual Media Services Directive brought online video providers under its sway in 2010. The Dutch and France have also reportedly required it to torque its algorithms to give priority to local content and to contribute to the creation and circulation of television content from both countries and Europe as a whole.

Whether we agree with that or not, it’s now the discussion to be had, rather than ducked with gestures towards the internet as some kind of nirvana that exists outside the normal laws of the land. Neither Netflix, Google nor any other ‘digital media giant’ can escape this reality by invoking the internet as an world beyond regulation when they please while calling for network neutrality when that suits. What we all need to realize, is that an open media requires smart regulation not no regulation.

  1. Only Moi
    September 24, 2014 at 6:12 pm

    You raised a good point on twitter: “How does this relate 2 Netflix v CRTC?”

    While I don’t have an answer to that (and I think the answer from the broadcasting act will also be a negative), it is also an internet service.

    Privacy wise, as you mentioned (at least as I understood that you mentioned) does fall under their jurisdiction in telecom, but it isn’t mandated in the Broadcasting act.

    However, as I see it, we are at a point where broadcasting and telecom converge (feel free to correct me here).

    In Telecom the CRTC has an overlapping role to that of PrivCom.

    In Broadcasting, I don’t see it.

    However, and I’m just taking a stab in the dark at your question here:

    1. Market forces can not be a replacement for privacy protections.

    2. Since I didn’t notice privacy in the broadcasting act, this may be the answer to your question.

    3. However the courts (in relation to telecom) stated:
    http://decisions.fca-caf.gc.ca/fca-caf/decisions/en/item/31309/index.do
    “The law must not set up new unjustified barriers to internal and international trade, and must not disadvantage responsible players by allowing data havens or offshore rivals to escape regulation.”

    “The heart of successful privacy protection lies in awareness of all parties of rights, expectations, responsibilities, and the actual facts of data processing and dataflow. There is a tremendous need for public education and awareness, and a vital role for the Privacy Commissioner to play.”

    Should the CRTC not also play a vital role in the protection of Canadians as they decide how the Set-Top Boxes enhanced data tracking and metrics will be used? And the data they will use and who it will be shared with?

    But, where is the privacy role of the CRTC in non-telecommunications, and OTT services. It appears to be lacking.

    Is it a flaw in an outdated broadcasting act whose time has come?

    I don’t see this as being out in left field as it comes to new media broadcasting (the netflix internet service) and eventually other innovating services which could affect privacy.

    So back to your question, I don’t think they may have the statutory authority via the broadcasting act in regards to privacy as they do in the telecom act.

    However, they must consider privacy (as they know) when rendering decisions, such as their upcoming decision on *enhanced* measurements with the Set-Top Box.

    But to my limited understanding, their power to regulate as it pertain to privacy, I couldn’t find a connection when it comes to a foreign broadcasting service. PrivCom does though since it involves a commercial service offering aimed at Canadians and the taking and using of Canadian info.

    If you ever get a reply to your question, please do share it, or share your thoughts on it. It has me very interested.

  2. Only Moi
    September 19, 2014 at 8:58 pm

    I see quite the opposite of the what the two above people see.

    I have seen the CRTC say no to regulating the internet when the ethnic channels wanted them to block access to international streaming sites that carry ethnic programs.

    I seen the CRTC say no to the American’s when the American group came in and said we want money for the OTA TV being seen in Canada.

    I seen the CRTC ask the most basic of questions to netflix and google and the CRTC being given a run-around.

    I have seen the CRTC stick up for your privacy rights and netflix just shrugging it off and actually laughing at it.

    The “netflix tax” crapola is something the Big telco’s stated they want, not the CRTC.

    Are you sure you guys listened to these hearings? Or maybe you read some website site who is hyping many things? Or read very badly trending twitter hype? Or read some pretty bad mainstream media reporting?

    Whatever it is, what is stated above is not what I have seen with these hearings.

    There is nothing shocking and shameful here aside from the replies given by google and netflix to the most basic of questions.

    BTW, did anyone catch how Vmedia’s stated operating costs of ~10$ to ~15$ for basic collaborates with the Consumers Union call for making basic a 10 to 15$ service?

    Vmedia stated that Basic, a true basic, would run about 3$. Add overhead in that (support, hardware, upgrades, and fighting the BDU’s at the CRTC etc) brings their costs to under 7-9$, but gave a ballpark of 14.95 to be “safe”.

    CRTC is eying 20 to 30$ from what I read based on the info they have/had. Consumers Union stated it should be 15$ at most. So this backs them up a bit.

    I get the feeling what people will be paying for is the Big Telco’s (and the CRTC’s) project of getting the STB data-mining up and running for behavioural advertizing if this exceeds the 15$ mark.

    Vmedia’s cost is 3$, and they are a reseller. Bell and the rest must surely be around or under a dollar.

  3. Justan Observer
    September 19, 2014 at 5:40 pm

    The overall problem is that the CRTC “thinks” it can regulate the Internet. The CRTC’s problem is that such a thought is not really present in law – they are out of their jurisdiction and they know it. However, being, like many Commissions in this country, aware that their mandate is ending and shrivelling like a mushroom in the sun, they are blatantly attacking where they can — and where they can is OTT services. “Broadcast” is a term whose definition does not appear to include the provision of selectively chosen subscriber services.

    I haven’t seen them investigating all of the porn sites not located in Canada which, arguably, may “broadcast” far more in Canada than Netflix. Do they really think that PornHub or its competitors will pay a tax to send their material here? Oops, CRTC, that’s just the problem…they don’t send it: subscribers ASK for it. That is not “broadcast”.

    The Canadian Government – at least until after the next election – has said that it will NOT introduce or condone a “Netflix tax” (or a “Youtube tax”..or, presumably a “Pornhub tax”, though they likely won’t use that example!).

    The CRTC is trying to shut the barn door after all the animals have left, and the animals aren’t returning. Pretty soon they’ll end up with the empty barn, securely locked, while the foxes feast on the animals outside.

  4. Liam Young
    September 19, 2014 at 2:33 pm

    Just to be clear, the companies that are benefiting from Netflix are Bell and Rogers, as they continue to add to the cost of Internet services, based on bandwidth. One could even stretch this to suggest that because of the excessive costs being applied by our national and well protected media conglomerates, we lack Net Neutrality and certainly equal access for all Canadians because of prohibitive costs.

    Also, this is all a big warm up for a ‘Netflix tax’, which Canadians will avoid by signing up with US IP addresses.

    Finally, I’m shocked with the audacity of the CRTC for demanding to know how many subscribers Netflix has. Does Consumer Affairs insist on seeing and reporting on how many widgets Walmart sells? Or the hundreds of other non-Canadian companies that profit from selling to Canadian every single day?

    Why does CONTENT raise the hackles of every policy expert in the country and yet we abort so many true economic liberties with other goods and services?

    Canadians are finally being presented with some innovative options when it comes to repurposed American (or international) content and our media monopolies want to ruin this for us, using the CRTC as their mouthpiece.

    Shame.

  1. September 22, 2014 at 10:25 am

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