CRTC wants internet providers and Netflix to fund and support CanCon

In a new report, Canada’s telecom regulator is recommending the federal government impose levies on internet service providers and request contributions from foreign streaming services to ensure the health of Canada’s media production industry.

The Canadian Radio-television and Telecommunications Commission (CRTC) suggested internet service providers should contribute to media funding in the same way that cable providers do.

In this manner, the Commission hopes to spread the burden of payment for media supporting funds like the Canada Media Fund between cable and internet subscribers. The Commission suggested in an example that if a levy for internet service providers was instituted, the levy for cable providers should be reduced, resulting in both contributing the same amount.

“The internet plays more than an emerging role — a dominant role — in the programming market” — CRTC Chair Ian Scott

“The aim is to take into account changes in the market place,” said CRTC Chairman Ian Scott in an interview with MobileSyrup.

“Our work over the last eight months demonstrates that the internet plays more than an emerging role — a dominant role — in the programming market.”

The CRTC noted, however, that it believes this would be a revenue neutral model – companies like Bell and Rogers which own cable, internet and broadcasting stakes would not be paying any more or less.

That said, it would affect those companies that solely provide internet, as well as consumers that have cut the cord and solely subscribe to internet, who would potentially see an increase on their monthly bill.

No ‘Netflix Tax,’ but a Netflix service agreement

Additionally, the CRTC is recommending to the Minister of Innovation, Science and Economic Development (ISED) and the Minister of Canadian Heritage that companies like Netflix and Spotify – foreign global companies that currently do not pay sales tax and do not pay into any media production fund – enter into “comprehensive and binding service agreements.”

Companies like Bell and Rogers would also enter into tailored agreements.

While the CRTC hasn’t fleshed out the details of what an agreement with Netflix would look like, the Commission noted that there would be certain baseline agreements, and that each agreement would be customized to the industry player.

Baseline elements include:

• Supporting the promotion or discoverability of content by Canadian creators
• Providing content of various types, such as news, drama, programming for official language minority communities or in indigenous languages, or accessible programming (e.g. through closed captioning and described video)
• Facilitating the prominent placement of Canadian content, its export and/or the attribution of Canadian sources
• Ensuring that content is of a high quality that meets Canadian standards in journalism, advertising etc.
• Protecting the privacy of Canadians and their data
• Providing more traditional direct financial contributions

The CRTC further clarified that the service agreements might not, in fact, include any monetary contributions at all. Rather, the contributions could take the form of dollars and time spent on promotion and discoverability of Canadian content.

Hi For online services, we are suggesting they contribute to our system but not necessarily in monetary ways. It could be promotion & discoverability. Different players can contribute equitably in different ways, & these contributions would be ensured through binding agreements

— CRTCeng (@CRTCeng) May 31, 2018

Scott stated that the process of developing these agreements “will be transparent,” adding: “This won’t be the Commission making some side deal.”

The CRTC and Scott have come under fire recently for a perceived lack of transparency in the regulatory process. Some analysts and advocates took issue in particular with the fact that the CRTC requested sensitive subscriber and revenue information from companies including Netflix and Spotify under the assurance that the information would be kept private.

“I would say that is absolutely no different to any of those companies’ filing business plans in a different context and asking the Commission to maintain privacy,” said Scott.

The suggestions in the report will be taken into account in the review of Canada’s Broadcasting Act and Telecommunications Act, launched by ISED Minister Navdeep Bains and Heritage Minsiter Melanie Joly. Further details of the review are expected in the coming weeks.