CRTC Hearings Day 5

Here's a summary of Day 5 of the CRTC hearings on broadcasting and new media. Special thanks to Elizabeth Martin, an M.A. student in Communication Studies at Carleton University for attending the hearings and preparing this report. A summary of Day 6 will appear here some time tomorrow.

Canadian Wireless Telecommunications Association (CWTA)
Bernard Lord, President & CEO of the CWTA, started off the day’s proceedings. Lord immediately emphasized that his members, who provide mobile services to consumers, believe the CRTC’s Mobile Broadcasting Exemption Order of 2007 should be maintained in the current situation. Lord argued that while some broadcasting does happen over mobile devices, there is little evidence from the two years since the exemption order to suggest that mobile services have had any significant impact on traditional broadcasting. In the absence of any threat to traditional broadcasting, and given that the wireless industry has flourished in the absence of regulation, there is no need to regulate mobile broadcasting.

Wireless technologies and mobile broadcasting must be understood as being part of an evolving, nascent industry, Lord argued. It is very difficult to determine the direction of mobile broadcasting for a number of reasons:

• Mobile broadcasting technology is still developing and adapting to consumer demands.
Presently, not all handsets are even capable of mobile broadcasting.

• Research shows that mobile broadcasting is not yet widely used.

• Mobile broadcasting is available, despite its slow adoption, mainly because of enthusiastic investors who heavily subsidize new technology and improvements to networks.

Lord was adamant in the CWTA’s position to oppose a levy on ISPs. Explaining that revenues derived from mobile broadcasting are extremely modest given the tremendous investment involved, he argued that a levy on wireless providers’ percentage of revenue would amount to little more than a “cash grab for revenues wholly unrelated to broadcasting.” He also argued that mobile broadcasting represents a success story for Canadian broadcasting, citing that much Canadian content has been made available to consumers on new platforms. Lord suggested that new media is potentially complementary to other broadcasting and it is meeting the needs of Canadians by increasing their ability to access Canadian content. Taxing mobile broadcasters would penalize the success of the industry.

When asked why the CWTA would oppose a levy based on percentage of revenues, which would be minimal if the industry’s revenues were indeed as modest as Lord suggested, Lord replied that it was the principle of the matter to which the CWTA is opposed. A levy on gross revenues is “an attack on an entire industry,” and the matter of the levy being a small amount of money does not make it acceptable.

The Commission expressed concern that the push toward converged service providers results in closed platforms where broadcasting offerings are limited. To this concern Lord responded that the trend among mobile services providers actually seems to be moving toward an open platform system. The industry is striving to meet the needs of consumers, and consumers want freedom to choose their content. However, Lord thought it important to note that consumers are also demanding increased choice, speed and mobility not just for video or broadcasting content, but for a variety of services available to them online. As technology develops, it is unclear how consumers will use the technology, and it is the CWTA’s position that consumers should be permitted to direct the evolution of this industry.

Further questions from the commission expressed interest both in the technological intricacies of the wireless industry, and in the economic viability of the industry. To these concerns, Lord drew from his opening remarks about the difficulty in anticipating the direction of the industry and reiterated that it is to the benefit of the industry and consumers that mobile broadcasting remain exempt from regulation.

Digital Media Association
General Counsel Lee Knife presented on behalf of the Digital Media Association (DiMA), a Washington, DC-based organization representing companies that provide or support new media. Knife argued that the current media exemption is effective and should be maintained. New media is already developing at a rapid pace in the absence of regulation, and it should be encouraged to expand, free of regulation.

Knife outlined some problems with imposing regulation on new media:

• Regulations will be difficult to comply with and enforce.

• Levies will ultimately hurt the consumer, and in turn, this negatively affects the creators of
content

• Consumers will try harder to circumvent controls and will turn more to illegal sources of content

• Regulation will harm creators who compete with unregulated international content.

Knife argued that new media cannot be regulated the way traditional broadcasters are. While many broadcasters have established relationships with major content creators, this is not the case with new media providers, who depend on many independent producers of content. Furthermore, new media does not face the same constraints that traditional media do when it comes to making Canadian content available. New media providers can easily deliver a large amount of Canadian content if it is in demand. The lack of regulation has allowed new media programmers to be more adaptable and responsive to consumer demands.

Knife expressed his concern that regulation would be chilling to innovation and investment in new media industries. On a personal level, he expressed his own concern that deciding on the kinds of media that required a levy stripped that media of its artistic merit, reducing it solely to a commodity.

Knife cautioned that if Canadian regulations made it difficult for American businesses to market to Canadians, his member companies, on an individual basis, may be forced to reconsider their business dealings with Canada. This would further limit choices for Canadian consumers.

Commissioner Poirier pointed out that regulations have helped Canadian broadcasting, and she questioned the presenter as to what makes new media so different that it would not be helped by similar regulations. Knife stressed that it is the environment of the internet that is fundamentally different from that of traditional media. In the traditional media environment, broadcasters control what listeners watch or listen to, so it may be appropriate to regulate broadcasters in that scenario. But the nature of new media is to respond directly to consumer demand, and providers should be permitted to do this. New media provides as much content as possible to as many users as possible, which differs from traditional broadcasting; therefore, it is not appropriate to require new media to subsidize content production. Knife also illustrated that the internet provides many innovative opportunities for bringing Canadian content to consumers who are not necessarily even seeking it. Knife suggested that the existing exemption order can help prevent the flourishing of piracy. On the other hand, additional taxes will make it more difficult for DiMA’s members to provide their services to consumers, due to the associated costs; as a result, consumers may turn to other sources to find these services elsewhere—including illegal sources.

As a final word of caution, Knife warned of the danger in applying levies to broad-based services like ISPs. Regulation, Knife said, could possibly be applied in the very narrowest form to the most “traditional-like” online services; but as so many internet providers are much more than broadcasters, such a levy would be inappropriate.

The National Film Board
Tom Perlmutter, Commissioner and Chairperson for the National Film Board of Canada, opened with a pronouncement that a “digital revolution” has taken place and we are now in an “internet generation.” He explained that a complex digital communication ecology is evolving, and the framework of traditional broadcasting no longer fits this new environment. With this Perlmutter urged that public policy must not restrict development of a new industry—policy should instead foster growth.

Perlmutter stated that it is not clear thus far that regulating new media in a way that parallels traditional media is feasible in this new environment. While scarcity of resources was an issue justifying regulation in traditional broadcasting, scarcity is not an issue in new media. The real concern, Perlmutter stressed, should be ensuring strong Canadian content featuring Canadian talent and meeting Canadian needs.

Perlmutter argued that because of the immediate and growing importance of new media, action must be taken now to support digital content. He proposed six areas to which support should be directed:

1. Broadcast content: extend existing broadcast content through the creation of supplementary content, particularly in the areas of children’s programming and original drama

2. Original digital content: This is content specifically produced for use in the new media environment. This may be the most difficult to promote, as it is still unclear what users do with this content.

3. Digitization of heritage collections: New media provides great opportunities to make archived collections more accessible.

4. Promotion of digital media: new marketing strategies are needed to capture audience attention in this new environment

5. Training

6. Research and development: Innovation needs to be encouraged in the development of platforms and services in order to compete in the international market. Supporting development in this area will in turn stimulate the creation of CanCon.

Perlmutter stressed that public funding would be necessary to achieve these objectives. The public sector needs to reaffirm its role in the online environment and provide a range of programming that might not otherwise be provided by commercial interests. Francophone, Aboriginal, and minority perspectives need to be represented in the new environment, and this should be the role of the public sector.

To illustrate the value of establishing a fund for new media production, Perlmutter spoke about the NFB’s new role as an online broadcaster. He conveyed strong support for the quick establishment of a new media fund that would differ from the scheme that exists to support traditional broadcasting. When asked how he envisioned this proposed fund, Perlmutter responded that it should be conceptualized “broadly” and that the establishment of a fund need not be thought of as an old solution to new media; international funding models could be looked to for an innovative solution.

Perlmutter added that further to these recommendations, Canada is in need of a comprehensive digital strategy that works to alleviate barriers to access and ensures that infrastructure meets existing and future needs.

Canadian Interactive Alliance
The Canadian Interactive Alliance was represented by its president, Ian Kelso, and executive director, James Lewis. The Alliance, which represents members that include game studios and mobile product developers and distributors, outlined the special concerns of interactive media. In particular, interactive media face competition and difficulties raising capital, and the presenters urged that new investment is needed in interactive media development.

The current approaches to regulating traditional broadcasting, the Alliance suggested, are too narrow to suit interactive audiovisual media—a new approach must be developed. The Alliance argued that the environment is now open to increased competition, and this is putting greater demands on media creators. Like the NFB before it, the Alliance reiterated a call for a national strategy to keep the interactive media sector viable and to keep companies stable. The Alliance spoke of the necessity to provide incentives to spur investment, innovation, visibility of content, and talent recruitment—all crucial to maintaining Canada’s competitive edge in the global market and in a knowledge economy that demands innovation and creativity.

The Alliance concluded its presentation by stating its support for the renewal of the new media exemption, with two conditions:
• that fair access, net neutrality, and the open nature of the internet be preserved to allow independent producers of content to thrive

• that those broadcasters who are regulated do not exert “undue influence” by the powers granted to them as licensees.

CRTC Chair Konrad Von Finckenstein was interested to know how the Alliance would propose to deal with the new media environment in the absence of a comprehensive national strategy, to which the Alliance was not clear in its response but seemed to favour allowing free market forces to determine the evolution of the new environment. The Alliance urged that eventually, a fund should support innovation in content, rather than platforms. When asked where the money should come from to support such a fund, the Alliance felt that ultimately it should be publicly funded, as taxpayers have much to benefit from continued support of industries that contribute to the development of assets crucial in a knowledge economy. While the Alliance was hesitant to be prescriptive of a plan for funding, it did not seem to favour the imposition of a levy on new media content providers. They re-emphasized the need to maintain the spirit of net neutrality and a reconceptualising of audiovisual policy that considers the dynamics and problems of emerging markets and industries.

Aliance Numerique
Alliance Numerique is a non-profit organization created in 2001 that represents Quebec-based digital and interactive media creators. Olivier Champion, Director of Communication for AN, expressed to the commission the group’s vested interest in the challenges and opportunities presented by new media. AN is particularly concerned about ensuring that Quebec’s language and culture is promoted in the internet environment.

Champion argued that governments, both federal and provincial, have a key role to play in promoting Canadian culture. AN supports government incentives that encourage the production of Canadian content in interactive and broadcast media, and they are particularly concerned about promoting content created by small or independent producers, stressing that these creators need to be permitted a place in the market.

AN supports mandatory contributions from ISPs into a fund which would foster the creation of Canadian interactive content. Francophone content in particular, Champion argued, must be supported in order to have a significant presence on internet platforms which are dominated by Anglophone content. Noting AN’s particular interest in supporting the growth of independent interactive media creators, the commission asked whether AN had considered other options for supporting these companies in the absence of a fund. Champion responded that other strategies can be considered, such as cooperation and exchanges with producers in other countries such as Japan. Such activities would permit the exchange of knowledge as well as promoting the work of Canadian interactive media creators. Public broadcasters also have an important role to play in the new media environment, and should ensure that there is diversity in Canadian programming available on new platforms.

Noting that AN seemed to be unique among the presenters in its support for a fund for new media, Champion commented that promoting original Canadian content is a valid concern. Funding and other tools that foster richness and development among small interactive media businesses should be a priority, Champion maintained.