CRTC New Media Hearings Day 4, Part I

It was a very full Day 4 of the CRTC hearings on Broadcasting in New Media, featuring appearances by a number of influential groups representing creative labour in the cultural industries. Here is Part I of the summary of the day's events. Special thanks to Samantha Burton, an M.A. student in Communication Studies at Carleton University, for attending the hearings and preparing this report.

Canadian Film and Television Production Association (CFPTA)
The CFTPA began by stating that new media should be viewed not as a threat, but as an opportunity for unprecedented cultural and economic dividends for Canadians and Canadian companies. However, they cautioned that although there is ample opportunity for Canadian content on new media to fulfill the policy objectives laid out in the Broadcasting Act, it is not currently doing so. Canadian are already creating world-class, award-winning new media content, but not enough is being done to support and promote it; “the window is closing,” they said, and if more effort is not made, foreign productions will move in to close the gap.

As a result, CFPTA stated that “a coordinated digital media strategy and 21st century policy toolkit” is required, and that the CRTC must take “light-handed yet decisive action” to ensure that Canadians have ample opportunity to participate in and enjoy distinctly Canadian broadcasting.

CFPTA identified a tangible economic stimulus as being critical to creations under which Canadian innovation, culture and creativity in new media can thrive; current funding is inadequate to provide independent producers with sufficient funds to compete within the growing but difficult to finance category of new media. Internet service providers (ISPs) and wireless service providers are already increasingly using and profiting from the internet as an extended broadcasting platform. Therefore, the largest of these companies should be required contribute a small amount of their gross broadcasting revenues to an independently-administered fund that is mandated to support high-quality, independently-produced Canadian new media broadcasting content. They emphasized that they supported a contribution policy mirroring the flexible approach that the CRTC currently has for broadcasting distribution undertakings (BDUs), wherein only the largest are required to contribute.

Citing a Nordicity group study, CFPTA argued that the financial impacts on large companies and consumers would be negligible, while potential positive results for the system are exponential. The group also highlighted the importance of fair and equitable terms of trade agreements, which they stated were necessary to restore an increasing imbalance between the digital rights of broadcasters and independent producers by providing the stability and clarity required to unlock the full exploitation of television content across all distribution platforms.

The CFPTA defined “fair and equitable terms of trade” as those that recognize the value of and provide appropriate compensation for multi-platform are integral to stimulating the development of content not only in new media, but across all platforms. CFPTA cited the CRTC’s Changing Channels report, which demonstrated that broadcasters often obtain the rights to digital distribution of products during licensing negotiations for traditional broadcasting windows, but fail to exploit them. Arguing that this missed opportunity causes creative industries to suffer and denies Canadians access to Canadian choices on new media platforms, the CFPTA proposed terms of trade agreements also include a “use it or lose it” provision. Such a provision would delineate a reasonable period of time within which a broadcaster would have to utilize a given new media right. If this right is not exercised within that period, it would then automatically revert back to being controlled by the independent producer.

The CFPTA concluded their opening statement by characterizing the independent producers they represent as not only leaders in the global new media industries, but also “catalysts of diversity.” Consequently, they require the means CFPTA have outlined to negotiate and navigate the complex transition to multi-platform media successfully.

CRTC Chair Konrad von Finckenstein pulled no punches when beginning his line of questioning, starting outright by that the CFPTA called for a “flexible forward-looking definition of broadcasting,” but did not provide one in their presentation. “Do you have one?” he asked pointedly. Instead of providing the simple and succinct definition von Finkenstein was clearly seeking, the CFPTA reiterated their position that it is more important not to “box ourselves in” with a tight definition in an environment so rapidly changing; however, they did offer to include a more solid definition in their written response.

The Chair then moved on ask why independent production is so key, as some argue that a healthy and expanding new media does not necessarily require independent broadcasters. The CFPTA responded by reiterated that independent producers offer increased diversity, prompting the Chair to ask whether they were making a direct correlation between the introduction of economies of scale and the stifling of creativity and innovation, to which the CFPTA responded “yes, but it also depended on individual business objectives.”

The next questions raised by the Commission were related to the proposed “use it or lose it” clause, asking why broadcasters would not be exploiting these rights and requesting a draft agreement outlining out precisely what “using it” would constitute. CFPTA stated that having the rights on the books is an asset to broadcasters, but taking advantage of them is not always financially viable; consequently, they are seeking a balance in order to ensure that the rights are exploited in the best way possible.

There was considerable interest from the CRTC in CFPTA’s mention in their submission of the International Standard Audiovisual Number (ISAN), of which CFPTA is the Canadian administrator. ISAN is a voluntary numbering system for the identification of audiovisual works, providing a unique, internationally recognized and permanent reference number for each audiovisual work registered in the ISAN system. The Chair was particularly interested in the potential of ISAN to provide a service or model for measuring and tracking distribution of CANCON on new media platforms, stating that he saw the potential in such a system to measure “what and how much is flowing through ‘dumb pipes’” of the ISPs.

Numerous questions were raised by both the CRTC and the CFPTA regarding the ability of the existing ISAN system to provide such a measurement, and it was clear the significant additional research into this area was required before any formal proposals or decisions could be made. The most glaring hole was the issue of how (and if) ISAN’s structure as an international system would fit with the specific requirements of measuring CANCON online, which is also connected of the challenge of defining such standards in the first place. Despite acknowledgment by both the CRTC and the CFPTA that the idea of ISAN as a measurement was “rough,” the Chair was excited (and as he himself admitted, perhaps overly optimistic) at this first example of something close to a concrete method of measurement of CANCON online.

Near the end of the question period, the Commission asked that, if the incentives for carrying a preponderance of Canadian content as requested by CFPTA were mandated, how would they ensure that audiences consume that content in “a world where fragmentation is infinite and getting more infinite every day.” Although the CFPTA responded that making CANCON more widely available and accessible was their key suggestion, the Commission’s follow-ups seemed to imply a lean toward built-in measures of privileging Canadian content on new media—through use of analogies such as “you can lead a horse to water, but how can you make it drink?” (and, perhaps, should you?)—which could possibly foreshadow debates that will emerge in the Net Neutrality hearings scheduled to take place later this year.

Documentary Organization of Canada (DOC)
As a representative of documentary filmmakers, DOC was mostly concerned with video content distributed over the Internet and over mobile devices and referred primarily to these aspects when using the term “new media.” They also emphasized original content created specifically for new media, rather than content that has been re-appropriated from traditional media platforms.

Primarily, the DOC supported the notion of net neutrality. They were concerned about the role ISPs have stepped out of the passive distribution role they have claimed for themselves by managing traffic flows; consequently, they recommended that the new media exemption order continue but also supports the implementation of specific, targeted measures to improve the availability of CANCON in new media.

The DOC proposed that for content to be deemed CANCON, it meet the following criteria: produced by a Canadian owned and controlled company, 75% of budget spent in Canada and the majority of key crew be Canadian as determined by a new point system geared toward documentary and new media production be created, a draft of which they provide.

They suggested that a method of tracking CANCON online be instituted, citing the American Digimark as an example of a model they feel would be beneficial. Although DOC also supported minimum CANCON requirements eventually be established for new media, they stated that at this juncture there is not yet enough information to provide hard numbers and that a tracking measure must be put in place before goals could be established.

They argued that new media content is particularly valuable because of its longevity, as it is available online indefinitely, and refute the idea that producing content for new media is cheaper than for traditional mediums. Consequently, DOC cited the lack of production financing as the biggest barrier to new media content production, and propose the creation of a fund to address this.

The DOC stated that such a new fund should support productions created primarily for the internet, as funds already exist to support other new media endeavors and re-appropriating television content online is relatively inexpensive. Although they were reluctant to suggest a dollar figure, they suggested a substantial multi-year investment would be required. Further, the definition of priority content should remain flexible, to allow for the funding of a variety of online productions. They saw it as reasonable for the fund to expect a return on its investments, and state that it should support the objectives of production, promotion and accessibility through different funding streams. The DOC highlighted accessibility as a particular blind-spot, as none of the ISPs have acknowledged accessibility as a problem in new media.

In terms of sources of funding, the DOC saw three potential resources: the Canadian government, an ISP revenue levy, and a spectrum heritage trust raised from sale of wireless spectrum. They stated that they would be happy to see funding come from any, or a combination of, these three resources. DOC also reiterated their belief that ISPs are direct beneficiaries of increased bandwidth usage by consumers and, citing statistics that show video as the driver of global bandwidth usage, argued that they should be required to contribute to the creation of content for new media in the same way that cable companies are required to contribute to Canadian content in television.

The first question raised by the CRTC Chair was related to tracking CANCON, and DOC’s suggestion of the adoption of a method such as watermarking. The CRTC Chair asked where the CRTC would come in, and namely who would be responsible for collecting the data and administering the database that would result in the aggregation of this information. After some fumbling around the question, DOC Co-Chair John Christou explained that such a watermark would be embedded in the digital content itself, and therefore send the information automatically and directly to the database without the need for any intermediary intervention. This evidence of confusion regarding the technical function of resources that the CRTC is considering utilizing in central operations, such as the measurement of CANCON in new media, illustrates the existing discrepancies in and pressing need for new media literacy in the creation and enactment of new media policies.

Next, Commissioner Timothy Denton addressed DOC’s strong position with regards to preserving net neutrality, asking the pointed question “What if bandwidth throttling worked in favour of Canadian content—would you change your mind about it?” DOC responded with a firm “No,” followed up with an unequivocal advocacy for the internet as a neutral setting for all content.

Denton followed up by asking “Supposing, however, if I was a very large user of bandwidth, I paid a higher price than people who were lower consumers of bandwidth? Is that objectionable to you?” DOC did not find this proposal objectionable.

What is interesting about this exchange is not only the undue conflation of bandwidth throttling (by the ISP) and variance in individual bandwidth usage (by the end-user), but also the apparent lack of internet literacy on the part of the CRTC. In fact, many major ISPs already charge subscribers different fees based on bandwidth usage levels; for example, Rogers offers four fee levels in the downtown Ottawa core ranging from “Ultra-Lite” (2GB/month) to “Extreme” (95GB/month). The existence of graduated licensing supports the argument that ISPs are profiting off of increased bandwidth usage, which DOC stated suggests indicates that they should therefore be funding the content for which that extra bandwidth is used.

Denton than asked whether CANCON tracking by watermarking or tagging content goes against their principle to net neutrality, to which DOC responded that inherently it did not, but would if it was subsequently used to impact how the content monitored was then accessed by the enduser. Commissioner Michel Morin followed this response by asking if DOC sees an opposition between peer-to-peer file sharing (P2P) and Canadian content, proposing that “it makes sense for the Canadian content to be prioritized in the future because the networks will be eventually congested.” DOC responded that P2P and CANCON are not mutually exclusive, and could in fact be mutually beneficial; even that notion represents an “ideal world” right now, it is not necessarily unrealistic. Turning to the example of the music industry ten years ago, they suggested that the industry would be in much better financial shape today had they accepted a user fee from Napster instead of revolting against it. Similarly, DOC said, there’s no reason why coalescence of P2P and CANCON is impossible, but if it is to be a goal to develop a system where such an arrangement works, then the time to take action is now.

Writers’ Guild of Canada (WGC)
The WGC began by strongly advocating that the CRTC rescind the new media exemption order, and institute a regulatory framework that supports and encourages CANCON in new media. They also identified their familiarity with ISAN, and added their offer of assistance to that of CFPTA’s in assessing the system’s suitability for measuring and tracking CANCON.

The panel stated that before they turn to the issue of measurement, some definitions need to be outlined. They began by defining a difference between linear and non-linear online video. WGC defines the experience of viewing linear video as passive and often meant to augment traditional broadcasting, such as the webisodes of Degrassi. Conversely, they viewed non-linear video as interactive, involving user participation in the guiding of events, yet still framed within a broader set of available content choices provided by the content, such as The Border’s interactive videos.

WGC also stated that “original, new media Canadian content” also required definition, in order to ensure that what is being measured, promoted and funded are truly Canadian programs. Television regulations cannot be transferred “wholesale” onto new media platforms, so WGC proposes a new certification system for new media. They recommended that the certification include the stipulations that the content be Canadian owned and produced, with at least 75% of costs spent in Canada and the top five highest creative positions held by Canadians.

They then addressed issues of measurement, proposing that linear video was easier to measure than non-linear video. With the former, broadcasters were increasingly making television programs available online and the audience sees no difference between watching this content on one screen or another; consequently, the WGC argued that from this perspective it makes little sense to exempt ISPs from broadcasting regulations. Further, they stated that the current exemption leaves Canadian broadcasters free to feature non-Canadian content on new media platforms, at the expense of CANCON. To illustrate, they provide the example of CTV’s homepage, which provides a prominent video link to the US series Lost. Although Canadian shows are available, the WGC stated, “you have to work hard to find them, just like on television.” As a result, they again argue that the exemption order be rescinded and that the CRTC set minimum CANCON levels for streaming and downloading of Canadian TV programs by Canadian broadcasters wherever their channels are hosted, proposing a minimum of 60% measured by time.

However, the WGC recognized that the length of a program is not an effective standard for measuring original new media content. For content falling under this category, they suggested measuring by title, but still imposing that CANCON comprise a minimum of 60% available content.

WGC stated that the online world measures success by audience size and revenue, similar to traditional broadcasting outlets, but the current exemption means that the CRTC does not have any data related to these levels in new media. Since the CRTC requires a baseline in order to establish CANCON requirements or implement any kind of levy, WGC recommended that the Commission require reports detailing these statistics.

In relation to that stipulation, WGC argued that while the CRTC should not regulate user-generated content, it does have legal jurisdiction to impose a levy on ISPs. As a result, they proposed that the CRTC create an ISP New Media Broadcasting Undertaking, which would impose a 3% levy for ISPs, drawing from certain revenues (later elaborated be, broadly speaking, revenues drawn from broadband subscriptions for personal use) which would create a pool of approximately $97 million. This undertaking would also offer an opt-in tier for independent new media broadcasters, who could choose to be licensed, taking on licensees’ obligations in exchange for gaining access to ISP levy-produced funding and any promotion incentives that might exist.

The WGC cited a Nordicity group study, which reiterated that the impact of a 3% levy on levels of CANCON online would be immediate and significant, but the cost to ISPs negligible and therefore unnecessary to pass down to subscribers. Finally, WGC stated that “access is meaningless if it is not effective” and went on to advocate for 10% of the levy fund being earmarked as an incentive to broadcasters who improve traffic to CANCON on new media platforms.

CRTC Chair von Finckenstein first asked about distinctions between unique and non-unique online audiovisual content, asking how those boundaries would be drawn in terms of regulation. WGC replied that if a limited number of choices or scenes are provided by the content producer, regardless of the user’s choice of what order to view them in, identifies non-unique/non-linear content. Conversely, something along the lines of Second Life would be considered unique, as the producer does not define a limited number of actions for the user to choose from through which to play out a particular story.

Leonard Katz, Vice-Chairman of CRTC Telecommunications, asked whether WGC supported other groups’ contention that additional support from the proposed ISP levy should not result in the establishment of a fund limited uniquely to new media. WGC responded that they believed that the fund should specifically support new media content, but that this could encompass content created to accompany television (and presumably other traditional broadcasting) programming as well as original content created specifically to standalone on new media. Specifically, they stated that they would not want to see the fund going toward supporting the creating of television programming.

Katz countered by asking whether it really makes sense to separate the funding, if the purpose of online content in fact to “create eyeballs” for traditional broadcasting. Further, even if audiences—and the revenues associated with them—are migrating from traditional to new media platforms, such a migration is not 1:1; while this movement may be occurring the consumer has not left the cable industry. Consequently, they questioned the increase of financial contribution by broadcasters for what could ostensibly be seen as an extension of television programming. WGC replied that funds presently exist to support television productions, and so they want to ensure that there is also some specific funding allocated for reaching audiences over the internet.

The Commission also requested clarification of WGC’s conception of ISPs as broadcasters, illustrating contradictions between their written submissions and oral presentation. In their written submission, WGC stated that ISPs are common carriers if they simply transmit content, but they are BDUs if they engage in traffic shaping and influencing available content; however, it is not clear at this point in time that they fall neatly into either category. WGC’s explained that their stance on the matter had progressed due to a legal opinion they had obtained and filed, which expressed that ISPs should in fact be considered a new class of BDU, which can be regulated accordingly without answering the question they had previously posed.

One of the final issues of concern for the Commission was establishing whether the lack of availability of CANCON on websites such as iTunes is a commercial or regulatory issue; that is, whether it is an issue the CRTC is concerned with. WGC responded by reiterating CFTPA’s earlier contention that such examples of the lack of exploitation of bought rights to new media distribution by broadcasters by reflect a commercial issue, but in fact indicates the need for regulation.

Songwriters Association of Canada (SAC)
The Songwriters Association of Canada presented a proactive proposal tailored around a very specific issue: peer-to-peer file sharing online. SAC opened by quoting statistics illustrating the magnitude of the presence of P2P; they contended that over 40 billion songs were shared annually over P2P networks, and account for nearly 90% of all music distribution online. SAC argued that P2P qualifies as broadcasting under the definition provided by the CRTC notice 2008-11; consequently, they said, regulation leading to monetization of P2P network broadcasting is required.

First, they made it clear that they support net neutrality and the preservation of P2P networks, which they characterize as the greatest repository of Western music ever. They acknowledged that these file sharing networks are not going to disappear; as a result, a movement needs to be made away from failed attempts to stop them and toward innovative solutions promoting making money from them.

There is the pressing need to monetize this file sharing system in order to ensure that artists and creative professionals receive compensation for their work. Noting a lack of movement forward to address this issue, SAC stated that they had decided to take a proactive approach and were prepared to provide an extensive plan to monetize the exponential growth of the unauthorized and un-remunerated P2P system.

Primarily, their proposal called for file sharing to require a monthly fee, purchased through ISPs by being “bundled” into internet service packages. This fee would go directly to a fund that would be then be divided fairly among the creators and rights holders of the music content, according to statistics comparing volume of content downloaded. ISPs could also receive a portion of the fee for their administrative and data collection services. In return for paying this fee, consumers would receive unlimited access to P2P file sharing networks and resources and be freed from legal obligations that currently deem the use of such systems illegal.

In doing so, a foundation of financial and legal certainty would be created that would allow music fans to access content when and how they want, while also allowing those who create music to get paid for it. SAC also referenced a study conducted in the United Kingdom which illustrated a receptiveness to such a proposition from internet and P2P users, which they stated demonstrated the viability of this plan in terms of consumer reception.

Calling it “disingenuous to develop the next generation of Canadian creators if they are not going to be able to make a living,” SAC positioned their proposal as integral to the promotion of increasing availability of and access to CANCON in the new media environment.

The Chair congratulated SAC on what he termed “a very creative approach,” but went on to inquire as to whether they were suggesting that such a monthly fee would replace projected revenues lost from P2P sharing, which they would translate into a given number of CD sales. SAC disagreed with that depiction, making a distinction between reproduction and sharing. The latter they characterized as a key identifier of P2P and stated that the act of file sharing is not something they are looking to stop, but that they are looking to be compensated for it.

The Commission went on to ask whether SAC’s proposal would require changes to international copyright treaties that Canada is a member of. SAC said that it would, and in order to avoid violating these treaties, it would need to be generally agreed that file sharing is impossible to stop; according to a study by Daniel Gervais that they had commissioned, if that were the case the kind of legislation they are requesting would not be a violation.

Several other points that required clarification were also identified by the CRTC, notably the questions of:
1. how to set the rate of such a fee

2. how (and if) such national legislation would affect international (and especially American)
P2P providers and music copyright holders

3. how (and if) to avoid charging users not participating in P2P music downloading

4. whether such a model could be extended beyond music to other media (such as film and television).

Throughout the discussion, SAC remained clear on their position in support of net neutrality, arguing that the internet is a pull medium and therefore the audience cannot be forced to listen to what providers or corporations want them to; as a result, the best solution is to protect net neutrality and ensure equal access to CANCON, the creation of which should be supported by financially compensating creators through a fee such as the one they propose.

The Commission expressed interest in this proactive proposal, with von Finckenstein calling it “the most original approach I’ve seen yet.” However, the CRTC ultimately emphasized that further development was needed and, furthermore that the CRTC should not be SAC’s primary target, since the implementation of the proposal fundamentally requires changes to copyright law and treaties.