CRTC Hearings Day 7

Day 7 of the CRTC Hearings on New Media featured some very interesting proposals by Sirius Canada as well as appearances by new media and one of Canada's broadcasters of adult content. Here is a summary of the day's events. Thanks again to Elizabeth Martin, an M.A. student in Communication Studies at Carleton University, for attending the day's hearings and preparing this report. I will be back next week with a review of week 2.

Sirius Canada, Inc.
Representing Sirius Canada, Inc., one of Canada’s two satellite radio providers, was Sherry Kerr, the company’s vice president and general counsel. Kerr stated that she was there to outline the unique concerns of satellite radio pertaining to unregulated audio broadcasting over the internet. Sirius has been regulated since it was granted a license to broadcast in 2005, but it has yet to turn a profit due in part to its close competition with internet radio. Internet radio is a direct substitute to satellite radio, she claims, and its reach is expanding by providing wider options than satellite. “Internet radio is a category killer,” Kerr proclaimed, “and the category it will kill is satellite radio.” That fate is not likely to become of terrestrial radio due in part to terrestrial radio deriving a large portion of its revenue from advertising, rather than subscriptions as with satellite. Kerr pointed to the absence of presentations from terrestrial radio at these hearings as an indication of its relatively secure position.

Kerr claimed that the two satellite radio companies in Canada contribute more to Canadian content development than any terrestrial radio company. Further, Sirius plays materially more Canadian content on its channels than does terrestrial radio. Kerr claimed that Sirius’ 65 channels play more CanCon (at 85%) than 65 regular radio channels because it has no commercials and is on the air 24 hours a day. Internet radio, on the other hand, faces no such obligations to satisfy content requirements. Essentially, this is an unfair situation which hurts satellite radio and does little to achieve the goals of Canadian content. Kerr asked the CRTC to question how regulating the tiny satellite radio element of broadcasting satisfies these goals.

Satellite radio is primarily concerned with the situation where users have unlimited access to content. Traditional broadcasting is relatively closed and limits the user’s access to non Canadian content. This excludes a great deal of content and shapes the listening experience of the user. Kerr admits that any effort to establish symmetry between internet audio broadcasting and traditional broadcasting in the content that is delivered to users would “thrill” satellite radio. The best case scenario for satellite radio would be one where internet audio providers were required to geo-block non-Canadian content. In fact, Kerr said glibly, if such an unlikely course of action were to be taken by the CRTC, Sirius would likely “throw a party” in celebration. Kerr added, however, that she realizes such an approach flies in the face of the principle of an open and neutral internet. But in suggesting such a course of action, Kerr wanted to highlight to the CRTC the dangerous situation that is immediately facing satellite radio.

To remedy this unfavourable situation for satellite radio, Kerr proposed that wireless providers and ISPs acting like BDUs should be regulated like other conventional BDUs. Kerr argued that it is necessary to capture those providers that to any degree control what users have access to. The more that wireless providers act like gatekeepers to content, the greater is the need to regulate and the more they should be treated like any traditional broadcaster.

A practical solution, Kerr offered is that a levy be placed on the revenues of ISPs that are derived from or related to broadcasting. The levy should be placed on all eligible parties and should be similar to the one already in place for traditional audio broadcasters. Kerr recognized that with this option, the asymmetry of content offerings between satellite and internet radio would persist because of the sheer amount that the internet offers, but at least it would level the playing field to some degree. When asked where Sirius felt the money derived from levies should go, Kerr said that there was no reason to change the current system. Sirius thinks it is wise to keep the current scheme which directly supports artists. She also asked the CRTC to consider lightening satellite radio’s current obligations, which she argued are even more demanding than those for terrestrial radio.

Kerr’s presentation was met with a favourable response from the CRTC, particularly from those on the commission who admitted to being Sirius customers and happy with the service. Members of the commission were particularly interested in understanding the technological differences that are making wireless audio broadcasting more desirable than satellite. Kerr explained that the newest vehicles are equipped so that users may hook up iPods and mobile devices that can play internet radio wherever there is a wireless signal. Also advantageous to internet radio are the facts that internet provides so many more options for listeners; that these stations can be listened to anywhere across Canada; and that these stations are still deriving revenue from advertising.

MoboVivo, Inc.
Based in Calgary, Alberta, MoboVivo, Inc. provides online distribution of TV content as a retail service. All content offered by MoboVivo is professional content intended for broadcast, and it offers a wide range of Canadian programs, four of which rank in the top ten of MoboVivo’s sales.

Alan Sawyer, representing MoboVivo before the CRTC, outlined the company’s wish for the CRTC to establish a clear, unambiguous, long-term policy directed at new media. Sawyer emphasized that while there is broadcasting going on in new media, the CRTC needs to be careful in its distinctions between broadcasting and non-broadcasting activities. In particular, Sawyer clarified for the CRTC the difference between retail sales of content, which are non-broadcasting activities (which MoboVivo is engaged in) and video-on-demand, which is broadcasting. Download –to-own is not analogous to BDU offerings of temporary viewing of content. Rental is similar to BDU video-on-demand, but they are not the same and rental cannot be thought of as broadcasting.

MoboVivo argues that retail and rental of content should be excluded from regulation. Diligence must be applied in creation of new policy so it doesn’t inadvertently include these activities, which Sawyer pointed out will not be a simple task. Some broadcasters, he says, insist on acquiring all new media rights to the content they provide, which can include the rights to retail and rental in addition to broadcast rights. Sawyer claims that these practices “trample on” the business of other content distributors. Sawyer reiterated the “use it or lose it” approach to new media rights previously proposed by groups including the CFTPA. Broadcasters should have to demonstrate their use of the content they have rights to; if they can’t, the rights to the content should revert to the content owner. When deals are made that lock up the rights to content but do not actually deliver the content to users, piracy flourishes; “use it or lose it” is a way to combat this.

Sawyer argued that services like MoboVivo add diversity to the overall ecosystem and the CRTC should ensure that they are not regulated out. Sawyer warned that regulation should ensure that unregulated content suppliers are not put at a competitive disadvantage in the new media environment, and should be protected from potential unintended consequences. Sawyer proposed that the CRTC should continue to recognize retail and rental as outside of broadcasting, and to recognize their importance to broadcasters as promoters of content.

The commission asked Sawyer to comment on Deep Packet Inspection as a means of identifying and prioritizing Canadian content, to which Sawyer cautioned that many factors, in his opinion, make DPI a cumbersome process. He argued that digital rights management encoding can make it difficult to inspect some of the content being transmitted, and that there is also no one standard form for transmitting video content. At the commission’s urging, Sawyer agreed to read and later comment on the submission to the CRTC on Deep Packet Inspection by Robert Hester.


TEN Broadcasting Inc.
Stuart Duncan and Ronald Renner presented on behalf of TEN Broadcasting Inc, which operates two adult entertainment Category 2 specialty television services in Canada. Adult entertainment on the internet is a huge success story, and TEN Broadcasting increasingly faces competition from services offered online. To maintain its competitive place in the market, TEN Broadcasting has plans to launch internet services that will promote its existing specialty channels.

TEN Broadcasting supports the continuation of the exemption order for new media broadcasting. It currently offers a variety of subscription choices—including by-the-minute or by-the-scene purchasing—and regulation of these different activities would require spending a lot of money to monitor practices. The presenters argued that the existing exemption orders are essential for continued success of new media. Taxes on internet broadcasting would impair new enterprise in this area. Furthermore, a tax or levy cannot be justified to support the wants of special interest groups. It is not in the interest of Canadians to have certain groups benefiting from the revenues of a successful industry. The presenters expressed discontent that groups like SOCAN and the CTF currently enjoy some of the broadcaster’s revenues, despite contributing in no way to the programming featured on TEN’s services.

TEN Broadcasting is concerned that the hearings thus far have seemed to be generally receptive of some limitations in new media, which the presenters objected to. They argued that regulation will create virtual online monopolies, which only benefits those interest groups reaping contributions from levies. A fair system would be one requiring all broadcasters to carry Canadian content, but even this isn’t happening under current regulation. Currently, there are inequities in Canadian content requirements that the CRTC should be considering; new regulations for unlicensed broadcasting will not remedy the current problems.

The commission asked the presenters how they envisioned the market playing an important role in maintaining competition when currently more than 80 per cent of internet traffic is supervised by five players. The presenters admitted that under the current system, consumers have little choice over the services they receive; they also maintained their argument that it should not be the responsibility of the ISPs to monitor and ensure minimum amounts of Canadian content in internet broadcasting.