Week 3

The final week of the CRTC hearings on Broadcasting in New Media wrapped up last week. Here is the transcript from Monday's hearings. Below you will find a summary of Tuesday's hearing, courtesy of Samantha Burton, an M.A. student in Communication Studies at Carleton University. For more on Tuesday's hearings, see the review by Yael Wexler at Michael Geist's blog. Michael also posted a summary of Wednesday's hearings, thanks to Greg O'Brien at cartt.ca. You can find that here. Many thanks to Michael Geist for the extra assistance this past week.

I'll be back shortly with a review of Week 3 and a summary of the hearings. You will also find thoughts and impressions on the hearings by two of my students, Elizabeth Martin and Samantha Burton, in the coming days.

In the meantime, here's Samantha's summary from Tuesday's hearings:

Astral Media
In their opening remarks, Astral described the ways in which they are currently taking advantage of new media, and the internet in particular, highlighting the fact that they are utilizing it primarily as a re-broadcasting tool. As a major Canadian bilingual broadcaster, Astral stated that new media help to increase the time audiences spend with their brands, and allow for the creation and retention of communities of interest around their products. New media is already used extensively for promotion, they stated, and there is an established reciprocal relationship between new media and traditional broadcasting.

They rejected the idea of regulating the content of new media, stating that in the new media environment, they are entered into nontraditional forms of competition; for instance, on the internet, they are competing with foreign media, regulated and unregulated media, other media industries (such as newspapers) and social networking applications. However, Astral was confident in their ability to compete in this environment, but expressed concerns that the imposition of CRTC content regulations would in fact limit their ability to do so. Consequently, they argued, the CRTC requires a broader, global conception of what is happening online in general, before looking to regulate broadcasters in particular.

Astral also spoke against the idea of an ISP levy, stating the ISP funds should instead be put towards improving their networks to allow more Canadian access, something they and other ISPs are already doing. An ISP levy, they stated, would also hinder their ability to compete in this new market populated by non-traditional players. However, they did suggest a number of alternate industrial measures, such as adjusting the Copyright Act to allow for a fair and speedy process to facilitate access to protected content online. Recognizing that some of their suggestions fall out of the realm of the CRTC, Astral suggested that the Commission should continue their dialogue with other institutions such as Heritage Canada in order to ensure that a broad picture is formed of the new media and used to inform policy, which might include some of the measures they suggested.

Astral stated that they do not believe it is feasible or valuable to impose a measurement system such as ICAN at this point, as raw volume is not an indication of user engagement or content value. Since there is no business model that is currently able to make new media profitable for broadcasters, they advocated for the continuation of an open market and the extension of the CRTC new media exemption order. However, they stated that the CRTC should continue to monitor new media developments and that measurement may become feasible in the future.

During the question period, the Commission first made clear that it was not their intention to simply transfer existing measurement strategies from traditional media to new media. They said that the question they are concerned with in whether measurement of CANCON is possible on new media platforms. The Commission was under the impression that every BDU is able to measure how much traffic goes to consumers and how much of this is video. As they understood it, the ICAN number would allow BDUs to track how much of this is Canadian content online.

However, Astral responded that the technicalities of the ICAN system actually do not allow ISPs to access the ICAN watermark. Without getting too technical, information packets sent over the internet consist of a header (which the ISP can read, and uses to direct the package appropriately) and the data itself (which is not assembled until it reaches the end-user and is often encrypted). Since the ICAN number is embedded in the data itself and not the header, the ISP cannot read it; it will not be visible until the information is reassembled at the end-user point.

Even if they were able to access the data being transmitted, Astral contended that this raises huge questions in terms of privacy. Further, although the header would tell the ISP whether the site being transmitted has a .ca address, which the Commission proposed could serve as a proxy measurement, Astral was adamant that a .ca address could just as easily contain foreign content as Canadian and, furthermore, that many Canadian broadcasters utilize .com addresses. As a result, Astral made clear that they did not see the ICAN number as a viable means for measuring CANCON online, and alluded that using it could lead to misleading results.

The Commission then posed a series of questions related to the impact of online radio on traditional radio, asking what they had observed as an important bilingual Canadian broadcaster. Overall, the question they were asking was: is traditional radio threatened by web-based radio? Astral answered that of course there is competition, but that they do not see exclusively web-based radio stations as a significant threat to traditional radio. Radio programming online is in fact more costly for broadcasters, which have to pay for the bandwidth to host online content; this is the case both for traditional broadcasters reproducing content online and for purely online radio. When the CRTC expressed concern that exclusively web-based radio stations may increase in order to circumvent regulation under the current system, Astral stated that not only do they have no intention to do so, but also they saw few reasons for any other companies to embark on such a venture. Web-based radio is a very costly, unprofitable model. “Of course people can do it,” an Astral representative responded, “but I would like to say good luck to them.”

Rogers Communications Inc.

Rogers stated their positions on the issues at hand right upfront:
1. Barriers to broadcasting on the internet cannot be remedied by an ISP levy
2. An imposition of ISP levy would harm growth and development of internet access in Canada
3. The imposition of an ISP levy would be unlawful
4. They have an alternative proposal: Rogers Broadband Video. They will illustrate how this will solve many problems that exist today for broadcasters

The first point they outlined is that there is little video produced solely for online purposes (ie. webisodes), in Canada or elsewhere. This is because there no evidence that there is a business case for this type of programming, primarily because there is no evidence that viewers are interested in it. Consequently, there is no viable market-based case to establish a levy that would create Canadian fund devoted to producing exclusively web-based content.

“The internet is nervous system of economy,” Rogers stated, “and broadband is the future.” Canadian broadband activity exceeds that over every other G8 country, and is growing at approximately 50% a year; as a result, funding is needed to increase the speed of pipes. Rogers argued that a levy would only frustrate this goal, and raise costs for users.

Rogers also briefly presented the argument that an ISP would be unlawful. “ISPs are pipes, not broadcasters,” they stated. Rogers contended that they only route data packages from source to destination and do now have any knowledge of the contents. Rogers and other ISPs cannot be subject to both the Broadcasting Act and Telecommunications Act at the same time, or for the same activity.

Primarily what is being done online at this time is re-broadcasting, and so Rogers argued this should be the focus; furthermore, advertisers prefer to pay for online spots associated with established audiences, which compounds the business viability of re-broadcasting. As a result, the focus should be on increasing accessibility to television content online.

Rogers stated that are three major barriers to posting traditional TV content online:
1. Cost
2. Cannibalization: broadcasters' concern that they will lose subscription TV revenues if the same content is available online, for free
3. Discovery: how to ensure that viewers can find content online?

To address these issues, Rogers introduced its new Rogers Broadband Video Service (BVS). This is a platform they are in the process of developing, which would provide an online video-on-demand service devoted to their exiting client base. Rogers BVS would be designed to compliment their existing television subscription packages. Basically, the idea is that whichever cable or satellite television package an individual subscribes to through their traditional Rogers TV service would also be available online. For example, if you currently subscribe to Rogers Basic Cable and have added The Movie Network to that package, BVS would automatically permit you to access to all of the channels these packages include online as well. No additional user costs would apply (the cost would be covered by your existing Rogers cable fees), you could access the web-based content regardless of your ISP, and there would be a screening system (such as password-protection) that would recognize you as a user and give you access to the content you are subscribed to.

Rogers stated that their BVS is the most viable way to support CANCON online, enhance the ability of broadcasters to reach audiences, and also make internet broadcasting profitable. It would address the three major barriers to posting traditional TV content online by:

1. Reducing distribution and promotion costs. Rogers will provide servers to content producers at a reduced cost, which will allow even the most niche content to be distributed. They would also promote the service heavily, not only saving content producers those costs but also ensuring a wide visibility of the product and content, making it easy for users to find.

2. Solving cannibalization. Content producers would know that only customers who have paid to receive their content on traditional TV service would be able to access it online. This would result in increased viewership instead of cannibalization.

3. Even more importantly, Rogers posited that this arrangement would further the goals of the Canadian Broadcasting Act, without any need for more regulation. Since their proposed online portal would mirror cable service, it would also contain the same levels of CANCON. Rogers also said that it would specifically promote its Canadian content, because it is what makes the service unique. Overall, Rogers presented this new service as a win-win-win breakthrough for broadcasters, BDUs and users.

The Commission was very interested in Rogers' proposed Broadband Video Service, and probed the panel during the question period to gain further insight into the plan. Their larger questions related to user privacy and possibly making such service provision mandatory for broadcasters. Rogers responded that the BVS would not be a violation of privacy, as the service would be an extension of existing TV billing relationships.

Rogers also made clear that this is not a practice they want to see made mandatory, but that they saw it as extremely likely for other broadcasters would create similar portals; as a result, they suggested that in three or four years, if their BVS system is successful, then perhaps the Commission should look into why other broadcasters may not have not adopted a similar strategy. Furthermore, they emphasized that the BVS is a not an ISP service; they envisioned other providers such as StarChoice and ExpressVu creating similar online portals. Rogers said that they would want to do this even if they did not own an ISP, in order to give users access to content they have already paid for.

Rogers stated that the high cost of posting video content online is extremely prohibitive to niche CANCON producers who want to make their content available. They stated that their BVS would allow these producers to make their content available online at a reduced price, because the focus of their new service would be not on profit. Instead, their focus would be on extending TV viewership relationships and take advantage of their existing infrastructure; therefore making niche Canadian content available online would be far more viable than it is now.

The CRTC's main question was, if BVS is hosting online content in almost the exact way that it is already available on TV, should it not then be licensed? Rogers' response was that the model they are proposing is attempting to replicate TV platform, for their own business purposes. Therefore, the online service would mirror existing CRTC television regulations without the Commission having to regulate new media specifically. If you regulate Canadian online services, Rogers argued, you would be setting Canadian businesses and creatives up for failure, because they will not be able to compete against unregulated online entities.

With regards to the other questions at issue, Rogers agreed with Astral that neither an ICAN-esque or .ca data flow measurement technique would be an accurate proxy for measuring, tracking or speeding up the flow of Canadian content online. As an example, they noted that in their CBC content is backhauled from American servers, as per a Rogers' business deal with Yahoo, which would make CBC content appear to originate in the United States.

With regards to exclusively online content usurping traditionally distributed content, Rogers stated that up to this point they do not see it as a problem. Although they stated that it could be a threat, their overall conclusion was that if they run their business properly and the CRTC keeps their regulations flexible to allow them to do so, the internet can be a complimentary service for traditional media.

The CRTC declined to discuss the questions of legality regarding the ISP levy; they stated that the issue is unclear and would be left to the courts to decide, if the CTRC did choose to impose an ISP levy.

Cogeco Cable Inc.
Cogeco began their address by outlining clearly what business enterprises they are involved in, stating that they do not market or produce products for the internet. “In short, we transmit bits and bytes.” They echoed Rogers' contention that the imposition of an ISP levy would not be legally permitted under the existing Broadcasting or Telecommunications Acts. However, they stated that the question goes far beyond a legal one; the cost of a levy would be passed down the users, and it is unclear exactly what need such a fund would fulfill—nor exactly how a fund would fulfill such a need.

Cogeco agreed that there are some broadcasting elements in new media, but that broadcasters have by and large adopted strategies similar to those the CRTC is suggesting without regulation. As a result, introducing regulation would be detrimental to broadcasters’ ongoing efforts.

With regards to measurement tools for CANCON online, Cogeco made it clear that this was not something they favoured. The internet is fundamentally versatile, they argued, and the absence of standardized tools raises serious questions of the viability of measurement development and implementation. They said that the internet is not to blame for financial difficulties faced by the television industry at present; traditional TV is suffering more from the consequences of audience fragmentation, decreased advertising revenues and broader global structural economic factors that are arising with the recession. It is naive, Cogeco argued, to believe that the scale of these complex structural problems would be solved by a relatively small-scale regulation on new media platforms.

Cogeco also supported Rogers' contention that there is no proven need to produce specifically new media content, and went further to contend that such a development strategy would not only fail, but also be harmful to the multi-platform business strategy of broadcasters. The exemption model for broadcasting in new media remains appropriate and justified, Cogeco argued, it makes no sense to begin a regulatory intervention unprecedented in the world in order to address fears based on speculation rather than real problems.

The Commission first asked for Cogeco's view on Rogers' proposal presented earlier in the day. Cogoco's response was that it was too early to say. They stated that they have been closely following Rogers' movement forward with this, as well as other applications in the more mature US market, but that more research needs to be done into how such a business model would be structured. They spoke strongly against making such a model mandatory, suggesting that it is not productive to try and make rules when a particular type of activity is at the concept stage and has yet to prove itself.

The CRTC then asked for Cogeco's reaction to yesterday's announcement by the Heritage Minister regarding the consolidation of the Canadian Television Fund and the Canadian New Media Fund. Cogeco stated that they were pleased with the announcement, and that they absolutely think funding support for professionally produced Canadian content should be directed to multiple platforms. However, they also emphasized that communication needs to occur between platforms in order to address the challenges that may be faced by the fact that they will often be carrying similar, and at times identical, media products.

The question of how to address piracy was raised next, to which Cogeco's immediate response was that it is important to recognize that not only content producers are impacted by this, but broadcasters as well; for instance, they cited the over 1 million unauthorized satellite users across Canada. Cogeco argued that ISPs are not profiting from illegal downloading of creative products, and furthermore have no way of tracking who is performing these activities. As a result, it was Cogeco’s view that they should not be held responsible ethically or financially for internet piracy.

Overall, Cogeco argued that what is required at this point is a comprehensive look at the variety of new media related issues—the broader picture instead on individual pieces of the puzzle—in order to construct a Canadian national digital strategy that will provide the appropriate construct to move forward in the digital age.

Shaw Communications
Shaw opened their introduction with an unequivocal statement of their position: “Canadians have clearly stated that there is no need for this proceeding... some of the best and most popular websites in Canada are Canadian.”

Their position against an ISP levy was clearly articulated, as they argued that such a measure would serve only to anger consumers, stifle innovation and slow the expansion of infrastructure needed to provide broadband services. With 70% of household having broadband access, Shaw stated that Canada's internet penetration rate is one of the greatest in the world and that competitively priced access to broadband services is the backbone of Canada's information economy. The proposed ISP levy would also reduce companies' abilities to invest in building a world-class new media network for their customers, as Shaw illustrated they have already done.

In addition, the assumption that a subsidy is necessary to produce new Canadian content online is false; citing several examples pulled from statistics provided by large companies such as Apple and Google, Shaw stated that there is already a proliferation of CANCON on the internet and that regulation would not only be unnecessary, but also harmful by introducing new barriers to entry.

Shaw said that the oft-quoted “if we build it, they will come” works in the reverse in the case of the internet and new media; the content producers are already coming, they argued, and Shaw needs to have the funding and flexibility to provide the advanced infrastructure necessary to support their arrival.

The question period was a lively, and at times heated, debate between the CRTC and Shaw, where questions relating to regulating the internet writ large continued to surface, despite the Commission’s attempts to keep the focus on the particular issue of the new media exemption that the hearings were meant to address.

Shaw's conflation of online broadcasting and audio-visual media content in general on the internet was in may ways reflective of some of the broader issues of definition the CRTC faces when dealing with new media. It could also be a sign that the way in which the CRTC means to distinguish between the two is unclear to the wider public.

The Commission asked for Shaw's opinion on what came to be called the Rogers Model (that is, Rogers’ proposal of a Broadband Video Service), to which they replied that such a model does not make much sense in the current environment. However, there seemed to be some confusion over whether the Rogers Model was a reappropriation of the “walled garden” approach. Shaw thought that it was, and argued that since such approaches had been unsuccessfully attempted in the past, it was even less likely that they would work today. Conversely, the CRTC said that the Rogers Model was not the same as a “walled garden,” and therefore may have viability. It seems that there needs to be a clearer articulation of precisely what Rogers is proposing, to be shared among the various broadcasters. This should happen before broadcasters are asked to give their formal opinion, as it seems that, at least in the case of Shaw, today was the first that many companies had heard of the model. As a result, the group had not had time to fully analyze or respond to the proposition, which led to these miscommunications between Shaw and the CRTC on this topic.

CTVGlobemedia
CTVGlobemedia stated outright that new media broadcasting was a small part of their business, used primarily at this point as a promotional tool intended to complement their traditional television programming model. They use the internet mainly to promote their TV programs and provide a vehicle for audiences members to catch up on episodes they may have missed; CTVGlobemedia's focus is therefore on traditional media and it was their view that, if their content on that platform were strong, audiences would naturally flow to their new media options.

The panel gave numerous statistics illustrating their powerful online position, as well as the success of their new media ventures. For instance, CTV online is the #1 Canadian-owned video destination. They have also been recognized by American partners as being leaders in new media design innovation, and are experimenting with user generated content such as the “Upload Yours” feature related to The Comedy Network.

CTVGlobemedia cited their ability to be nimble and act quickly as the crux of their success on new media platforms; consequently, regulating these platforms would not only be impractical, but also inhibit CTVGlobemedia's ability to develop competitively as platforms shift and change.

Continuing the exemption order, CTVGlobemedia stated, is the only practical choice in this context. Imposing levies or regulations on ISPs or broadcasters would only serve to create a two-tier system where regulated broadcasters would compete with unregulated, nontraditional competitors online. This would seriously inhibit the growth of Canadian new media in what is an inherently a rapidly-changing, global system.

The CRTC’s first question asked whether CTVGlobemedia could see a day in the future where their media products would be transmitted more through the internet and related new media services than through traditional broadcasting mechanisms, such as television. This was a concern the Commission related to the request to continue the exemption order; if new media continues to be exempt from regulation, would companies not then migrate their services away from traditional media in order to avoid these restrictions? CTVGlobemedia did not view this as an inevitability; although “no one has a crystal ball,” they said that at this point in time conventional and specialty TV continues to be very relevant.

The Commission then moved on to pose the question of CTVGlobemedia’s view on the Rogers model. CTVGlobemedia had in fact heard of the platform prior to today, saying that they had held meetings with Rogers previously to discuss it. They stated that they saw it as a possibility, however clearly outlined that in order for it to work, the model would need to be adopted universally. This is because not to have all distributors participate would foil BVS before it even got off the ground; at the moment, CTVGlobemedia offers many of its programs streaming online for free, and so it would make little sense for some subscribers to pay to get that same content through Rogers BVS. As a result, despite the potential the idea has, CVTGlobemedia saw many practical issues that needed to be addressed before a decision could be made.

Another line of questioning related to the popularity of certain TV genres online, and the fact that CTVGlobemedia was profiting from some of these services. When asked whether unscripted programs were more popular than scripted programs, CTVGlobemedia said that this was not necessarily the case (although TSN and MTV are two of their most highly trafficked streaming channels); however the difficulty in providing online access to scripted dramas is in the fact that they have to require the rights, which adds to the cost of providing these shows online. Even so, CTVGlobemedia said that both varieties of programming were popular, and in either case the company is the “victims of their own popularity,” as when the number of users of a particular streaming video rises, so too does the cost to provide that content.

With regards to making money off of their new media ventures, CTVGlobemedia stated that they are making a “modest, modest” profit online, but that this is only enough to support existing platforms, along with some experimentation and expansion. Again, with video being the most expensive to produce and host, they stated and the majority of money earned goes back into the system to keep it going. One of the major problems they are facing in terms of monetizing their online media is in their lack of ability to measure audiences, which is required primarily in order to sell time and space to advertisers; CTVGlobemedia stated that in their last evaluation, which used both internal and external metric applications, the discrepancy between the results was too wide to extrapolate a viable estimate of audience traffic and usage. Consequently, they stated that more accurate means of measurement need to be developed and implemented for these purposes before additional measurement systems (ie. ICAN) can be discussed.

Canadian Cable Systems Alliance
As the representative body for Canada’s smaller ISPs, the Canadian Cable Systems Alliance (CCSA) offered a perspective distinct from those of the larger companies that preceded it.

CCSA’s main contention was that the provision of retail internet service is key element of small systems' continual commercial viability. Even as the costs of providing cable TV rise, Canada remains a world leader in broadband services. CCSA companies have been very active in this process of facilitating the growth of Canada’s broadband network; however, without the freedom to develop in flexible directions that they have had over past decade, many of these small companies would have disappeared.

In many cases, small companies are the only internet service providers in their communities. Since the entire debate regarding availability and funding of CANCON online is based on access to broadband internet, CCSA argued that any regulation or levy that the CRTC might choose to impose must not impair the ability of these small companies to provide internet access to smaller communities across Canada.

Recognizing that the challenge with regulation will be devolving and measuring Canadian content online, CCSA stated that it would support the CRTC if it decides to institute such a system, so long as no intervention by ISPs would be required. Therefore, the CCSA requested that if an ISP levy were to be instituted by the CRTC, small ISPs should be exempted from it. They stated that the reason for this position was that the small ISPs they represent could not afford to invest the funds necessary to inspect or report on the content of the traffic their “pipes” facilitate; while a 3% levy might be “peanuts” to a large conglomerate, small operators would be greatly impacted by this loss of revenues.

However, CCSA followed this by speaking out against the idea of an ISP levy in general. The group said that ISPs just provide the pipe, which permits new media broadcasting to happen, but that no one has up to this point found a way to effectively monetize the content flowing through the pipe. Further, Canadians have already excelled at telling their stories through new media platforms, stories that are easily made available online. CCSA identified the power of the internet as the wealth of resources available, catering exclusively to the user’s demands. Their view was that imposing a levy on ISPs would not be an effective or appropriate response to challenges faced by producers of Canadian content by the growing prevalence of new media. Since CCSA sees the internet as a fundamentally democratic medium, which belongs to the people, the current exemption orders should be maintained as they are, and continue to provide the great opportunities for creators and investors that they already offer.

The Commission began by noting that, based on their past actions and decisions, their support of CCSA’s call for an exemption from any levy for small broadcasters is implicit. The CRTC then asked the now-familiar question, requesting an opinion on the Rogers model. CCSA responded that today’s hearings were the first they had heard of the idea. Even so, at first glance it seems promising, although if the intention is to cost-share, that might not be a viable option for the smaller ISPs CCSA represents.

The CRTC’s other primary inquiry was whether all of CCSA’s members are currently internet broadcasters, and what the demand is like for broadband access in the communities where these companies are located. CCSA said that not all of their members provide internet access, but that there is definite interest in expansion into this service. Further, there is always demand for access in small communities, and that demand is only increasing as the number of high-bandwith users rises steadily.