In a short decision, the Supreme Court of Canada affirmed the Federal Court of Appeal’s ruling that Internet Service Providers (“ISPs”) do not carry on “broadcasting undertakings” subject to regulation by the Canadian Radio-television and Telecommunications Commission (“CRTC”) under the Broadcasting Act.

This case arose from a reference by the CRTC to the Federal Court of Appeal following its 2009 determination to continue the 1999 New Media Exemption Order (the “Order”). During the CRTC proceeding, a coalition representing the Canadian cultural industry proposed a levy on ISPs in order to fund the creation of new Canadian broadcasting content for the “new media” platform (consisting of Internet and mobile media applications), similar to existing levies that are paid by traditional broadcasters in Canada.

In its 2009 ruling (Broadcasting Regulatory Policy CRTC 2009- 329), the Commission determined that a levy was unnecessary. Nevertheless, it wished to resolve the question of whether ISPs are subject to the Broadcasting Act, because if so, ISPs would fall within the scope of the Order, which was intended to encompass all broadcasting undertakings whose services are delivered and accessed over the Internet. Rather than ruling on whether ISPs were broadcasting undertakings, the CRTC referred the following question to the Federal Court of Appeal: “Do retail Internet service providers (ISPs) carry on, in whole or in part, “broadcasting undertakings” subject to the Broadcasting Act when, in their role as ISPs, they provide access through the Internet to “broadcasting” requested by end-users?” In its decision (Re Canadian Radio-television and Telecommunications Commission, 2010 FCA 178), the Federal Court of Appeal said “no,” finding that ISPs are not carrying on a “broadcasting undertaking” under the Broadcasting Act where the ISP’s role is strictly limited to providing an end-user with access to the Internet and therefore has no control over the content made available to the end-user. The cultural groups were granted leave to appeal to the Supreme Court of Canada.

In its brief decision released on February 9, 2012 (Reference re Broadcasting Act, 2012 SCC 4), the Supreme Court of Canada unanimously affirmed the Federal Court of Appeal’s decision and dismissed the appeal. The Supreme Court of Canada agreed with the Federal Court of Appeal’s interpretation that the term “broadcasting undertaking” in the Broadcasting Act does not contemplate an entity that has no role in contributing to the policy objectives stated in section 3(1) of the Act. Those policy objectives focus on content, such as the cultural enrichment of Canada, the promotion of Canadian content, establishing a high standard for original programming and ensuring that programming is diverse. The Court noted that an ISP does not engage with those policy objectives when it merely provides the mode of transmission for content.

The Court found that this interpretation of “broadcasting undertaking” is consistent with its decision in Electric Despatch Co. of Toronto v. Bell Telephone Co. of Canada (1891), 20 SCR 83, in which the Court was tasked with determining whether the term “transmit” implicated an entity who merely provided the mode of transmission, in a case involving an exclusivity contract relating to messenger orders. In Electric Despatch, it was found that only the sender of a message could be said to “transmit” the message. The Supreme Court of Canada relied on Electric Despatch in SOCAN v. CAIP, 2004 SCC 45, where it held that because ISPs merely act as a conduit for information provided by others, ISPs themselves could not be held to “communicate” that information to the public.

Ultimately, considering that term in the context of the scheme and purpose of the Broadcasting Act, the Supreme Court of Canada’s decision affirms that ISPs, when acting solely in their capacity to provide access to the Internet, are not “broadcasting undertakings” under the Broadcasting Act.