The Canadian Radio-television and Telecommunications Commission (‘CRTC’, or ‘Commission’) has issued a decision in its year-long consultation on audiovisual material delivered in Canada using the Internet or an on-demand mobile platform. In Broadcasting Regulatory Policy CRTC 2009-329, issued on Thursday, June 3, 2009, the CRTC decided not to require mobile and Internet access providers to fund Canadian audiovisual content, nor to compel software-locked audiovisual devices to ensure shelf space for Canadian content. However, in a move that will be of interest to many "net neutrality" advocates, distributors of audio and audiovisual material over the Internet or on-demand mobile platforms will now be prohibited from conferring an undue preference or subjecting anyone to an undue disadvantage.

Other rulings include reservation of the power to require exempted Internet or mobile platforms to file information with the Commission in order to help it monitor and release better information on Canadian new media markets; a recommendation to the federal government that it follow the lead of countries like France and the U.K. in creating a national digital strategy; and a technical change in terminology which will resolve legal ambiguity about the status of on-demand mobile audio services.

The Commission has launched three follow-up proceedings as a result of this decision. The first is a CRTC consultation to iron out more specifically:

  • how to prohibit undue preference;
  • who should be required to provide what market information to the CRTC; and
  • how to redefine the CRTC’s terminology for new media, which will now cover both Internet and mobile point-to-point audio and audiovisual material.

The comments on which the CRTC will base its determination are due on July 6, 2009. Separately, the CRTC has invoked a little-used provision to ask the Federal Court of Appeal to resolve a much-debated legal issue as to the distinction between broadcasting and telecommunications as these are defined in various statutes. Finally, the Commission will, at an unspecified future date, initiate a proceeding to identify exactly what and how it should monitor Canadian new media markets

Audiovisual Content as "Broadcasting"

The Canadian Broadcasting Act, passed six years after the current version of the Copyright Act was enacted, applies to most video and audio accessed in Canada on a personal device like a computer or mobile phone. The Act requires that, in order to implement the Broadcasting Policy laid out in the statute, the CRTC either licence each broadcasting undertaking in Canada, or decide to exempt such undertakings from licensing. Packetized video and audio, which accounts for much of the traffic on the Internet, falls under this requirement. In order to avoid regulating and licensing the delivery of audio and video over the Internet or to wireless devices in Canada, the CRTC is therefore obliged to consider whether, and the extent to which, it should exempt such "new media broadcasting undertakings" from the Act’s licensing rules.

The CRTC has traditionally exempted classes of broadcasting undertaking from licensing and regulation where it is able to demonstrate that licensing or regulation would not contribute significantly to Canadian programming production or spending — both policy objectives set out in the Act — nor impair the ability of other, licensed undertakings to fulfil their mandates. These reasons have typically applied to new or experimental technologies not yet (or, simply, not) widely adopted. In 1999, the CRTC found that reasons such as these applied to audio and video delivered over the Internet (the "Internet Exemption Order"). In 2006 the Commission found that on-demand video feeds delivered to mobile devices partly using the Internet fell under the Internet Exemption Order but, in 2007, further exempted on-demand video made available on mobile devices without using the Internet (the "Mobile TV Exemption Order"), both to achieve regulatory symmetry and to recognize the service’s nascent nature.

At the same time, since responding in 2006 to a Cabinet order to report in the future environment facing the Canadian broadcasting system the Commission has also been engaged in a broader initiative to review its approach to so-called "new media". This initiative led to a public consultation between May and July 2008, canvassing issues to be considered in reviewing the Internet and Mobile Exemption Orders (together, the "New Media Exemption Orders"), followed in October 2008 by a second consultation conducting such a review.

Organizations and groups of organizations — including access providers; broadcasters; provincial culture ministries and citizens’ groups; and creators’, producers’, and distributors guilds and associations — filed nearly 100 formal written submissions in that consultation. Separate oral hearings, convened during February and March 2009, helped narrow the issues raised in these submissions. Broadcasting Regulatory Policy CRTC 2009-329 (the "New Media Policy") is the CRTC decision resulting from this second consultation.

Exemption Maintained

The most important, and least surprising, aspect of the New Media Policy is the Commission’s decision to renew the New Media Exemption Orders. Anyone may continue to provide audiovisual content in Canada over the Internet — or, assuming an authorized use of spectrum, wirelessly — without registering with the CRTC, meeting any Canadian ownership and control requirement, ensuring a minimum level of Canadian content, or being subject to any cross-media ownership rule. The definition of the "new media broadcasting undertakings" to be exempted is to be amended to include any broadcasting service that is delivered and access over the Internet, or delivered using point-to-point technology and received by way of mobile devices. This definition closes a previously-existing loophole in respect of wireless audio services not delivered over the Internet, such as pay audio services delivered to mobile phones, which were not exempted from licensing under the Internet Exemption Order or Moible TV Exemption Order, but for which the CRTC had not created a licensing scheme or regulatory framework, either.

In exempting all new media broadcasting undertakings in the same manner, the Commission chose to ignore the distinction made by some interveners between open and closed platforms. Open platforms are, generally, those which let users access any content or application whose rightsholder has secured connectivity to permit it, such as the Internet, or certain on-deck "applications stores". On closed, software-locked hardware platforms, including certain mobile devices and set-top boxes, whether and how programming choices are made available to users results from decisions by gatekeepers similar to broadcasting distribution undertakings (BDUs). Interveners making this distinction suggested that, while open platforms such as the Internet should not be regulated, it would be consistent with Canadian broadcasting policy that "bottleneck" programmers of closed hardware be required to ensure the availability of shelf space for Canadian content. A related concern regarding the digital rights acquirers whose bargaining power derives, not from control over consumer hardware, but from the substantial purchasing power associated with acting as a traditional broadcaster, was similarly raised. While the Commission rejected both these arguments, it left the door open to revisiting these issues as "new media" mature into established business models:

The Commission retains its view set out in the New Media Exemption Order that the exemption of new media broadcasting undertakings will enable continued growth and development of the new media industries in Canada, thereby contributing to the achievement of the broadcasting policy objectives, including access to those services by Canadians. To a significant degree, the Commission’s position is based on its conclusion that a successful commercial business model for broadcasting in new media has yet to emerge….

The Commission is of the view that the promotion and visibility of Canadian content in new media is important to implementing the broadcasting policy set out in the Act…. However, the Commission considers that, at this early stage, specific measures for the visibility and promotion of Canadian content in new media would not be appropriate.

Accordingly, the Commission will continue to monitor the "appropriate regulatory treatment" for new media broadcasting, with another review to come "within five years, or at such time as events dictate." This is consistent with the Commission’s ordinary practice of reviewing exemption orders each five years.

Net Neutrality

Because the New Media proceeding was in part about the Internet, a number of interveners asked that the CRTC use this forum to create network neutrality rules forbidding Internet access providers from acting in a manner that could interfere with users’ ability to access and communicate the content and applications of their choice, particularly by levering their control of the user’s access facility in a way that disadvantages competing applications or content. The Commission preferred to deal with network neutrality in the distinct (and ongoing) proceeding on Internet traffic management it convened under the Telecommunications Act. However, an alleged network neutrality telecom violation committed by an access provider acting as a broadcasting distributor cannot be addressed under the Telecommunications Act. In addition, a number of interveners raised possible issues of discrimination or non-neutrality that are unique to the audiovisual content sector and go beyond the Internet access provider’s transmission of programs by means of telecommunications for reception by the public. These issues, which extend to the role of wireless providers, again engaged the question of open and closed hardware platforms.

Rules forbidding a broadcasting undertaking from granting anyone an undue preference, or subjecting anyone to an undue disadvantage, are among the Commission’s key instruments for regulating fair competition in all parts of the broadcasting sector, and mirror similar rules in the telecommunications sector. The Commission made no finding as to whether discriminatory behaviour that is undue has taken place — such a finding ordinarily arises as the result of a specific complaint filed with the Commission — but did elect to qualify the exemption order by adopting in it undue preference rules that will govern new media broadcasting undertakings:

Despite assurances from the wireless industry that walled gardens are being replaced with open Internet access, the Commission notes that closed services are the norm in advance of greater mainstream adoption of more sophisticated devices. As such, the process of selecting content for those services must not subject unaffiliated programming undertakings to undue disadvantage with respect to reaching mobile audiences.

With respect to other new media broadcasting undertakings, the Commission does not consider that such concerns over undue preference are warranted. It recognizes, however, that this could change as business models for the aggregation of content offerings evolve. The Commission therefore considers the imposition of an undue preference provision to be appropriate.

Accordingly, in Broadcasting Notice of Consultation 2009-330, the Commission proposes amendments to the New Media Exemption Order, prohibiting new media broadcasting undertakings from conferring an undue preference on themselves or another person, or subjecting any person to undue disadvantage.

To provide guidance on the type of situation that could give rise to an undue preference in the new media environment, the Commission offers the example of a new media broadcasting undertaking engaged in programming distribution that acquires content from an affiliated programming undertaking either to the exclusion of non-affiliated programming undertakings or on more favourable terms or conditions than those applicable to non-affiliated programming undertakings.

Parties alleging undue preference will have access to the CRTC’s mediation and dispute resolution framework, which is intended to provide inexpensive, rapid redress for discrimination arising from the vertical exercise of market power. A reverse onus rule is to require that, "[o]nce the complainant has established the existence of a preference or disadvantage, the onus [of proving that the preference or disadvantage is undue] should shift to the allegedly infringing party to demonstrate that its actions were not undue."

Those interested in the network neutrality debate should take careful note of this rule, which provides recourse against discrimination by Internet and wireless broadcasting undertakings. The Commission has proposed to implement it by including the following as part of the description of a new media broadcasting undertaking which is exempted from licensing or regulation:

The undertaking does not give an undue preference to any person, including itself, or subject any person to an undue disadvantage. In any proceeding before the Commission, the burden of establishing that any preference or disadvantage is not undue is on the party that gives the preference or subjects the person to the disadvantage.

Comments on this wording should be filed with the Commission by 6 July 2009. The scope of this provision’s application to Internet access providers will, however, be significantly affected by the Commission’s decision to refer to the Federal Court of Appeal, under the Federal Courts Act, the question of "whether ISPs, when they provide access to broadcasting content, are broadcasting undertakings within the meaning of the Broadcasting Act and are thus subject to the New Media Exemption Order." Should the Federal Court of Appeal find that Internet access providers, when they provide access to broadcasting content, are not acting as broadcasting undertakings, any allegation of discrimination with respect to an ISP’s provision of access to broadcasting content could be pursued only under the Telecommunications Act.

Funding Canadian Content

In addition to the question of which complaints as to undue preference should be brought under the Telecommunications Act and which under the New Media Exemption Order provision described above, the Federal Court of Appeal reference will also shed light on an intense debate that took place during the New Media proceeding as to whether wireless and Internet access providers should contribute to funding the creation and promotion of Canadian audiovisual content.

Broadcasting distribution undertakings in Canada, including cable providers like Rogers or Vidéotron and satellite providers like Bell Video or Shaw Direct, are required to contribute 5 per cent (soon rising to 6 per cent) of their gross revenues derived from broadcasting activities for the creation and promotion of Canadian content. A number of interveners argued that Internet access providers distribute broadcasting content and that, accordingly, they should be subject to the contribution requirement faced by other broadcasting distribution undertakings.

In its New Media Policy, the Commission decided not to require such contribution, in part because "no evidence was presented to establish that additional funding … would further the objectives of the Act" and "the absence of established viable business models for broadcasting in new media suggests that the creation of a new fund as proposed is not appropriate at this time." Wireless and Internet access providers argued that, in any case, the Commission does not have the authority to require such contribution under the Broadcasting Act as, although audiovisual content accessed using the Internet is broadcasting, Internet access providers do not act as broadcasting undertakings. The Federal Court of Appeal reference will therefore help determine whether the Commission has the power to revisit this proposal should further evidence be presented, or viable business models for new media broadcasting be established.

A Bigger Picture

In addition to the above issues, the Commission spent a significant portion of the proceeding’s oral hearing phase discussing how to measure the "availability and consumption of Canadian broadcasting content on new media platforms." This keen interest in measurement and monitoring is part of a larger and generally well-regarded shift within the CRTC to focus on evidence-based decision-making and market transparency, exemplified by the merger of the Commission’s annual Broadcasting and Telecommunications Monitoring Reports into an annual Communications Monitoring Report, and the creation of a large Policy Development and Research branch alongside the Commission’s Broadcasting and Telecom branches in order to build capacity for these activities.

However, despite much discussion of particular instruments such as the International Standard Audiovisual Number (ISAN) metadata initiative for identifying audiovisual works, the New Media Policy developed no conclusion as to what to measure and how to measure it with respect to new media broadcasting monitoring. Instead, the Commission has undertaken two measures designed to allow it to develop such a monitoring program. First, the Commission will — alongside the undue preference rules — add a further qualifier to the New Media Exemption Order to allow the Commission to request information regarding new media broadcasting undertakings’ activities from time to time. Second, the Commission will undertake a follow-up proceeding on reporting requirements to identify and set out reporting requirements in detail.

More broadly, the Commission has lent its voice to calls by the National Film Board, Ontario Minister of Culture and others recommending to the federal government that it follow the lead of countries like Australia, France, Germany, New Zealand and the U.K. to pursue a holistic national digital strategy — something the Commission is unable to do alone given

its mandate under the Act … [which] is limited in scope compared to the wide range of issues resulting from developments in the digital age. The Commission recognizes that issues raised in relation to matters of taxation, copyright, privacy, spectrum management, and convergence of broadcasting and telecommunications industries, among others, are all interrelated and warrant a coordinated approach.

Despite this more limited mandate and lack of political guidance, it should be noted that the New Media Policy is only one in a series of important CRTC decisions issued recently or to be issued shortly which are ushering in significant change in Canadian communications regulation, particularly with respect to this latest phase in the CRTC’s long-running adaptation to new platforms and new technologies. These include broadcasting decisions on issues ranging from media cross-ownership and the relationship between distributors and discretionary programming services to digital television transmitters and the role of generalist over-the-air broadcasters to video-on-demand in an iTunes era, and telecommunications decisions on matters such as Internet traffic management, essential facilities and wholesale access lines.