NOTE: What follows is an informative and well-written article by Stephen Zolf recently published by Heenan Blaikie's Nota Bene and discussing a very recent Supreme Court decision ruling that ISPs are not considered "broadcasters":

On February 9, 2012, the Supreme Court of Canada confirmed that Internet service providers (ISPs) do not act as “broadcasting undertakings” in providing end-users with access to broadcasting content through the Internet. This ruling is significant as it addresses the scope of the regulatory jurisdiction of the Canadian Radio-television and Telecommunications Commission (“CRTC”) under the Canadian Broadcasting Act. The Supreme Court of Canada has now clearly demarcated the respective roles of various entities involved in the chain of Internet transmission, some of which communicate broadcasting content and some of which merely provide the means of communication.

The legal nature and scope of ISP activity from the standpoint of broadcasting law came before the Supreme Court of Canada in view of the increasing amount of broadcasting content (television programs, feature films, etc.) available over the Internet. This trend led the CRTC in 2009 to reconsider its 1999 New Media Exemption Order pursuant to which all new media content, including broadcasting content on the Internet, was exempt from CRTC licensing and the corresponding requirements to contribute to Canadian content.

In the 2009 proceeding, the CRTC reaffirmed its approach that it would not impose licences or any other material regulatory obligations on any providers of film and television content delivered and accessed over the Internet referred to as “new media broadcasting undertakings”.

However, during the CRTC hearing, several parties had submitted opposing views on whether ISPs were subject to the Broadcasting Act. A coalition representing the Canadian cultural industry argued that ISPs are integral to the transmission of broadcasting and should be viewed as equivalent to the role played by cable and satellite broadcasting distributors who are subject to regulation as broadcasters under the Broadcasting Act. The coalition proposed that the CRTC impose a levy on ISPs to fund the creation of new Canadian broadcasting content for new media platforms (similar to the levy paid by conventional Canadian broadcasters). The ISPs in opposition argued that their role was distinct from that of a programming or distribution undertaking and akin to a telecommunications common carrier (and therefore subject to regulation under the Telecommunications Act, rather than the Broadcasting Act).

In its determination following the 2009 hearing, the CRTC determined that a levy was unnecessary from a policy perspective. Nevertheless, it wished to resolve the legal question of whether ISPs are “carrying on a broadcasting undertaking” and are therefore subject to the Broadcasting Act. Rather than ruling on whether ISPs were broadcasting undertakings, the CRTC referred the issue to the Federal Court of Appeal for determination, asking the following question by way of “reference”: “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?”

The Federal Court of Appeal released its decision on the CRTC’s reference question in July 2010. The Court first clarified that it was not examining the CRTC’s earlier determination in the 1999 new media proceeding that “broadcasting” does occur on the Internet. Rather it noted the following:

…the issue to be decided is whether, when providing access to the “transmission of programs …”, ISPs are broadcasting. The answer to this question hinges on a consideration of the findings of the CRTC as to how programs are transmitted on the Internet on the one hand, and the exact purport of the definition of the word “broadcasting”, on the other.

The Federal Court of Appeal noted the CRTC’s description in the reference question that in providing access to broadcasting, “ISPs do not select or originate programming or package or aggregate programming services” in providing for the transmission of content requested by their end-user Internet customers. This characteristic led the Court to conclude that an ISP is not carrying on a “broadcasting undertaking” under the Broadcasting Act as it has no control or input over the content made available to the end-user. Therefore, it does not “transmit” the program for reception by the public as per the statutory definition in the Broadcasting Act.

The cultural groups sought leave to appeal to the Supreme Court, which was granted in March 2011. In a relatively rapid timeframe, the Supreme Court heard oral argument in January 2012 and released its ruling on February 9, 2012. In brief reasons, the Supreme Court upheld the Federal Court of Appeal’s finding that the activities of intermediaries such as ISPs cannot be said to “transmit” the content when their role is limited to providing the means of transmission. In these circumstances, ISPs are exempt from the operation of the Broadcasting Act.

Among the key determinations of the Court were:

  • The Broadcasting Act makes it clear that “broadcasting undertakings” are assumed to have some measure of control over programming which an ISP does not when it merely provides the mode of transmission;
  • An ISP does not engage the policy objectives in the Broadcasting Act which focus on content goals (i.e., cultural enrichment of Canada, the promotion of Canadian content, programming standards and diversity) when it merely provides the mode of transmission;
  • When providing access to the Internet, ISPs take no part in the selection, origination, or packaging of content. The term “broadcasting undertaking” does not contemplate an entity with no role to play in contributing to the Broadcasting Act’s policy objectives; and
  • While cable television companies have control over content, by contrast ISPs have no such ability to control the content of programming over the Internet.

However, it is significant that the Court elected not to decide whether the nature of ISP activity (i.e., use of “routers”) prevents them from being characterized as a “telecommunications common carrier”. The Court determined that it did not need to decide this question in order to make its finding that ISPs were not “broadcasting”.

The Supreme Court’s Decision has provided much needed guidance on this contentious issue in Canadian broadcasting law.The Court’s ruling has implications not only for the issue of who among various entities involved in Internet broadcasting are subject to regulatory obligations under the Canadian Broadcasting Act but also with respect to the harmonized approach to copyright law over the Internet. With respect to the latter issue, the Supreme Court cited its previous determination with respect to copyright liability of ISPs in SOCAN v. CAIP 2004 SCC 45, in particular that ISPs merely act as a conduit for information provided by others and, therefore, they could not themselves be held to implicate the communication right under Canadian copyright law.