CRTC responds to Netflix critics, opens consultation on over-the-top services

Following requests from broadcasters and a parliamentary committee, the CRTC announced Wednesday that it will hold a public consultation on online programming services like Netflix and Apple TV. The commission called the consultation a “fact-finding exercise” and said it is seeking data and comments on over-the-top programming services as it investigates their impact on Canadian broadcasting. The public consultation comes following a recommendation from the House of Commons heritage committee and pressure from a secret broadcasting industry working group of 35 executives. The group's full membership has not been released but the commission said it includes “35 private sector executives from the distribution, telecommunications, broadcasting, production and creative sectors in Canada.” In a notice of consultation released Wednesday, the CRTC said a defining feature of over-the-top services is that they provide “Internet access to programming independent of a facility or network dedicated to its delivery (via, for example, cable or satellite).” The commission said barriers to over-the-top programming are falling, a trend that domestic and foreign providers are taking advantage of through various revenue models including subscription and advertising-based services. “The digital environment is providing Canadians with more programming choices than ever before,” Konrad von Finckenstein, chairman of the CRTC, said in a release. “Canadians have access to libraries of online content that can originate from anywhere in the world, and which can be watched on different screens. This fact-finding exercise will give us a better understanding of the dynamic and innovative environment as it continues to evolve.” The consultation is likely to generate some criticism. Former industry minister Tony Clement had said he opposed opening a consultation on Netflix and other over-the-top services. In an interview with The Wire Report during this spring's federal election campaign, Clement said he had a problem with such a consultation if it is a “Trojan horse to hobbling Netflix.” “They’re asking for a consultation, but I guess I’m skeptical of the reasoning of the mainline broadcasters—that they’re doing this in the hopes of fairness and equity. I think it’s also a way to strangle the competition,” Clement said. But the consultation also has its supporters. Major broadcasters like Astral Media Inc. and distributors like Shaw Communications Inc. have been calling for action to level the playing field. The Canadian Media Production Association (CMPA) and the Alliance of Canadian Cinema, Television and Radio Artists (ACTRA) issued releases Thursday in support of the consultation. "ACTRA has been calling on the CRTC to regulate broadcasting in new and digital media for more than 10 years and was disappointed in 2009 when the regulator continued its hands-off approach and extended its new media exemption order," the union said in a release. "ACTRA’s main concern is ensuring that there is self-space for Canadian programming and that all broadcasters contribute to the system, as mandated by the Act." In a statement Thursday, CMPA president Norm Bolen congratulated the CRTC for "launching a process that is obviously intended to encourage open and frank dialogue among all stakeholders as it relates to OTT programming services in Canada." Bolen told The Wire Report in February that Netflix has no staff in Canada and that it is selling its content to subscribers in "the same way as a pay-TV service, except they’re not going through a cable provider. They’re using the same wire, just a different part of the wire. All they do is take dollars out of the country.” In a report released this month, Internet support company Sandvine Inc. said Netflix's 800,000 Canadian users now amount to 10 per cent of broadband households nationally in Canada and 13.5 per cent of peak downstream traffic. It's unclear what regulatory solutions could be possible, if any, but industry sources have suggested that the CRTC's new media exemption order could be amended so that over-the-top services pay contributions into the Canadian broadcasting system, as broadcasting distributors do. But observers have also questioned how regulations on over-the-top services could be enforced. Von Finckenstein previously appeared reluctant to do anything about over-the-top services. In a speech at the Broadcasting Invitational Summit this month, the CRTC chair said that if broadcasters want the commission to open a proceeding on over-the-top services, they should push the newly elected Conservative government to issue a direction to the CRTC to study the issue under section 15 of the Broadcasting Act. In its notice of consultation Wednesday, the CRTC said it is seeking public feedback on: analytical and measurement tools to better understand over-the-top programming trends; consumer trends in the consumption of foreign and domestic programming now and in the next five years; trends in consumer devices and network capabilities that will play a role in the development of over-the-top programming; the possibility that over-the-top services may replace or reduce BDU in the near future; the challenges and opportunities that over-the-top services are creating for the Canadian creative industries; the possible impacts of over-the-top services on the ability of Canadians to acquire and exhibit programming; over-the-top services’ impacts on consumers; and any additional issues or evidence that applies to over-the-top services and the policy objectives of the Broadcasting Act. The CRTC is accepting comments by the deadline of June 27. news@thewirereport.ca

CRTC responds to Netflix critics, opens consultation on over-the-top services

News | 05/25/2011 9:40 pm EDT

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