The following is a letter sent by David Ellis, who recently released a commissioned report on the Telefilm Canada New Media Fund, to new media industry stakeholders and obtained by Canadian NEW MEDIA. Over the last couple of weeks, a storm of controversy has developed around the July 16 CRTC decision on DTH and its damaging impact on new media funding, in particular the Bell Broadcast & New Media Fund (Broadcasting Public Notice CRTC 2003-37 and the accompanying decisions). Many of the issues involved were addressed in the letter of July 16 from Jonas Diamond et al, addressed to Chairman Dalfen. In adding my voice to the debate, I propose to make only a few brief comments in this note. As luck would have it, however, I was commissioned last fall by Telefilm to conduct a wide-ranging study of the new media industry. I’ve included here a pdf copy of the final 100-pp report, completed in February but only made public in recent weeks. (Please note that the views expressed here and in the report are strictly my own and do not necessarily reflect those of Telefilm or any other third party.) The current debate is centered on the fallout from the July 16 PN and decisions. My observation is that the funding crisis is actually much worse than it appears, and the proposal to gut the Bell Fund is only one part of a larger problem. Let me offer two examples of that larger problem: the state of the Canada New Media Fund and the technology R&D programs administered by CANARIE. A. CNMF. Many of you are already familiar with the woes of the CNMF, which begin with the staggeringly small amount of money allocated to it, $9 million a year. My recommended increase to $36 million annually is unlikely to attract support in Ottawa, at least in the next couple of years. The report also documents a host of other problems concerning the financial health of new media in Canada, some related to the Fund, some not. For example: micro-management of the Fund by Heritage officials; far higher levels of support and far better recoupment terms under Telefilm’s TV and feature film programs than for new media; wholly unrealistic funding guidelines concerning what is "cultural" and what is "Canadian" in new media projects; the failure of federal policymakers to grasp the crucial importance to the industry and to end-users of games and streaming technologies; lack of sufficient operating scale to attract investment and sustain the growth of franchises and continuing product lines. Please consult the report for further details. B. CANARIE R&D Funding. While Heritage waffles over how and even whether to support mainstream content development (as opposed, e.g., to digitizing our past), Industry Canada is offering little comfort as to the future of R&D funding at CANARIE. Programs such as CANARIE’s Ebusiness R&D fund are now closed to further applications and may or may not be replenished at some future date (I may have this wrong and would be delighted to stand corrected). This fund alone represented some $26 million earmarked for the development of innovative new media technologies. I’m mixing metaphors by pointing to troubles that, in policy terms, belong to two different worlds. The controversy surrounding the Bell Fund is focused on content and content developers, on culture rather than technology. The distinction is - unfortunately - an important one in Ottawa, where new media has to get by in a house divided between Heritage and Industry. In the real world, the development of new media content goes hand in hand with the development of enabling technologies. I offer these two examples as evidence of the appalling state of uncertainty and ambivalence surrounding federal new media policymaking in all its forms - and to persuade readers to see the Bell Fund crisis as merely the tip of a much larger, uglier iceberg. If you look at such developments together, I see three particularly compelling reasons to be worried: 1. New media is our future. The offending CRTC decisions provide a textbook example of regulatory lag and its perils, in its attempt to shore up part of our once glorious broadcasting past (local TV), at the expense of what will soon be a vastly more important cultural industry (new media). In the next three or four years, much of the imperiled "local reflection" via TV that has the interested parties in an uproar will be readily available over very fast IP networks. The fact that the Commission has compromised our place on the Internet and in the world of digital media generally as the result of trying to resolve, of all things, DTH program deletion in small TV markets, reduces the whole proceeding to an absurdity. Even the dissenting commissioners didn’t grasp this point. 2. The new media industry is being suffocated by mismanaged expectations. Over the last couple of years, the federal government has gone out of its way to let the populace know that "getting connected" is one of its highest priorities. A flurry of activity at Heritage, Industry and many of their agencies keeps suggesting to new media developers that Ottawa is serious about the policy goals of fostering sustainable growth and exposing more Canadians to Canadian-produced online content. I just don’t believe it. One of the main reasons for the disconnect between the rhetoric and the money to give the rhetoric substance is that, as one of my report interviewees put it, Ottawa is "two or three business cycles" behind the industry. This out-of-touch thinking affects issues such as whether video games are "cultural" and "Canadian" enough to warrant support. While federal policymakers struggle with the perception that games are made to help young people misspend their youth in arcades, this form of entertainment has for several years now earned revenues in the U.S. that surpass theatrical box office revenues. This is a huge opportunity, not a cultural aberration. 3. Our claims to leadership in new media are fast becoming a dead letter. Canada has done brilliantly in both the private sector (e.g. IMAX, Alias|Wavefront, Softimage), and the public sector (e.g. CA*net and other CANARIE-supported R&D). To the surprise of many, moreover, Canada’s per capita broadband penetration is still almost twice that of the U.S. And yet Canada has fallen significantly behind in use of the web for e-business applications by SMEs - adding lost B2B opportunities to those lost in the B2C sector. Canadians have long lamented the fact that we do a great job of building the pipes, but not creating the content and services for which they’re intended. The federal policymakers and regulators who apparently don’t get new media should remember what happens to people who ignore the lessons of history - especially now that the new media marketplace gives us a real shot at turning the tide.