Objectors to ringtone royalty begin two-pronged attack on SOCAN proposal

There were few fireworks on the Copyright Board of Canada’s first day of hearings into a steep new proposed tariff on ringtones. On June 21, the board began hearing factual evidence around Tariff 24, a 10% tariff proposed by the Society of Composers, Authors and Music Publishers of Canada (SOCAN) on ringtones. A coalition made up of the Canadian Wireless Telecommunications Association, the major record labels, as well as Telus Mobility and Bell Mobility will attack the tariff proposal on at least two fronts over the next week or so. They are expected to argue that there is no communication to the public by telecommunications that would entitle SOCAN to a tariff, and that even if such a communications exists, that SOCAN’s members are a small part of the value chain, and that the tariff should be much lower. Under the proposed tariff, SOCAN wants to collect 10% of a ringtone supplier’s revenue up to a maximum of $30,000 for 2003. For 2004, the group ups the rate to 10% of a ringtone supplier’s revenue, subject to a minimum of 10 cents per ringtone supplied. Again in 2005, SOCAN would increase the tariff to 10% of a ringtone supplier’s revenue subject to a minimum fee of 20 cents per ringtone supplied. For 2006, SOCAN has also added a proposed tariff on ringbacks – at 15% of retail each, subject to a minimum of 15 cents. Ringbacks are tunes that play and are audible to calling parties. The first day of the hearing was largely taken up with an examination of SOCAN’s witness panel, with the group’s general counsel Paul Spurgeon and Paul Hoffert, chair of the Guild of Canadian Film and Television Composers, as witnesses. As expected, objector coalition counsel David Kent was quick off the mark to begin differentiating between streamed and downloaded content. The issue will be critical to the board’s finding of whether or not ringtones are a form of communication to the public by telecommunications – something that’s likely not the case if ringtones are strictly a download. Both Hoffert and another witness, Tom Jurenka, a principle in ecom company Disus, were careful not to be nailed down on a hard and fast difference between downloading and streaming. Said Jurenka, "I’m not quite sure what the difference is between streaming and downloading…it’s an implementation issue." Hoffert agreed under Kent’s cross-examination, noting that streams can be saved. Further, said Hoffert, the technology is irrelevant to the user, who would experience both the same way. Kent came back to that quickly, getting Hoffert’s concession that, for the moment, streamed content isn’t easily re-configured on the fly from the handset according to a user’s wishes. Hoffert noted, however, that the difference will become increasingly transparent as higher speed broadband wireless networks allow users to select ringtones and ringbacks from a central server with the same speed as if the content were stored locally on the device. The second prong of examination during the afternoon was around the value of SOCAN’s contribution to the ringtone value chain. Spurgeon was at pains under cross-examination to emphasize that communication to the public was a critical element in the way the market works. He told Kent that if "you take it away, your clients are out of business." Kent pressed the issue by noting that songwriters and publishers also have mechanical reproduction rights and asked Spurgeon whether a communication right isn’t tantamount to further remuneration for the same purchase. Spurgeon responded by saying that "I wouldn’t call it a ‘further’ right. It’s a right that exists in the Copyright Act." In the same vein, as the CWTA, record labels and ISPs attempt to devalue the songwriter’s and publisher’s role to bring a potential tariff down in price, Kent pressed Hoffert on how ringtones are sold. He won agreement from Hoffert that most ringtones are sold on their association with whoever performs the song, and not on the strength of the songwriter. Hoffert agreed, but with the proviso that many ringtones are also popular because they are associated with other media properties such as theme songs for television programs or movies. The same arguments will likely come back to the fore throughout the hearing, which may wrap up before the Canada Day long weekend. The tariff proposal is being heard by Copyright Board members Brigitte Doucet, William Vancise (chair), and Francine Bertrand-Venne.

Objectors to ringtone royalty begin two-pronged attack on SOCAN proposal

Broadcast | June 24, 2005

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