CRTC, courts, can enforce Cancon rules on foreign OTT services: legal expert

Legal experts say the CRTC and Canadian courts have jurisdiction to regulate foreign over-the-top providers, but the National Film Board of Canada says Canadians should respond to online broadcasting competitors with the creation of a “national screening room" website. As part of a joint submission to the CRTC’s fact-finding consultation on over-the-top services, the Alliance of Canadian Cinema, Television and Radio Artists (ACTRA), the Association des producteurs de films et de television du Québec (APFTQ), the Canadian Media Production Association (CMPA), the Directors Guild of Canada and the Writers Guild of Canada filed a non-commissioned report by McCarthy Tétrault LLP counsel Peter S. Grant. The legal analysis was released publicly on Wednesday following the CRTC's deadline for submissions on Tuesday. Grant cited cases involving Internet music sites and direct broadcast satellites to argue that the Supreme Court and the CRTC have previously determined that they have jurisdiction over foreign online operators. “Could regulatory requirements be enforced against an internet service with no physical assets in Canada?” he wrote. “The answer is clearly yes.” David Elder, a communications lawyer with Stikeman Elliott, said in an interview on Tuesday of this week that over-the-top services pose an enforcement problem, particularly if they are advertising-supported and passively received from somewhere else over a network. In previous interviews with The Wire Report, other experts have said it would be difficult if not impossible to enforce regulations on a foreign-owned website. But Elder said it’s easier for regulators to wade in when it's clear that a service is being sold in Canada. “It really comes down to what other kind of direct jurisdiction would they have. It’s a bit easier if they’re actually collecting money in Canada, if they have a process where they’re taking payments, if it’s a subscription service,” he said. Grant wrote that once jurisdiction is asserted and requirements are put in place, most services will voluntarily comply to avoid enforcement. “If these companies are publicly traded, or if they are supported by venture capital, they need to be able to say that they are compliant with Canadian law in order to retain investor support,” he wrote. “It is not helpful if they have to disclose to investors that Canada has come after them for non-compliance or that they may be vulnerable to enforcement action. There are therefore significant pressures on such firms to bring themselves into compliance.” Apart from an ex juris court case against a person or company outside the country—which Grant wrote has twice resulted in settlements with foreign broadcasters—he wrote that the CRTC could issue a mandatory order under the Broadcasting Act demanding compliance with the act. Those disobeying with the order after it’s filed with the court could be guilty of contempt of court, he wrote, which could lead to fines or prison terms. Grant added that the order could be applied to anyone helping a foreign over-the-top service, such as a domestic Internet service provider. Joanne Deer, ACTRA’s national director of public policy and communications, said the CRTC should force foreign over-the-top services to provide Canadian content and contribute to Canadian production funds as regulated broadcast distributors do. She said it wasn’t surprising that some distributors, like Shaw Communications Inc., instead called for an end to contributions for all broadcasters to level the playing field. “Yes, we agree, it’s not fair right now. There is asymmetry in the regulation but the answer isn’t to lower the bar for the traditional broadcasters,” she said in an interview. “It’s to raise the bar and have the online broadcasters contribute to the system as well as the Broadcasting Act dictates.” The call for an expansion of the rules comes as the National Film Board of Canada (NFB) is calling for a competing Canadian over-the-top service rather than regulation. In its submission to the CRTC, the NFB asked why the broadcast sector hasn’t been more innovative, farsighted and prepared for technological change. The NFB launched its online screening room and iPhone app in 2009 and now offers more than 2,000 films and interactive works that have over 11 million views on its site and another 10 million views on branded channels through YouTube and other platforms. When it monetizes some of its service later this year, the NFB wrote it will have become a “full-fledged OTT service” like Netflix. “The possibilities of on-line video allowed the NFB to explore opportunities that were and are simply not available within the traditional broadcast system whether it is experimental short works, auteur animation, demanding feature-length documentaries and, increasingly today, original interactive work. The NFB here is an exemplar of the possibilities that OTT offer,” it wrote. The public production agency proposed working with the private sector to create a “national screening room” or over-the-top service for Canadian content that would be non-exclusive and available on other platforms. “Given that OTT was predictable, even if the economic conditions were not totally propitious, we need to understand why Canadian broadcasters were not able to respond earlier. We need to figure out in what ways we can adjust our system to encourage ongoing innovation given that the technical disruption and consumer response to it that enabled OTT is not going away,” the NFB wrote. “Thus, a regulatory response to existing OTT services, and these may be necessary to some extent, should not have as an unintended consequence the erection of strong barriers that create disincentives for innovation.” Deer said she does not know why an over-the-top service for Canadian content has not been launched but said she supports the idea. “I think there’s a bit of a misnomer—people think some of the creator groups are kind of stuck in the dark ages and we’re trying to clamp down on all of this stuff,” she said. “It’s absolutely not true. Our members and everyone who creates content want as many people to be able to see it as possible. There are a lot of great opportunities out there to get Canadian content in front of people and on as many different screens. The more people see it, the more people will talk about it, the more it will help build our star system. Hopefully, if people are watching, it will help bring more money back into the system to create more content.” In its submission to the CRTC, Google Inc. wrote about Canadian content on its YouTube service and how it is an expression of Canadian culture. “Some of YouTube’s Canadian content is not highbrow, but it is certainly a meaningful contribution to Canadian culture,” Google wrote. “Treating television as rarefied art, and somehow superior in quality to New Media, is a mistake. In fact, television content has increasingly started to mimic user-generated content in its style.” Deer said a platform like YouTube might be more useful in the future, but right now, consumers need to be able to better locate the content they want. “Down the road, you might see people increasingly going down to more direct distribution or self-distribution. I’m not sure the model is completely there yet because the challenge is finding an audience,” she said. “Right now the easiest way to get audience is to start with a conventional over-the-air broadcast, and then you go to specialty and then you go to different windows. With time we might start to see that changing a bit.” mburgess@thewirereport.ca

CRTC, courts, can enforce Cancon rules on foreign OTT services: legal expert

Broadcast | July 7, 2011

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