The CRTC vs. Netflix – POW! SOK! BLAM!

What do you get when you mix Canada’s broadcasting regulator and the company that defines the future of “television”? Fisticuffs! Well, not really, we’re talking about bureaucrats here. But we do get a heated discussion, and Netflix sticking it to the man. We also get internet lawyers on TV. What’s this all about? ONLY THE FUTURE OF BROADCASTING AND INTERNET VIDEO IN CANADA. Which is why they put me on TV I guess. Lemme explain.

So last Friday was the final day of the CRTC’s public hearings as part of its Let’s Talk TV thingamajig. I call it a thingamajig because frankly I am not sure what it is. A program? A plan? A happening? The CRTC calls it a “Conversation with Canadians” but that sounds like marketing-speak to me. In essence the CRTC is examining a bunch of aspects of the future of TV in Canada. So on the last day of these hearings, Netflix showed up, in the form of Corie Wright, Netflix’s global public policy director. Things got testy.

Jean-Pierre Blais, CRTC chairman, asked Ms. Wright to submit information. He wanted to know the number of Netflix subscribers, how much Canadian content Netflix has, and some other stuff. Netflix was like, uh, dude, that’s kind of sensitive private information, can you keep it confidential? Mr. Blais was like, yo, we always keep it real and confidential, you don’t get no special treatment. Netflix was like, dude, not sure that’s good enough. Mr Blais was all “you will comply by 5:00 PM Monday.” Netflix: we’ll see.

So 5:00 PM yesterday came around, and Netflix said bite me. Well technically they said this, in a statement:

While Netflix has responded to a number of the CRTC’s requests, we are not in a position to produce the confidential and competitively sensitive information ordered by the commission due to ongoing confidentiality concerns

And here we are. The CRTC stared Netflix down, but they didn’t blink. That’s all the news that you need to know, to understand my “analysis”, such as it is.

Super terrific happy hour analysis time

Let’s start with some basic facts. The CRTC does not regulate content on the internet. This goes back to a 1999 decision, where they said “meh, not our problem.” This became known as the “New Media Exemption.” Then in 2011, the TV networks in Canada were all pissed, because Netflix was providing programming to Canadians but not paying into the system or obeying Canadian content rules. So the networks asked the CRTC to do something about that, but the CRTC again said “meh, not our problem.” I wrote about all this in 2011, go read that.

2011 was like 3 decades ago in internet time. Back in 2011, the CRTC decided that Netflix was not taking business away from Canadian broadcasters. Can anyone make that argument today? Anecdotal evidence would say no way. I know enough people who have “cut the cord”, in part because of Netflix, to say that there is no doubt the Canadian broadcasting industry is suffering as a result of online streaming services like Netflix. Simply put, you can find some of the best movies on Netflix Canada, not to mention many great shows as well. You can watch without adverts and you can watch a whole series in one sitting if you have to. Canadian broadcasters can have a hard job competing with that level of service.

Does the CRTC want to rescind the New Media Exemption and start to regulate internet content? Who knows. But no doubt they are asking themselves questions now, because Netflix has pissed them off. Should they be regulating the internet? Internet video? That’s the broader question here as a result of this. As Geist put it today:

By escalating the issue with regulatory threats, however, the CRTC – Netflix battle seems set to turn the TalkTV initiative into a legal battle over the CRTC’s authority to regulate online video.

In 2014 a screen is a screen. You watch TV on your computer, you connect to the internet through your TV. The Broadcasting Act, which is where the CRTC gets its powers (in part) to regulate “broadcasting”, is worth looking at here. Is Netflix engaging in broadcasting? Probably. The definitions under the Broadcasting Act are so convoluted and circular they are kind of hard to understand (even for me, the expert!). But the key phrase is always “other means of telecommunications”. It is easy to put the internet in that category.

The CRTC claims it has the power to regulate the internet, they just have chosen not to. They may be right. But what happens if they try to regulate Netflix, or Daily Motion, or Metacafe, or any other site providing “programming” by some “other means of telecommunication? You can see the answer from those services now: “bite me”. Netflix does not have any Canadian operations. They have no Canadian office. They have no Canadian employees. They have no Canadian assets. What is the CRTC going to do? Cross the border with (legislative / judicial) guns drawn? Good luck with that.

Not to mention there is no political will, or public will, to see the CRTC stick its nose in the internet. Since the Netflix announcement yesterday, the CRTC has been quiet. The Minister of Canadian Heritage tweeted:

We will not allow any new regulations or taxes on internet video – we will reject a Netflix and Youtube Tax

If you read the comments on the Globe and Mail stories linked above, I defy you to find someone who says “please regulate Netflix, Mr Blais!”. It just doesn’t seem to be something anyone, except for the traditional broadcasters, want.

But it may be coming. While the lines between traditional TV and internet are blurring, you can still sort of draw a line at least. It is only a matter of time (10 years?) before you really can’t. At that point, the whole industry implodes, and the CRTC starts to wonder why it exists if it’s not regulating the “internet”, in whatever form that is in 2021.

September 29, 2014 update – The CRTC is not amused:

Netflix’s intervention and supporting documentation will be removed from the public record of this proceeding on October 2, 2014

Man that sounds like they are taking their toys and going home to mommy.