Involved Investigates – Bill C-11

TORONTO, ON ( October 5th, 2023)

The CRTC issued a press release on Friday, September 29, 2023 regarding the Online Streaming Act. Timing a release for a Friday afternoon is typically an attempt to minimize reach and impact of the information. This release got a lot of attention, including Elon Musk tweeting:

About Bill-11 and C-18

The Online Streaming Act was introduced as Bill C-11 in Canadian Parliament. This is not to be confused with Bill C-18 which became An Act respecting online communications platforms that make news content available to persons in Canada; it was recently in the spotlight for shaking down Meta and Google for almost $300 million for certain news operators. Meta called the governments bluff and suspended news distribution earlier in 2023. The dispute remains at a standstill, with Canadian news operators unable to distribute their content to Canadians on the valuable social channels.

The Online Streaming Act (C-11) fundamentally attempts to apply the Canadian Broadcasting Act to online entities. The Broadcasting Act caused the entire Canadian Content entertainment industry to flourish by requiring broadcasters (TV/radio) to carry a certain fraction of CanCon. This Act made sense when introduced in 1936 as the supply of media was limited – there were very few options available to consumers as there were only a few over the air television and radio stations in any market. Then came cable which introduced foreign signals to the market primarily from America. The original intent of cable was to conveniently distribute over the air (OTA) signals to increasingly urban households, and this included both Canadian and US OTA broadcasters. With these foreign services representing world class content (AKA Hollywood), regulation was required to protect and nourish Canadian culture.

With a limited number of Canadian broadcasters and a substantial amount of foreign content, the Broadcast Act attempted to assert Canadian content and support the industry. The introduction of cable represented a new challenge as entire channels of content (typically US) could be imported by satellite, with no real costs or expenditures incurred in Canada yet compete for the same audience.

The recurring limiter was available spectrum – there remains limited number of spots on the analog dial. Within this finite universe of broadcast bandwidth, it was necessary that a minimum threshold of Canadian content be maintained.

With the internet, there is an unlimited number of foreign services at every imaginable scale available to Canadian consumers. In this infinite-sized online universe, there is no way, or need, to set a minimum threshold of Canadian content. The Liberal government disagrees.

The current government appears to be seeking control of digital information. Bill-C-18 was positioned to be about digital publishers ‘paying their fair share’, however, it’s about government control of distribution of funds to Canadian news companies. with the implication being that the most compliant would be the biggest beneficiaries.

About Bill-11 and C-18

With C-11, the government is trying to apply the Broadcast Act to Online streaming services, such as Netflix, by making them licensed Online Undertakings. Such licensing demands that operators provide any financial or commercial data the CRTC considers necessary for the administration of the Act and requires that they make specific Canadian programs “discoverable” through algorithmic modifications.

A significant component of broadcast regulation requires broadcasting undertakings to make expenditures to support the Canadian broadcasting system. Under such a scheme, the government approves what content is applicable (through processes such as the CanCon “points” system). Netflix already invests heavily in production in Canada, primarily because of the numerous production incentives provided by entities such as the Canadian Media Fund. Encouraging output in this manner seems much more reasonable than forcing global entities to participate in some heavy-handed licensing regime.

The threat of having a license revoked is substantial, and no notable broadcaster has ever suffered that fate in Canada.. The CRTC and Canadian broadcasters, particularly the large ones, have a reasonably non-confrontational relationship with one another. Introducing every streamer that does more than $10 million of business in Canada (the C-11 threshold) to the regulatory mix significantly changes the complexion of the CRTC, creating a more authoritative mandate over current and proposed licensees.

This authority has concerned some Canadians since the inception of both C-11 and C-18. One could speculate that these bills were introduced and managed simultaneously to create confusion in the market. Most Canadians would not be able to discern the difference between these Bills. Whereas C-18 focused on news operators and the distribution of news, C-11 is more insidious.

Implications of the Online Streaming Act

What does the Canadian future look like with the Online Streaming Act? Not great. Any legislation that seems to creep into consumer privacy is not to the benefit of Canadians. The process is entirely opaque. If the CRTC is demanding and collecting all data from streamers, is that not akin to the CCP deriving user insights from TikTok? Consumer choice is going to take a hit through this legislation, which will have two likely results:

1) increased costs incurred by licensees will be passed on to consumers and

2) consumers will increasingly resort to content piracy.

All content is available on the Internet, and consumers will pay for it based on convenience. When content is no longer convenient to access, it will be pirated. This impact of piracy has become more attractive as content distributors have also become content producers with a more significant stake in the game.

Recent Changes to the Act

This brief reiteration of Bills C-11 and C-18 brings us back to the Elon Musk proclamation that Trudeau is trying to quash free speech in Canada. It was the CRTC press release issued this past Friday which kicked off a renewed conversation about the role of the government in media and content distribution.

Bill C-11 goes into effect November 28, 2023, and not even 60 days before that, the Liberal government changed the game to assert that every podcast in Canada must be registered with the government.

That statement is correct and not an overstatement. The government wants a registry of every podcast producer in Canada. The Canadian government pitches the new rule as a “modern broadcasting framework that can adapt to changing circumstances. To do that, we need broad engagement and robust public records.” It requires those podcasters to register with CRTC ‘only once’ and “collects basic information” from them. The idea that the government is deciding to collect this data should be concerning.

The government has tried very hard to frame the various encroachments on privacy as good for Canada and good for the CRTC. Ex-CRTC Chair Peter Menzies tweeted:

“Essentially and eventually, @crtceng (CRTC) intends to regulate everything on the Internet pretty much the way it regulates TV, radio and cable. Say g’bye to a free and open internet in Canada.”

Michael Geist, a prominent Canadian law professor and Internet law expert, has asserted:

First, the CRTC rejected most requests to exclude services that do not fit the conventional video or audio streaming mould, except for some audiobook sites and video games. For example, that means podcasts, which the CRTC admits includes “individuals that host podcasts on their own websites or make them available on a subscription service platform other than a social media service are not explicitly excluded from the Broadcasting Act under subsection 2(2.1)”. The same applies to :

Social media services (“the Commission finds that it is neither necessary nor appropriate at this time to exempt from the Registration Regulations online undertakings that provide social media services.”)
Adult websites (“the Commission considers that it would be asymmetrical to exempt online services that provide adult content, while traditional broadcasters offering such content remain regulated”)
Online news services (“it would not be appropriate to exempt online undertakings that provide news services from the requirement to register”)
Thematic services (“the Commission finds that it would not be appropriate to exempt the broad category of thematic services”)

Given the government’s regular insistence that “platforms are in and users are out,” it begs the question of why some users are, by the Commission’s own admission, now in.

The scope of C-11 seems to be expanding, even before it launches. Everywhere that the scope is increasing, it seems to be infringing on the privacy of Canadians and setting up for greater control of content in Canada.

The Impact on Advertisers

This doom and gloom could have a real impact on the future of advertising in Canada. For example, if Meta takes a hard line against C-11, which would force them to register with the Canadian government, it could mean no Meta products at all in Canada. This would change the Canadian digital media landscape by removing a massive portion of the current media spend allocations. Google is of a similar mindset that the C-18 legislation is unacceptable and unworkable.

Another point to consider is the possible impact on podcasting in Canada. Digital audio has grown substantially as an entirely free market. How will advertisers and agencies respond to government control and censorship of content? Podcast distributors, which will qualify as Online Undertakings under the Act, will be responsible and held accountable for content. Will the distributors tolerate the government trying to enforce elements of the Act such as CanCon or “misinformation”?

This is uncharted territory for Canadians as a whole. The government has made clear steps to remove elements of freedom of speech from the Internet. Distributors of content have been targeted with taxes and fees in an attempt to reallocate wealth to the news publishers, as per C-18. C-11 seeks to regulate the distributors (now Online Undertakings) in terms of content, by threat of substantial fines or removal of their “license”.

If this was truly just about the money, there are many alternatives beneficial to Canadians and the online industry. In the early days of cable television, US Border Stations advertising to Canadians was an issue. For example, the Buffalo, NY stations were made readily available in Toronto via cable, which created new competition for Canadian broadcasters. The US stations could sell at a lower rate as their market was relatively small to Toronto. To make the inventory unattractive, and to make things simple, the government introduced infamous Bill C-58 which made it such that the US inventory could not be written off as an expense by Canadian advertisers. This created confusion in the market and made the inventory unappealing, basically eliminating demand by most advertisers. Creating a framework which incentivizes spending on Canadian platforms would eliminate any semblance of government interference with free speech.

Money talks, and advertisers can play a huge role in steering freedom of speech in Canada.