Home > crtc, internet, netflix > Actually, regulating Netflix might be pretty absurd

Actually, regulating Netflix might be pretty absurd

April 21, 2011

The other day I wrote about why it might be logical to regulate Netflix in Canada the same way that broadcasters get regulated. While the specific rules differ, both radio and television broadcasters are required to air a certain percentage of Canadian programming each day. On the TV side at least, they’re also required to pay into a fund that then creates this programming.

Since Netflix is essentially another television channel - albeit one that is piped to TVs over the internet - it stands to reason that it should be subject to the same rules. I couldn’t actually think of a good reason why it should be exempt, so I asked people on Twitter to see if they had any ideas. I got a lot of good responses and suggestions.

A number of issues came up. Here’s a sampling, along with some counter-thoughts.

Blockbuster isn’t regulated, and Netflix is similar to Blockbuster. That’s true, although Blockbuster is clearly a retailer. It’s definitely not a broadcaster, while there is a strong case that Netflix is. The two are actually very different businesses.

Should iTunes and similar services like Xbox Live also be regulated? Probably not because iTunes is actually more similar to Blockbuster - a retailer - than it is to Netflix.

Does the medium matter? Strangely, maybe it does - watching Netflix on a television screen seems to make it more regulatable (that’s not a word) than watching it on a computer monitor.

What about YouTube and Vimeo? Those are free services while Netflix is paid. Should that matter? Probably not, because free over-the-air television stations are still subject to CanCon rules.

Netflix already has a lot of Canadian content. Yes it does, but it isn’t required to pay for producing it.

Netflix is different because it’s all on-demand. This one’s a stumper because it puts the service in a category all its own. It’s most similar to cable providers’ video-on-demand television services, which do have CanCon regulations applied to them, but it’s not quite the same. For one thing, cable VOD is pay-per-view (correct me if I’m wrong, it’s been ages since I’ve had cable) while Netflix is more of an all-you-can-eat buffet.

As is pretty evident, whether or not Netflix should be regulated is a very muddy issue because many moving pieces come into play. One sentiment that came through again and again during the Twitter conversation was the belief that regulating Netflix is a slippery slope - if you do it, sooner or later people are going to want other internet services and websites regulated.

That might be the kicker to the whole argument. After all, Canadians can listen to just about any radio station in the world online right now - here’s a fine selection of what the Czech Republic has to offer - so should those stations also be subjected to CanCon regulations? That would be pretty absurd, wouldn’t it?

One thing is definite: the internet has made cultural protectionism obsolete. As several people suggested during the Twitter chat and as I intimated toward the end of the other day’s post, it’s probably about time to jettison these outdated rules. That, however, is another can of worms for another day.

Categories: crtc, internet, netflix
  1. April 21, 2011 at 10:01 am | #1

    Interesting post Peter. I think there are two issues at play here. First, do you agree with CanCon rules in the first place? That’s a whole debate in and of itself. But assuming for the moment that they are here to stay, the second and more timely question is who should be regulated under CanCon. The lines are blurry to say the least, but I think a starting point should be CRTC regulation. If your business is regulated by the CRTC, CanCon applies. If it isn’t, you should be exempt. That way, we use a new and more compelling yardstick to evaluate the applicability of CanCon. If the country felt, for example, that MSN.ca should be regulated by the CRTC (a terrible idea IMHO) then CanCon rules apply to them. Simply put, if a business has a large enough impact on Canadian consumers that CRTC regulation is deemed necessary, CanCon is part of the regulation. Hopefully, most net-delivered content and services will escape this burden.

    • April 21, 2011 at 10:44 am | #2

      Good points. I personally don’t think we should have any CanCon requirements at all but if we must accept them, I really don’t see why businesses have to pay for them. If the government (acting for the people) feels that Canadian culture is something that needs to be subsidized, shouldn’t the burden fall to the taxpayer?

      • sirhomealot
        April 21, 2011 at 10:45 am | #3

        LOL - I thought that’s what the CBC was for! ;-)

    • April 21, 2011 at 11:28 am | #4

      Should we have CanCon?

      For me it comes down to editorial control.

      When you have something that is clearly a broadcast, where there is some executive deciding what show is going to be aired and when, then I believe we need CanCon rules.

      When you have an open retail scenario when a retailer makes major amounts of content available and it is the consumer that makes their own choice, then CanCon gets in the way of Canadians being able to make their own choices.

      For me it is about limited spectrum. I believe that the limited shelf-space used to promote some shows over another in Walmart would make a better target for CanCon rules than Netflix.

      But the question of content generation and funding is another set of questions.

      As a condition of government subsidies or access to limited resources (OTA spectrum, right of way to put wires above/below public/private property) it makes sense for there to be Canadian content requirements. This clearly applies to broadcasters and BDU’s (cable/satellite), but does this really apply to NetFlix?

      If NetFlix wanted some of the various government handouts for creating content, then clearly there would be some Canadian content requirements — but if they never put their hand out the way the broadcasters do?

  2. rbn
    April 21, 2011 at 10:32 am | #5

    The other catch is that the Internet allows companies to sell to consumers without necessarily having a presence in Canada. Right now it’s difficult to offer an international service due to online streaming rights being parceled out geographically, but that may change as these OTT services grow in influence and the content producers find them more lucrative partners for the streaming rights than conventional networks (ie why mess around with negotiating with hundreds of different companies around the world who will only use it for peripheral purposes when you can deal with one big client who is using it as their main line of business (and hence is likely willing to pay more)).

    When and if that happens, onerous rules will just provide these companies with incentives to keep the entirety of their operations in the US where they are outside of the CRTC’s jurisdiction (not to mention killing any possibility of a home-grown options ever arising). Further, this would ultimately trigger the opposite effect than desired - with a purely international service the demand for CanCon would be limited and we’d likely see *less* of it than we do now.

  3. April 21, 2011 at 11:02 am | #7

    sirhomealot :

    LOL – I thought that’s what the CBC was for! ;-)

    Heh, I hadn’t even thought of that. Why do we have a taxpayer-funded CBC AND industry-funded CanCon? Holy overkill Batman.

  4. Todd
    April 21, 2011 at 11:23 am | #8

    Just to confirm a point you ask about “cable VOD is pay-per-view (correct me if I’m wrong…”

    You are partly. Cable VOD has 2 areas. One is pay-per-view (mainly newish movies) and the other side is totally free and includes the last 2-4 episodes of many TV shows from all the major networks.

  5. Marc Venot
    April 21, 2011 at 2:34 pm | #9

    Actually the CBC is mostly hockey looped and rebroadcast of the Rick Mercer show or 22 minutes. Radio-Canada is doing a little better.
    Why not having the equivalent of PBS?

    • April 21, 2011 at 2:55 pm | #10

      CBC television is different than CBC radio. I’m a fan of CBC radio, podcasts and cbc.ca news. I’m a fan of TVO television and podcasts. Don’t see much difference between CBC TV and CTV TV.

      • Derek Anderson
        April 21, 2011 at 4:09 pm | #11

        I don’t understand Peter. You’re mixing up broadcasters and broadcast distribution units (BDUs). Broadcasters don’t pay into the CMF and BDUs don’t commission content.

        Netflix on the other hand gets a free ride on three fronts. They’re commissioning content (so they have editorial control - part 1 of the CanCon equation) and they don’t have to support the Canadian production sector by paying into the CMF for example (part 2 of the CanCon equation) and finally they don’t have to shoulder any of the infrastructure costs of fiber optic to the home or any of the other necessary infrastructure improvements for Web 3.0 services.

        Canadian ISPs and BDUs are upgrading infrastructure and paying into the CMF, in return they get regulatory protection. It’s a classic P3 arrangement. That was the deal they made with the CRTC and it should be upheld.

        If you don’t think there is any reason to protect a distinct Canadian voice on our televisions and other media then go ahead and get rid of regulatory protection. But you’ll lose the 200,000 plus jobs that the film and television industry provides in Canada.

        And please don’t argue that new/transmedia doesn’t get any regulatory protection and therefore traditional media shouldn’t either. That’s wrong first of all, as new media producers also have access to the CMF. And secondly, their’s is a direct to consumer business model not one mediated through a broadcaster. But more importantly, that internecine bickering just damages both groups who share common interest more and more with each passing year.

        There’s no easy solution. But if we’re going to get to one, we have to make sure we’re clear about the landscape.

  6. April 21, 2011 at 4:33 pm | #12

    Derek: I’m not mixing up BDUs with broadcasters - they’re one and the same (Bell + CTV, Shaw + Canwest, Rogers + City). Also, the argument that over the top providers like Netflix don’t pay for infrastructure… come on, that ship sailed a long time ago. If it wasn’t for Internet services like Netflix, Google, Skype et al, there would be no reason to subscribe to the Internet and thereby give ISPs those fat revenues (which fund the infrastructure). As for the CMF, I don’t think the likes of YouTube or Netflix would even consider drawing on that. In regard to losing jobs by scrapping CanCon, like I said: another topic for another day.

    • Derek Anderson
      April 21, 2011 at 8:06 pm | #13

      Peter: That’s true of the three examples you sighted and Cogeco to some extent. But it is not true of Telus, or Videotron or the handful of other BDUs operating in Canada. And on the flip side, there are scores of independent broadcasters who are not BDU affiliated. If you are going to treat Shaw, Bell, and Rogers differently than everyone else, why not Netflix?

      I simply don’t buy the argument that somehow by virtue of their existence that we owe Netflix, Google or Skype some deep debt of gratitude and therefore they get a free pass on paying for infrastructure. I paid for high-speed internet service long before Skype or Netflix showed up. To suggest that we owe them for the very existence of the internet as it is today is like saying we should be thankful that there are so many unregistered cars on the road because otherwise we wouldn’t need to have six lane highways and everyone loves six lane highways. They are just users of that infrastructure. Google, Netflix, and Skype, or Skoogle, Getflix, and Nype - it matters not. They didn’t build the web and they have no claim to access. They can only exist because other companies have shouldered the cost of building the infrastructure. They don’t build infrastructure. End of story.

      I would never expect Netflix, or Youtube, or Hulu to participate in the CMF system. They have no vested interest in Canadian content, or the Canadian TV and Film industry. Canada is just another market to them. No bigger than California.

      Canadian broadcasters were incredibly naive two years ago when they said that OTT services were not disruptive. Incredibly! But that doesn’t change the fact that OTT services now threaten to completely erode a system that we’ve spent the last thirty years building. Why should we let that happen? To protect a principle that is not protected in any other industry in Canada. Not mineral exploitation. Not the automotive industry. Not lumber. Not agriculture. If free and unfettered commerce is what you’re after, why don’t you start with something a little more precious - like fresh water. Throw open the borders, let ‘em have it. And let Canadians choose who to buy their fresh water from.

      • April 22, 2011 at 11:01 am | #14

        I hope you realise that analogies between phone/cable infrastructure and roads demonstrate the opposite problem to what you describe? If we were talking about a tax on all users of communications infrastructure to fund a publicly owned infrastructure, then there would be no issues. While publicly subsidised and beneficiaries of right-of-way exceptions to property rights, phone and cable companies allege ownership “rights” and the ability to privately set policy on that infrastructure.

        I’m all for separating the private-sector and public-sector aspects of our communications infrastructure, at which point your analogy and suggestions might make sense. I said so at the CRTC http://creform.ca/5096

        But suggesting that NetFlix should subsidise a competitor that is trying to put them out of business is not appropriate.

      • April 22, 2011 at 11:16 am | #15

        Not only is the whole “free ride” argument specious, it’s also not even remotely true. The big content providers pay billions in bandwidth and other infrastructure costs. As Arbor Networks has said, if Google were counted as a telecom company it would actually be the third biggest in the world based on its infrastructure: http://www.techdirt.com/articles/20100412/0111098965.shtml

  7. April 22, 2011 at 11:24 am | #16

    petenowak2000 :
    Not only is the whole “free ride” argument specious, it’s also not even remotely true.

    Ahh, but everyone is claimed to be getting some sort of free ride. Content companies think communications companies should pay to distribute content, communications companies think content companies should pay to have their content distributed … we could go on-and-on with all the circular arguments have been tossed out there. Clearly everyone owes everyone else a job and free money growing on trees.

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