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The Copyright Lobby’s IIPA Report: Fake News About the State of Canadian Copyright

Michael Geist Law RSS Feed - Wed, 2017/02/22 - 11:25

The International Intellectual Property Alliance (IIPA), a lobby group that represents the major lobbying associations for music, movie, software, and book publishing in the United States, has released its submission to the U.S. government as part of the Special 301 process. The Special 301 process leads to an annual report invariably claiming that intellectual property rules in the majority of the world do not meet U.S. standards. The U.S. process has long been rejected by the Canadian government, which has consistently (and rightly) stated that the exercise produces little more than a lobbying document on behalf of U.S. industry. The Canadian position, as described to a House of Commons committee in 2007 (and repeated regularly in internal government documents):

In regard to the watch list, Canada does not recognize the 301 watch list process. It basically lacks reliable and objective analysis. It’s driven entirely by U.S. industry. We have repeatedly raised this issue of the lack of objective analysis in the 301 watch list process with our U.S. counterparts.

The lack of credibility stems in part from the annual IIPA submission. While the submission generates some media attention, this year’s falls squarely into the category of fake news. The IIPA focuses on three concerns: piracy rates in Canada, the notice-and-notice system for allegations of infringement, and fair dealing. None of the concerns withstand even mild scrutiny and each is addressed below.

1.    State of Canadian Piracy

Throughout the Canadian copyright reform process that led to the 2012 law, the IIPA and rights holder groups claimed that Canada was a piracy haven in need of copyright reform. Despite getting what it asked for – tough anti-circumvention rules similar to those found in the U.S., an ISP liability system, an enabler provision that makes it easy to target websites that primarily facilitate infringement, and retention of some of the biggest statutory damages for commercial infringement in the world – the IIPA has returned to the same playbook in advance of the review of Canadian copyright law scheduled for later this year.

The IIPA claims are presented without much evidence, presumably because it isn’t available. The real Canadian story is that infringement rates have consistently declined in recent years. For example, the Business Software Alliance’s annual report last showed Canada at its lowest software piracy rate ever and well below the global and European averages. The decline will not come as a surprise to anyone following the explosive growth of digital services in Canada. As many predicted, the availability of affordable, convenient services is easily the best method to counter infringement. In the case of Canada, Netflix is seemingly too popular for many in the cultural community as the millions of subscribers have transformed the sector and conclusively demonstrated that Canadian consumers are willing to pay for good entertainment services. The growth of these services is not limited to video. SOCAN, Canada’s largest music copyright collective, recently reported record earnings from Internet streaming services which increased by more than 460 percent (which followed from previous records) again confirming that Canadian consumers are paying for music online too.

But wait, says the IIPA. While it admits that Canadian law has been used to shut down piracy sites such as isoHunt and KickAss Torrents, it identifies a few other sites that it says have a Canadian connection. However, the IIPA neglects to mention that the U.S. government’s most recent report on notorious markets makes no reference to Canada. In fact, it identifies what it says are the most problematic online markets and sites in the world and the word “Canada” does not appear anywhere. More importantly, the IIPA acknowledges that the Canadian enabler provision has been effective in shutting down sites of this kind. The failure is not a function of Canadian law, but rather a failure of the IIPA and its members to use the very legal tools they demanded.

2.    Notice and Notice

The IIPA is also unhappy with Canada’s notice-and-notice system, which it says is inadequate, is not receiving full compliance from ISPs, and which hurts licensed services. As noted above, licensed services are experiencing record revenues and growth in Canada.  Further, there has been no public evidence that ISPs are not compliant with the law. It would be surprising if there was given that ISPs face financial penalties for failure to comply with the law.

With respect to whether the notice-and-notice system meets U.S. standards, it is worth noting that the U.S. government itself has acknowledged that it does. As part of the Trans Pacific Partnership treaty, the Canadian system was treated as equivalent to the U.S. system for the purposes of complying with ISP liability and safe harbour rules. All parties, including the U.S. and Canadian governments, asserted that no reforms would be needed in Canada to meet the TPP requirements. Moreover, promoting the U.S. system raises serious concerns, particularly since it is receiving increased scrutiny with reports that it generates millions of fake DMCA notices that have massively inflated claims of online infringement. In fact, Google has advised the Register of Copyrights that 99.95% of the processed URLs from Google’s trusted submitter program regarding search are machine-generated URLs that do not involve actual pages in the search index. In other words, the notice-and-takedown system is filled with fake notices and rife with abuse.

The Canadian notice-and-notice system needs amendment, but not for the reasons articulated by the IIPA. The Canadian government never intended for notice-and-notice to be used by rights holders to send thousands of settlement demands and scare recipients into paying settlements. The Canadian government’s own public documents make it clear that there is no obligation to settle and even the movie industry has established a website that tries to set the record straight. The misuse of the notice-and-notice system is the real story and one that requires reform when the government turns to copyright.  Notice-and-notice should not be used by rights holders to trick or scare users into paying hundreds of dollars for settlements as part of ethically questionable anti-piracy business tactics. Addressing the notice-and-notice loopholes in the system should be at the top of the 2017 reform list.

3.    Fair Dealing

The IIPA comments on Canada also focus on Canadian fair dealing law, as it points to the 2012 reforms and states “that none has had a more concrete and negative impact than the addition of the word ‘education’ to the list of purposes (such as research and private study) that qualify for the fair dealing exception.” Given that it is fair dealing/fair use week, it essentially to correct the record yet again.

i.    Fair Dealing Practices

First, the attempt to link fair dealing practices in Canada with the 2012 legislative reforms are false. Fair dealing includes multiple purposes that can be relied upon by educational institutions, including research and private study. The addition of education in 2012 was always evolutionary rather than revolutionary. Indeed, the proof is in the Supreme Court of Canada’s fair dealing copyright decisions, which ruled against Access Copyright without the benefit of an education fair dealing purpose.

The widely used fair dealing guidelines are based primarily on decisions from the Supreme Court of Canada, the Federal Court of Appeal, and the Copyright Board of Canada. Despite claims that fair dealing guidelines went beyond the law, Access Copyright has lost every legal attempt to challenge them. The courts and board have provided detailed guidance the scope of fair dealing, the appropriate test, and the applicability of insubstantial copying. Current practices have been influenced by what courts and tribunals have ruled, not what the government implemented in 2012. In fact, Canadian educators could rely far more on the 2012 reforms, including the use of Internet exception for education and the exception for non-commercial user generated content.

It is important to note that Canadian fair dealing practices are not inconsistent with many jurisdictions around the world. For example, the U.S. fair use provision is far broader than fair dealing with recent fair use decisions involving the legality of university copying, digitization practices, and use of APIs. Fair use can be found in other countries, some of which have practices that involve far more generous copying than Canada. For instance, copying 20% of a book is viewed as fair use in Israel, double the Canadian guideline. Most recently, the Australian Productivity Commission, a government-backed think-tank, recommended the adoption of fair use in that country.

ii.    The State of Canadian Educational Publishers

The IIPA repeats the oft-stated claim that Canadian educational publishers are struggling and seeks to draw a direct link to fair dealing. The claim is false. Publishers may be facing new challenges, but copyright is a minor part of the story as disclosed in their own corporate and legal filings. Pearson PLC, the world’s largest education company, recently warned of an unprecedented decline in the North American education publishing market. This primarily reflects U.S. developments and highlights how Canada is not an outlier in educational publishing.

Pearson is not alone. Ariel Katz has previously debunked claims regarding Oxford University Press, whose recent annual reports acknowledge changing market conditions around the world, with the company noting:

“the Higher Education textbook market shrank in important markets such as the UK, Canada, and the US, illustrating the contrasting array of market conditions to which OUP needed to adapt in 2014.”

Nelson Education is the largest Canadian educational publisher and its President and CEO Geoff Nordal identified the primary economic challenges in an affidavit:

In Canada, each province and territory has authority over curriculum development and education funding for the K-12 Market. Following a historic high in Canada in 2006 with respect to new curriculum development and spending, the K-12 Market contracted. The K-12 Market has been negatively affected by reduced spending on new curriculum by Canadian schools over the last five years, and in particular the spending decline in Ontario which represents the largest proportion of educational spending in Canada.

In the higher education market, Nordal focused on the following issues:

The Higher Education Market has been negatively affected by, among other things: a lack of clarity at universities with respect to ‘ancillary fees’; with certain institutions banning digital homework solutions with added fees; increased traction in the open textbook movement due in part to government funding in a number of provinces; and the use of used books, rental books and peer-to-peer sharing, impacting the demand for new textbooks at universities and colleges in Canada. The impact caused by used books and rental books is mitigated by revisions cycles and new textbook editions, the adoption of digital materials and increased use of custom and indigenous products. In addition, the Higher Education Market is in transition from traditional books to digital products, which is having a transformative effect on the business.

Nordal’s emphasis on reduced provincial spending (for K-12) and the digital shift (for higher education) is consistent with the data from other sources. The 2010 report on K-12 publishing commissioned by Canadian Heritage also pointed to the long pilot periods delaying purchasing decisions and the increased use of alternative and digital resources.

These findings are also consistent with a 2015 study prepared for Creative BC and the Association of Book Publishers of British Columbia. The study characterizes the challenge for educational publishing as follows:

Scholarly and educational publishers share some of the same issues as trade publishers, but they face other unique challenges. Tablet and other nonprint use will increase in the school systems here and abroad, changing how educational materials are bought, used and updated. Scholarly publishers and trade publishers that sell into the academic market are struggling with the impact on their sales of Open Access and fair use policies, tailored subscription services such as Scribd’s Edelweiss, used book sales, student piracy and increased library use for class reading lists.

None of this will surprise anyone on campuses or in schools in Canada. As the B.C. study on the publishing industry notes, open access and free online alternatives do represent a business threat to the conventional publishing industry. Several provinces have invested heavily in developing quality, peer-reviewed online materials that can be freely used by any school. For example, Open School BC, backed by the province, has modules in the sciences, social sciences, and languages. The B.C. Open Textbook Project has over 150 open textbooks that has saved students millions of dollars. E-learning Ontario has an online resource bank featuring thousands of resources from students from kindergarten to Grade 12.

Meanwhile, Canadian post-secondary institutions continue to spend hundreds of millions of dollars each year on licensing from publishers. As the Canadian Association of Research Libraries (CARL) noted at the start of this academic year:

The 31 member libraries of the Canadian Association of Research Libraries (CARL) spent $293 million on information resources in 2014-15, demonstrating a clear commitment to accessing print and digital content legally and rewarding content owners accordingly. Universities are actively engaged in outreach to their faculty, staff, and students, educating them on their rights and responsibilities under the Copyright Act and ensuring that uses of material under copyright fall well within the provisions of the law. Where educational uses are more substantive and therefore fall outside of fair dealing, the content is either purchased to be added to licensed collections, or rights clearances are obtained and royalties are paid for these uses. Trained, knowledgeable library staff support these activities.

The IIPA and its allies have engaged in a fake news effort to malign fair dealing in Canada. The actual numbers and evidence tell a far different story: paying for content remains by far the largest method of acquiring access to content for educational institutions. In fact, the spending from just the 31 CARL libraries on information resources are more than 14 times the total revenues for Access Copyright for all its licences.

The Future of Canadian Copyright Reform

The issue of copyright reform will unquestionably be on the policy radar screen starting later this year and continuing into 2018. Changes are needed: as discussed above, the government should address the misuse of notice-and-notice. With the Canadian recording industry now admitting that the WIPO Internet treaties were a wrong guess, the government should fix the fair dealing gap by creating a clear exception in the anti-circumvention rules for fair dealing.  Further, it should consider expanding fair dealing to a fair use model (by adding “such as” to the list of fair dealing purposes), which would be more consistent with the intent of the law and create the necessary pro-innovative policies that we see in places like the U.S., Singapore, and Israel. As the government moves forward with the review process, it will be essential that the debate focus on the real state of Canadian copyright, not the fictional one portrayed by the IIPA.

The post The Copyright Lobby’s IIPA Report: Fake News About the State of Canadian Copyright appeared first on Michael Geist.

Bogus Claims: Google Submission Points to Massive Fraud in Search Index Takedown Notices

Michael Geist Law RSS Feed - Wed, 2017/02/22 - 08:44

The U.S. DMCA notice-and-takedown system has generated heated debate for many years with supporters arguing that the safe harbour is essential, while rights holder critics countering that the growing number of takedown notices sent to Google illustrates mounting piracy concerns. In recent months, there have been several reports that raise questions about the reliability of takedown notices. A study released last year by the University of California, Berkeley and Columbia University found that approximately 30% of notices were questionable, while TorrentFreak report this week identified tens of millions of fake DMCA takedown notices sent to Google on a website with virtually no traffic. An earlier report also raised questions about dubious takedown practices.

Yet those reports pale in comparison to data just released by Google in its submission to the Register of Copyrights as part of the review of the DMCA notice-and-takedown system. Google reports that the overwhelming majority of takedown notices sent to Google Search through its Trusted Copyright Removal Program do not involve pages that are actually in its search index. The submission states:

a significant portion of the recent increases in DMCA submission volumes for Google Search stem from notices that appear to be duplicative, unnecessary, or mistaken. As we explained at the San Francisco Roundtable, a substantial number of takedown requests submitted to Google are for URLs that have never been in our search index, and therefore could never have appeared in our search results. For example, in January 2017, the most prolific submitter submitted notices that Google honored for 16,457,433 URLs. But on further inspection, 16,450,129 (99.97%) of those URLs were not in our search index in the first place. Nor is this problem limited to one submitter: in total, 99.95% of all URLs processed from our Trusted Copyright Removal Program in January 2017 were not in our index.

These numbers of simply staggering with only a tiny number of millions of requests reflecting actual pages in the search index. Rather, 99.95% of the processed URLs from Google’s trusted submitter program are machine-generated URLs that do not involve actual pages in the search index. Given that data, Google notes that claims that the large number of requests correlates to infringing content on the Internet is incorrect:

Nor is the large number of takedown requests to Google a good proxy even for the volume of infringing material available on the Internet. Many of these submissions appear to be generated by merely scrambling the words in a search query and appending that to a URL, so that each query makes a different URL that nonetheless leads to the same page of results.

The incredible volume of fake claims regarding allegedly infringing pages represents a serious problem. Indeed, the Google data points a massive fraud in search index takedown requests, calling into question claims about the scope of infringing material on the Internet. The Register of Copyrights review of the DMCA continues with written submissions on empirical research due next month.

The post Bogus Claims: Google Submission Points to Massive Fraud in Search Index Takedown Notices appeared first on Michael Geist.

Bains Gives Bell-MTS Merger a Pass Despite Competition Bureau Finding Serious Wireless Market Problems

Michael Geist Law RSS Feed - Tue, 2017/02/21 - 10:12

The Canadian government has prioritized innovation as a marquee policy issue. There are  signals that Innovation, Science and Economic Development Minister Navdeep Bains will use the upcoming budget to overhaul the myriad of innovation funding and support programs that have cost billions of dollars with only a limited return on investment. There is no reason to doubt the commitment to innovation, but a national strategy must involve more than changes to how the government doles out cash incentives.

Yet when presented with the opportunity to address a core component of any serious innovation strategy – the communications sector that provides the foundation for the digital economy – Mr. Bains last week took a look at a market that the Competition Bureau found suffers from coordinated behaviour among the three dominant providers and simply whiffed. My Globe and Mail column notes that the decision to approve the merger of BCE and Manitoba Telecom Services (MTS) with only minor tinkering seems certain to increase wireless pricing for Manitoba residents and eliminate one of the few competitive bright spots in Canada.

The government’s news release on the merger approval attempted to shift attention toward the expansion of Xplornet into the Manitoba market as the satellite Internet provider picked up some wireless spectrum, six retail locations, and 24,700 MTS customers that were otherwise headed to Bell. Xplornet plans to use the assets to launch its own wireless service in the province.

Canadian consumers can be forgiven, however, for sensing that they have seen this movie before and knowing that it does not end well. The inability of smaller, wireless only entrants such as Public Mobile and Wind Mobile to create viable fourth competitors leaves little hope that Xplornet will do any better. Indeed, with the same challenges – the lack of bundled services, weak purchasing power for new devices, and threats from discount flanker brands deployed by the Big Three – a small new entrant will be no match for Bell, Telus and Rogers.

The Xplornet news distracted from the far more important findings of the Competition Bureau. Its analysis of the merger confirmed what critics of the wireless sector have long maintained, namely that markets with a strong fourth competitor feature better pricing than markets dominated by the big three. The Bureau, which had access to confidential internal company data, issued the following unambiguous conclusion:

“as a result of coordinated behaviour among Bell, TELUS and Rogers, mobile wireless prices in Canada are higher in regions where Bell, TELUS and Rogers do not face competition from a strong regional competitor. Conversely, the Bureau concluded that where Bell, TELUS and Rogers face competition from a strong regional competitor, prices are substantially lower. The Bureau concluded that the lower prices are caused by the presence of a strong regional competitor who can disrupt the effects of coordination among Bell, TELUS and Rogers.”

The Bureau’s findings represent a near-complete indictment of the current wireless competitive landscape in Canada. While the Big Three insist that they actively compete against each other, it found that they actually coordinate with each other in markets without a strong fourth competitor. It is the presence of a strong fourth player that disrupts that coordination and which helps explain why the companies engaged in a lobbying blitz against the potential entry of U.S. giant Verizon several years ago.

The Bureau gave the merger a pass by concluding that beefing up Telus’s presence in Manitoba and adding Xplornet would help offset the loss of MTS. But those assurances are difficult to square with the evidence on the competitive effects of a strong regional competitor.

The Conservative government was criticized for failing to fix Canada’s uncompetitive wireless market, but at least it recognized the problem and did not shy away from challenging the Big Three. By contrast, Mr. Bains was faced with a sure thing – higher wireless prices for consumers and a less competitive, innovative marketplace – and blinked. Unless there are some new pro-competitive policies on wireless yet to come, the approval of the BCE-MTS merger guarantees that the government’s innovation strategy will start with a weak foundation.

The post Bains Gives Bell-MTS Merger a Pass Despite Competition Bureau Finding Serious Wireless Market Problems appeared first on Michael Geist.

fair dealing week 2017

Fair Duty by Meera Nair - Sun, 2017/02/19 - 22:23

Tomorrow marks the start of Fair Dealing Week in Canada. There is much to be proud of with the steady advance in the realm of exceptions, gained not by intemperate action but by deliberative thought on the part of the judiciary, the government, the Copyright Board, and, institutions and individuals across the country. A moment of celebration and pride is warranted.

Yet, significant challenges remain. Educational institutions continue to be a favorite target with copyright owners. Those who take aim at fair dealing lack a cogent argument grounded in either legality or economics, and so must rely on hyperbole. The picture painted is that educational institutions steal from an industry which is on its deathbed, to the detriment of those individuals who carry the very soul of the nation.

In the absence of informed discussion, emotion can masquerade as logical thought. With our sesquicentennial year upon us, the emotion index will likely exceed what hysteria we have already seen. Unfortunately, many Canadians (and their representatives in government) are unaware of the nuance of copyright, that it is a system of limited rights. This post is written with the hope of reaching some of those individuals.

For those who do not yet know what fair dealing means in an educational environment, have a look at Student Life without Fair Dealing. This presentation was created a few years ago by Annie Ludbrook of Ryerson University; it remains the best illustration of how necessary fair dealing is to learning, and takes only a minute or two to view.

And, if interested in a larger story, please see below.

“Millions of times a day copyright material is probably shared in this country.”[1]

That phrase stood out among the miscellany that a Sunday-morning excursion into Twitter had unearthed. Said by a Federal court judge, it was in reference to a dispute over unauthorized uses of material protected by copyright. This dispute (later resolved in favour of fair dealing) is only one of many skirmishes in an ongoing Great Battle in the realm of copyright. Ever since it became apparent that digital technology set on world-wide networks has considerable potential for distribution, copyright holders and copyright users alike have claimed those streams of sharing. To some, sharing represents a threat to the very production of creative material; to others, such sharing is creativity’s salvation.

But the contemporary clash of views is not the first Great Battle fought in the name of copyright. Matthew Arnold, renowned poet and social commentator of 19th century England, bestowed the title on a Royal Commission which probed the very structure of copyright as a grant of monopoly power and openly questioned its usefulness. Eventually, the outcome supported the continuance of copyright as it was designed and has functioned so ever since.

But a critical point has almost been lost to history; the decision was not unanimous. Ten of the fifteen commissioners attached dissenting opinions to the final report, dissatisfaction brewed even among the victors. One could say that the only element of absolute unanimity was the implicit boundary that circumscribed any assertion of copyright: copyright was a means to govern the conduct of players in the commercial book market.

Meaning, copyright was a trade regulation imposed on corporate entities. Yet by virtue of what will long be rued as a poor choice of vocabulary, today the language of copy suggests that copyright may privatise the intellectual and creative activity of individuals.

Copyright falls within a branch of law addressing what has come to be known as intellectual property, a phrase of equally dubious construction. We are told that Thomas Jefferson was the first to associate intellectual creation as property, a word expressly chosen in order to break with the English tradition of declaring such rights as monopolies (a practice of control that functioned to the detriment of the people in England).[2]

Ironically, three centuries later, intellectual property rights are just as capable of being harnessed towards monopolistic behavior. For instance, efforts by literary estates to curtail scholarly work,[3] a steep escalation of textbook costs,[4] and the thirty-year effort it took to reach an international agreement allowing some manner of adaption and distribution of copyrighted materials to aid visually-disabled people,[5] should disabuse anyone of the notion that copyright can do no harm.

A cogent argument for some control over intellectual creations does exist. It is reasonable that writers, artists, musicians, et al, should receive remuneration when their creations are exchanged in a professional marketplace. Many will agree that the likelihood of development of creative effort is heightened when there is assurance of some rights of control after creativity has been exercised. But perpetual furor over copyright eclipses a vital factor: that control is insufficient to bring about creativity.

Creative effort does not occur by the presence of rights alone. Creativity needs knowledge, awareness, skill, diligence, luck, fodder, and something else that lacks capture in a single word; loosely speaking, this indefinable element is a capacity to envision that which others may not. A confluence of all these elements might result in developments in art, music, literature, or science.

In this light, the creative process seems less and less the purview of law, and more and more some manner of alchemy, or worse. According to Voltaire: “One must be possessed of the Devil, to succeed in any of the arts.”[6] Alternatively, one constant theme regarding creative effort is to engage with other creative effort. William Faulkner’s advice: “Read, read, read. Read everything — trash, classics, good and bad …. You’ll absorb it. Then write.”[7] Or this declaration from Margaret Atwood: “The first thing I did when starting this project was to reread the play. Then I read it again. Then I got my hands on all the films of it that I could find, and watched them. Then I read the play again… then I read it again, backwards.”[8]

And yet, law dominates discussions of fostering creative effort. Likely because law is specific, law can be written down, law can be upheld, or, violated and then wielded as an instrument of retribution. Addressing the law meets a political goal—to show that something is being done. Three centuries ago, copyright law was created under the façade of supporting starving authors; that trope reappears as each development in media is cast as a threat to literary or other artistic endeavors. The refrain repeats: Dire consequences will lie ahead for society as a whole, unless something is done.

Today, the repercussions of amending copyright law far exceed the mandate of trade regulation. Technological development has brought us to a point where we live our private lives through copies. Unauthorized use is a vital step to creativity and needs protection.

Fair dealing is a very modest exception to the monopoly of copyright. A fair dealing of copyrighted work must not only fit within prescribed categories of use (education is among them) but must also survive a fairness analysis. The educational community takes its responsibilities seriously; no institution would sanction unrestrained copying as fair dealing. Yet this is the image presented by those who prefer to cast fair dealing as something to fear and something to blame.


[1] Justice Barnes, quoted by Graham C. Gordon, Loonie Politics. 24 September 2016.

[2] The praecursor to copyright were the printing privileges bestowed upon guilds; the most powerful among them holding control over the printing of widely used classes of books such as catechisms, bibles, ABCs, and lawbooks. Philosopher John Locke condemned all monopolies as hoarding money and property to the detriment of the kingdom and was particularly incensed at the system which enabled booksellers to charge high prices for poorly produced books.

[3] A case of note was the unwillingness of James Joyce’s estate to recognize fair use in scholarly work; see Schloss v. Estate of James Joyce.

[4] For instance, “…new textbook prices increased by a total of 82 percent over [2002-2012],” see Students Have Greater Access to Textbook Information, U.S. Government Accountability Office. There does not appear to be comparable data for Canadian students, but as products are generally more expensive to purchase in Canada, it is unlike that the situation would be better on this side of the border.

[5] James Love, “A Treaty for the Blind?Fordham Intellectual Property, Media and Information Journal (2006), Vol. 22 Issue 12. See also Meera Nair, “Wonderful news from Marrakesh,” in FairDuty, 6 June 2013,

[6] Quoted in Nancy Mitford’s Voltaire in Love (London: Hamish Hamilton, 1957).

[7] “The Best Writing Tips From William Faulkner,” 25 September 2013, Huffington Post.

[8] Margaret Atwood, 24 September 2016, The Guardian.

The Shattered Mirror, Part Three: Why Income Tax Changes for Digital Advertising Won’t Save Local Media

Michael Geist Law RSS Feed - Fri, 2017/02/17 - 10:15

The third part of my critique of The Shattered Mirror: News, Democracy and Trust in the Digital Age, the Public Policy Forum’s report on the future of media, has taken longer than anticipated. In the interim, there have been some excellent posts on the report, including those from Andrew Potter, Dwayne Winseck, and Marc Edge. The first two parts of my review focused on the copyright and CBC/open licensing recommendations. This post discusses the report’s most significant financial recommendation: reforms to the Income Tax Act that would be designed to increase or capture digital advertising costs with Google and Facebook accompanied by a scheme to create a fund to support Canadian media.  The recommendation is similar – though not identical – to one floated by communications law veterans Peter Miller and David Keeble in a report commissioned by the Friends of Canadian Broadcasting (FCB).

At the heart of both reports is the recommendation that advertising purchased on foreign Internet-based media should not be tax deductible. The reports offer a tempting vision for those seeking a simple solution to the struggles of Canadian media organizations. Both posit that much of the problem lies largely with the dominance of Google and Facebook in the digital advertising market. According to the FCB report:

The reason is not a failure on the part of Canadian media to transition to the internet age, or to meet Canadians’ needs. The reason, adapting the well known trade term, is the ‘dumping’ of advertising inventory into the Canadian marketplace by foreign-based internet conglomerates, which do not contribute the same level of investment, jobs and Canadian content as Canadian media.

The FCB report proceeds to try to make the legal case that these services should not qualify for advertising deductions under Canadian law, going so far as to argue that even the Google Search page should be treated like a “program” within the context of constituting “broadcasting”.  According to the FCB report, these changes would dramatically change the Canadian media landscape:

For Canadian media, it could be the single greatest factor in reversing revenue declines and ensuring viability for Canadian local print, TV and radio operations – and their contributions to Canadian culture, news and democracy. Hundreds of millions of dollars could move back from foreign to Canadian owned-and-controlled media companies – stabilizing and growing their revenues, and allowing these companies to reverse job cuts and re-invest in Canadian content, including journalism.

Specifically, the suggested re-interpretation of the advertising tax deductibility provisions of the ITA would, we estimate, result in on the order of 50% – 80% of current internet advertising expenditures being deemed nondeductible. Conservatively estimating that 10% of these now non-deductible foreign internet advertising expenditures shift back to Canadian media, this would represent an influx of $250 to $450 million annually in incremental advertising revenue.

The Shattered Mirror also places great hope in the benefits of Income Tax Act reform, making it recommendation #1 and claiming that $300 to $400 million is at play.  Instead of hoping that advertising will gravitate to Canadian sources, however, it envisions a ten percent withholding tax on “non-qualifying media”, which would be determined based on meeting a test for either Canadian ownership or a significant Canadian media presence that includes tax payments and meeting minimum thresholds for producing “original civic function journalism aimed primarily at Canadian audiences.”  The report also recommends that the Canadian government only advertise on Canadian qualifying sites and that an exemption be created for small-scale advertisers. It estimates that the withholding tax would generate up to $400 million, which would be allocated toward a fund to support Canadian journalism.

While these reports purport to provide a much desired easy fix to the Canadian media world, the reality is unsurprisingly far more complicated. In the case of the FCB report, some of the legal arguments – Google Search and Facebook as broadcasts? – are very weak and would be unlikely to survive a court challenge.

Further, the hope that advertisers will move away from digital advertising by making it more expensive (as FCB envisions) misunderstands the very nature of advertising. Simply put, digital advertising is a function of the audience. Given that more and more people are shifting their viewing and media consumption habits from offline to digital, advertisers are unsurprisingly following their audience. A change in the tax code will not result in a shift to less effective advertising venues. Rather, it will simply make the digital advertising more expensive and leave Canadian business less competitive in the digital marketplace.

In fact, this slide from Mary Meeker, the well-known Internet analyst, provides a nice illustration of the close correlation between audience size and advertising. It suggests that these trends will continue, with newspaper advertising likely to continue its decline in favour of mobile based advertising.

Mary Meeker, KPCB Internet Trends 2016, pg. 45, http://www.kpcb.com/blog/2016-internet-trends-report


Even more problematic is how both reports miss the complexity associated with digital advertising.  First, a considerable portion of digital advertising with companies such as Google involves a revenue share between Google and the site where the advertising appears. In other words, the advertising often appears on the same Canadian sites that the reports want to support. That revenue initially goes to Google, which then sends the majority back to the site or media organization. For that form of advertising, Google is simply matching advertisers and websites, while collecting a commission for providing the service.  If advertising through the Google or Facebook network alone were enough to disqualify the advertising from tax deductibility, Canadian sites would be harmed in the process.

In cases where the advertising is on a foreign site – think YouTube – there may also be important Canadian connections. For example, the Globe and Mail posts videos on Youtube and generates a revenue share for the advertising that appears alongside the video. That is part of how Canadian media is trying to monetize its content, yet the policies in the reports would discourage such advertising by making it more expensive.  The problem with Canadian content on foreign sites also crops up for Canadian artists and smaller media organizations, who may similarly use foreign sites as important sources of distribution and advertising revenue.

The harm extends to Canadian businesses seeking to reach larger audiences through digital advertising. As Google points out, changing the Income Tax rules would ultimately make it more difficult for small and medium sized business to reach Canadian audiences since they could not easily use existing digital ad networks.

There is a reasonable debate to be had over the dominance of Google and Facebook in the digital advertising sector and over how to fund important investigative journalism. There are some good ideas out there including levying sales taxes on digital providers, opening the door to foundational support, and creating an investigative journalism fund similar to the court challenges program. However, cutting the flow of dollars to Internet giants – particularly where that money often boomerangs back to Canada – will do little to actually help Canadian media organizations seeking to attract digital ad dollars, Canadian artists searching for new revenues online, or Canadians businesses trying to grow through digital advertising.

The post The Shattered Mirror, Part Three: Why Income Tax Changes for Digital Advertising Won’t Save Local Media appeared first on Michael Geist.

Why the Wireless Industry Fears Bill Transparency and Bans on Unlocking Fees

Michael Geist Law RSS Feed - Tue, 2017/02/14 - 10:53

The National Post has a story today on a research note written by Maher Yaghi, a telecom analyst, warning about the “regulatory risks” of the CRTC’s review of the wireless code. The article focuses on a single analyst, but there is a long tradition in Canada of the industry saying one thing to the regulator and another to the business community (see, for example, Bell’s position on investing in fibre networks) so the comments likely reflect industry concerns. What regulatory risks might arise from changes to the wireless code?

Yaghi cites two concerns that lay plain why the industry has been fighting potential changes. The issue is not, as some would have you believe, increased regulatory costs. Rather, the fear is that changes would create better informed consumers who would seek cheaper pricing and be freer to take advantage of marketplace competition.

Yaghi says the industry is concerned with “mandated bill segmentation”, which would require providers to separate the monthly service cost from the cost of devices. Once two-year contracts expire and the cost of the device is paid off, consumers would likely want to know why their monthly cost remains largely unchanged. Yaghi notes:

“In our view, bill segmentation would make the different charges more transparent to customers and would likely prompt them to look for cheaper (bring your own device) plans, which could pressure (average revenue per user) growth in the Canadian market.”

Yaghi says there is similar concern about the prospect of banning fees for unlocking phones.  The reason is that removing the fees – which bear little relation to actual cost or purported concerns about fraud – would make it easier to switch providers and reduce roaming costs:

“We believe the current policy reduces churn and increases customer stickiness, decreasing competition slightly. It also allows wireless operators to generate profits from international roaming for customers who are travelling.”

The acknowledgement that mandated bill segmentation would lead to better informed consumers able to get more competitive pricing and that unlocking fees reduces the benefits of competition provides the CRTC with validation that the reforms would be pro-consumer and should be implemented with the forthcoming changes to the wireless code.  Indeed, if the CRTC does not include the changes in the code, provincial governments should consider them as they work to update consumer protection laws for the digital marketplace.


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Canadian Senate Report Emphasizes Need for Consultation, Transparency in Trade Talks

Michael Geist Law RSS Feed - Mon, 2017/02/13 - 10:18

Prime Minister Justin Trudeau meets U.S. President Donald Trump today with trade issues sure to be a key part of the agenda. With the TPP now dead and NAFTA headed to renegotiation, the arrival of a Trump administration has had a dramatic impact on Canadian trade policy.  Last November, I wrote a piece in the Globe and Mail arguing that Canada’s trade negotiation strategy needed to focus more on the how of trade negotiations than the who:

the how of negotiation may be more important than the who. The public backlash against trade deals points to a process that leaves many feeling excluded and to terms that are presented publicly for the first time as final. The real opportunity for Ottawa is not just to explore new trade partners but to challenge some of the long-standing assumptions about such deals in order to foster greater public confidence in the outcome.

The column continued by suggesting that the government “ensure that the same emphasis on transparency and public consultation that is emblematic of domestic policy development is mirrored in the trade file.”

Last week, the Standing Senate Committee on Foreign Affairs and International Trade issued a report on free trade agreements, which it described as “a tool for economic prosperity.”

The report was the result of months of hearings that included stakeholders from across the spectrum (I appeared in March 2016).  The final recommendations are particularly noteworthy since there is a strong emphasis on the need for public consultation, evidence-based policy, and greater transparency in Canadian trade negotiations.  They include:

Recommendation 1
That the Government of Canada engage more actively in activities aimed at increasing consultations with – and direct engagement of – Canadians on the importance of international trade and the relevance of trade agreements to Canada’s economic prosperity.

Recommendation 5
That the Government of Canada commission one or more independent evaluations of the effectiveness of the federal measures intended to mitigate the potentially adverse impacts of free trade agreements on Canadian workers, sectors and businesses. These evaluations should be used to enhance the effectiveness of such measures, and inform the development of future “free trade agreement implementation strategies.”

Recommendation 6
That the Government of Canada establish a formal consultation process when defining a negotiating mandate in relation to a particular free trade agreement. Consultations should continue throughout the negotiation process, provide timely updates and be open to all relevant stakeholders, including the public. As well, consultations should lead to the identification of measures to be included in a “free trade agreement implementation strategy.”

Recommendation 7
That, in order to enable parliamentarians to serve as effective legislators in relation to international trade agreements, the Government of Canada report throughout the negotiation process to the Standing Senate Committee on Foreign Affairs and International Trade, and the House of Commons Standing Committee on International Trade. Reports to these parliamentary committees should occur on a quarterly basis, and should provide information on negotiating mandates and progress made during negotiations. When required, sensitive information should be disclosed to these committees with strict adherence to in camera rules.

Recommendation 9
That, prior to the ratification of a free trade agreement, the Government of Canada publicly report the expected economic, labour, environmental, social and other outcomes in relation to that agreement. Moreover, five years after the ratification of such an agreement, the Government should commission one or more independent evaluations to analyze the agreement’s outcomes, and should table a report outlining these outcomes in both the Senate and the House of Commons. These reports should thoroughly describe the methodology used in the analysis, and clearly identify the agreement’s benefits and costs for Canada.

The full report is worth reviewing as it contains considerable discussion on the benefits of greater transparency in trade negotiations. The committee report notes:

The Committee’s witnesses stressed that comprehensive FTAs reach into areas of domestic regulation in a way that traditional trade agreements never did before. This trend can contribute to a perception that the freedom of governments to regulate in the public interest is diminishing. In such a context, the lack of transparency of trade negotiations risks contributing to a perception that trade deals are not necessarily negotiated for the public good. The Committee believes that a higher level of transparency is required during trade negotiations, particularly as modern FTAs increasingly involve areas of domestic regulation. Increased transparency in relation to trade negotiations could help to better inform Canadians about potential advantages while also providing for opportunities to consult Canadians and take into account their concerns throughout the negotiations.

With some additional comments on the need for future trade agreements to ensure that IP commitments are – to the greatest extent possible – consistent with Canada’s IP regime, the Senators were clearly attentive to the concerns raised by witnesses and have provided a useful road map for how Canada might proceed with future trade negotiations.

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Canadian Privacy in the Age of Trump

Michael Geist Law RSS Feed - Thu, 2017/02/09 - 11:11

Last night I appeared on TVO’s The Agenda with Steve Paikin to discuss privacy issues in light of the Trump Executive Order that eliminates Privacy Act protections for non-U.S. citizens or permanent residents. A video of the discussion is embedded below.

The post Canadian Privacy in the Age of Trump appeared first on Michael Geist.

The Future of Simsub Post-Super Bowl: Why Canadian Viewership Data Vindicated the CRTC

Michael Geist Law RSS Feed - Wed, 2017/02/08 - 12:43

The release of the television ratings for the Super Bowl unsurprisingly sparked a wave of reports yesterday blaming the CRTC for a decline of viewers at CTV.  The Hollywood Reporter claimed there was a ratings collapse, the National Post talked about a 39 percent drop, and Cartt.ca argued that the CRTC had failed Cancon with its decision. While CTV’s numbers may have dropped by 39 percent from the 2016 Super Bowl, that number on its own means as much as saying that Tom Brady’s quarterback rating dropped from his last Super Bowl appearance (it did).

When assessing the impact of the CRTC’s simultaneous substitution decision that opened the door to competing U.S. and Canadian feeds for the game (but not for the pre and post-game broadcasts), the far more important number is the Canadian audience for the U.S. feed. It tells the story of how many switched away from CTV to the newly available alternative. Although Bell indicated that this data is not available, that does not appear to be accurate. The Globe and Mail reports today that some Fox stations are measured in Canada, but that Numeris did not provide it with the numbers. [Update: A Numeris spokesperson confirmed that it measures some, though not all, Fox feeds in Canada].

However, Richard Deitsch, the lead media reporter for Sports Illustrated, tweeted on Monday that the CTV feed drew 4.5 million viewers, while the U.S. Fox viewed garnered 803,000 in Canada. Deitsch’s source for the report was Sportnet’s John Shannon, a longstanding sports television producer, who discussed the issue on the Prime Time Sports program on Monday afternoon. The Fox number may involve some guesswork given that Numeris does not track all Fox affiliates in Canada, but I am reliably advised that its data showed low numbers for some U.S. affiliates, including the Buffalo Fox affiliate feed [update 2/9: new reports indicate that the Buffalo number may be in error, suggesting a higher number of Fox viewers in Canada that reported by Shannon/Deitsch. CTV still retained a majority of the Canadian audience].

Even with some amount of guesswork, the real story is that the Canadian feed maintained a healthy majority of the audience. perhaps with as much as 85 per cent of all viewers. Far from representing a collapse (or – as the Hollywood Reporter inaccurately reported – that 40 percent of Canadian viewers turned to Fox), the Canadian feed did far better than the doomsayers predicted. Indeed, Bell’s claims of tens of millions in losses seems likely to have been overstated, particularly with additional revenue from a game that went into overtime.

The CRTC’s Super Bowl simsub decision was vindicated not only by the numbers, but also with the broadcast and the CTV response. The Super Bowl ads were available online, but watching the game and the commercials together demonstrated that the ads are (as the CRTC ruled) an integral part of the broadcast.  For example, commercials for Budweiser and Lumber 84, which speak directly to the immigration controversy in the United States, are powerful on their own, but took on an additional meaning when viewed during the game alongside the customary Americana of the Super Bowl and several shots of Vice President Mike Pence in the crowd.

The CTV response also provided a measure of vindication. Once it became apparent that the lobbying campaign to overturn the decision would fail, CTV competed with Fox for viewers. The Canadian feed included a contest with cash prizes and a trip to next year’s Super Bowl along with additional on-air promotion. While there were glitches with the contest, the creation of two different feeds with different benefits is precisely what the CRTC had in mind when it focused on creating more choice for Canadians.

The Bell appeal of the CRTC decision continues, but the bigger question is what comes next for simultaneous substitution policies. Canadian broadcasters have long feared that abandoning the policy would result in hundreds of millions in lost revenue. The Super Bowl experience suggests that that may not be the case. With a majority share of Canadian viewers, decades of watching the Canadian feed may have had a lasting impact on television viewing habits of those who still watch conventional television.

The importance of simsub is surely declining given the availability of streaming and recording alternatives, but it appears that many Canadian viewers will stick with the Canadian feed even with a U.S. alternative. Since removing simsub altogether would free Canadian broadcasters from U.S. programming schedules and potentially reduce the costs for foreign programming, the regulator should consider expanding the removal of simsub beyond one program per year.

The post The Future of Simsub Post-Super Bowl: Why Canadian Viewership Data Vindicated the CRTC appeared first on Michael Geist.

Did a Canadian Court Just Establish a New Right to be Forgotten?

Michael Geist Law RSS Feed - Tue, 2017/02/07 - 09:32

The European Union shook up the privacy world in 2014 with the creation of “the right to be forgotten“, creating a system that allows people to seek the removal of search results from Google that are “inadequate, irrelevant or no longer relevant.” The system does not result in the removal of the actual content, but rather makes it more difficult to find in light of the near-universal reliance on search engines to locate information online.

Since the European decision, Google has received nearly 700,000 requests for the removal of links from its search database resulting in the evaluation of 1.8 million URLs. Moreover, privacy authorities in Europe – led by France’s national regulator – have adopted an aggressive approach on the right to be forgotten, ruling that the link removal should be applied on a global basis.

My Globe and Mail op-ed notes that while the Canadian courts have grappled with the question of removing links from the Google search database (a key case on the issue is awaiting a decision from the Supreme Court of Canada), there has been little sense that Canada would establish its own right to be forgotten. That may have changed last week as the Federal Court of Canada issued a landmark ruling that paves the way for a Canadian version of the right to be forgotten that would allow courts to issue orders with the removal of Google search results on a global basis very much in mind.

The case – A.T. v. Globe24H.com – involves a Romanian-based website that downloaded thousands of Canadian judicial and tribunal decisions, posted them online, and demanded fees for their swift removal. The decisions are all public documents and available through the Canadian Legal Information Institute (CanLII), a website maintained by the legal profession in support of open access to legal materials (I am a former board member).

Since most decisions on CanLII are not indexed in Google, their availability is not widely known and their content does not typically come up in search queries. Globe24H.com opened its database to Google, however, leading to the discovery of the decisions for many for the first time. When users contacted the site, they were told that a “free” removal service could take six months or more. If they paid for the removal, the content was quickly deleted without issue.

The Privacy Commissioner of Canada received dozens of complaints about the website and issued a report in June 2015 that it violated Canadian privacy law. The case moved to the federal court, which agreed with the Privacy Commissioner’s privacy findings, but was left with the question of whether it could do anything about it.

The court first ruled that it was entitled to assert jurisdiction over the foreign website, noting that the courts have applied Canadian privacy law to foreign organizations for many years. Given the connections to Canada – the content was Canadian, the site targeted Canadians, and the harm was felt in Canada – it ruled that it met the “real and substantial connection” standard required under the law.

Yet even if Canadian law could be applied to the site, enforcing the ruling posed a more difficult challenge. The court concluded that it could issue an order both requiring the site to comply with the law and declaring that it was currently violating it. The declaratory order  was expressly adopted with Google in mind.

The court noted that the declaration could be used to submit a request to Google seeking the removal of the offending links from its search database. While acknowledging that there was no guarantee that Google would act, it was persuaded by the Privacy Commissioner that “this may be the most practical and effective way of mitigating the harm caused to individuals since the respondent is located in Romania with no known assets.”

In doing so, the court may have created the equivalent of a Canadian right to be forgotten and opened up an important debate on the jurisdictional reach of privacy law as well as on striking the balance between privacy and freedom of expression. While more onerous than a direct request to Google, the court’s approach suggests there is now a road map for the global removal of search results of content that may be factually correct, but which also implicates the privacy rights of individuals.

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The Shattered Mirror, Part Two: The Underwhelming Recommendation for Open Licensing at the CBC

Michael Geist Law RSS Feed - Thu, 2017/02/02 - 13:45

My review of the The Shattered Mirror: News, Democracy and Trust in the Digital Age, the Public Policy Forum’s report on the future of media continues with a comment on long-overdue recommendation that unfortunately falls short of the mark (my first post on copyright reform recommendation is here). The report tackles the future of the CBC with three recommendations: increasing the emphasis of the CBC’s mandate on news, moving to an ad-free approach online, and adopting a Creative Commons licence for news content to help broaden distribution.

The recommendation of increased emphasis on news is a good one as is the call for an ad-free CBC online.  I wrote in support of the CBC becoming an ad-free digital news competitor last year and while Ken Whyte offered up arguments against it (noting that the Canadian market needs more ad choices, not less), the online advertising competition has been a longstanding source of frustration for online media competitors who resent public support for CBC’s online presence.

The recommendation that I would like to like is the adoption of a Creative Commons licence for CBC news content. I have similarly argued for open licensing of CBC content for many years as part of its role as a public broadcaster. In 2014, I noted:

What the public often needs are the “raw materials” to enhance their content and better platforms to help distribute and market it. What if the CBC saw its public role primarily through that prism?  It could continue to produce news programming, but openly licence its content so that Canadians could freely use it for their own creativity and storytelling.

In 2005, I made a similar recommendation, citing examples from Norway and the UK for how public broadcasters were actively using open licensing to enable new creativity that builds upon their work.  In fact, many public broadcasters have adopted Creative Commons licences (or other open licences) to facilitate new works. Brazil’s Radiobras did so nearly ten years ago and still features a Creative Commons licence on its site.  Other public broadcasters – including PBS in the U.S. and NHK in Japan have established open content libraries that allow users to create their own works.

So what is the problem with the Shattered Mirror recommendation?  Unfortunately, it does not view the shift to Creative Commons as an opportunity to foster more creativity or commentary on the news. Instead, it merely sees it as an opportunity for further distribution. The report states:

There are seven types of Creative Commons licence. We recommend that the CBC use the “Attribution + No Derivatives” class, which would require those using its material to provide attribution and forbid the “remixing” of CBC content while allowing it to be monetized.

In other words, the goal is to allow others to post CBC content, but not actually use it to create anything new. The CBC has experimented with different forms of distribution in the past – it used BitTorrent to distribute the finale of the show Canada’s Next Great Prime Minister in 2008 – but the benefits of open licensing for a public broadcaster are about far more than just some additional distribution. In fact, opening the door to commercial re-distribution will raise its own set of competition concerns for existing players such as the Canadian Press. It is terrific to see the issue garnering some attention, but to truly “stake out a leadership position” (as the report suggests), shifting to non-commercial distribution and use of CBC content is needed.

The post The Shattered Mirror, Part Two: The Underwhelming Recommendation for Open Licensing at the CBC appeared first on Michael Geist.

Fairness Confirmed Again: Federal Court of Appeal Upholds Copyright Board’s Fair Dealing Ruling

Michael Geist Law RSS Feed - Wed, 2017/02/01 - 10:58

The Federal Court of Appeal has issued its ruling in the judicial review of the Copyright Board’s ruling involving copying in Canadian K-12 schools. The decision is the latest in a growing number of decisions that have all adopted the same, flexible approach to fair dealing. Access Copyright has spent years (and millions of dollars) losing challenges on what was readily apparent from the Supreme Court of Canada’s 2012 copyright pentalogy: the value of the Access Copyright licence is very limited in light of authorized copying and fair dealing.

The Copyright Board of Canada decision on the application of fair dealing to educational copying, granted a tariff of $2.46 per student for 2010-2012 and $2.41 for 2013-2015. That rate is not only far lower than Access Copyright had demanded, but is nearly half of what was previously certified for the period from 2005-2009 (which was set at $4.81). The Board minced no words in explaining the reduction:

The main reason for that decrease is the fact that as a result of the decision of the Supreme Court in Alberta v. Access Copyright, 2012 SCC 37, copies made for student instruction, assignments or class work, that were not included in the fair-dealing analysis in the preceding decision, were now included. This resulted in the Board’s finding that a significant proportion of copying by elementary and secondary schools was fair under the fair-dealing provisions of the Copyright Act. These copies therefore do not generate remuneration.

In fact, a close look at the Copyright Board’s analysis revealed that it found that 97.2% of copying from books, 98.1% of newspapers, and 98.5% from periodicals qualified as fair under a fair dealing analysis. In other words, virtually all copying of books, newspapers, and periodicals in the large sample reviewed by the Board was covered by fair dealing and did not require a licence from Access Copyright. Moreover, the Board found that copying 1 to 2 pages from a book is insubstantial and does not even require a fair dealing analysis. A full discussion of the decision can be found here.

The Federal Court of Appeal ruling considers whether the Board erred with its fair dealing analysis. Interestingly, the court hints that the Board could have considered – and potentially found fair dealing – based on the existence of fair dealing guidelines. The Board did not do so, but the court states:

Although both parties were clearly disappointed by the fact that the Board did not offer any detailed comments on their evidence relating to those Guidelines, Access did not challenge this finding, which was based on its assessment of the weight of the evidence. This was a wise decision, for indeed, the Board’s conclusion was clearly open to it on the evidentiary record.

A finding of fairness with the fair dealing guidelines would have ended the issue. Instead, the court (and the Board) undertook a deeper fair dealing analysis. The court rejected Access Copyright’s challenge to the Board’s fair dealing approach, stating:

It may well be that the Board’s methodology is not perfect, but again, given the particular circumstances of this case, I have not been persuaded that its overall determination that a large portion of the exposures were fair (again this was much less than the numbers proposed by the Consortium using a similar statistical approach) was unreasonable because of the method it chose to weigh the evidence in forming its overall impression of the fair dealing factors.

The court also rejected – again – Access Copyright’s claim that the amount of copying should involve an examination of the aggregate amount of copying. Access Copyright has consistently claimed that the total amount of copying, rather than the copying for an individual user, should be considered. This argument has been repeatedly rejected:

Access argues that the Board ought to have followed the Supreme Court’s teachings in CCH and Alberta and ought to have considered evidence of the aggregate volume of the total pages copied – this is not the teaching of these cases.

In fact, the court suggests that the even the total copying of 90 pages per student was fair:

In explaining why looking at the aggregate volume of copies was not helpful to its assessment of whether the copies were widely distributed, the Board reasonably applied the Supreme Court’s teachings in CCH and Alberta. I find no reviewable error on the part of the Board in this respect. In fact, this finding is reasonable even if one were to consider that the overall number of copies represents approximately 90 pages per student per year. I agree with the Consortium that this figure does not support the view that this factor could only tend to a conclusion that the dealing was not fair.

The unanimous court decision, which rejected several other Access Copyright arguments (it won only one the impact of some coding errors in its repertoire), should not come as a surprise. Access Copyright has lost on its interpretation of fair dealing at virtually every legal level including the Copyright Board, the Federal Court of Appeal, and the Supreme Court of Canada.

The copyright collective will no doubt seek to reform fair dealing in the 2017 review process, but even an ill-advised removal of “education” as a fair dealing purpose would not undo decisions that are based on Supreme Court rulings and the desire to strike a fair balance in copyright. Moreover, there is considerable evidence that the challenges faced by the educational publishing are not about copyright. Pearson PLC, the world’s largest education company, recently warned of an unprecedented decline in the North American education publishing market. This primarily reflects U.S. developments and highlights how Canada is not an outlier in educational publishing.

Meanwhile, the growth of free online textbooks continues (nearly all of UBC’s math textbooks are now freely available online) and the rising costs of journal subscriptions are leading to cancellations and greater emphasis on open access. I have written more extensively on Canadian university spending on licences here and on the decline of educational publishing in Canada here.

Where does that leave the issue? The scope of fair dealing is a settled issue with Canadian courts now consistently applying it as a user’s right in the manner articulated by the Supreme Court of Canada. Within the educational sector, the reality is that the overwhelming majority of copies within K-12 schools are compensated and virtually all of the remaining copies are covered by fair dealing. Simply put, there is little value in the present Access Copyright licence which now pays a little more than a couple of dollars per student. Within post-secondary institutions, database licences, open access materials, transactional licences, and fair dealing have similarly eliminated the need for the current Access Copyright licence. In light of these developments, Access Copyright recently indicated that perhaps it too recognizes the need to adapt to the changing marketplace and legal realities. Last week, it posted a request for interviews with professors and students, stating:

We could use your help. Our innovation team is aiming to re-invent Access Copyright’s offerings for universities and colleges and needs help finding students and professors willing to sit for 1-hour research interviews on the topic of content use and technology. 

With the law on fair dealing well settled in Canada, the need for Access Copyright to re-invent itself is long overdue.

The post Fairness Confirmed Again: Federal Court of Appeal Upholds Copyright Board’s Fair Dealing Ruling appeared first on Michael Geist.

Never Again: A Comment on U.S. Immigration and The Need for a Canadian Response

Michael Geist Law RSS Feed - Sun, 2017/01/29 - 22:06

This blog is normally limited to digital law and policy issues, such as privacy, copyright and the Internet. Not today. These are not normal times. The events in the United States over the past few days involving the creation of an executive order with a thinly-veiled Muslim ban demand a response. While some politicians have tried to avoid comment by arguing that this is an internal U.S. matter, the far-reaching implications for the world and for the millions of people whose lives are at stake does not allow for such an easy out. There may be a cost to Canada for speaking out – some have suggested that Prime Minister Justin Trudeau should avoid angering U.S. President Donald Trump – but if so, it is a price worth paying.

With the exception of the indigenous peoples in Canada, we all trace our family history to immigration. In my case, I am the grandson of holocaust survivors and a family that fled the Nazis by running east to Siberia and beyond. Both families were largely wiped out. My grandfather’s wife and two children were murdered along with virtually all of his siblings, parents, and extended family members. He and my grandmother survived the concentration camps, met after the war, gave birth to my mother, and were given the opportunity to start a new life in Canada. The same is true for my father’s family, who also came to Canada in the early 1950s. My family story is not unique. Millions of Canadians can also tell stories of fleeing war, religious persecution, or searching for new economic opportunity. While we often think that it is health care or hockey that bind us, it is really our common story of a largely immigrant society searching for a better life for future generations.

Canada’s record of admitting Jews during the war, chronicled in the book None is Too Many, speaks to the incredible harm caused by immigration policies focused on race or religion (the same is true for those turned away by the U.S). To see some of this replicated in the U.S. in 2017 is exceptionally painful. I am proud of Prime Minister Trudeau, Jason Kenney, and the many premiers and mayors that have tweeted out Canada’s openness to refugees and immigration. The initial response from Immigration Minister Ahmed Hussen indicating that Canada will permit temporary residence for anyone traveling to the U.S. that is left stranded is a good start, but much more is needed.

From the federal government, Canada should consider expanding our refugee target for 2017.  There are obviously cost and security constraints, but if the U.S. closes its doors, others will need to open theirs even further.

Moreover, the government should work closely with both the technology and education sectors to expand opportunities for foreign workers and students. Hundreds of people in the Canadian technology community have signed a public letter emphasizing that diversity is our strength and calling on the government to institute an immediate and targeted visa program for those displaced by the U.S. Executive Order. With the U.S. tech sector increasingly vocal in its opposition to the U.S. developments, Canada should stand ready to provide an alternative for global technology workers.

The news is also filled with reports of professors, researchers, and students that are blocked from entering or re-entering the United States. Canadian universities (including my own) have indicated a desire to explore accepting displaced professors and students. We should move quickly to offer visiting professorships as needed and partner with U.S. institutions to allow graduate students to continue their studies in Canada. There is a need to accommodate students that have yet to begin their studies and now find themselves blocked from doing so. Further, universities must consider whether they can continue participating in conferences and joint programs in the U.S. that may bar the participation of their own students.

But even more difficult will be the response to the U.S. government. In the weeks leading up to the inauguration of Donald Trump, there was much discussion about the need to create a team that would mesh well with the new president given the uncertainty of new trade talks and policies. No doubt a close relationship based on friendship and mutual self-interest is preferred. However, with Trump signing an executive order eliminating Privacy Act protections for Canadians, the Canadian government must now stand ready to re-consider information sharing programs with the U.S. With Trump signalling his support for torture, the Canadian government must be ready to stop programs that could implicate Canadians in the same activity. With Trump instituting immigration policies that run counter to fundamental values of equality, the Canadian government must be prepared to say so. And when words are not enough, we must be ready to act.

The post Never Again: A Comment on U.S. Immigration and The Need for a Canadian Response appeared first on Michael Geist.

The Shattered Mirror, Part One: Fair Dealing Reform Isn’t the Answer for News in the Digital Age

Michael Geist Law RSS Feed - Fri, 2017/01/27 - 11:03

The Public Policy Forum released its much anticipated report on the future of Canadian media yesterday. The Shattered Mirror: News, Democracy and Trust in the Digital Age garnered considerable attention and may influence policy discussions over what – if anything – to do about the struggling media industry. I tweeted some initial responses to the report and plan several posts to examine some of the recommendations more closely.

This post starts with one of the worst (if unsurprising) recommendations: copyright reform. For the better part of two decades, business sectors facing digital challenges invariably think that copyright law offers a solution. It rarely does and definitely does not in the case. In fact, the proposed copyright reform to fair dealing would cause considerable harm to freedom of expression and the practice of news reporting with little likelihood of economic benefit.

The copyright recommendation is one of the least developed in the report as it pops up with no advance discussion or analysis.  Rather, the report simply recommends:

The fair-dealing provisions of the Copyright Act, amended in 2012, are scheduled for review in 2017. We recommend that this review tighten usage of copyrighted news material in favour of creators, without unduly stifling the social power of sharing on the Internet. News producers have a right to benefit from their work for a reasonable period while pursuing the business strategy of their choice.

In the notes that follow, the report claims that aggregators, bloggers and others may use materials without permission by relying on fair dealing. The report concludes that “even if the material links back to its source, the original producer should be able to decide whether it wants to share–and whether it wants to negotiate compensation in some form.”

Simply put, the recommendation doesn’t make sense. There are at least two kinds of activities that seem to raise anger among some media companies. First, there are sites that largely re-write original reporting and run the alternative version of a story on their site with their own advertising. This may be the reference in the report to bloggers using materials without permission. For this form of use, fair dealing is not implicated at all. Copyright law is designed to protect specific expression, but rightly recognizes that ideas and facts should not be controlled by a single entity.  To change the law would grant a single rights holder exclusivity over reporting, effectively limiting the ability of the press to do its job.

Second, there are sites that aggregate content and link back to the original story.  This has generated frustration among some media organizations, who fear that users rely on intermediaries and social networks to decide what to read. It is true that aggregators typically rely upon fair dealing (or fair use) to generate snippets or short summaries of the articles. Efforts in some European countries to legislate payments for snippets or create a “link tax” has been disastrous for publishers, where aggregators simply opt out the system, reducing traffic to the sites (and with it advertising revenues).

The report doesn’t recommend a link tax, but it does suggest somehow limiting fair dealing to grant greater control over the materials. Yet left unsaid is that fair dealing is exceptionally important for journalists and efforts to restrict it would harm the practice of news reporting. Indeed, news reporting is included as one of the purposes of fair dealing to ensure that copyright is not used to stop important journalism. Claims that fair dealing is a detriment to journalism fails to understand that newspapers are themselves active users of fair dealing. If the media were required to seek permission each time it quoted from another work, expression would be curtailed and costs to produce original reporting would increase.

Not only is flexible fair dealing important to new reporting, but it is far from the free-for-all feared by publishers. Commercial republication of full articles is unlikely to qualify as fair dealing. The courts have rightly permitted copying and posting portions of articles for criticism or review purposes, but competitors cannot rely on fair dealing to copy and post full articles. The fair dealing fears are largely the stuff of fake news that is raised throughout the report and the ill-advised recommendation of reform would do more harm than good.

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Trump’s Executive Order Eliminates Privacy Act Protections for Foreigners

Michael Geist Law RSS Feed - Thu, 2017/01/26 - 11:32

President Donald Trump’s Executive Order on domestic safety, released yesterday, has enormous implications for the privacy of everyone living outside the United States. For Canadians, the order should raise significant concerns about government data shared with U.S. authorities as well as the collection of Canadian personal information by U.S. agencies. Given the close integration between U.S. and Canadian agencies – as well as the fact that Canadian Internet traffic frequently traverses into the U.S. – there are serious implications for Canadian privacy. Moreover, the order will raise major concerns in the European Union, creating the possibility of restrictions on data transfers as it seemingly kills the Privacy Shield compromise.

Section 14 of the Executive Order states:

Agencies shall, to the extent consistent with applicable law, ensure that their privacy policies exclude persons who are not United States citizens or lawful permanent residents from the protections of the Privacy Act regarding personally identifiable information. 

The protection of Canadian information which ends up in U.S. hands has long been a source of concern. Professor Lisa Austin has written about “constitutional black holes” in which Canadian data is not protected by the Canadian Charter of Rights and Freedoms and the protection afforded to the data in the United States is at a lower standard than for its citizens and permanent residents.

The Privacy Act referenced in the order did not extend privacy rights to non-U.S. citizens and permanent residents when it first enacted in 1974. However, in 2007, the Department of Homeland Security issued a policy that extended some provisions to non-U.S. persons. In the aftermath of the Snowden revelations, there has been much written on the need to extend privacy protections to foreigners.

The Trump Executive Order makes it clear that U.S. agencies should ensure that their policies do not extend privacy rights to non-U.S. citizens or permanent residents under the Privacy Act. The intent and effect of the order means that the personal information of Canadians will not be protected under that statute. The decision requires an immediate review by the Privacy Commissioner of Canada on the effect of Canadian personal information and data sharing agreements and a potential re-assessment of what personal information is made available to U.S. agencies.

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The Trouble for Canadian Digital Policy in an ‘America First’ World

Michael Geist Law RSS Feed - Wed, 2017/01/25 - 09:50

Canadian digital policy over the past decade has been marked by a “made-in-Canada” approach that ensures consistency with international law but reflects national values and norms. On a wide range issues – copyright rules, net neutrality, anti-spam legislation, and privacy protection among them – the federal government has carved out policies that are similar to those found elsewhere but with a more obvious emphasis on striking a balance that includes full consideration of the public interest.

My Globe and Mail opinion piece notes that as with many issues, the burning question for the Liberal government is whether the Canadian digital policy approach can survive the Donald Trump administration. Trade pressures are likely to present Canada with an enormous challenge in maintaining its traditional policy balancing act since the United States is already using tough talk to signal demands for change. This suggests that many Canadian policies will be up for negotiation, although there are some potential opportunities that reside outside of the trade talk spotlight.

A renegotiated NAFTA might reshape the Canadian digital policy landscape. Copyright discussions could lead to demands for Internet takedown rules that were rejected during the 2012 Canadian copyright reform process, pressure for further patent laws reforms are likely to lead to higher pharmaceutical costs, and the possibility of weakened privacy safeguards would make it tougher for Canada to restrict data transfers to protect sensitive personal information.

If Canada’s bilateral negotiations with the U.S. seem certain to be defensive, there are digital opportunities that lie beyond the United States. New International Trade Minister François-Philippe Champagne has hinted at the possibility of reviving the TPP with the remaining partners, but the final text was largely a product of U.S. demands and it makes little sense to make major concessions for limited market gains.

The TPP should head back to the drawing board, but more interesting possibilities lie outside the trade portfolio. For example, late last year the Internet Archive, a California-based online library that has stored billions of Web pages, announced that it is planning to establish a backup of the archive in Canada (I am a member of the Internet Archive Canada board). Internet Archive founder Brewster Kahle pointed to comments from Trump during the campaign in which he discussed “closing up the Internet” and characterized free speech concerns as talk from “foolish people.”

Trump’s position on Internet freedoms remains an unknown, but the risk of a shutdown was enough to spur the Internet Archive to look for a safe haven for its data in Canada. Should Trump continue to speculate about more restrictive Internet rules, Canada could emerge as an attractive destination for data storage.

Net neutrality represents another Canadian digital policy opportunity. Trump has named a longstanding net neutrality opponent as chair of the Federal Communications Commission, indicating that the U.S. approach to an open Internet will soon be reversed. Canadian net neutrality rules remain in place, however, opening the door to enticing digital businesses that rely on those regulations to set up shop in Canada.

The arrival of the Trump administration brings considerable uncertainty and risk to Canadian trade policy that will trickle down to domestic digital policy. The goal should be to preserve made-in-Canada policies in trade talks, while leaving open the possibility of benefiting from a strong commitment to an open, neutral Internet.  The full column is posted here.

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As Trump Pulls the U.S. Out of the TPP, Canada Should Follow Suit

Michael Geist Law RSS Feed - Mon, 2017/01/23 - 14:01

In one of his first acts in office, U.S. President Donald Trump has signed an executive order withdrawing the United States from the Trans Pacific Partnership. With the U.S. out of the TPP, the agreement cannot take effect as it requires ratification from both the U.S. and Japan to do so. Last week, new International Trade Minister Francois-Philippe Champagne said that Canada would consider all its options with the remaining TPP countries, but the reality is that Canada should follow the U.S. lead and abandon the agreement.

The need for U.S. and Japanese ratification for the TPP to take effect is no accident. For most of the countries in the TPP, access to those two markets were the reason they were willing to sign in the first place. For example, Canada came late to the TPP negotiations in part because it saw limited value in better access to markets such as Australia, Vietnam, Malaysia, and New Zealand. Trade with those countries is relatively minor and would not justify making significant policy concessions. The decision to join the negotiations was sparked by concern that preferential access to the U.S. would be undermined if Canada was left out of the TPP and by a desire to strike a trade agreement with Japan. Once Japan shifted its focus from bi-lateral discussions to the TPP, Canada pushed for inclusion in the deal. With the U.S. out, one of the foundational arguments for joining the TPP is gone.

Moreover, the TPP text reflects the power of the U.S. in the negotiations. For example, the extension of the term of copyright stems from  a U.S. demand, since many TPP countries have terms that mirror Canada’s life of the author plus 50 years. For Canada to move forward with an agreement that does not offer the benefits of better access to the U.S. market, cannot be enforced (since it cannot take effect), and which involves provisions of little interest to many other TPP members does not make sense.

The future of Canadian trade policy is clearly now wrapped up the NAFTA renegotiation, the attempts to push CETA over the finish line, and efforts to kickstart bi-lateral trade negotiations with the major Asian countries, including China, Japan, and India.  Many TPP provisions may resurface in the NAFTA talks (despite today’s withdrawal, the TPP will likely serve as a blueprint for U.S. negotiators on many issues), but conceding on those issues without clear U.S. gains would not advance Canadian interests and would weaken the NAFTA negotiating position with the U.S.

The Canadian government has been consulting on the TPP for about a year and has yet to adopt a firm position on the agreement. As I chronicled extensively last year, there are significant problems with the TPP.  The U.S. withdrawal offers the chance to hit the reset button by pursuing a renewed Canadian trade agenda featuring greater transparency, public participation, and preservation of the national interest.

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Not Exactly a Netflix Tax: Where Canada Stands on a Digital Sales Tax

Michael Geist Law RSS Feed - Wed, 2017/01/18 - 11:12

The CBC’s report that the Canadian government is considering extending goods and services sales taxes to foreign-based digital services has sparked yet another round of articles and coverage of a possible “Netflix tax.” Some Conservative MPs were quick to pounce with claims the Liberals are pursuing a Netflix tax, yet the reality is a bit more complicated. At issue is not the culture contributions payment that is often called a Netflix tax. Despite calls for that form of Netflix tax, Canadian Heritage Minister Melanie Joly has been consistent in saying that the government will not extend mandatory Cancon contributions to Netflix.

In fact, this proposal is not targeted specifically at Netflix at all. Rather, it envisions the possibility of extending GST/HST to foreign-based digital services that are currently exempt from collecting and remitting sales taxes. While the law technically requires Canadian consumers to self-declare the sales tax they owe on those purchases, few are aware of the requirement and presumably even fewer actually do it.

The prospect of extending GST/HST emerged as an issue in 2014 when the Conservative government raised the idea in its budget and launched a public consultation on the issue.  Moreover, the Canadian government is not alone in exploring the possibility of extending sales taxes to the digital world. With many governments fearing increasing lost tax revenue due to online sales and domestic companies expressing frustration with being placed at a competitive disadvantage (Netflix does not collect and remit sales tax, but CraveTV does), the extension of sales taxes to foreign digital providers appears to be a question of when, not if. The “when” depends largely on developing international standards on the issue. The OECD has been actively working on it, recognizing that common standards and a reasonable exemption amount is needed (asking small foreign businesses to collect and remit for a few hundred dollars makes little sense).

The digital sales tax issue was discussed in some detail last month at a Standing Committee on Canadian Heritage hearing that did not attract much attention. Sean Keenan, the director of the sales tax division with the Department of Finance’s Tax Policy Branch told the committee:

E-commerce sales by foreign-based companies can present a challenge for proper sales tax collection. Foreign-based Internet vendors’ businesses with no physical presence in Canada are generally not required to collect GST/HST on their sales. Instead, in the case of physical goods that are purchased online and shipped to Canada by post or courier, the applicable customs duties and GST/HST would generally be collected by the Canada Border Services Agency at the time the goods are imported.

In cases other than the importation of physical goods, the GST/HST legislation imposes a general requirement to self-assess the tax. For businesses that would be entitled to recover any tax payable by claiming input tax credits, there is generally no requirement to self-assess tax on such imports.

The challenges related to the proper collection of sales tax on digital supplies by foreign-based vendors are not unique to Canada. It’s a difficult issue for all jurisdictions with a sales tax. In this regard, the issue was examined as part of the recent initiative of the G20 and the Organisation for Economic Co-operation and Development to address what is known as “base erosion and profit shifting”, or BEPS.

In the context of that international initiative, budget 2014 invited input from stakeholders on what actions the government should take to ensure the effective collection of sales tax on e-commerce sales by foreign-based vendors. Specific feedback was solicited on whether foreign vendors should be required to register with the Canada Revenue Agency and charge the GST/HST on digital sales to residents of Canada. The feedback from these consultations helped shape Canada’s input and participation in the G20 OECD BEPS project.

The final reports of the BEPS project were issued by the OECD on October 5, 2015, including “Addressing the Tax Challenges of the Digital Economy, Action 1”. The Action 1 report examined issues related to the effective collection of sales tax on cross-border digital supplies and services and recommended that where countries decide to institute a regime for taxing foreign suppliers of digital content, the regime should follow the principles of the OECD’s international value-added tax/GST guidelines for these supplies. These guidelines indicate that, at the present time, the most effective and efficient approach to ensure the appropriate collection of VAT/GST on cross-border business-to-consumer supplies is to require the non-resident supplier to register and account for VAT/GST in the jurisdiction of the consumer—essentially, the usual residence of the customer.

Following up on the BEPS Action 1 report, the OECD’s Working Party No. 9 on Consumption Taxes is developing a report on mechanisms for the collection of VAT/GST on digital supplies and services by foreign vendors. The report will examine and identify the best practices of jurisdictions that have required non-resident digital suppliers to register and collect tax on sales in their jurisdictions, in order to assist those that are considering doing so. Canadian officials are participating in the development of this OECD report.

The discussion that followed is worth reading as the witnesses explained the complexity behind developing policy in the area and patiently tried to address MP questions that had nothing to do with digital sales taxes. The takeaway was that extending GST/HST to foreign based digital service providers seems inevitable, but is unlikely to happen in Canada until global standards are adopted at the OECD.

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Why Canada’s Simultaneous Substitution Policy Should Face Cancellation

Michael Geist Law RSS Feed - Tue, 2017/01/10 - 11:56

With the Super Bowl only a few weeks away, an unusual coalition comprised of the National Football League, Bell Media, Canadian advertisers, and an actors’ union have launched a full lobbying blitz aimed at overturning a 2015 ruling that will allow Canadians to view both the U.S. and Canadian feeds of the game. The change addresses longstanding frustration with Canadians’ inability to view U.S. commercials during the Super Bowl, since simultaneous substitution policies dating back to the 1970s allow Canadian broadcasters to block U.S. signals and substitute their own feed and commercials.

My Globe and Mail opinion piece notes that the fight to block the U.S. feed has led to some unlikely arguments. CRTC critics who typically call on the regulator to get out of the way are now calling on it to impose the simultaneous substitution rules. Meanwhile, in an odd role reversal, the NFL is emphasizing the Canadian culture benefits of blocking its U.S. broadcast and ACTRA, which issued a press release calling the Super Bowl ruling balanced and protective of the public interest when it was first unveiled, is going to bat for Canadian coverage of a U.S. sporting event.

In fact, given the vocal criticism, Canadians could be forgiven for thinking that the CRTC sprung the decision on broadcasters without a proper hearing (it did not as the future of simultaneous substitution was squarely on the record), that it will spell the end of the Canadian broadcasting system (the estimated cost is $18 million in a $16 billion industry), that the ruling bans Canadian commercials (it does not as Bell is free to air its own feed with local commercials), or that dual feeds are unusual for a major sporting event (they are not as Canadians already have access to multiple feeds for the World Series, Stanley Cup, MLS Cup, and Olympics).

Critics contend that relatively few people have filed official complaints about the issue, but if they are correct that few Canadians truly care, most will presumably watch the Canadian feed with limited impact on domestic television ratings. However, if Canadians opt for the U.S. feed, that will signal that many more were unhappy and preferred greater choice.

Beyond the Super Bowl broadcast, the far bigger issue is the future of a policy born decades before specialty channels, recording devices, and Internet streaming that have combined to render simultaneous substitution increasingly irrelevant. Recording television shows, watching them on demand, or subscribing to sports streaming packages largely eliminates the simultaneous substitution issue since Canadians control when and what they watch. Moreover, while the Canadian industry has grown addicted to the revenues from licensing the relatively cheap U.S. programming that triggers the ability to block U.S. feeds through simultaneous substitution regulations, the policy arguably undermines the long-term success of the Canadian system and Canadian programming.

The full column – which also discusses why ending simultaneous substitution is consistent with the government’s emphasis on promoting Canadian content to a global audience – can be found here.

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Historic or Immaterial?: Making Sense of the CRTC Ruling on Broadband Access as a Basic Service

Michael Geist Law RSS Feed - Thu, 2016/12/22 - 10:04

The CRTC released its much anticipated Talk Broadband ruling yesterday, declaring Internet access a universal service objective, shifting the local voice service subsidy to the Internet, and setting much-improved speed targets of 50 Mbps download and 10 Mbps upload. The decision sparked a wide range of responses: Open Media labelled the decision historic, but business analysts largely shrugged, calling it “immaterial” and “neutral” for the telecom carriers. How to reconcile the competing perspectives?

From a big picture perspective, those that have advocated for a forward-looking Canadian digital policy that places universal Internet connectivity as the foundation have good reason to be pleased. The CRTC’s recognition of Internet access as a basic service is an important development that is long overdue. While critics downplayed the importance of the formal recognition for years, updating Canadian policy to include access to broadband Internet services provides an important signal to the market and the basis for further regulatory and policy steps if needed.

Moreover, after years of middling broadband targets, the CRTC has stepped forward with a broadband target worthy of a country that wants to see itself as an innovation leader. The target of 50 Mbps download and 10 Mbps upload changes the Canadian conversation on broadband. Indeed, when Bell appeared before the CRTC as part of this hearing, it defended the previous 5 Mbps download/1 Mbps upload target. Bell executives warned that the company can’t even offer that speed in some markets, telling the Commission that “If a 5/1 basic service was mandated, we might have to withdraw our internet service from those markets, removing an option for consumers.” With this decision, the days of discussing 5/1 as a reasonable target are thankfully over.

The decision also marks a fundamental shift from voice to the Internet for Canadian communications regulation. Shifting the local voice service subsidy to broadband is absolutely the right thing to do as it takes the essence of a policy designed to ensure that all Canadians have basic connectivity and updates it to reflects how Canadians communicate today. The $100 million from the local voice service subsidy will help address the broadband access issue, though the Commission itself acknowledges that more money will be needed.

While these are all exciting, important developments, digging deeper into the details suggests that this is a small piece of a much bigger puzzle.

It may be important for the regulator to acknowledge the centrality of Internet access, but most Canadians are already there. Similarly, Bell may be content to argue for 5/1 service, but the CRTC’s own data indicates that 82% of Canadians already have access to 50/10. The CRTC wants 90% of Canadians to have access to those speeds by 2021 with the remaining 10 percent of the country getting there within 10-15 years. Expanding access to an additional 8 percent of the population over five years helps, but it isn’t transformative. In fact, given the ongoing investments from various providers, it is worth asking whether Canada might reach that target with or without the CRTC’s efforts. The real challenge remains the last 10% in rural and remote areas and for that the CRTC has no easy solution given that it sets a target of 2031 for achieving universal access.

The CRTC’s five year broadband target is within reach, but many other broadband goals are not. Affordability goes hand-in-hand with access, yet the CRTC largely punts on the issue, noting that “a comprehensive solution to affordability issues will require a multi-faceted approach, including the participation of other stakeholders.” That places much of the responsibility on the government, but it was open to the CRTC to push the providers harder on affordability. It points to innovative solutions from some companies (presumably Rogers and Telus), but does not go further by setting goals or targets for the obvious laggards in the industry.

The CRTC’s approach on data caps also avoids strict regulation, settling instead for more information and tools for consumers to monitor and manage their data usage. Some ISPs already provide those tools and others will be required to do so within a matter of months. These requirements will be helpful for some, but they eschew tougher regulatory options.

The CRTC’s proposed funding model – $100 million per year from the local voice subsidy and another $250 million over five years from telecom revenues that include Internet services – creates a useful source of funding, particularly when combined with the $500 million promised by the federal government. Moreover, the additional funding is relatively modest as a percentage of overall telecom revenues, especially when contrasted with the five percent Internet tax sought by some groups in the digital Cancon consultation. Yet even the CRTC admits that more money will be needed, telling ISED Minister Navdeep Bains that “meeting the nation’s broadband challenges will require billions of dollars over many years to come.”

Given that the CRTC largely avoids imposing regulatory requirements in this decision, more than just money will be needed to meet the broadband challenge. The Commission could have gone much further in mandating broadband obligations, addressing affordability, and curtailing data caps. It calls this decision “Modern Telecommunications Services – The Path Forward for Canada’s Digital Economy” and while it sets the target for modern telecommunications services, the path for getting there will still require much work.

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