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CRTC, Competition Bureau Enforcement of Canadian Anti-Spam Law Picks Up Steam

Michael Geist Law RSS Feed - Wed, 2015/04/08 - 12:23

Appeared in the Toronto Star on March 28, 2015 as Plenty of Fish, Avis Fines Show Anti-Spam Law Has Teeth

As the launch of the Canadian anti-spam law neared last spring, critics warned that enforcement was likely to present an enormous challenge. Citing the global nature of the Internet and the millions of spam messages sent each day, many argued that enforcement bodies such as the Canadian Radio-television and Telecommunications Commission and the Competition Bureau were ill-suited to combating the problem.

In recent weeks it has become increasingly clear that the CRTC and the Bureau can enforce the law against companies that send commercial emails that run afoul of the new legal standards. Those agencies have completed three enforcement actions against Canadian businesses that point to the risks of millions of dollars in fines for failing to obtain proper consent before sending commercial messages, not granting users the ability to unsubscribe from further messages, or sending false or misleading information.

The first CRTC case involved Compu-Finder, a Quebec-based corporate training company that sent commercial emails without consent and without proper unsubscribe mechanisms. Their emails practices accounted for a quarter of the complaints in the sector received by the CRTC. In response, the company was hit with a $1.1 million penalty.

The CRTC concluded its second case earlier last month, this time targeting Plenty of Fish, the popular online dating site. The Commission received complaints that the company was sending commercial emails without a clear and working unsubscribe mechanism. One of the key requirements in the law is that each commercial email contain an unsubscribe mechanism to allow recipients to opt-out at any time. Plenty of Fish agreed to settle the case by paying a $48,000 penalty and developing a compliance program to address its email practices.

While most of the anti-spam law enforcement attention has focused on the CRTC, the biggest case to date originates from the Competition Bureau. In March, it took action against Avis and Budget, two of Canada’s largest rental companies. The Bureau alleged that the companies engaged in false and misleading advertising when they failed to disclose numerous additional fees as part of their car rental promotions.

The misleading advertising was featured in several places, including email messages. The Bureau used the anti-spam rules, which contain new prohibitions against false or misleading commercial messaging, as part of its complaint. The case now heads to the Competition Tribunal, where the Bureau is seeking $30 million in penalties as well as customer refunds.

These cases confirm that the Canadian anti-spam law comes as advertised with tough penalties and enforcement agencies that will not hesitate to use it. However, it also suggests that solitary errors are unlikely to lead to investigations or fines. Rather, the CRTC examines the hundreds of thousands of complaints it receives from Canadians to identify trends and suitable targets for enforcement.

The cases have thus far focused on legitimate businesses that fail to comply with the law. That can be expected to continue, but the enforcement agencies must also turn their attention to the large spamming organizations that are still operating in Canada. According to Spamhaus’ Register of Known Spamming Organizations, five of the top 100 spamming organizations (responsible for 80 per cent of spam worldwide) are based in Canada.

Since the anti-spam law is premised on both improving the commercial email practices of legitimate business and shutting down Canadian-based spamming organizations, the CRTC should continue to work with businesses on anti-spam law compliance and also begin the process of wielding tough penalties to stop the groups responsible for clogging in-boxes with millions of unwanted messages every day.

Michael Geist holds the Canada Research Chair in Internet and E-commerce Law at the University of Ottawa, Faculty of Law. He can be reached at mgeist@uottawa.ca or online at www.michaelgeist.ca.

The post CRTC, Competition Bureau Enforcement of Canadian Anti-Spam Law Picks Up Steam appeared first on Michael Geist.

Privacy Commissioner of Canada Rules Bell’s Targeted Ad Program Violates Canadian Law

Michael Geist Law RSS Feed - Tue, 2015/04/07 - 11:26

The Privacy Commissioner of Canada has released the long-awaited decision on Bell’s targeted ads program. The Commissioner’s press release soft-pedals the outcome – “Bell advertising program raises privacy concerns” – but the decision is clear: Bell’s so-called relevant ads program violates Canadian privacy law. As I wrote earlier this year, the key issue in the case centered on whether Bell should be permitted to use an opt-out consent mechanism in which its millions of customers are all included in targeted advertising unless they take pro-active steps to opt-out, or if an opt-in consent model is more appropriate. Given the detailed information collected and used by Bell, I argued that opt-in consent was the right approach.

The Privacy Commissioner of Canada agrees:

In our view, for the reasons expressed above, the RAP clearly involves the use of sensitive personal information. As such, the sensitivity of the information at issue leads us to the conclusion that Bell must obtain express consent for the RAP in the circumstances. This conclusion is further supported by our assessment of the reasonable expectations of Bell Customers, which is set out below.

The decision includes detailed analysis of why the opt-in standard is appropriate and why Bell’s insistence that the personal information is not sensitive is wrong. The decision concludes:

we remain of the view that Bell cannot rely on the opt-out consent of its customers in order to implement the RAP. Both the sensitivity of the information at issue and the reasonable expectations analysis lead us to the conclusion that such consent is not appropriate in the circumstances. In our preliminary report, we recommended that Bell provide its customers with the opportunity to make an express opt-in choice regarding whether or not they consent to Bell’s use of their personal information for the RAP. Bell refused to comply with our recommendation. [emphasis added]

Bell’s decision to violate Canadian privacy law leaves the Privacy Commissioner of Canada with little alternative: it must pursue the case in the Federal Court of Canada. Yet that approach will takes years as the case will have to be mounted from scratch. In the meantime, Bell will presumably continue to violate the law.

[Update: Bell now says it will abide by the Privacy Commissioner of Canada’s ruling including the opt-in approach issue.]

The case is a perfect illustration of why Bill S-4, the Digital Privacy Act, should be amended to include order making power (I argued for order making power during my appearance before the Industry committee last month). The government cannot credibly claim that its bill offers Canadians strong privacy protections when the country’s largest telecommunications company can simply refuse to comply with the law and the Privacy Commissioner of Canada’s only recourse is lengthy, expensive litigation.  Provincial privacy commissioners have order making power as do virtually all data protection and privacy commissioners around the world. As currently drafted, PIPEDA leaves the Privacy Commissioner of Canada with little power to fully protect Canadians’ privacy with companies such as Bell seemingly free to reject his decisions.

The post Privacy Commissioner of Canada Rules Bell’s Targeted Ad Program Violates Canadian Law appeared first on Michael Geist.

Scan This or Scan Me? User Privacy & Barcode-Scanning Applications

Freedom to Tinker - Mon, 2015/04/06 - 08:00
[Please welcome guest bloggers Eric Smith and Nina Kollars. Eric Smith serves as the Chief Information Security Officer (CISO) for a higher ed consortium with membership consisting of Bucknell University, Franklin & Marshall College and Susquehanna University. Nina Kollars is assistant professor of government at Franklin & Marshall college, where her scholarship examines the ways […]

Where is Internet Congestion Occurring?

Freedom to Tinker - Thu, 2015/04/02 - 12:32
In my post last week, I explained how Netflix traffic was experiencing congestion along end-to-end paths to broadband Internet subscribers, and how the resulting congestion was slowing down traffic to many Internet destinations. Although Netflix and Comcast ultimately mitigated this particular congestion episode by connecting directly to one another in a contractual arrangement known as paid peering, […]

Conservative MP Ablonzcy on Bill C-51: Who Needs the Rule of Law?

Michael Geist Law RSS Feed - Thu, 2015/04/02 - 08:35

Over the past two days, I’ve posted on the extremely disappointing review of Bill C-51 with Conservative MPs rarely asking substantive questions of critics and the difficulty the government had in finding expert supporters of the bill. The clause-by-clause review of the bill held earlier this week was not much better. Not only did the Conservative MPs reject all opposition amendments, but the discussion remained acrimonious with attacks against both critics of the bill and opposition MPs.

One of the most worst examples involved a proposed amendment from Green Party leader Elizabeth May which incorporated suggestions from the Canadian Bar Association. The CBA, like many witnesses, expressed serious concern about the inclusion of a provision in the bill that appears to grant judges the right to issue warrants that violate the Charter of Rights and Freedoms (Craig Forcese writes about the government’s anomalous effort to justify this provision). The CBA noted in its brief:

This aspect of the proposed Bill is at odds with the role of the courts and the judiciary. Canada’s judges are charged with upholding the Rule of Law and Canada’s Constitution against unlawful state action. They should not be conscripted by the state to limit Charter rights, when their fundamental role is to ensure that all legislation is in accordance with the Constitution and prevent unjustified Charter violations.

The proposed sections 12.3 and 21.1 could authorize any conduct that violates the Charter in the name of reducing a threat to the security of Canada, as long as it does not obstruct justice, cause bodily harm, or violate sexual integrity. This invitation to Charter violations is unlikely to be justified under section 1 or to be interpreted as being “prescribed by law”.

There are also procedural concerns with this proposal. Any deliberation on the fundamental question of when and how CSIS can be authorized to violate Charter rights will be conducted in an ex parte and in camera warrant proceeding. The hearing will be conducted in secret, and only the government’s views will be represented. No third parties will be able to make submissions. Further, the ultimate court decision will likely be unavailable to the public, due to confidential security information. No party will be able to appeal the decision.

How to address Charter busting warrants issued at secret hearings that cannot be appealed? The obvious answer is to not create this form of warrant, which will certainly be challenged on constitutional grounds. However, absent that, the CBA recommended that the warrant provisions “be amended to ensure that they align with the fundamental role of Canada’s judiciary in upholding the Rule of Law and Canada’s constitutional guarantees.”

Green Party leader Elizabeth May proposed an amendment consistent with the CBA recommendation that would add a requirement that the warrant be consistent with the rule of law and principles of fundamental justice. That elicited a remarkable response from Conservative MP Diane Ablonczy (PressProgress has the video), who proceeded to blast the CBA, the Green Party (who she accused of creating barriers to protect Canadians against terrorism), and the very idea that a judge should have to also consider the rule of law and fundamental justice. The full response:

Ms. May seems to have a touching faith in the Canadian Bar Association, but others of us have been members of various bar associations. I’ve been one and I have quite a different opinion. It’s disappointing to see the Green Party continue to attempt to put more barriers in the way of protecting Canadian society against terrorism and terrorist threats. Now, here’s another example.
   
Right now in order for CSIS to take the steps that they feel are necessary to protect against a threat, they have to go to a judge, say what they’re going to do, why they’re going to do it, and convince the judge that this is a reasonable and legal thing to do. The judge has to consider the CSIS Act to see whether CSIS is in fact acting within their mandate, and of course the Charter, because anything that CSIS wants to do has to be compliant with the Charter, as we’ve already talked about at length.
   
Now the Green Party wants to throw some other things into the mix. I’m sure the NDP would never want to do that. Now the judge has to also consider, in addition to the Charter and the CSIS Act, something like rule of law. They have to consider things like principles of fundamental justice, whatever that is. If the Green Party had their way, there would be such a morass of opinions and considerations that action would be pretty much at a stalemate. I strongly disagree with the Canadian Bar Association on this, and I’ve been a member of the bar, and I strongly disagree with this amendment.

There are reasonable arguments against the proposed amendment, namely that judges don’t need a statutory provision to know that rule of law and fundamental justice should be factored into decision-making. Yet Ablonzcy’s comments suggest that they should not be considering those factors as it would create a “stalemate”. It is not clear how abiding by the rule of law would create such a stalemate, but Ablonzcy’s concern that it be explicitly factored – along with the attacks on the CBA and the Green Party – speak volumes about how Conservative MPs approached the review of Bill C-51.

The post Conservative MP Ablonzcy on Bill C-51: Who Needs the Rule of Law? appeared first on Michael Geist.

From Obama Birthers to Anti-Immigration Activists: Who the Government Turned to for Bill C-51 Support During Committee Hearings

Michael Geist Law RSS Feed - Wed, 2015/04/01 - 09:12

The Standing Committee on Public Safety and National Security completed its clause-by-clause review of Bill C-51 yesterday with a hearing that Green Party leader Elizabeth May described as the “most offensive she has experienced.” In all, the government rejected 61 Green Party amendments, 28 NDP amendments, and 13 Liberal amendments. Yesterday I posted a “by the numbers” review of the committee hearings on Bill C-51 noting that Conservative MPs rarely asked substantive questions about provisions in the bill and that important voices such as the Privacy Commissioner of Canada were blocked from appearing altogether.

One of the most striking aspects of the hearings was how difficult it was for the government to find expert supporters of the bill. There were certainly some – police associations, Robert Morrison, Peter Neumann, Garth Davies, Christian Leuprecht among them – but the line-up of supporting organizations also included:

  • the Center for Security Policy, a U.S.-based organization founded by Frank Gaffney. Gaffney is the author of a short book claiming the Muslim Brotherhood has infiltrated the Obama White House, was a leading voice in the Obama birther movement, and is concerned by the “increasingly obvious and worrying pattern of official U.S. submission to Islam.”
  • the Centre for Immigration Policy Reform, who no longer operate a functioning website and seem mainly concerned with slowing immigration to Canada.
  • Matt Sheehy, a former Air Canada pilot, who typically focuses on airline security issues. Sheehy claimed that the legislation created a more robust and resourced oversight of CSIS and that in talking to some associates (“front line type people”) he learned that police have been reluctant to deal with terrorism.
  • David Harris, who has described Canadian immigration policies as “making Canada a kind of Islamic extremist aircraft carrier for the launching of major assaults against the U.S. mainland.”
  • the Heritage Foundation, a right-wing U.S. think-tank that is said to push Republican members of the Congress further to the right.
  • the American Islamic Forum for Democracy, which appears to have a full-time staff of one person with a rather small board.
  • the Canadian Thinkers’ Forum, a small Toronto NGO which runs a barely functioning website that does not say anything about Bill C-51
  • Salim Mansur, a Western University professor who has also focused on muslim immigration and who ran as a Freedom Party of Ontario candidate in last provincial election, picking up 636 votes.

The role of these commentators was rarely to discuss specifics on the bill. In fact, witnesses such as the American Islamic Forum for Democracy, the Center for Security Policy, and the Centre for Immigration Policy Reform did not comment on any Bill C-51 provisions during their opening statements. Instead, those groups were often used by Conservative MPs to avoid asking questions of critics of the bill. For example, when the Canadian Bar Association appeared before committee, Conservative MPs did not pose a single question to their representatives. Instead, virtually all their questions went to the American Islamic Forum for Democracy.

When more mainstream groups and experts supporting Bill C-51 did appear, they often could not bring themselves to fully supporting the bill:

  • B’nai Brith Canada, which spoke specifically in support of the advocacy or promotion of terrorism offence, urged the government to create a new defence against the charge
  • the Mackenzie Institute criticized the CSIS provisions and called for improved oversight
  • former Senator Hugh Segal warned “that any time we set aside any freedom if we don’t have to, any time we set aside any core constitutional protection if it’s not absolutely necessary, we’re going down the wrong road; and we should do our best not to do that.”
  • the Centre for Israel and Jewish Affairs called on the government to establish improved oversight and to reform the information sharing provisions
  • Ron Atkey, former chair of SIRC, argued that “Part 4 authorizes the federal court to issue a warrant to CSIS to take measures that may contravene a right or freedom guaranteed by the Canadian Charter of Rights and Freedoms. This provision, in my view, is clearly unconstitutional and it will be struck down by the courts.”
  • Barry Cooper, a University of Calgary professor, called for improved oversight

The bill has now passed the committee and heads to the House of Commons for third reading. Left behind is an anti-democratic approach to the bill has attracted the attention of leading commentators who have concluded that Canada now has “a fake legislature designed to fool the tourists and visiting dignitaries Canada retains a vibrant parliamentary democracy.”

The post From Obama Birthers to Anti-Immigration Activists: Who the Government Turned to for Bill C-51 Support During Committee Hearings appeared first on Michael Geist.

Bitcoin and game theory: we’re still scratching the surface

Freedom to Tinker - Tue, 2015/03/31 - 11:03
In an earlier post I argued why Bitcoin’s stability is fundamentally a game-theoretic proposition, and ended with some questions: Can we effectively model the system with all its interacting components in the language of strategies and payoff-maximization? Is the resulting model tractable — can we analyze it mathematically or using simulations? And most importantly, do […]

We Can’t Hear You: The Shameful Review of Bill C-51 By the Numbers

Michael Geist Law RSS Feed - Tue, 2015/03/31 - 08:24

The Standing Committee on Public Safety and National Security will hold its clause-by-clause review of Bill C-51, the Anti-Terrorism bill, this morning. The government is expected to introduce several modest amendments that experts note do little to address some of the core concerns with the bill. While there is some tinkering with the information sharing provisions, the law will still allow for widespread sharing without effective oversight from the Privacy Commissioner of Canada. Moreover, key concerns with respect to the CSIS Act (warrants that can violate Charter rights) and broader oversight and accountability remains untouched.

None of this comes as a surprise. Earlier in the committee hearings, Green Party leader Elizabeth May lamented that “the hearing process is a sham. They’re not listening to witnesses.” Now that the hearings have concluded, the data bears this out. Witnesses from across the political spectrum called for changes to the information sharing rules, to oversight, to the CSIS powers, and to the advocating or promoting terrorism provision, yet Conservative MPs never bothered to listen.

Few legislative issues are as important as the security and privacy of Canadians, but the entire hearings were structured to avoid hearing from experts, to asking irrelevant questions, or to bringing in witnesses with scant knowledge of the proposed bill.  Just how bad was it? The Bill C-51 hearings by the numbers:

Conservative MPs (Roxanne James, Rick Norlock, Diane Ablonzcy, LeVar Payne, Ted Falk)

49: Number of external witnesses
16: Number of hours spent in committee with external witnesses
25: Number of times a Conservative MP asked a substantive question about a Bill C-51 provision (Payne (7), Falk (6), Norlock (6), Ablonzcy (3), James (3))
3: Number of times a Conservative MP asked a critic a substantive question about a Bill C-51 provision (Falk (2), Ablonzcy (1))
4: Number of times a Conservative MP asked one or fewer questions during their time due to long statements (Norlock (2), Ablonzcy (1), James (1))

3: Number of times LeVar Payne asked if CSIS or the RCMP is too busy to ask government for information on protesters (Davies, Morrison, Toronto Police Association)
2: Number of times Roxanne James interrupted critics of Bill C-51 with points of order or questions to the chair during their statements or responses (CCLA, Open Media)
4: Number of times Diane Ablonzcy asked about jihadi or ISIS threats (Cooper, NCCM, Heritage Foundation, CIJA)

1: Number of times Diane Ablonzcy questioned whether the witness was committed to fighting terrorism (NCCM)
1: Number of times Rick Norlock asked a witness if they “opposed taking terrorists off the street” (BCCLA)
1: Number of times Roxanne James asked witnesses to comment on “unhelpful information” being circulated about information sharing (Davies)
1: Number of times Diane Ablonzcy said she struggled with the relevance of former Senator Hugh Segal’s concerns (Segal)

The Witnesses

9: Number of witnesses who did not comment on C-51 specifics in their opening statements (Davies, Collacott, Gora, Neumann, Quigan, American Islamic Forum for Democracy, Nawaz, Boisvert, Center for Security Policy )
8: Of those who were supportive of Bill C-51 (Davies, Collacott, Gora, Neumann, Quigan, American Islamic Forum for Democracy, Boisvert, Center for Security Policy)

12: Number of Canadian privacy commissioners who have publicly criticized Bill C-51
0: Number of appearances by the Privacy Commissioner of Canada
0: Number of appearances by any Canadian (federal or provincial) privacy commissioner
3: Number of U.S. groups with no Canadian connections who appeared as witnesses (American Islamic Forum for Democracy, Heritage Institute, Center for Security Policy)

135: Number of pages Professors Craig Forcese and Kent Roach wrote in four background papers on Bill C-51
3: Number of questions posed directly to Forcese and/or Roach by Conservative MPs

1: Number of immigration “experts” who could not answer a direct question (asked three times) on the immigration provisions in Bill C-51 (Collacott)
1: Number of witnesses who argued that critics of Bill C-51 were unaware of the increasing threat of terrorism and tide of hatred at Canadian university campuses (Benlolo)
1: Number of witnesses who pointed to the need for Parliamentary oversight and claimed that Bill C-51 included it (Center for Security Policy)
1: Number of witnesses who, when asked what gaps Bill C-51 fills, responded that it allows police to monitor what people say in public (Sheehy)

The post We Can’t Hear You: The Shameful Review of Bill C-51 By the Numbers appeared first on Michael Geist.

Quebec Takes on the Internet: Government Announces Plans to Require Website Blocking & Studies New Internet Access Tax

Michael Geist Law RSS Feed - Fri, 2015/03/27 - 06:47

The Government of Quebec released its budget yesterday featuring two Internet-related measures that are sure to attract attention and possible litigation. First, it is moving forward with plans to study a new tax on residential Internet services in order to provide support for the cultural sector. The study was recommended by the Quebec Taxation Review Committee, which is looking for new sources of revenue to support the movie, music, and book publishing industries. There are no further details on how much an ISP tax would be, though the plan would increase Internet access costs at the very time that governments are concerned with improving affordability.

Second, the government says it will be introducing a new law requiring ISPs to block access to online gambling sites. The list of blocked sites will be developed by Loto-Quebec, a government agency. The budget states:

A legislative amendment will be proposed to introduce an illegal website filtering measure. In accordance with this measure, Internet service providers will not be allowed to provide access to an online gaming and gambling website whose name is on a list of websites that are to be blocked, drawn up by Loto-Québec. This measure will be applied by the Régie des alcools, des courses et des jeux, which should have the necessary resources to fulfil its new responsibilities.

The government views this as a revenue enhancing measure because it wants to channel gamblers to its own Espacejeux, the Loto-Quebec run online gaming site. A November 2014 report found that Espacejeux was not meeting revenue targets since people were using other sites. It believes that the website blocking will increase government revenues by $13.5 million in 2016-17 and $27 million per year thereafter.

This is a remarkable and possibly illegal plan as the government seeks to censor the Internet for its own commercial gain. The plan would likely face a legal challenge, both on free speech and jurisdictional grounds, since the telecommunication regulations fall within federal jurisdiction (Quebec will counter that provinces are empowered to regulate gambling and consumer protection).

More importantly, website blocking in Canada has been exceedingly rare. Canadian Internet providers block access to some child pornography images under the Cleanfeed Canada initiative, but the blocking is not legislatively mandated and involves images that are illegal to access. Online gambling sites are not illegal to view and to legislate blocking for commercial gain sets a dangerous Canadian precedent. In fact, once blocking gaming and gambling sites is established, it is easy to envision the government requiring blocking of sites that are alleged to infringe copyright or blocking e-commerce sites that are not bilingual or do not pay provincial taxes.

The post Quebec Takes on the Internet: Government Announces Plans to Require Website Blocking & Studies New Internet Access Tax appeared first on Michael Geist.

Why the Crull Controversy Is a Symptom of Bell’s Bad Bundles Bet

Michael Geist Law RSS Feed - Thu, 2015/03/26 - 07:42

The furor over Bell Media President Kevin Crull’s banning of CRTC Chair Jean Pierre Blais from CTV news coverage following the pick-and-pay decision made for a remarkable news day yesterday.  From the initial Globe report to the unprecedented response from Blais to the Crull apology, it was a head-spinning day. While Bell presumably hopes that the apology brings the matter to a close, that seems unlikely to be the case as there are bigger implications for Crull, CTV News, and Bell more broadly.

Crull’s future has been the subject of much talk, with some calling for his resignation, particularly since there is evidence that this is not the first instance of the editorial interference. Assuming it has occurred before (the reference to “re-learning” in the Crull apology is telling), CEO George Cope was undoubtedly aware of the practice and must surely have condoned it, suggesting that Crull will survive. However, Crull’s bigger problem may be that his ability to represent Bell Media before the CRTC has been irreparably damaged. Bell could have Cope represent the company rather than Crull (indicating the seriousness of the issues), but Crull will struggle as the public face of the company before the regulator for as long as Blais remains chair.

The CTV News problem is that the Crull apology does not address the broader systemic problems of editorial interference. Unless it plans to have Robert Fife cover all telecom and broadcast matters, its future coverage will be subject to intense scrutiny and skepticism over whether it is unbiased. As Steve Faguy argues, an independent investigation and stronger walls between editorial and corporate executives is needed. Moreover, Peter Nowak calls for an independent ombudsman within the company to address editorial independence.

The bigger implications are for BCE and Bell Media itself. Crull’s editorial interference reflects what must be enormous corporate frustration with the CRTC. Bell could once reliably count the CRTC as an ally, but the Commission has ruled against it on a host of issues in recent months, including pick-and-pay, simultaneous substitution for the Super Bowl, and the legality of MobileTV service. Those decisions and the Bell frustration speak to the biggest issue of all: the company’s big bet on one bundle – Internet, wireless, broadcast distribution, and content – is falling apart due to market and regulatory changes.

Bell’s bet on vertical integration, which included buying Astral and CTV, was premised on the idea that Canada’s biggest communications company could create the ultimate bundle with consumers buying their Internet access, wireless services, and television packages from a single source. That same source would own the majority of television channels and the Canadian rights to the most popular programs. It could then leverage this control by creating unmatchable offers to entice consumers (ie. data-free mobile access to television services) and give advertisers access to the most comprehensive data on user preferences and online activities.

That might be attractive to business analysts, but the vision has faced steady opposition from government, regulators, and market developments. Government has emphasized the need for more competition in wireless services with spectrum set-asides designed to assist new competitors. As noted above, the CRTC has ruled against Bell on several key issues in recent months and may yet order wholesale access to fibre Internet access. The Privacy Commissioner and/or the CRTC may also rule against the targeted advertising approach. Meanwhile, companies like Netflix have proven to be far more effective competitors than Bell likely anticipated.

It is no coincidence that Bell’s anger boiled over with the pick-and-pay decision, since it was particularly harmful to Bell’s one-bundle vision. A week after the decision, Bell has still not publicly commented on the ruling, but three aspects of the decision represent worst case scenarios for the company. First, pick-and-pay will make it far more difficult for the company to cross-subsidize some of its unpopular channels through bundling. With limited ad revenue and lost subscription revenue, some of those channels will shut down.

Second, the basic service requirement of a $25 package hurts Bell the most, since its Bell Fibe service has the highest price among the major providers for basic service. Further, while it might be inclined to exclude U.S. channels from the basic package, it will be difficult to do if competitors such as Rogers (which argued for inclusion of the U.S. channels in a basic service and is bleeding customers to IPTV services) add them to its service.

Third, as I pointed out earlier this week, the pick-and-pay decision specifically targets vertically integrated companies. For example, starting in September 2018, for every service offered by a vertically integrated cable or satellite company, an independent programming service in the same language must also be offered if available. That policy severely undermines Bell’s ability to leverage its large cohort of channels.

Bell Media has been scrambling to adjust to these developments with calls for blocking U.S. channels, making it more difficult to access U.S. Netflix, levying a TV tax for conventional channels, and challenging the CRTC decisions on MobileTV and simultaneous substitution at the Federal Court of Appeal. But these moves smack of desperation as doubts increase about whether its multi-billion dollar bet on bundling will pay off.

The post Why the Crull Controversy Is a Symptom of Bell’s Bad Bundles Bet appeared first on Michael Geist.

Be wary of one-time pads and other crypto unicorns

Freedom to Tinker - Wed, 2015/03/25 - 18:53
Yesterday, a new messaging app called Zendo got some very favorable coverage from Tech Crunch. At the core of their sales pitch is the fact that they use one-time pads for encryption. With a few strong assumptions, namely that the pads are truly random and are only used once, it’s true that this scheme is “unbreakable” […]

Bell’s Crull Banned CRTC Chair Blais From CTV News Coverage Following TalkTV Decision

Michael Geist Law RSS Feed - Wed, 2015/03/25 - 07:57

The Globe and Mail’s James Bradshaw reports that Bell Media President Kevin Crull banned CTV media properties from including CRTC Chair Jean Pierre Blais in coverage of the recent TalkTV decisions. The report indicates that Crull ordered the head of CTV News to stop including Blais in coverage following an interview on BNN, which led to the cancellation of an interview with Don Martin and dropping him from local news stories (he was included in the national newscast as Robert Fife defied the order). Bell Media has still not publicly commented on the pick-and-pay decision. Crull is the same Bell executive who earlier this month called for the blocking of U.S. channels and for new measures to make it more difficult for Canadians to access U.S. Netflix.

I would say the story is shocking, but this is not the first time of reports that Crull has meddled in news coverage related to his company. In August 2013, Dwayne Winseck reported that Crull intervened on coverage of the wireless sector when Verizon was considering entry into the Canadian market. Winseck posted emails from Crull to news executives throughout CTV urging certain coverage of a wireless report throughout Bell Media’s television and radio stations. I wrote about Winseck’s story here.

Steve Faguy followed up with Bell following the post who claimed that “our news divisions are independently managed and have the full power to make editorial decisions, as outlined in the CTV News Policy Handbook.” That claim is unsurprising, since the CAB Code of Ethics says that “news shall not be selected for the purpose of furthering or hindering either side of any controversial public issue, nor shall it be formulated on the basis of the beliefs, opinions or desires of management, the editor or others engaged in its preparation or delivery.” Yet given that the Wendy Freeman, the President of CTV News, apparently felt that she would be fired if she did not comply with Crull’s demands, Bell’s claims of editorial independence ring hollow.

The post Bell’s Crull Banned CRTC Chair Blais From CTV News Coverage Following TalkTV Decision appeared first on Michael Geist.

Why Your Netflix Traffic is Slow, and Why the Open Internet Order Won’t (Necessarily) Make It Faster

Freedom to Tinker - Wed, 2015/03/25 - 07:07
The FCC recently released the Open Internet Order, which has much to say about “net neutrality” whether (and in what circumstances) an Internet service provider is permitted to prioritize traffic. I’ll leave more detailed thoughts on the order itself to future posts; in this post, I would like to clarify what seems to be a […]

A Conversation About Bill C-51: How the Anti-Terrorism Bill Undermines Canadian Privacy

Michael Geist Law RSS Feed - Tue, 2015/03/24 - 09:31

Yesterday, I had the honour of participating in a terrific panel at the University of Ottawa on Bill C-51 alongside colleagues Dean Nathalie Des Rosiers and Joanne St. Lewis (the panel was moderated by the Toronto Star’s Tonda MacCharles and organized by Carissima Mathen). My remarks focused on the privacy implications of Bill C-51, drawing on a recent column on the issue (Toronto Star version, homepage version). My opening comments are posted below.

A Conversation About Bill C-51

Thanks to Carissima Mathen for organizing this panel. It’s a great idea and given that this week looks like the final week for committee hearings, very timely.

It is hard to know where to start with Bill C-51.  So I’m not going to start with the bill at all.  In fact, I’d like to share my context for reviewing the bill and provide a far more personal take than is typical. There is good reason for doing so – if you have followed the rather limited committee hearings to date, you know that government MPs have made deeply personal comments, raising questions about the loyalty to Canada of some witnesses and whether critics of the bill believe terrorism is a threat.

So, let me be clear.  My children go or have gone to a school that has 24 hour security.  They get buzzed into the building by a security guard.  Their lunch boxes are tagged so that non-tagged bags can be easily identified in case of a threat. My community centre has 24 hour security and requires identification to enter in a manner reminiscent of some embassies.  When I go to synagogue, there are armed police who prominently guard the building.  All of this is for good reason. There have been attacks in recent months around the world on Jewish synagogues, museums, and grocery stores that has resulted in the murder of innocent civilians.

The terror threat is something that my family feels everyday.

That’s my context for C-51.  But my context also comes from being engaged in privacy related issues for most my career. I have a book coming out in a couple of months – an edited volume with contributions from scholars from across the country include Forcese, Roach, Austin, Parsons, and others – on privacy and security in Canada in the post-Snowden environment that shapes my thinking.  And that experience, as well as the work of exceptional scholars, leaves me convinced that providing law enforcement with the powers it needs is a far cry from granting it a blank cheque.

The Snowden revelations have made it abundantly clear that given the capability, intelligence agencies and law enforcement will monitor and gather everything they can and then disseminate and data mine that information in every conceivable way.  This means tracking everything.  Indeed, it is why the nearly weekly reports about an NSA or CSE or GCHQ initiative to gather all Internet communications or hack into private systems no longer shocks. For example, we know that Canadian agencies grab tens of millions of downloads every day from users around the world. We know that Canadian Internet communications pass through routers that collect the metadata on all communications.  These are our agencies working on concert with others, yet the activities merit barely a mention.

This is the current reality.  I would prefer – in fact, I think we desperately need – far stronger limits on data collection, which is currently indistinguishable from mass surveillance. We also need stronger safeguards on its dissemination, disclosure, and use.  And we need far better oversight to ensure that this massive data collection does not run afoul of the law and is not misused.

That too is part of my context for Bill C-51 and which brings me to the information sharing provisions in the bill.

The privacy-related concerns in the bill stem from the Security of Canada Information Sharing Act (SCISA), a bill within the bill, that goes far further than sharing information related to terrorist activity.  It does so in three steps.

First, the bill permits information sharing across government for an incredibly wide range of purposes, most of which have nothing to do with terrorism. The government has tried to justify the provisions on the grounds that Canadians would support sharing information for national security purposes, but the bill allows sharing for reasons that would surprise and disturb most Canadians.

The bill opens the door to information sharing due to “activity that undermines the security of Canada.” Rather than using the CSIS Act definition, however, it creates a new expansive definition. Terrorism is included within the definition, but several of these provisions would seemingly allow for information sharing for almost any investigative purpose, particularly “public safety” and the “economic or financial stability of Canada.”

Further, the provision excluding “lawful advocacy” provides little comfort, given the ease with which those protections can be lost due to a municipal violation or other technical issue. Those expressing fears about these provisions covering advocacy or protests have good reason for doing so.

Second, the scope of sharing is exceptionally broad. The government not only opens the door to sharing information for a myriad of non-terrorism purposes, but it also permits access for a broad array of government institutions and departments. The bill currently identifies the following 17 institutions and departments:

•    Canadian Border Services Agency
•    Canada Revenue Agency
•    Canadian Armed Forces
•    Canadian Food Inspection Agency
•    Canadian Nuclear Safety Commission
•    CSIS
•    CSE
•    Citizen and Immigration
•    Finance
•    Foreign Affairs, Trade, and Development
•    Health
•    National Defence
•    Public Safety
•    Transport
•    FINTRAC
•    Public Health Agency
•    RCMP

That list can grow, however, with cabinet empowered to add institutions and departments by regulation. Moreover, the inclusion of CSE, which as noted has been the focal point of the Internet surveillance debate due to the Snowden revelations, suggests that CSE information could be readily shared across government departments despite repeated claims that its work does not target Canadians.

In addition to this form of information sharing, the bill also permits additional use and disclosure of information “in accordance with the law…to any person, for any purpose.” Section 6 states:

For greater certainty, nothing in this Act prevents a head, or their delegate, who receives information under subsection 5(1) from, in accordance with the law, using that information, or further disclosing it to any person, for any purpose.


It is worth repeating – “disclosing the information to any person, for any purpose.”

Third, oversight is indeed a problem since the privacy protections found in Privacy Act are widely viewed as already outdated. In fact, Bill C-51 effectively neuters the core protections found in the Privacy Act by opening the door to the very kind of information sharing that the law is intended to prevent.

Since the enactment of the Privacy Act in 1983, every federal privacy commissioner has urged the government of the day to strengthen it. Those calls have grown louder over the past decade as PIPEDA places tougher obligations on the private sector than the government places on itself. The law as it currently stands has weak annual reporting requirements from government agencies, does not provide much protection to Canadians from abusive treatment by foreign states, does not give the Privacy Commissioner order-making power, does not provide redress in cases involving harm, does not prevent over-collection of personal information, does not protect against surveillance where the data is not recorded, and does not feature security breach disclosure requirements.

Given its impact, it should come as no surprise that in recent weeks, all privacy commissioners from across the country have spoken out. For example, Privacy Commissioner of Canada Daniel Therrien, appointed by the government less than a year ago and described as an expert by Prime Minister Stephen Harper, slammed the bill:

the scale of information sharing being proposed is unprecedented, the scope of the new powers conferred by the Act is excessive, particularly as these powers affect ordinary Canadians, and the safeguards protecting against unreasonable loss of privacy are seriously deficient.  While the potential to know virtually everything about everyone may well identify some new threats, the loss of privacy is clearly excessive.  All Canadians would be caught in this web.

All provincial privacy commissioners have offered a similar analysis, jointly calling on the government to withdraw the information sharing aspects of the bill. They also warn of routine surveillance of large portions of the population:

It could be used to authorize, in effect, surveillance across governments in Canada, and abroad, for virtually unlimited purposes. Such a state of affairs would be inconsistent with the rule of law in our democratic state and contrary to the expectations of Canadians.

The privacy community may be unanimous in condemning the information sharing provisions in Bill C-51, but discouragingly Liberal leader Justin Trudeau has pointed to those provisions as one of the positives of the bill.

What he should be saying – along with all opposition MPs and the broader public – is that this bill needs amendment.  There may be times when we want government to be able to share information more aggressively to counter a legitimate security threat.  Yet that can still occur with amendments that would adopt the CSIS Act approach to security threat (thereby limiting the scope of sharing) and building in stronger oversight through both the Privacy Commissioner of Canada (via the Privacy Act) and addressing the ongoing concerns with CSIS and CSE oversight.

The post A Conversation About Bill C-51: How the Anti-Terrorism Bill Undermines Canadian Privacy appeared first on Michael Geist.

Privacy Under Attack in Anti-Terror Bill

Michael Geist Law RSS Feed - Tue, 2015/03/24 - 09:23

Appeared in the Toronto Star on March 14, 2015 as Privacy Under Attack in Anti-Terror Bill

As witnesses line up to warn about the dangers associated with Bill C-51, Canada’s anti-terrorism bill, it is increasingly clear that the proposed legislation is an unprecedented undermining of Canadian privacy protection. Much of the focus on the bill has related to oversight: the government implausibly claims that it increases oversight (it does not), the Liberals disappointingly say they support the bill but would like better oversight, and much of the NDP criticism has also centered on oversight. Yet with respect to privacy and Bill C-51, lack of oversight is only a part of the problem.

The privacy-related concerns stem from Bill C-51′s Security of Canada Information Sharing Act (SCISA), a bill within the bill, that goes far further than sharing information related to terrorist activity. It does so in three steps.

First, the bill permits information sharing across government for an incredibly wide range of purposes, most of which have nothing to do with terrorism. The government has tried to justify the provisions on the grounds that Canadians would support sharing information for national security purposes, but the bill allows sharing for reasons that would surprise and disturb most Canadians.

Second, the scope of sharing is exceptionally broad, covering 17 government institutions with government granting itself the right to expand sharing to other departments. In fact, the bill even permits further disclosure “to any person, for any purpose.” In other words, there are few limits on how information the government collects can be shared internally, with other governments, or with any entity it sees fit.

Third, oversight is indeed a problem since the privacy protections found in Privacy Act are widely viewed as already outdated. In fact, Bill C-51 effectively neuters the core protections found in the Privacy Act by opening the door to the very kind of information sharing that the law is intended to prevent.

In recent weeks, all privacy commissioners from across the country have spoken out. For example, Privacy Commissioner of Canada Daniel Therrien, appointed by the government less than a year ago and described as an expert by Prime Minister Stephen Harper, slammed the bill:

the scale of information sharing being proposed is unprecedented, the scope of the new powers conferred by the Act is excessive, particularly as these powers affect ordinary Canadians, and the safeguards protecting against unreasonable loss of privacy are seriously deficient.  While the potential to know virtually everything about everyone may well identify some new threats, the loss of privacy is clearly excessive.  All Canadians would be caught in this web.

All provincial privacy commissioners have offered a similar analysis, jointly calling on the government to withdraw the information sharing aspects of the bill. They also warn of routine surveillance of large portions of the population:

It could be used to authorize, in effect, surveillance across governments in Canada, and abroad, for virtually unlimited purposes. Such a state of affairs would be inconsistent with the rule of law in our democratic state and contrary to the expectations of Canadians.

The privacy community may be unanimous in condemning Bill C-51, but perhaps the biggest disappointment is to see how Harper has flipped on the importance of privacy protection over the information collected by governments.

Nearly twenty years ago, he was a Reform MP commenting on a proposed electronic voter registry and warning that “the first and main concern is the privacy issue … since the information is to be shared by different levels of government and different governmental bodies. There is a risk that privacy can compromised.”

Today, the Prime Minister is fast tracking a bill that represents the biggest ever reduction in Canadian public sector privacy protection and even blocking the Privacy Commissioner of Canada from appearing before the committee studying the bill. This is a remarkable about-face and one that could leave Canada with some of the weakest safeguards against government information sharing in the developed world.

Michael Geist holds the Canada Research Chair in Internet and E-commerce Law at the University of Ottawa, Faculty of Law. He can be reached at mgeist@uottawa.ca or online at www.michaelgeist.ca.

The post Privacy Under Attack in Anti-Terror Bill appeared first on Michael Geist.

Why the Vertically Integrated TV Giants Are the CRTC’s Hidden Target in Pick-and-Pay Decision

Michael Geist Law RSS Feed - Mon, 2015/03/23 - 11:19

The Canadian Radio-television and Telecommunications Commission last week announced much-anticipated plans to require cable and satellite companies to offer consumers basic television packages for an affordable $25 per month alongside the option of picking the television channels they want without requiring them to purchase expensive bundles.

Despite some hand wringing that the changes will lead to reduced revenues for broadcasters, my weekly technology law column (Toronto Star version, homepage version) notes that it is readily apparent that the CRTC is committed to reducing or eliminating outdated regulations in the hope of fostering a more competitive broadcast environment. Consumer choice for television channels, greater flexibility for broadcaster programming, adjustments to Canadian content requirements, and the enforcement of net neutrality rules all fall within the same broader strategy of exercising its regulatory muscle to enable a level playing field and encourage the development of globally competitive content.

What makes the latest CRTC decision particularly notable is that it identifies a new threat to a competitive broadcast environment. Much to the chagrin of many within the Canadian system, it isn’t Netflix. In recent months, seemingly everyone has had a turn taking shots at the enormously popular online video service: the Government of Ontario has called for a Netflix tax, Bell Media has asked for measures to block access to the U.S. service, and many creator groups have urged the CRTC to adopt new regulations for online media.

Yet the commission is seemingly far more concerned with the impact of vertically integrated broadcast giants than it is with Netflix. Indeed, the “pick-and-pay” decision includes several safeguards against potential anti-competitive conduct by the vertically integrated companies, who combine ownership of conventional and specialty broadcasters, cable or satellite broadcast distributors, broadband Internet access providers, and wireless services.

Consider the justification the commission gave for mandating pick-and-pay channels. After noting some companies maintained that the market alone would lead to greater consumer choice, it stated:

“this approach does not take into account the fact that vertically integrated broadcast distributors (BDUs) have every incentive to ensure that their related programming services are insulated from the financial pressures that come with greater choice and packaging flexibility. As such, BDUs, and vertically integrated BDUs in particular, may not be sufficiently incented to make the necessary changes to their current offerings or might make these changes at a much slower pace than that desired by Canadian subscribers.”

In other words, without rules mandating the pick-and-pay option, companies like Bell and Rogers are likely to drag their feet on making changes in order to protect their broadcast interests.

But the CRTC decision involves far more than just pick-and-pay. It notes that Bell, Rogers, and Shaw/Corus control nearly 80 per cent of English language “Category A” services (specialty services that must be carried by broadcast distributors) and that two-thirds of the French language services are owned by Quebecor, Bell, and Shaw/Corus.

The CRTC is creating new measures that target those vertically integrated companies. For example, starting in September 2018, for every service that is owned and distributed by a vertically integrated cable or satellite company, an independent programming service in the same language must also be offered if available. Both Bell and Rogers had recommended a 2:1 ratio, while Quebecor opposed any rules.

Moreover, the CRTC is expanding a wholesale code that governs negotiations between broadcasters and programmers by creating more safeguards against unreasonable terms and pricing. The commission announced that it will amend the code to require vertically integrated cable and satellite companies to ensure that independent programming services are given packaging and marketing support that is comparable to what they give their own services.

Why the focus on vertically integrated companies rather than on Netflix? It comes down to competition. Rather than viewing Netflix as a threat, the CRTC rightly sees it as a pro-competitive entrant that creates more consumer choice and forces others to innovate. Its real concern lies with the vertically integrated companies, who may find it in their interests to create competitive barriers since increased consumer choice could be viewed as a threat to their broadcast interests.

The post Why the Vertically Integrated TV Giants Are the CRTC’s Hidden Target in Pick-and-Pay Decision appeared first on Michael Geist.

Vertically Integrated TV Giants Are the CRTC’s Hidden Target

Michael Geist Law RSS Feed - Mon, 2015/03/23 - 11:17

Appeared in the Toronto Star on March 21, 2015 as TV Giants are the CRTC’s Real Target

The Canadian Radio-television and Telecommunications Commission last week announced much-anticipated plans to require cable and satellite companies to offer consumers basic television packages for an affordable $25 per month alongside the option of picking the television channels they want without requiring them to purchase expensive bundles.

Despite some hand wringing that the changes will lead to reduced revenues for broadcasters, it is readily apparent that the CRTC is committed to reducing or eliminating outdated regulations in the hope of fostering a more competitive broadcast environment. Consumer choice for television channels, greater flexibility for broadcaster programming, adjustments to Canadian content requirements, and the enforcement of net neutrality rules all fall within the same broader strategy of exercising its regulatory muscle to enable a level playing field and encourage the development of globally competitive content.

What makes the latest CRTC decision particularly notable is that it identifies a new threat to a competitive broadcast environment. Much to the chagrin of many within the Canadian system, it isn’t Netflix. In recent months, seemingly everyone has had a turn taking shots at the enormously popular online video service: the Government of Ontario has called for a Netflix tax, Bell Media has asked for measures to block access to the U.S. service, and many creator groups have urged the CRTC to adopt new regulations for online media.

Yet the commission is seemingly far more concerned with the impact of vertically integrated broadcast giants than it is with Netflix. Indeed, the “pick-and-pay” decision includes several safeguards against potential anti-competitive conduct by the vertically integrated companies, who combine ownership of conventional and specialty broadcasters, cable or satellite broadcast distributors, broadband Internet access providers, and wireless services.

Consider the justification the commission gave for mandating pick-and-pay channels. After noting some companies maintained that the market alone would lead to greater consumer choice, it stated:

“this approach does not take into account the fact that vertically integrated broadcast distributors (BDUs) have every incentive to ensure that their related programming services are insulated from the financial pressures that come with greater choice and packaging flexibility. As such, BDUs, and vertically integrated BDUs in particular, may not be sufficiently incented to make the necessary changes to their current offerings or might make these changes at a much slower pace than that desired by Canadian subscribers.”

In other words, without rules mandating the pick-and-pay option, companies like Bell and Rogers are likely to drag their feet on making changes in order to protect their broadcast interests.

But the CRTC decision involves far more than just pick-and-pay. It notes that Bell, Rogers, and Shaw/Corus control nearly 80 per cent of English language “Category A” services (specialty services that must be carried by broadcast distributors) and that two-thirds of the French language services are owned by Quebecor, Bell, and Shaw/Corus.

The CRTC is creating new measures that target those vertically integrated companies. For example, starting in September 2018, for every service that is owned and distributed by a vertically integrated cable or satellite company, an independent programming service in the same language must also be offered if available. Both Bell and Rogers had recommended a 2:1 ratio, while Quebecor opposed any rules.

Moreover, the CRTC is expanding a wholesale code that governs negotiations between broadcasters and programmers by creating more safeguards against unreasonable terms and pricing. The commission announced that it will amend the code to require vertically integrated cable and satellite companies to ensure that independent programming services are given packaging and marketing support that is comparable to what they give their own services.

Why the focus on vertically integrated companies rather than on Netflix? It comes down to competition. Rather than viewing Netflix as a threat, the CRTC rightly sees it as a pro-competitive entrant that creates more consumer choice and forces others to innovate. Its real concern lies with the vertically integrated companies, who may find it in their interests to create competitive barriers since increased consumer choice could be viewed as a threat to their broadcast interests.

Michael Geist holds the Canada Research Chair in Internet and E-commerce Law at the University of Ottawa, Faculty of Law. He can be reached at mgeist@uottawa.ca or online at www.michaelgeist.ca.

The post Vertically Integrated TV Giants Are the CRTC’s Hidden Target appeared first on Michael Geist.

Security flaw in New South Wales puts thousands of online votes at risk

Freedom to Tinker - Sun, 2015/03/22 - 08:45
Update April 26: The technical paper is now available Update Mar. 23 1:30 PM AEDT: Our response to the NSWEC’s response New South Wales, Australia, is holding state elections this month, and they’re offering a new Internet voting system developed by e-voting vendor Scytl and the NSW Electoral Commission. The iVote system, which its creators […]

Beware of the Scare Tactics, Part Two: CRTC Unveils Cheap Basic Service and Pick-and-Pay

Michael Geist Law RSS Feed - Fri, 2015/03/20 - 08:36

As expected, the CRTC ruled yesterday that it will require cable and satellite companies to offer a mandatory basic service capped at $25 per month (which may include U.S. channels) and a pick-and-pay alternative for individual channels no later than December 2016. As also expected, the doomsayers are out in full force, trying to explain why a low priced service and more consumer choice will lead to higher cable bills. The Globe and Mail’s Kate Taylor predicts “my bet is that most Canadians will find themselves piecing together a smaller cable package that will cost just about the same as the old behemoth.” The National Post’s Terrance Corcoran says that no one will buy the basic bundle and that “what is clear is that, when viewers start picking [bundles and channels], the amount they end up paying could go up.”

Yet that analysis runs counter to what business analysts expect to happen. Maher Yaghi of Desjardins Capital Markets says the changes could “lead to a reduction of $5 to $10 in monthly [revenue per user] as customers get the option to choose the channels they want to watch and move discretionary money toward OTT (over-the-top) services such as Netflix.” Canaccord Genuity analyst Dvai Ghose suggests even bigger declines of $9 to $21 for some customers. In fact, Ghose notes that “current entry-level TV monthly prices for the large BDUs are as follows: Bell Fibe TV $45.95, Rogers Cable $40.48, Shaw $39.90 and Videotron $38.00 and Telus $34.00 ($29.00 if bundled).” A $25 service is obviously going to result in reduced spending for those consumers.”

Critics keep claiming that the changes will result in billions in lost revenue. For example, Friends of Canadian Broadcasting says that more than $2 billion per year could be lost under a pick-and-pay system. The CRTC rejected those claims, but if they are even close to correct, how do you take $2 billion out of the system? By having consumer spend less on broadcast services. It simply makes no sense to suggest that broadcasters will earn less, broadcaster distributors will earn less, but somehow consumers will spend more.

Beyond the obvious economics, critics like Taylor and Corcoran emphasize that consumers will have to piece together bundles or more expensive pick-and-pay channels in order to get what they want. For example, Taylor says consumers will be looking for U.S. channels in their package. They can be included in the basic $25 service, but if they are not, they will be forced onto a higher tier. The fallacy with this analysis is that it thinks of consumer choices as limited to the cable system. This might have been true years ago, when consumers had few other choices (OTA the exception) than purchasing cable services.

No longer. Cable and satellite must now compete with streaming services such as Netflix, sports packages, and (soon in the U.S.) HBO and something that looks a lot like basic cable from Apple. The price points of streaming services are far lower than a cable bill of basic plus lots of bundles or individual channels (there is also an Internet bill, but consumers are buying Internet access with or without streaming services).

Cable and satellite services can try to piece together a crappy basic service without U.S. channels or set high fees for individual channels. But in a competitive market, there will be a strong disincentive against doing so. My bet would be that the major cable providers will include U.S. channels on basic because that is what the market wants and if they don’t, many will simply walk away altogether. Indeed, it was Rogers that specifically asked for the U.S. networks to be included on the basic package. The same is true for high prices for standalone services. Some might be pricey, but typically when there are no other alternatives to the same programming. When consumers have other options – streaming sports packages rather than TSN or Sportsnet rather than TSN – the market will keep prices in check.

Some Canadians will obviously continue to buy expensive bundles or retain their existing service. Old habits are slow to change. But they do change (as the newspaper or music industry can attest). With the new changes, those who currently purchase basic service will certainly save money. Moreover, the next generation of potential subscribers – my kids and my students – will only subscribe if cable or satellite offers better value than the online alternatives.

The post Beware of the Scare Tactics, Part Two: CRTC Unveils Cheap Basic Service and Pick-and-Pay appeared first on Michael Geist.

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