Canada Ejects It’s Digital Agenda to Focus on Ratcheting Up Copyright

The Canadian Liberal party vowed it will lead the country into an innovation future. Now, it is ejecting that policy entirely.

The Canadian Liberal party, the current governing party, showered promises of making Canada a hub for innovation and technology. Everything to bolster the countries position in the world on the technology and digital front was on the table. Whether it is rolling out high speed Internet coverage for ISPs in poorer communities or investing in artificial intelligence, the Liberal party envisioned a bold strategy to make Canada a world leader on this front.

Now, it seems that the Liberals have effectively scrapped this forward thinking agenda. Perhaps the strongest signal that Canada was heading in the wrong direction was when Heritage Minister, Steven Guilbeault, pushed for a link tax. Recently, he called the lack of a link tax “immoral“.

The push for a link tax recently is based off of the conspiracy theory that big corporate tech giants steal millions from the poor down-trodden big publishing industry. The only way to level the playing field is to force news aggregators to “pay their fair share” by forking over money for the “privilege” of linking to them in the first place. Obviously, this is all fact free nonsense because aggregators have a legal symbiotic relationship with publishers online.

Aggregators simply gather links, snippets, and thumbnails from different news organizations. They then display those results based on search results or personal preferences for the users. The result is that users flock to those news sources which generates revenue for the publishers – be it ad revenue or subscriptions. The more people who use aggregators, the more powerful they become. The more powerful they become, the more traffic news publishers get when they appear. It’s basically a win-win situation for all involved.

Of course, those are the facts. When governments push for the link tax, they are generally leaning towards the fictionalized version of how things work. That abandonment of reality appears to be what the Canadian government is leaning towards these days. Late last month, observers grew increasingly horrified at the terrible turn the government has taken. From Michael Geist:

Last week, I wrote about the need for the Canadian government to reboot its digital agenda, arguing that less than 12 months after the 2019 national election, the policy agenda had gone off the rails with a reversal on affordable telecom services, delays in broadband support and privacy reform, as well as plans for extensive online regulation. The Speech from the Throne, which sets out the government’s agenda, suggests that rather than rebooting the digital agenda, the government has largely deleted it altogether.

The speech was the longest throne speech since the Liberal election in 2015, yet there was apparently no time to reference privacy reform, intellectual property, wireless, or innovation (innovative appears once). Instead, beyond catching up on unfulfilled promises on rural broadband and promising action on online hate, the government’s digital agenda is – as Canadian Heritage Minister Steven Guilbeault said last week – now distilled primarily down to “get money from web giants.” That isn’t a digital agenda, it’s anti-digital agenda, with technology companies cast as both a foreign enemy to be regulated and an ATM for free cash to fund pet projects in the cultural sector.

What makes the government’s position so disappointing is that there are critical policies that could be addressed with respect to the Internet companies. The government could prioritize competition laws and take the companies to task where there is misuse of power. It could enact long-overdue privacy reforms with real enforcement powers to ensure that the companies do not abuse Canadians’ personal information. The government could bring in transparency and algorithmic disclosure requirements so that misuse of information and online harms could be curtailed. It could seek to hold the companies liable for failing to enforce their own policies and establish further restrictions on misleading advertising. It could ensure greater competition for access to telecom services that provide the gateway to the Internet and lead by example on ethical uses of data.

Shortly after, the heritage minister doubled down on his push for, what critics call, the anti-digital agenda. From Geist:

Canadian Heritage Minister Steven Guilbeault has said that his top legislative priority is to “get money from web giants.” That approach has typically been taken to mean the introduction of digital sales taxes and mandated Cancon payments from Internet streaming services such as Netflix. More recently, Guilbeault has raised the possibility of a link tax or licence, which would be paid by companies such as Facebook or Google merely for linking to news articles. If that wasn’t a sufficiently large digital tax agenda, Guilbeault now says the government is also planning new taxes on data and online advertising.

Since the election, the government has flip flopped on this commitment. Rather than seeking a standard on sales tax at the OECD (as indicated in the platform), the government now says it will move ahead with the digital sales tax and seek international consensus on multinational technology companies paying corporate tax on the revenue they generate in Canada.

Regardless, the platform did not specify plans for a data tax or an advertising tax. It is likely that Guilbeault is thinking of the Parliamentary Budget Office document that references taxes on advertising services and digital intermediation services, but does not include a specific reference to a data tax. A similar approach in France has been delayed with the U.S. threatening billions of dollars in tariffs in response. Canada would face the same fate and the prospect of retaliation under the USMCA. But even if that is the source, the plan was to work with the international community to develop a global standard, not develop a domestic approach. Further, what does this have to do with the Minister of Canadian Heritage? Tax policy is the responsibility of the Minister of Finance and privacy falls to the Minister of Innovation, Science and Industry, yet Guilbeault says a data tax is something “her and I are working on.”

Beyond the failure to include any reference to a data tax in its 85 page platform, the proposal is ill-advised and runs counter to the platform’s commitment to enhance privacy rights. Guilbeault mistakenly describes how Facebook uses personal information (it does not sell personal information to other companies without permission) to argue that some form of tax is needed. Yet rather than beefing up Canada’s privacy laws, the government effectively seeks to take a cut of the revenues that come from using Canadians’ personal information. Canadians don’t need yet another party profiting from their personal information. They need stronger privacy rules that limit the collection, use and disclosure of their information. In his zeal to “get money from web giants”, Guilbeault apparently seems to think that even a tax cash grab derived from Canadians’ data is fair game.

At the end of last month, things went even further into the world of fiction when the government apparently made further claims to bolster its anti-digital agenda. More specifically, they started pushing numbers that apparently don’t line up with what is really happening in the industry. Michael Geist called the numbers pushed by the government “bogus“:

Canadian Heritage Minister Steven Guilbeault has said that his top legislative priority is to “get money from web giants.” While much of the attention has focused on his ill-advised plan to require Facebook to obtain licences for linking to news articles, his first legislative step is likely to target Internet streamers such as Netflix, Amazon and Disney with new requirements to fund Canadian content and to increase its “discoverability” by making it more prominent for subscribers. Based on his comments at several town halls, Guilbeault is likely to also create new incentives for supporting indigenous and persons of colour in the sector with a bonus for those investments (potentially treating $1 of investment as $1.50 for the purposes of meeting Cancon spending requirements). Much of the actual implementation will fall to the CRTC, which will be granted significant new regulatory powers and targeted with a policy direction.

Guilbeault’s case for establishing new mandated payments is premised on the claim that support for the film and television sector is declining due to the emergence of Internet streaming services, which have resulted in decreased revenues for the conventional broadcast sector and therefore lower contributions to Cancon creation. In fact, Guilbeault recently told Le Devoir that without taking action there would be a billion dollar deficit in support in the next three years. He says that his objective is to actually generate a few hundred million more per year in local production by the Internet streamers. In other words, he’s expecting roughly $2 billion in new investment over three years in Cancon from U.S. entities due to his planned regulations (moving from a billion dollar deficit to a billion dollars in extra spending).

While Guilbeault frames these regulatory requirements as a matter of fairness and “rebalancing”, industry data over the past decade tell a much different story. Indeed, there has been record setting film and television production in recent years, much of it supported by companies such as Netflix. CRTC chair Ian Scott last year said that Netflix is “probably the biggest single contributor to the [Canadian] production sector today.” While that is not entirely true – the data suggests that Canadian taxpayers are the biggest contributor with federal and provincial tax credits consistently the largest source of financing – the claim that there is a billion dollar deficit coming or that foreign streamers do not contribute to film and television production in Canada without a regulatory requirement is simply false.

The real story of Canadian film and television production is not lost billions or unbalanced contributions as there has been significant growth in the sector and huge contributions from the unregulated foreign services. Rather, it is how Canadian film and television production has demonstrated it can compete without regulatory intervention. In other words, web giants are already paying without interventions from the CRTC or Minister Guilbeault that may increase consumer costs, reduce competition, violate net neutrality rules, and spark tariff retaliation from the U.S.

More recently, it’s been noted that there is also a push for increasing patents as well:

Provincial governments have also become increasingly engaged in innovation policy with plans to encroach on the federal government’s jurisdiction over intellectual property. For example, the Ontario government launched an intellectual property action plan that is convinced that universities could become better at commercialization if only there were clearer roles for technology transfer offices and better governance frameworks.

The experience elsewhere suggests this is unlikely, but the plan nevertheless equates patents as a proxy for innovation and bets on governance frameworks and centralized resources as the mechanism to create and commercialize intellectual property. The benefits of open innovation that eschews the restrictive patent model – particularly for the millions of dollars of publicly funded research – is surprisingly absent from the provincial plan.

While innovation policy may have fallen out of favour, the global pandemic has highlighted how governments can help foster private-sector innovation without the emphasis on commercialization and patenting. Years of publicly funded research has been essential in supporting the race to find an effective COVID-19 vaccine, serving as the foundation for the Astra-Zeneca/Oxford vaccine candidate. Further, the World Health Organization has focused on innovation models that support wide access to research outcome and publications.

The need to prioritize alternative innovative policies has not been totally lost in Canada. Soon after the pandemic took hold, the government passed legislation to override patents in an effort to remove potential barriers to the distribution of vaccines or other pharmaceuticals. More recently, National Science Adviser Mona Nemer released a report that touted making “scientific data, research and results freely available to all, with minimal restrictions.”

Indeed, we’ve seen the references to taxing the “large tech giants” during one of the debates during the last federal election. While increasing privacy and many other interesting policies were discussed during the last federal election, almost all of it was sidelined. One of the few surviving policies has been the taxing of large tech companies. Unfortunately, it has mutated into link taxes and unnecessary Cancon requirements. Both policies would make Canada an increasingly hostile place for innovation. With a push for ratcheting up patent laws, that agenda only adds to that toxicity.

Still, what all of this lays bare is that neither the Liberal party, nor the Conservative party can be trusted on this file. On the one hand, you have Liberals pushing for a link tax that could prove disastrous for the news sector. On the other hand, you have Conservatives demanding that patent laws be ramped up which has proven to be disastrous for innovation all around. This largely leaves the NDP and Green party as the two largest parties that seems to have Canada’s best interest in mind on that front. This largely mirrors what we’ve found during the Canadian election when we compared the party platforms. It would appear that, to date, the picture has largely remained unchanged throughout the entire government so far.

Drew Wilson on Twitter: @icecube85 and Facebook.



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