We continue our coverage of the CRTC hearings. Today, we are covering Michael Geist who apparently made his first CRTC appearance.
We are continuing our coverage of the CRTC hearings. The CRTC is holding these hearings as part of their consultations before implementing the Online Streaming Act (formerly Bill C-11).
We’ve already provided extensive coverage of these hearings. The appearances we covered are: Spotify, Paramount, Netflix, Amazon, Apple, Google/YouTube, Bell, Rogers, Corus, Shaftesbury, Digital First Canada, ACTRA, Unifor, and FRIENDS. While this is far from a complete list of all appearances up to the point of Michael Geist, it is certainly a considerable amount of coverage.
Today, we are continuing our long running series by seeing what University Law professor, Michael Geist, has to say. Geist, of course, has been a well known critic of the legislation. He fought against many of the misunderstandings of how platforms work and tried to raise awareness of consumer interest in these debates. This includes pointing out that the Online Streaming Act does manipulate algorithms on platforms and the fact that digital first creators are, in fact, scoped into the Act. While these concerns were dismissed as mythical or fearmongering, Geist stood by these facts like so many other critics of the legislation – and was rewarded when the fears came to fruition.
So, it was going to be interesting what Geist had to say to the CRTC now that the bill has become law. As it turns out, this would be Geist’s first appearance before the CRTC. You can read the full transcript of what was said here. So, with that, let’s take you inside the hearing.
In his opening statements, Geist pointed out how little attention was given to consumer interests:
9396 Well, I’d say that while many of my concerns such as discoverability, algorithmic regulation, minimum content requirements and modernized Cancon definitions are still to come, the interests of individual Canadians, I think, deserve far more attention. I don’t pretend to represent anyone other than myself, but in my research and work in the area I’ve developed a growing appreciation and understanding of the impact of internet regulatory policy on competition and consumer choice.
9397 These are all issues found in the Broadcasting Act’s policy objectives and in the government’s Policy Direction, yet with a handful of notable exceptions, there are relatively few witnesses over these three weeks who speak to them. Instead, respectfully, the hearing is treated by many as a cash grab to inject new funding into a myriad of policy priorities with limited discussion of the risks for consumers and competition.
This certainly tracks with what we read throughout the hearings. You have lobbyists like Bell and Rogers channelling their inner Mr. Vain, pounding the table demanding free money. The streamers, understandably, responded by saying that the contributions they already make should count towards their obligations. Digital First Canada and Google/Youtube did call for a system that does protect the digital environment. They rightfully pointed out that corporations like Bell and Rogers aren’t the only ones creating Canadian content. There’s plenty of digital creators that have taken to the internet to create content and reach audiences on their own terms. This, at the very least, touches on the consumer interests. The problem is that most witnesses didn’t even bother addressing what is in the interest of consumers.
Geist also touches on another particularly asinine part of the debate. For months now, anyone voicing any concern for the legislation is automatically classified as a “shill” for “Big Tech”. That is, if you don’t agree 100% with the corporate lobbyists in the debate, you were accused of being paid by “Big Tech” to sabotage the debate. It led independent voices to be forced to have to preface their remarks by saying things like “I’m not paid by Big Tech“. This is something I have been forced to do off and on as well.
MPs pushing the Online Streaming Act have gone so far as to call for politically motivated “investigations” into anyone daring to criticize the legislation. The Online News Act debate was equally disturbing in that even people who supported the legislation wound up being silenced because their comments might constitute criticizing the bill that the big media lobby was trying to push. In short, questioning the legislation is basically an unspeakable crime no matter the intention of such criticism is. Supporters of both bills expect everyone to say that these two laws are 100% perfect no matter what. Failure to adhere to this means you could be subject to personal attacks and even potentially law enforcement intervention. This is simply a reflection of how toxic these debates have come, so simply speaking out is an act of bravery because the powers that be will make those voicing these concerns as miserable as possible.
So, what are some of the risks Geist is highlighting? He went into that in more depth:
9398 I’d like to highlight some of the risks and urge the Commission to prioritize public over private interests, which means putting Canadians at the centre of their communications system, as one Chair once characterized it.
9399 Despite record spending on film and television production in Canada and now new Canadian legislation that will provide broadcasters with tens of millions of dollars in support of news production, I’ve heard many witnesses battling over whose situation is the most in crisis. I don’t think there’s much doubt about who faces the biggest crisis right now. It’s Canadian consumers, facing inflation, higher interest rates and oftentimes pricey communications services.
9400 Internet streaming services are not policy ATMs that can be subject to unlimited withdrawals. There are consequences to new regulatory costs and mandated contributions, particularly if they are set at rates that are outliers when compared to global standards or require support for policies or activities that fall far outside the core of the streamer’s business activities.
9401 Those consequences raise two risks. One I’d argue is market exit. As I’m sure you’re aware, that’s precisely what I think has occurred in the context of the Online News Act, where what amounts to uneconomic regulatory payments by Meta led to exit existing ‑‑ led Meta to exit existing deals, block news links and create enormous harm for Canadians and Canadian news outlets.
9402 Last week’s announced deal with Google was clearly driven by a desire to avoid a similar outcome, yet it, too, will leave some outlets receiving less than before the introduction of Bill C‑18.
9403 In the context of internet streaming services, there have been cases of market exits elsewhere in light of regulatory costs. That include the Denmark experience, where mandated payments significantly above what most EU countries had established led to a significant reduction in domestic film and TV production.
The market exit is precisely the same concerns I have. Geist rightfully notes that if we see streamers exit the market, it wouldn’t be an unprecedented move. In fact, it would be a case of history repeating itself. Meta has already exited the news sharing market altogether, devastating the Canadian media landscape. The $100 million deal that got worked out with Google doesn’t even come close to covering the losses as a result of Meta dropping news links in Canada. As I pointed out several times in the past, the media in Canada is currently operating at a net loss as a result of the Online News Act.
Journalists have become a sort of canary in the coal mine, finding out the hard way what happens when wild conspiracy theories pushed by Canadian mainstream media get put into law. Even some in the mainstream media sector have admitted that the Online News Act was a disaster and are now seeking a sort of “Plan “D”” to try and make up the shortfalls they have created for themselves. With respect to the Online Streaming Act, the same scenario is being set up here. Like with the Online News Act where the affected platforms have been warning for months that they would rather drop news links rather than pay the ransom payments, online streamers are warning that the new costs of the Online Streaming Act would lead to financial uncertainty – making exiting the market an attractive option should the insane idea of initial base contributions actually go through.
This is all based on the myth that online streamers are making money hand over fist. Some people legitimately believe that these online streaming services are experiencing a money making bonanza. The numbers, however, tell a vastly different story. As we noted last year, streamers directly competing against Netflix have collectively lost $5 billion, leading to some panic over how to move forward with some of these platforms. There has been plenty of talk about consolidation or competitors simply bowing out of the streaming sector entirely. This talk is, of course, happening even before the added costs of “initial base contributions” are factored in. Add that over top of these costs and the idea of some streaming platforms exiting the Canadian market doesn’t seem all that far fetched.
Some out there might insist that while some streamers aren’t exactly having a good time, any streamer exiting any market is not likely to happen because of added costs because the audience they would lose would cause more harm than paying the ransom payments. The counterpoint to that would be the fact that Twitch left South Korea. Twitch, of course, is a massive online streaming platform and the size of the audience in South Korea is undeniable. Yet, when slapped with bogus “networking fees” (where ISPs demanded payments for simply transferring data even though this has already been paid for by individual customers), Twitch had made the business decision of exiting the marketplace altogether rather than appease the ISPs over there.
The idea of streamers exiting the market isn’t some theoretical situation. It isn’t an idea brought on by a difference in philosophical opinion. It is a reality that has already happened on multiple occasions, forcing supporters of things like the Online Streaming Act to revert to the desperate argument of, “Yeah, but it won’t happen again in this instance because this situation is special/different.” At that point, the argument against a market exit is laughably weak. This, as Geist points out, leads to a detrimental impact on consumers:
9404 There are many services not participating in this hearing, but which provide increased choice to consumers and often serve communities that do not otherwise have domestic alternatives. Regulatory requirements or payments could lead to market exit and I think they should be avoided with a do‑no‑harm prism applied to thresholds. The $10 million threshold may work for registration and data collection, but a higher number such as 50 million to truly capture the web giants, as the government often framed it, I think is more appropriate for mandated contributions.
Indeed, there is the potential for enormous consumer harm throughout all of this. Geist went on to highlight another risk in all of this:
9405 The second risk involves increased costs that are ultimately passed onto consumers. I don’t doubt for a moment that the large streaming services are positioned to contribute, though I believe that appropriate taxation measures such as the digital services tax is a better vehicle for doing so. However, the notion of free money for various policy objectives is not free and is likely to be borne primarily by Canadian consumers.
9406 I’ve long believed that regulatory payments or contributions were largely premised on a quid pro quo that went far beyond mere market access, which I think is best addressed through fair tax policies that are applicable to all market participants. Justifying mandated broadcaster or BDU payments is often linked to regulatory policies such as mandatory carriage and simultaneous substitution that are worth hundreds of millions of dollars to the industry. But in the case of internet streaming services, these regulatory benefits don’t exist and tying companies to payments for objectives such as news that are largely disconnected from those services runs, I think, the risk of either market exit, delayed market entry for new competitors, or costs that are ultimately passed along to Canadian consumers.
Indeed, that is a very real risk where if certain streamers stick around, they will simply pass the costs onto consumers. For instance, YouTube has provisions in their terms of service where if there is added taxation onto the platform, then the platform has the right to simply take that money out of creators ad revenue. The chances are also high that more ads will be put onto Canadian consumers who view YouTube to help cover this added streamer tax. Even more, those who pay for premium YouTube services could very easily see a price increase as well. In fact, I would argue that it would be a brilliant move on YouTube’s part to show the added cost as a separate line item in people’s bills to showcase the cost of the Online Streaming Act tax if it were to ever come to that.
Further, for other streaming platforms, chances are, they would be passing these costs onto consumers in a similar manner. One way or another, the added cost will be something that would have to be footed by the consumer one way or another.
Geist then concluded his remarks with this:
9407 Finally, limiting the risk of increased consumer costs, I think, is therefore essential. I think that means falling within the one to two percent range that’s more common in Europe for those EU member states that have mandated some form of payment which I think would ideally be implemented once the full scope of the Bill C‑11 regulatory model is fully developed, not on this interim basis as currently envisioned.
9408 I believe it also means avoiding mandated funding for policies or activities that have little to do with the underlying streaming service. Indeed, cross‑industry subsidy models is precisely why it’s better to wait until a full framework is developed.
In the question and answer period, the CRTC seemed interested in talking about the applicability. Specifically, with regards to user generated content:
9412 COMMISSIONER LEVY: Good morning. And as this is your first time here, we will, as with all intervenors, be gentle.
9413 I’m going to start with some questions that relate to ensuring that we have certain information on the record the proceeding.
9414 So I’d like to start first with applicability.
9415 Regarding your proposed definition of social media services as “platforms that predominantly consist of third‑party user contributions”, can you elaborate on whether all users of user‑generated content should be considered equally? For instance, should Disney, Bell, Wildbrain, other media companies be considered users?
There are already mechanisms in place to identify whether the content being uploaded is from a major corporation or if it’s uploaded by someone who is producing user generated content. This is generally a question that tries to confuse matters because the pushback here is in light of the fears of the harms this Act will likely cause to people who post their content onto the platforms. Whether it is an individual or someone who has employees under them creating digital first content, those are the people that are going to get hurt in all of this. So, every time I see questions like this, it comes off as a way of trying to confuse matters more than is necessary. Regardless of motive, though, Geist responded with this:
9416 MR. GEIST: I think it’s ‑‑ well, I would start by saying the challenge within that question highlights why I was vocal in expressing the view that this ought to be excluded from the legislation altogether so that we would not have to get into some of these more challenging questions and these dividing lines.
9417 I think it’s pretty clear and I think the Commission has heard from any number of commercial outlets that nevertheless operate in a space that largely is in that user content space, and so admittedly it’s a challenging divided line. It’s easy when we are talking about individuals doing so for non‑commercial purposes. We already have sought to define that in Canadian legislation, for example, in copyright law with non‑commercial user‑generated content exception that exists under copyright.
9418 In other contexts, though, it does seem to me the goal here is particularly to ensure that new digital creators as well as individuals themselves are the ones that are excluded. And I would, at a minimum, say that if you had an entity that is already scoped into your legislation by virtue of the threshold the notion that their content might be excluded because it appears on one of those platforms wouldn’t make a whole lot of sense. It seems to me that if they are caught by the legislation, they’re caught by the legislation.
Indeed, there are ways of separating out user generated content and content produced by a company like Disney. There are specific provisions in law that scope such operations into such a system. No one is going to think that an operation like Linus Media Group is the same thing as the CBC. The productions are different and the targeted audiences are generally different as well. Linus Media Group isn’t a production company where you could flick on a traditional television and find on one of your channels by any means. So, ultimately, the tools exist today to properly identify who should be left in to the legislation and who should be left out. It’s actually kind of a mystery as to why this is even a question in the first place.
Another question that was eyebrow raising is this:
9419 COMMISSIONER LEVY: Let’s talk about contributions. And you’ve highlighted Denmark’s six percent contribution proposal, which you believe is the primary reason for a 40 to 50 percent reduction in media production in Denmark. But we’ve had previous intervenors who’ve said that that’s not an issue at all, the level of contribution is not going to, you know, create market exit in the Canadian market due to the very established situation here with the online streamers. So in terms of Denmark and some of the others that might have seen changes in the production level, is it not just as likely that there are other factors that have weighed into the reduction in production, for instance, disagreements over rights and those sorts of issues?
A vast majority of the comments that say that this fear of a market exit comes from those who are seeking to extract the money from those streamers in the first place. There may be some confused voices who just blanket assume that streaming services are wealthy without any real hard evidence to back them up. It strikes me as a situation where the lobbyists are trying to do the same thing with the Online Streaming Act as they did with the Online News Act and expect a different result despite the ample evidence that this is unlikely. Geist responded to the question with this:
9420 MR. GEIST: I think that those kinds of decisions are, of course, always going to be multi‑factorial. That’s one of the reasons why I think we’re far better off completing the C‑11 regulatory framework so that the full costs and scope of the regulatory process are understood and it’s much easier to make what are ultimately long‑term decisions. Writing stuff in pencil for companies that make decisions on decade‑long bases often doesn’t work particularly well and I think certainty’s better in that regard.
9421 I do think the data that we’ve seen with immediate responses in cutting back significantly or exiting production in that country that seemed to be directly linked to the contribution is pretty clearcut, but to me it isn’t solely about the contribution. It is about the regulatory cost, which is why I emphasized that in my opening statement.
9422 We can look to Uruguay where Spotify has now announced they are exiting the market in several weeks due to regulatory costs that are arriving out of copyright. We could look at what we just experienced now in Canada with exiting a particular aspect, not necessarily exiting the market altogether, but exiting the market in terms of a certain part of a service, in Facebook’s case, stopping distribution of news links.
9423 We’ve seen stopping of news in other jurisdictions as well as a result of some of those regulatory costs. And so I guess my view would be that of course organizations are going to respond to regulatory costs. Oftentimes that’s exactly what we want them to do. We want them to respond to regulation.
9424 We have environmental rules hoping that they are going to respond to those environment rules and to think that we could establish a whole range of rules here without any sort of consequences. We’ve great creators and good tax breaks and so the equation and the analysis will remain the same strikes me as pretty unlikely.
So, Geist offered example after example of how the situation turned out. Astonishingly, the CRTC responded to this by effectively saying, “Well, that’s different”:
9425 COMMISSIONER LEVY: Well, Uruguay, Denmark they hardly compare to Canada’s situation where we’re the fourth‑largest provider of production locations and, you know, our contribution to the online streamers and their production flow is the fourth‑largest in the world, so I think we’re in a different place than Denmark and Uruguay.
Uh, really? That’s the response to the evidence being presented? I mean, if that’s the attitude, expect that placement to tank because there has to be a means to maintain such a high ranking in production. Geist responded with the obvious response of, “Uh, this situation is already happening.”:
9426 MR. GEIST: I suppose. But as I mentioned, here in Canada response to regulation from large platforms has occurred. I mean, it literally has occurred in the last six months in response to the Online News Act. It occurred in Spain and Germany in similar fashion on that issue with respect to regulation.
9427 And even on the production side, we have seen, especially where tax credit systems are changed in various provinces, there is a direct response to whether or not productions continues to occur. Why? Because the economic equation associated with making those decisions changes.
9428 So if production houses will make changes based on the absence or availability of tax credits, the notion that there are significant increases in the costs they’re facing strikes me as pretty likely that of course you’re going to respond in some fashion.
9429 It doesn’t mean that they’re going to exit the market; I don’t think I’m going to lose my Netflix subscription regardless of what you happen to say, or at least the availability of a Netflix subscription. But are they going to respond, either by way of higher fees or by altering the way in which they produce, or perhaps scaling back some of the production taking that into account? We’re already seeing streamers scale back production on a global basis, as the economics of that sector change. It’s not clear to me why Canada, whether fourth or whatever the number happens to be, would be immune from those considerations.
Indeed, Canada is not some sort of economic island that experiences growth forever. Just because a foreign streamer operates in Canada doesn’t automatically mean they now operate in a completely different reality bubble. It’s kind of sill to think that Disney+ now operates in Canada and the reality bubble dictates that they are making unlimited money forever and nothing will change that. It’s perplexing to see this thought process come from the CRTC, but there it is.
The confusion by the CRTC doesn’t end there. They seemed perplexed at the notion that consumer interests aren’t being considered:
9435 COMMISSIONER LEVY: You said in your presentation that competition and consumer choice should be at the centre of our considerations. However, we have an Act and we have a policy direction that makes very clear that there are very significant social policy objectives that we must try to meet. How do you propose we do that with your considerations front and centre?
9436 MR. GEIST: I see some of my considerations front and centre in those policies ‑‑ in both the policy direction and in the Broadcasting Act. My concern ‑‑ and as I mentioned, one of the reasons that I felt it necessary to come forward ‑‑ is that I feel that too often those policy objectives don’t get the kind of hearing and consideration that they ought to.
9437 COMMISSIONER LEVY: Which ones in particular?
9438 MR. GEIST: Well, there’s talk ‑‑ there’s discussion around affordability in the policy direction. There’s talk about consumer choice directly in the policy direction. And so, and there are in the Broadcasting Act objectives as well ‑‑ references to choice and access and affordability. These seem to me ‑‑ this seems to be sine qua non of what we ought to be trying to achieve. Maybe it’s a bit of a chicken and egg thing, but there is no broadcasting system without the consumer. There is no broadcasting system unless people are willing to help support it.
9439 And if we are in this era where we are moving more and more towards streaming‑based services ‑‑ I think there is a consensus that that’s the case ‑‑ ensuring that Canadians have that access both ‑‑ certainly from a consumer perspective, and have that kind of choice that allows or enables many different services previously that may not have been available, especially for many communities that may be newer to Canada, that want to have a connection and a link back home, and the access to those kinds of services becomes so essential that it seems to me that it’s absolutely critical ‑‑ and written within our Broadcasting Act policy objectives and within the policy direction that you’ve received ‑‑ to ensure that that’s a core part.
9440 Now, that doesn’t mean that the only thing you think about is consumers, but to me that’s the starting point. And then, I think there is an opportunity ‑‑ and it’s quite clear within both the Broadcasting Act policies as well as in the policy direction ‑‑ that you are to consider some of the other things more broadly within support for the sector, different communities, and the like. I think once again, one of the reasons why it would be ideal to ensure that you’ve got all the various aspects of this broadcasting policy addressed before we kind of launch ahead with something, is that many of the kinds of objectives may well be met through some of those issues that you have yet to address, but are forthcoming as part of your hearings.
9441 COMMISSIONER LEVY: But at this point, we have ‑‑ as I said, in the directive and the Act we are tasked, and tasked understandably with meeting social policy objectives for equity‑seeking groups, to try to create more fairness in the system, to address legislation such as the Accessible Canada Act, to try to ensure that Canadians have a chance to participate in our proceedings and so forth.
9442 MR. GEIST: Yes.
9443 COMMISSIONER LEVY: Those are all issues that also have to be covered in what we’re doing.
9444 MR. GEIST: Yes.
9445 COMMISSIONER LEVY: And they are urgent. The issue of news is urgent. So, there is a lot of pressure to do something at this stage of the process that will go some way to addressing some of those very obvious and understandable desires by not only the policy makers but by Canadians themselves.
9446 MR. GEIST: Of course. The Broadcasting Act objectives speak to that. I think they often speak to them within a context of delivery of programming at affordable rates, about promotion of Canadian content. There is a range of different ways to achieve some of those objectives. And so, part of it is to address things like discoverability and content‑related issues that appear on these various services, beyond just the bare contribution that we’re talking about, and doing so in a way that ensures that we do ensure that Canadians have the kind of choice and that these services remain affordable, which also, as I say, is included directly in the objectives themselves.
9447 On some of the other issues ‑‑ news, for example ‑‑ yeah, of course; news is urgent, and quite literally last week, we had an announcement of a deal with government and Google in which the Parliamentary Budget Officer suggested that 75 percent or 75 million of that is headed to broadcasters. There’s a very small portion that’s actually available to print and digital outlets. I don’t know if that’s a game changer per se. I know that certainly some entities have spoken favourably about the fact that that’s the outcome that they’ve got.
9448 But it seems to me that within, I believe, the policy direction as well, it speaks to considering this within the broader context of a range of things that are taking place. And in news, we’ve got a pretty clear approach from the government that includes expansion of the Labour Journalism Tax Credit, the enactment of the Online News Act, the notion that we need Netflix to pay for news strikes me as just highly disconnected from what that service is about, and I have a hard time seeing where that connection gets made. That appears to be nothing more than, “You’re here, and this is what we want you to fund just because you happen to be here.”
9449 They’re here, tax them. If they’re here, make sure that Canadian content receives the kind of visibility that we think is essential. There’s a number of things that we can be doing and recognize the contributions and the spending they’re already making ‑‑ and this is true for any number of entities, but I guess from my perspective, there needs to be some kind of linkage between saying, “We want you to fund this particular objective because it’s an important objective,” and the kind of operations that that organization has.
9450 Otherwise, once again, I think it does open the risk that some of these organizations may say that Canada has either entry costs for services that are not already here, or Canada’s operating costs for those that are, has rendered this less economic, and it’s either Canadian consumers that ultimately foot the bill or we see a change in the way that they operate within the country itself. And those are, I think, real risks that have to be factored as well.
9451 And you’re right ‑‑ there are a lot of challenging competing objectives that you’re facing and, I mean, that’s why I assume you’re holding a three‑week hearing, to ensure that you hear from all those different perspectives.
If you want an idea of just how confused the CRTC is, that’s a great showcasing of it. They seem to think that the interests of consumers is the same interests as the media lobbyists. If it’s in the interest of the news media lobbyists, it’s in the interest of the consumers. That is definitely not the case by any stretch of the imagination as it is the mainstream production companies and news media companies that are trying to take a wrecking ball to the internet while viewing the carpet bombing of consumer interests as acceptable collateral damage.
Some people might wonder why I have so little faith that the CRTC will do the right thing here and this is a prime example why I have so little faith. The moment consumer interests is brought up in such debates, the CRTC just seems dazed and confused at the notion. Forget about having even a basic level of understanding on how the internet works (we know they don’t have that even), even considering consumer interests in general is a really perplexing concept to them.
Geist did what he could here. What he did is highly commendable. The problem is that the CRTC is unlikely to really rule in either consumers interests or the interests of Canadian digital first creators. I mean, the CRTC set up these consultations in such a way as to try and keep out public feedback in the first place. It was such an insanely closed off process that even the lobbyists supporting this legislation was asking for deadline extensions just so they could formulate the response – and they were the ones that wrote this freaking legislation in the first place.
So, as far as I’m concerned, Geist represented common sense in these hearings. It’s that common sense that the CRTC has little interest in, though.