Thursday, June 13, 2013

CRTC – Canadian Media Needs Different Regulation

Letter to Heritage Minister FOUR Years Ago - WHAT HAS CHANGED

As a function of some business obligations recently it was necessary for me to consider interaction with the CRTC. As a part of the inquiry process, I took under my examination a report commissioned by the CRTC in August 2007 entitled REVIEW OF THE REGULATORY FRAMEWORK FOR BROADCASTING SERVICES IN CANADA. In the report the authors Dunbar and Leblanc assessed the effectiveness of the CRTC and offered recommendations on how to change regulations to make the CRTC more effective. It was striking to me, upon review of the document and related materials, how a relatively concise piece of legislation communicating a limited mandate spawned an organization that morphed into a large bureaucracy; a bureaucracy which has developed an extremely complex set of regulations and hosting its own extensive body of jurisprudence. This complexity is perhaps evidenced by the fact the Mr. von Finckenstein, presumably a competent Chairman, had a requirement to solicit the services of lawyers familiar with this body of jurisprudence to offer direction on how to reform the CRTC. As is often the case, and it appears to be the case with the CRTC, a legislated mandate takes on a life of its own; as well intended civil servants seek to serve us by attempting to manage an entire industry, rather than allowing the desires of the populace to manifest in an industry the serves them.
In contemplating the CRTC and the media industry in Canada, in the context of the present regulatory environment, one needs to reflect on the underlying motivation for the creation of the legislation in the first place; indeed the complexity the CRTC presently offers to the outside observer mutes this underlying motivation. The written material related to the CRTC’s creation indicated the spirit of the CRTC’s function is to ensure that Canadian content finds expression to Canadians, by providing a regulatory framework that both allows for fair operation of Canadian media companies and protects the overall industry from overwhelming competition. The single most salient realization that emerges when surveying the sheer mass of resources the CRTC requires and the complexity it brings to the media industry, is that the very best and simplest way to ensure the preservation and enhancement of a Canadian narrative is to contribute to compelling Canadian content. When Canada’s message finds embodiment in premium and compelling content, competition is welcome. Excellent Canadian content has the potential to take the important elements of the Canadian narrative outside just the realm of Canada to other jurisdictions transcending boarders and influencing global culture. This prospect offers better security for our culture than merrily utilizing legislation to block foreign content from Canada. By elevating Canadian content through the redirection of CRTC funding, to reward excellent Canadian content, the foreign content entering the Canadian market elevates in competition, thereby enriching the whole media experience. Successful, compelling, Canadian content on the world stage provides for strong national confidence.
The Canadian content requirements of 60% for prime time television, greatly limits the Canadian media experience. By regulating Canadian content the CRTC has created a circumstance were poor Canadian content is thrust upon the consuming public, hurting the Canadian brand. Had the CRTC and its masters chosen a different tact which included deregulating the industry and levying a generalised media tax, thereby establishing a pool of funds to direct toward investing in excellent Canadian content, our present state of media would very likely be different now. As people are inclined to consume more of a good thing, this suggested approach would allow foreign excellence to feed domestic excellence, ultimately providing a generally rich media environment in Canada and strengthening Canadian media’s ability to project our culture abroad.  

The present regulatory regime effects stagnation in the media industry ownership as a result of regulation that extends advantage to incumbent companies. There is clear reference in CRTC material to the fact that the CRTC passes judgement on the appropriate number of media providers in a given market and then influences the issuance of licences in a manner the restricts the volume of media provision, essentially  managing supply. The CRTC’s rationale for this behaviour is that the CRTC needs to ensure the profitability of a given operator so that the said operator has sufficient resources to meat the requirements of CRTC regulations. This practice distorts the market in many ways, the most damaging of which is retarding new entrants and the innovation they may bring – creative destruction is curtailed as incumbents are unduly supported by regulation. Additionally, concentration of ownership is bound to occur as incumbents hold privileged access to the market and virtually “inside” information by virtue of their previous exposure to an arcane regulatory environment. The CRTC should be compelled to refrain from this practice and licenses should be issued freely to anybody who chooses to service the market – limits on licenses should be the product of limitations of available spectrum or other technological requirements.  The financial requirements associated with fulfilling licensing demands are a cost of doing business that all participants are aware of upon entering a market and or having been in the market, as such, the CRTC should let the operational realities decide who can satisfy the cost of servicing a given market within regulatory parameters.      

The present media industry configuration has evolved in a manner that has siloed various media types and their respective functionality. The CRTC’s present regulatory frame work has evolved in response to the existing siloed environments. The combination of these two realities has created an inertia the retards the absorptive capacity of the industry in its entirety. The media industry is, at its base, in the business of collecting information and redistributing it. Where historically this function took place on many substrates from disparate sources, the modern media industry now has one unifying digital substrate. The boundaries that produced siloing in the media industry are now defunct for a number of reasons, yet CRTC regulation still mandates, for example, that a company owning both a newspaper and television station must send two reporters to the same story. Given that all media emanates from a single digital medium that allows for seamless integration of all information collection, while at the same time dispersing the information through the full panoply of media, the established business models are failing to bring all possible efficiency the task. This effect diminishes the Canadian media industry’s ability to provide maximal benefit to the consuming public, retards profitability, impairs innovative utilization of new technology and generally impoverishes the industry. While the writer recognizes the desire to prevent concentration of ownership and that the CRTC views integration as a modality of ownership concentration, there needs to be provision for the new media reality to find expression. The CRTC should reconsider the present constraints it places on media integration. 
In CRTC literature there is much use of the term “cross media ownership” as a modality for the concentration of ownership. The CRTC takes measures to prevent “cross media ownership” as a means to prevent ownership concentration and undue influence falling into to few hands. The irony is that, the challenges the CRTC regulations have thrown in front of new entrants has contributed to present situation of ever increasing ownership concentration. The institutional measures exercised to limit “cross media ownership” also inhibit more appropriate and less capital intensive business models from being accessed. The recent advances and low capital requirements of digital media technologies lend themselves to small nimble multi media companies to enter the market and challenge the incumbents, with the desired effect of dispersing ownership and hence influence. Recognition needs to be given by the CRTC that due to technological advancement there is no logical barrier between media types anymore. When the CRTC seeks input on these matters from industry and persons, such as Dunbar and Leblanc, they are accessing the opinion of the media establishment who may be unaware of, or even threatened by the unfettered access to the market by disruptive technologies. Your ministry needs to address the reality that, inherent in the actions of the CRTC, is an ever strengthening of incumbent influence both on the regulatory regime itself and also by virtue of preferred treatment – distorted market influence, more and more concentrated influence over the market. Here again, as in all CRTC action, there needs to be a paradigm shift which moves government action away from away from media control and toward supporting excellent Canadian content; as the Canadian content emerges in the market, unfettered by government intervention, and finds approval in the market place.

If you believe as I do that liberty should be the paramount focus of government and that liberty can be defined as the absence of coercion and the presence of choice, then you will share my dismay at the spectre of the CRTC impairing my ability to view content of my choice. There are also restrictions placed on the distribution of Playboy TV, because
of the adult nature of its content, and Al Jazeera, because of the politically
controversial nature of its programming: these restrictions are incorporated by
reference into the BDU Regulations via the Lists.” While the playboy TV may hold little interest for me, Al Jazeera does. I find it grossly offensive that there is willingness in the CRTC, as evidenced by the above quote, to regulate my exposure to whatever programming I want, in whatever portion of my consumption I want. We have a rating system for movie content that transfers well to all content and media types, we should ensure the government intervention restricts its actions to informing the public and avoid paternalistic judgement on what Canadians choose to watch.

The present approach of the CRTC of attempting to regulate every aspect of the industry, from the percentage of Canadian content to which reporter chases a story, may well be overtaken by events. “Obviously if Canadians start watching more programming services on the Internet, and less on conventional television, advertising dollars will continue to follow the viewing audience and the underpinnings of the Canadian content regulation in Canada will be threatened. The question arises whether there are measures that can be taken to decrease this threat, or whether the whole system needs to be rethought.” This quote from the document REVIEW OF THE REGULATORY FRAMEWORK FOR BROADCASTING SERVICES IN CANADA, makes explicit what tacitly has been affecting the conduct of the CRTC and its industry partners, they view as a threat the democratising effect that the internet and digitised media brings to the over all media reality. One takes solace that to date the CRTC’s ambivalence to the internet has resulted in a benign atmosphere from a regulatory perspective. It seems clear to the writer that “the whole system needs to be rethought”. What is perplexing is that the CRTC and its advisers view massive opportunity as a “threat”. The beautiful thing that emerges from digitally based media is that the distinction between the generator of content and consumer is no longer there. “Broadcasting” is now possible for us all, as is exemplified everywhere we turn on the internet.

There is a role for government at a strategic level to ensure a neutral infrastructure on which digitised media can travel. Internet Service Providers and carriers such as cable companies and telephone companies have begun to challenge competitive content providers by interfering with competitor’s data flow. These sorts of anti competitive actions are sure to intensify absent some “arms length” direction. By way of example, websites that provide streaming video should be allowed equal access to the consumer as cable providers, under a provision that sees cable providers being fairly remunerated for the band width utilized by such content providers.    

When one reads the CRTC literature it becomes apparent that the CRTC has delved to deeply into the operational aspects of the media industry. The complexity of the present CRTC function has reached epic proportions, as with every passing day another piece for regulation is added to address another eventuality. The complexity of the media forum precludes effective regulation, except in the most strategic realm. As the CRTC attempts to control Canadian media, it serves to distort and constrain effective access to innovation and generally retards access to the rich potential modern media holds for us all. The CRTC as it is now configured and its resultant operation, is antagonistic to the free flow of information, to the public, across medias and generally. Clearly, another approach is needed, and given the progress and nature of new technology, the only viable point of influence is at the level of content – content that flows from the creativity of Canadians and finds acceptance by demonstrated success in the market place. Content is now the domain of the Canadian citizen, if government intervention is required at all to facilitate our Canadian story can being told, then the intervention needs to be directed to enable Canadians to create compelling content.      

 Throttling – Sent to Heritage Minister

The internet has provided Canadians access to information in a manner unprecedented in our history. The internets free access and utilization as a platform has been an excellent forum for exchange and newly created commerce to flourish. The democratizing effects of the internet have been dramatic; the whole human interest has been enhanced by this amazing resource.  The internet has now emerged as a critical piece of infrastructure foundational to many people’s livelihoods. Free and open access to this infrastructure is absolutely imperative as a provision for existing activities on the internet and the enthusiastic utilization by start up entities. Net Neutrality ensures a fertile place for new wealth to be generated and further democratization to emerge. The government must be wary of any attempt to curtail the unfettered and open use by all parties of this valuable resource.

The internet should be viewed as one entity, Internet Service Providers and other companies contribute and utilize this single entity as a part of it.  The recent CRTC ruling allowing Bell to use “throttling” to control high volume users threatens the essence of the internets success to date. Certainly Bell and companies like them are affected by high volume users, but throttling is a poor way to manage volume. Throttling can be introduced as a seemingly logical means to manage volume now, but it is far too easily utilized as a means to curtail competitors, or worse control the free and unfettered access to certain sets of data. Throttling is simply an unacceptable practice which should be avoided at all costs.

The issue that companies claim gives rise to the utilization of throttling is inadequate internet capacity to service the desired level of use by the public. Rather than ration use, it is in everyone’s interest to expand capacity. Clearly there must be some scalability issues preventing the ISPs to respond with more capacity. Rather than the CRTC giving credence to a practice fraught with risk in terms of potential abuse, the government should provide an atmosphere that permits and encourages greater capacity. Greater capital cost allowance for new internet infrastructure or some other tax benefit to encourage more capacity is a better response than regulations that permit predatory practices and put at risk a whole segment of new business. 

The CRTC has taken us down the wrong track with their recent ruling related to Bell and throttling. It is imperative that the internet remains the bastion of free exchange, if greater capacity in required, then greater capacity needs to be sought. We have a wonderful source of exchange in the internet; we need to keep it in a liberated state.    

Neil E. Thomson   

 RE: CRTC regulation of the internet

There has been discussion in the press of late around the control of Internet Service Providers (ISP). The advocates of licensing seem to be people such as the Canadian Actor’s gilds, producers and the like. They state a fear that “Canadian stories will stop being told” as foreign content flows over the net. They advocate licensing ISPs and enforcing Canadian content rules. In essence, they want to force us (Canadian citizens) to watch their productions whether we like it or not. This modality of action has been applied to other media forums in Canada for decades. Ask yourself, how Canadian content is fairing now, what are the most popular shows on television and where are the most popular movies made. The force feeding of substandard content in an attempt to build a common Canadian narrative was ludicrous at the inception of the CRTC and it is still errant. The very creation of the CRTC was a product of a cultural inferiority complex and Canada needs to take aggressive and bold measures now to take our stories to the world – we need to stop defending insipid weak Canadian media content and generate a circumstance where our stories are presented in compelling fashion.

We need to allow all media to flow into the Canadian market; levy a moderate tax on ALL media and earmark the proceeds for the creation of compelling Canadian content. Access to these funds should be determined by performance, that is to say, that content should only receive support if it is compelling enough to compete in the media market place and then only 50% of production costs – as determined by success at the box office or advertising support. In this way, over time, the strength of foreign media will serve to strengthen our media offering. Over time then, Canada will be taking its narrative and national values, much needed in the world, to the world. Compelling content is “King” as opposed to more regulations that constrain access to markets, retard new entry into various media forums and threaten the great strides in the democratization of media that the internet has been a catalyst for.

The present legislation intended to “protect” Canadian media is actually impairing and impoverishing the Canadian media environment. Give creative Canadians the capital they need and get out of their way, and watch the Canadian story prosper. The government needs to stop attempting to control with regulation, and direct government action toward providing an open and accessible environment for Canadians create and compete.            
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