CRTC issues road-map to C-11 implementation

CRTC Chair Vicky Eatrides

May 13, 2023

Yesterday CRTC Chair Vicky Eatrides published Broadcasting Notice of Consultation (BNOC) 2023-138, the Commission’s roadmap to implementing Bill C-11.

Here are the highlights followed by some MediaPolicy commentary.

• The Commission is aiming to having the Bill operational by the Fall of 2024.
• Prior to then, there will be a downpayment by foreign online undertakings on making financial contributions to Canadian content; the MediaPolicy guesstimate is April 2024.
• Eatrides says she is not touching any regulation of user generated programs, but that commitment is subject to important caveats.
• She is spinning off the debate over the definition of a Canadian video program or song to another proceeding for which a timetable is yet to be announced.
• Participants (and industry players) have to file their submissions to the CRTC in a lightning quick six weeks, before a June 27th deadline. The first day of public hearings is November 20, 2023. That date might seem unreasonably delayed, but once you digest how many issues the Commission has to prepare for, you might not think so.

Here’s the commentary.

User Generated Programs

Let’s begin with the discoverability of user generated programs on YouTube and TikTok, as this is the issue that attracts us policy moths to the flame.

The vocabulary of BNOC 2023-138 is consistent with Eatrides’ earlier public statements: the Commission has ‘no intention’ of ‘regulating’ YouTube creators or their user-generated content.

Caveat #1. For now. Not in “this proceeding” (i.e. 2023-138):

41. Sections 2.1 and 4.1 of the current Broadcasting Act also provide for a rather complex set of exclusion provisions with respect to social media services and users who upload programs on these services. The Commission does not intend to regulate any aspect of a social media service, nor does it intend to “prescribe” user-uploaded content on social media services for the purpose of regulating such content, as part of this proceeding. The Commission is also cognizant that it should avoid imposing regulatory requirements on broadcasting undertakings if that imposition will not contribute in a material manner to the implementation of the broadcasting policy set out in subsection 3(1) of the current Broadcasting Act. 

Caveat #2: ‘Regulating’ programs can mean a lot of things, or not, under the Broadcasting Act.

Caveat #3: When Eatrides says she won’t regulate user generated content she doesn’t mean ‘discoverability’ obligations for Canadian programs. YouTube will have some kind of discoverability obligations, they just might not involve the algorithmic ranking of program recommendations:

As indicated above, the Commission intends to apply an approach that focuses on desired performance standards and measures of success without specifying the means or the method for achieving them. In this regard, the Commission does not intend, at this time, to prescribe or require an undertaking to use a certain method or tool in order to achieve desired promotion and discoverability outcomes. For example, the Commission would not require an undertaking to change marketing strategies or prescribe specific home page or search engine functions. Moreover, the current Broadcasting Act prohibits the Commission from making orders pursuant to paragraph 9.1(1)(e) that that would require the use of a specific algorithm or source code. It would be up to the undertakings to decide which tools are best suited to achieve the identified outcomes regarding promotion and discoverability. However, the Commission will need to understand how those tools are utilized and measured to assess whether the identified outcomes are being achieved.

Eatrides’ view (on many things in this BNOC) is that regulation should be ‘outcomes based,’ which is regulatory code for ‘give us a good result any way you choose.’ This is very similar to how former Chair Ian Scott envisioned the Commission’s approach to discoverability last June when testifying before the Heritage Committee.

You can probably read into these statements emanating from the Commission as the regulator wanting no part of the culture war that has been stirred up over the ranking of content recommendations.

A good guess about the shape of the Chair’s desired ‘outcome’ is that the Commission will leave it to online undertakings to figure out discoverability on their own and then present it to the Commission. How effectively these self-designed outcomes are measured and enforced by the Commission is something we will have to wait for.

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The Money

There are three issues here.

How much should online undertakings contribute to Canadian content, in what manner, and where does the money go? Which content funds get the money?

How do those obligations, when imposed on a kaleidoscope of foreign media companies, get implemented in a way that is equitable and fair to our existing broadcasters who are licensed to provide a wide spectrum of Canadian content genres (such as unprofitable drama and local news)?

How do we rethink our existing content funds given the elevated expectations in C-11 for programming relevant to diverse communities and Indigenous Peoples? Or do we need to start up new ones governed by the communities themselves? How do we reinvent local news funding given its unravelling business model?

Eatrides wants a downpayment of sorts from the Californian streamers and other online giants.

So she has split up their future financial obligations into two pieces: the first is a basic initial contribution to a content fund (for example the Canada Media Fund or the Independent Local News Fund) as a common denominator shared by all broadcasting undertakings.

Whatever that contribution is, it is supposed to be in place in the first half of 2024.

The second, additional layer of financial contributions to CanCon will be more custom-fit to the nature of the online undertaking. It could just beef up its base contribution to a content fund or alternatively it might be an ‘expenditure’ obligation (for example, Netflix broadcasting Canadian programs it has made or purchased). As part of this additional contribution, there will be ‘intangible’ contributions expected such as the promotion and discoverability of Canadian programs on their platforms.

Another important point Eatrides makes about these additional expenditures beyond base is that they might be custom fit to the broadcasting undertaking’s favoured production fund or programming genre. The rules might even include getting credit for non-programming expenditures like training and internships. That will be catnip for corporate accountants who specialize in that kind of regulatory hokum.

The custom-fitting idea is not new: the Commission mooted it almost five years ago in its report on regulating online undertakings, Harnessing Change.

A Commission official interviewed yesterday by Cartt.ca suggested online undertakings might be regulated in very individualized ways:

“Someone might come and say…we would do it in thirds. We’ve assessed our contribution at a certain level — a third of it would be a contribution to a fund, a third of it would be our support for Canadian programming, a third of it might be what we’re calling the ‘intangibles,” a CRTC official said, adding the regulator would have to further figure out how to value those contributions.

“You can see that mix, and it would be different for each player,” the official said, emphasizing that all players are required to contribute to the base amount.

All of this tells us that this is not your grandma’s regulatory scheme. There will be pricing of apples and oranges among various broadcasting undertakings making different —but equitable– contributions to Canadian content.

Perhaps that is why the Commission vocabulary is so chock full of regulatory zingers like ‘flexible,’ ‘adaptable,’ and ‘outcomes based.’ It’s a matter of pragmatism as much as deregulatory zeal.

***

Canadian content and Ownership of Intellectual Property

This is without a doubt the most difficult issue before the Commission. You will hear plenty about it over the next year.

The current definition of a ‘Canadian’ program eligible for the array of subsidies available in Canada provides that most of the key creative talent on a show, especially the producer who is quarterbacking the venture, must be Canadian. Those subsidies include ‘video production tax credits’ under the Income Tax Act, film and television financing from the Canada Media Fund, and broadcasters getting credit from the CRTC towards their target for ‘Canadian Programming Expenditures’ (CPE) for airing Canadian shows. If a show maxes out on Canadian talent, the show may be 50% subsidized.

Most of the subsidy programs —the Commission-administered CPE being the exception— also require the Canadian producer retain the copyright for the long term commercial exploitation of the show, in effect making it illegal for broadcasting undertakings to force the producer to surrender that copyright as a condition of putting the show on the air.

The most important thing to keep in mind to understand this complex issue is that broadcasting undertakings —soon to include Netflix and the other Hollywood streamers— could potentially be ordered by the CRTC to contribute to the Canada Media Fund (CMF) as the Canadian cable companies must.

Yet unlike our Canadian cable companies, the American-owned streamers would not be allowed to ‘draw upon’ the Canada Media Fund by purchasing CMF-subsidized films from a Canadian filmmaker unless the streamers are okay with the filmmaker denying them the long term copyright.

The streamers are not okay with that.

You have here the makings of a doozy trade complaint from Hollywood against the Canada for potentially violating the ‘National Treatment’ rules under our international trade deals. In a different context, MediaPolicy explained those issues as they arose 25 years ago during the notorious ‘split-run magazine’ dispute between Canada and the US.

This issue has been long anticipated from the very beginning of Parliamentary debate over Bill C-11 and its predecessor C-10. And you can Search ‘Bill C-11 CUSMA trade complaint‘ and come up with plenty of commentary on it. The most recent contribution from Douglas Barrett on Cartt.ca is a good place to start.

One last complexity to keep in mind: the CRTC only has jurisdiction over the definition of Canadian content for ‘CPE.’ The federal government has governance of the production tax credits and, ultimately, the CMF.

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It seems only fair to sign off this commentary by allowing CRTC Chair Eatrides the last word:

A new and modernized framework should recognize the new perspectives and opportunities that online undertakings bring to the broadcasting system, and ensure flexibility and adaptability in the future. For these reasons, the Commission intends to apply an approach that recognizes that each broadcasting undertaking or group of undertakings is unique, and that focuses on desired performance standards and measures of success. At the same time, it is essential for the approach to ensure that the principles of regulatory fairness and equitability are upheld across all contributors. Further, by considering the possibility of a group-based approach to contributions (where applicable) the Commission aims to provide greater flexibility and a reduced administrative burden.…

…..the Commission recognizes that it continues to be appropriate for different types of broadcasters – whether traditional or online, Canadian or foreign – to support the audio and video elements of the Canadian broadcasting system in different, yet equitable ways. 

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