Bill C-11 has dominated the media news lately at Heritage Committee hearings, but the Online News Act C-18 (the “pay-for-news” Bill) has also passed second reading in the House of Commons and is waiting patiently to pull into the station once C-11 leaves.
Even though C-18 is a copycat of last year’s legislation in Australia, the early signs are that Facebook and Google are going to be far from passive. William Turvill of Press Gazette has written an excellent backgrounder on what is a global issue for FaceGoogle.
The architect of the pathbreaking Australian legislation Rod Sims —-in his role as the former head of Australia’s Competition Bureau—– has his eye on C-18 and has published an insider’s account of the Australian story. He wrote an abridged version published in two consecutive op eds by the Toronto Star.
Some of the things that Google has been saying in Canada about the Bill are getting under the skin of the Bill’s supporters. This prompted a rare foray into Op Ed writing by Bell Media CTV defending C-18 and lambasting Google.
Lastly, federal Innovation, Science & Development Minister François-Phillipe Champagne announced a new Policy Directive from cabinet to the CRTC tweaking previous Policy Directives and proclaiming expectations the regulator will find a way to drive down Internet and Wireless prices.
From Irene Berkowitz’s analysis of YouTube, Watchtime Canada 2019
May 26, 2022
Heritage Minister Pablo Rodriguez haspromised a Policy Directive to the CRTC with cabinet instructions on implementing Bill C-11.
Point number one in the new Directive should be making the certification of Canadian content more relevant to the Canadian experience by including qualitative judgments of national subject matter in the video content. I posted about this recently, as have others. The signal from the Minister is that he has an open mind to it.
Point number two is to direct the CRTC to reappraise the existing regulatory supports for the money-losing local news industry. More on that in a future post.
Point number three is what to do about “programming” that is User Generated Content (UGC) uploaded to hosting platforms like YouTube, TikTok, and Facebook.
So far it seems as if the debate about UGC —in blogs, tweets and witness appearances before the Heritage Committee — has been binary: UGC is entirely in or out of the Act.
UGC appears in Bill C-11 not because the government seeks the power to police its content. That may indeed become an issue some day if the government tables an Online Harms Bill. But as Iposted earlier, C-11 is drafted to shut the door on supervising the content of UGC.
UGC is in the Bill because hosting platforms like YouTube act as broadcasters even though they are direct-to-consumer platforms for media creators, quite different from content-curating broadcasters Bell Media, Rogers, TVA, Netflix, or Disney Plus.
The government wants the hosting platforms to share the responsibility of creating and distributing Canadian content and that means adapting CanCon regulation to a new business model where programming consists of uncurated uploads.
Conservative MPs and other critics of C-11 seem to be grudgingly (and tactically?) conceding that Netflix and the other large American streaming platforms might be appropriately covered by the new Broadcasting Act so they can begin carrying their fair share of the burden of creating and distributing Canadian content. But those same MPs and critics made it clear during this week’s Heritage hearing they remain opposed to regulating YouTube and other hosting platforms.
Alas the debate over UGC is in danger of becoming a dialogue of the deaf.
On one hand C-11 makes it clear that UGC programming will only have a regulatory impact if it is sufficiently commercial in nature, triggering the hosting platform’s obligations to contribute cash to Canadian media funds and promote Canadian content channels in its viewer recommendations.
On the other hand C-11 opponents want no part of even that limited regulatory activity, fearful of mandatory CanCon recommendations alienating the global audience for Canadian creators. Open Media’s Matt Hatfield went so far as to disparage the Broadcasting Act’s rules on pushing Canadian content as “parochial.” All of this is despite the fact that the Liberals announced in the House back on March 30th they would not regulate programming uploaded by “digital first creators.”
Amidst the polemical noise, Metropolitan Toronto University professor Irene Berkowitz appeared before the Heritage Committee to focus on how the creation and distribution of content by Canadian digital creators actually works.
Berkowitz published her study of the YouTube broadcasting platform “Watchtime Canada” in 2019. Of course it’s out of date now but remains an essential drill down into how broadcasting on the hosting platform works as a business model. The Report was commissioned and paid for by YouTube, and Berkowitz is categorically opposed to regulating the hosting platform, but allowing for her point of view it provides a good survey of the landscape to Heritage MPs.
Here are a few things on that landscape:
YouTube is a hybrid of different online platforms including:
A flanker streaming platform for well established broadcasters and studios to add to their existing distribution in radio, TV, and online. Think Rogers Sportsnet or CBC News.
A platform for branded multi-channel aggregators that behave a lot like conventional broadcasters.
A free or premium music service that competes directly with legacy and other online music services.
An archive of classic video content, I am guessing most of it in the public domain and not copyrighted.
A free direct-to-consumer broadcasting platform for successful independent artists and small creative companies who are delighted to end-run Canadian media curators and make money by splitting adverting revenue with YouTube on a 55/45 split once they surpass the minimum audience threshhold.
For 75% of uploaders, a free direct-to-consumer platform for up and comers, hobbyists, and struggling artists who hope one day to make money on the platform.
And for consumers it must be added: a treasure trove of DIY videos.
From Watchtime: Distribution of earnings among the 40,000 monetized channels
The entrepreneurial lustre of YouTube is a free platform with a potential global market (Berkowitz provides data on the major export markets in the US and the UK, with the Indian and French markets still a work in progress as of 2019). Unlike the curated broadcasting industry, YouTube creators don’t have to sell their copyright to broadcasters and studios to reach an audience.
So what part of YouTube is a candidate for regulatory obligations supporting the creation and distribution of Canadian news, sports and entertainment?
YouTube’s UGC programming that is the most highly analogous to regulated broadcasting is the video content on flanker streaming platforms and multi-channel aggregators, as well as audio content on music services. That programming is monetized by advertising revenue captured from the rest of the Canadian media universe (and subscriber revenue in the case of the premium music service). It’s hard to appreciate an argument that this programming should not generate regulatory obligations for YouTube.
But it gets complicated after that when we consider the YouTube ecosystem of digital first creators.
First, there is the argument that discoverability —-obliging YouTube to push Canadian content—- could backfire on independent artists and small businesses seeking the global market. I remain to be convinced this is a real danger, but it’s not something we want to make a mistake on.
Second, as of 2019 there were 160,000 Canadian creator channels (of which 40,000 were monetized and about 15,000 belonged to artists and small enterprises making real money at it). They generate thousands of video posts. How badly do we want to expend civil servant time viewing and certifying them as Canadian content?
Third, if the programming from these digital first creators were to be counted towards YouTube’s financial responsibility to contribute to Canadian media production funds, how are we going to deal with the possibility that YouTube would pass along those costs to the creators by changing the 55/45 advertising split?
Maybe all of these challenges are surmountable, but the CRTC may well look at it and decide that the regulatory squeeze in not worth the juice.
So here are MediaPolicy.ca’s instructions to the CRTC:
Divide YouTube programming into major categories of commercial activity, keeping an eye on the size of the media business sponsoring the channel, its success in monetizing content, and whether it seeks audiences in the CRTC’s categories of priority Canadian content (i.e. news, drama, sports, music, entertainment.)
Regulate the programming uploaded by corporate channels in those priority areas which means YouTube as the host platform must make financial contributions based on the value of that programming and promote certified Canadian content through recommendations or keyword search results.
Exempt everyone else until and unless circumstances change.
From Watchtime: overview of genre uploadsRegulated broadcaster spending, by genre: CRTC Summaries 2020
A footnote on discoverability of Canadian content from Watchtime 2019:
Professor Berkowitz makes the point in her study that YouTube is a global media platform, unlike the domestic distribution of conventional Canadian media, and as such caters to Canadian viewers seeking that global content.
With an eye to the debate on mandated discoverability obligations, Berkowitz asked a series of questions to her 1200 survey viewer participants. Survey questions are notoriously blunt instruments given their brevity, but here are three interesting questions and outcomes:
Is regulation of what viewers can view good or bad?:
Given that the question can easily be interpreted as soliciting views on censorship (as opposed to discoverability), the results are not surprising.
Is promotion of Canadian content on YouTube a good thing?
A high rate of indifference to this question, but far more positive than negative.
What if promotion of Canadian content hides other content?
Even when you phrase that question as a zero sum proposition —-promoting one kind of content means less of another— the conclusion is mixed and begs further survey questions.
Skyship Entertainment CEO Morghan Fortier before the Heritage Committee
May 24, 2022
Heritage MPs hosted more than a dozen witnesses today at the first formal review of the Online Streaming Act C-11.
Much of the five-hour session was predictable: well known advocates and critics of C-11 recycling their narratives.
There was some interesting new material, however.
Skyship Entertainment CEO Morghan Fortier made her case against regulating User Generated Content (UGC) as a successful Canadian entrepreneur creating and uploading children’s programming for the global market, using YouTube as her distribution platform.
It was a refreshing witness appearance in a proceeding dominated by the usual suspects. Fortier avoided anti-regulatory and cyberlibertarian tropes, arguing that her kind of digital first creators aren’t concentrating on the domestic Canadian market, the fundamental policy impetus for regulation under the Broadcasting Act. She was in effect telling MPs that her business model is working just fine thank you, no help sought or needed.
The repeated criticism of regulating UGC from other C-11 critics appearing before the committee was that imposing “discoverability” obligations on YouTube and TikTok to include Canadian content in their algorithm-driven responses to key word searches would backfire on Canadian creators. It’s an arguable point, unfortunately none of those witnesses took the time to explain why that might happen.
Another witness, former CRTC Vice-Chair Peter Menzies, speculated that leaving the door open to regulating UGC might invite the CRTC to censor posts in the future. That’s something that C-11 appears to prohibit. But his comment does reflect the visceral fear that free speech absolutists still have about the Bill.
Representatives of the Québecois music industry argued in favour of regulating UGC for the purpose of extending the CRTC’s radio funding and discoverability obligations to YouTube and TikTok music services. It was a compelling perspective that English Canadians don’t hear much about. So much so that it was a disturbing Canadian moment to observe English speaking Conservative MPs and C-11 critics hammer away against any regulation of UGC, oblivious to francophones pleading for cultural oxygen.
Another under appreciated policy point was brought forward by OutTV CEO Brad Danks. He supports C-11 for ensuring that CRTC rules giving Canadian programmers access to Canadian cable TV audiences will be expanded to include access to online aggregation platforms like Roku, Amazon and Apple TV. Danks predicted a future in which foreign aggregator platforms flood the Canadian market and warned MPs that some of them (not the aforementioned Americans) have already refused to carry his LGBTQ+ content.
In a different political environment one could be philosophical about the entrenched policy differences expressed before the Committee because the Minister has promised to release a Policy Directive to the CRTC with more detailed instructions on how to handle User Generated Content and how to revise the certification rules of Canadian content. Following the release of that Directive, the CRTC will do what it does best: hold public consultations with scores of witnesses and thousands of pages of submissions covering C-11 implementation in an encyclopedic way.
But the Minister has given no indication he is going to issue that Policy Directive prior to Royal Assent. He may have made the astute observation that Conservative MPs and critics of C-11 remain inconsolable in their opposition to the legislation.
Here’s hoping that MPs put policy ahead of partisanship on this Bill.
Critics of Bill C-11 insist Bill C-11 empowers the CRTC to “regulate” social media posts, otherwise known as User Generated Content (UGC).
The reverse is probably true depending on what is meant by “regulate.”
The current Act confers upon the CRTC regulatory jurisdiction over all broadcasting platforms but the Commission has never used it for the Internet. Heritage Minister Pablo Rodriquez’s Online Streaming Act diminishes that jurisdiction over the Internet and specifically takes it away with respect to the content supervision of audio-visual uploads to hosting platforms like YouTube or TikTok.
Before I get to how the critics have it upside down on UGC, a word about the word “regulate.”
“Regulate” means more than one thing under the Broadcasting Act: the big one is how much Canadian media companies have to spend on making Canadian news, sports and entertainment.
“Regulate” also includes how often Canadian content must be shown on linear television and how much must be promoted (made “discoverable”) in the on-demand platforms of cable TV and the Internet.
Lastly “regulate” can also include the supervision of broadcasting content, something that the CRTC rarely does (more on that below).
Every broadcasting nerd knows the CRTC possesses the unlimited authority to regulate “broadcasting” over the Internet the same as television and radio because of section 2(1) of the Act:
broadcasting means any transmission of programs, whether or not encrypted, by radio waves or other means of telecommunication for reception by the public by means of broadcasting receiving apparatus,
However the Commission exempted the Internet platformin 1999 and since then and its regulatory authority has remained dormant.
Bill C-11 wakes up that regulatory authority over Internet broadcasting, but narrows it at the same time.
Here’s how:
Section 2.1 of Bill C-11 says social media uploaders are never regulated under the Act, for anything: no rights, no obligations, no liabilities.
Section 2.3 of the Bill says that Internet platforms hosting UGC can be regulated but only in respect to “programming” (uploads) that is monetized or commercial. That means YouTube will be regulated for UGC posted by Rogers Sportsnet, but not UGC that is amateur, educational, or citizen opinion.
In the months following Royal Assent of C-11, the CRTC will draw the line between “commercial” and amateur (we will see if the Minister gives them specific instructions in a Policy Directive, he has promised to do so at some point in the future).
Regardless of where the line is drawn, “regulation” will focus on the financing, creation and promotion of Canadian videos, but almost certainly not the supervision of the content.
How do we know that?
For decades the CRTC has shown little appetite for supervising content (more on that below) but C-11 appears to rule it out with respect to UGC by amending section 3(1)g of the Act:
Lets unpack that, because it’s a little complicated.
In almost every case, the CRTC outsources its enforcement of those policies to industry bodies such as the Canadian Association of Broadcasters or Advertising Standards Canada. In one exceptional case in 2004 documented at length in Robert Armstrong’s Broadcasting Policy in Canada the CRTC revoked the license of the unrepentant shock jock radio station CHOI-FM and did so again more recently in the case of the Russian propaganda outlet, RT Television.
Crucially the CRTC’s legal authority to develop and enforce those policies in the first place is based on getting through the door of section 3(1)g and (h) of the Act which provide that “programming must be of a high standard.”
Bill C-11 appears to shut that door by exempting UGC Internet posts through two amendments, the first inserting a requirement into section 3(1)(g) and (h) for “programming control” of content before it is subjected to the “high standard” test:
(g) the programming over which a person who carries on a broadcasting undertaking has programming control should be of high standard;
(h) all persons who carry on broadcasting undertakings have a responsibility for the programs that they broadcast and over which they have programming control ;
Having established “control” as a condition of content supervision, section 2.2 of C-11 deems UGC not to be within the control of hosting platforms.
(2.2) An online undertaking that provides a social media service does not, for the purposes of this Act, exercise programming control over programs uploaded by a user of the service who is not the provider of the service or the provider’s affiliate, or the agent or mandatary of either of them.
As UGC is deemed not “within the control” of the hosting platforms, that means that the CRTC appears to be about to lose its authority under the Broadcasting Act to do anything about sexist, racist, or conspiracy-based misinformation posted as UGC. That responsibility may fall to the CRTC or some other federal body under the yet-to-be-tabled Online Harms Bill, but at this point it’s speculation.
There remains the regulatory issue of discoverability, which has been raised by cyberlibertarians Michael Geist and Open Media, as well as the new lobby group Digital First Creators.
Those C-11 critics say regulatory obligations on YouTube to recommend posts by Canadian creators will backfire by pushing their content to disinterested Canadian viewers, exposing their posts to the risk of poor ratings through an underwhelming response of thumbs-up.
It’s a contentious point given that recommendation algorithms excel at matching content to individual consumption preferences.
Nevertheless the government has reacted to these voices by committing in the House of Commons to exclude any programming created by Canadian “digital first” artists from the hosting platforms’ regulatory obligations to fund, create and promote Canadian programs.
What that exclusion looks like, and whether it will help or hurt Canadian YouTube uploaders, remains a mystery for now. It would help to see the Minister’s Policy Directive to the CRTC.
Heritage MPs unofficially kicked off their consideration of the Online Streaming Act Bill C-11 on the occasion of CRTC Chair Ian Scott appearing before them to answer questions about the Commission’s budget in preparation for implementing C-11 and the Online News Act C-18.
MPs asked if Scott believed the extra $8.5 million in special funding committed by Minister Pablo Rodriguez for the Commission to prepare for C-11 was adequate. Scott assured MPs that the Commission has had 100 of its approximately 600 staff working for the last year on issues expected to arise in the implementation of C-11. Asked how long that implementation might take after the Bill is passed, Scott suggested a year for the public consultation and key regulatory decisions and perhaps another year for knock-on changes in licensing.
It was all very business like until it was CPC MP Rachael Thomas’ turn to ask questions. Thomas was parachuted into the Committee last year to lead the Conservative filibuster of Bill C-10. Now appointed to the Heritage Committee on a permanent basis, she gave every indication of carrying on where she left off, engaging in aggressive questioning and interruptions of Scott. As time ran out on her allotted six minutes, she accused Scott of “incompetence” for which she was admonished by Committee Chair Hedy Fry: View Video:
Today Heritage Committee (CHPC) MPs tabled their Report in the House of Commons following several days of hearings held on the Rogers-Shaw merger. While expressing a perfunctory opposition to the merger of broadcasting assets already approved by the CRTC, MPs of all parties are demanding the Liberal government mitigate the merger’s impact on local and community news coverage.
The significant threat to local news coverage by the merger will be felt in eight local markets —-Kelowna, Lethbridge, Saskatoon, Regina, Kingston, Peterborough, St.John and Halifax — currently served by Shaw-owned Global News stations that are not part of the merger. Because of existing CRTC regulations, $13 million of the Global network’s annual $131 million news budget will transfer automatically in a windfall to Rogers’ four western City TV stations in Vancouver, Edmonton, Calgary and Winnipeg.
(I’ve written previously in this blog about the complexities of CRTC funding rules for local and community news in the context of the Rogers-Shaw merger. There’s a summary at the bottom of this post.)
There’s some retail politics being played by Heritage MPs for whom support of local news is a must. To their credit (particularly Chair and Liberal MP Hedy Fry) the CHPC has long been an advocate of better regulatory and government funding of local news. Its 2017 Report was two years ahead of the Liberal cabinet in demanding support for journalism.
The Committee’s roster of mitigation measures address the eight local Global News markets, but also other hyperlocal community TVmarkets starved for news coverage:
Juicing the government journalism funding program “Local Journalism Initiative,” a modest $10 million per year fund that focusses on “news poverty” regions and communities.
Expanding the much larger federal journalist salary subsidy program to include broadcast journalism (currently it only applies to written journalism).
Diverting money from the Canada Media Fund (co-funded by cable companies and the federal government to support film production) to local news.
Reversing the impact of the CRTC’s 2016 decision that allowed Shaw Cable to reassign its $13 million funding of community news stations to its Global stations. This would require the CRTC to establish a new Community News fund.
Directing the CRTC to increase cable company contributions to the Independent Local News Fund which will now have the eight Global stations applying as newly independent stations (no longer owned by a cable company) to replace the lost $13 million funding that is moving from their former parent Shaw Cable to Rogers.
MPs would probably not deny the scattershot nature of their recommendations. That’s because funding of local TV news coverage is a patchwork of band-aid solutions developed by the CRTC over the last decade in response to year after year loss margins of nearly 10%.
For advocates of local news, it’s good timing that Heritage MPs are alive to the plight of broadcast journalism. As I wrote in a recent post, they will have an opportunity to do something about it when they convene to review Bill C-11.
***
How the CRTC makes cable companies and broadcasters sponsor local news coverage:
– Major networks Bell CTV, Rogers City-TV, Québecor TVA and Shaw/Corus’ Global News must spend 11% of total TV budgets (about $382 million) on news coverage by their 60 local stations.
– Community TV stations owned by cable companies were for many years the recipients of parent company cash mandated by the CRTC but in 2016 the Commission, in response to intense advocacy on behalf of local TV stations, robbed Peter to pay Paul and gave the option to cable companies to reassign those community TV funds to their own local stations. Shaw Cable took the CRTC up on its offer, transferring $13 million from their community stations to their Global local stations. If and when Shaw Cable is merged with Rogers Cable, that money will be spent by Rogers on its City TV stations.
– The Liberals’ $10 million annual “Local Journalism Initiative” to fund journalism in under serviced communities includes funding some community TV stations.
The drama of the Rogers-Shaw deal without a doubt demonstrates the ability of corporate mergers to focus the popular mind.
Last week Competition Bureau chief Matthew Boswell asked the Competition Tribunal to block the merger on the grounds it will prevent or lessen competition in the mobility markets in Ontario, BC and Alberta where Shaw’s Freedom Wireless business had made great strides in lowering consumer prices.
If there is no settlement or deal (like the mooted Québecor option) that satisfies the Bureau, it is possible that Rogers might surrender and pay off Shaw with a $1.2 billion break-fee. Or more likely, Ed Rogers will fight it out at the Competition Tribunal.
If the Bureau and Rogers decide to lawyer up, expect all manner of legal arguments. The most controversial will be the notorious “efficiencies defence” in section 96 of the Act.
Unique to Canadian competition law, the efficiency defence requires the Bureau to bless a merger —even the creation of a monopoly owned by a foreign corporation— if the gains in allocative efficiency (read: increased output and productivity) outweigh on a net basis the anti-competitive harm of higher consumer prices.
This happened previously in 1998 when Superior Propane bought ICG Propane and, in a number of regional markets, was poised to become the sole propane supplier with the ability to jack up retail prices. The Competition Bureau tried to block the merger. The Competition Tribunal approved it and the Federal Court of Appeal backed that decision.
Analysts at the time reminded everyone how we got the efficiency defence in the first place.
The Mulroney Conservatives had overhauled the Competition Act with Bill C-91 in 1986 and the efficiency defence was explicitly designed to drive the Canadian economy through the growth and success of large Canadian corporations (especially in the resource sector) against global competitors. A “national champions” policy if you will.
C-91 might be judged as just another corporate end-zone celebration amidst the deregulatory era of Thatcher-Reagan. It ran deeper than that, judging by the parliamentary record. The business community anxiety over Canada’s fate as an economic backwater was described this way by Bay Street analysts:
Supporting the debate lay the implicit assumption that, in order to survive, Canada needed disproportionately large enterprises to take on the larger world. Fostering efficiency therefore, was the way to achieve policy objectives. Canada has always been an economy dramatically dependent upon exports. The geographic extent and the small population of the nation itself has historically led to a concentrated industrial structure. The ability to maintain large capitally intensive enterprises in Canada’s essential mining, oil and gas, and forest industries has constantly focused competition law upon the need to foster efficiency.
The debate behind the Competition Act does clarify the perspective. In the Report of the Economic Council of Canada in 1969 it was boldly stated that “competition policy should aim primarily at bringing about more efficient performance by the economy as a whole. Competition should not itself be the objective but rather the most important single means by which efficiency is achieved.” The provisions of the four bills introduced from 1971 to 1983 prior to Bill C- 91, which finally became the Competition Act, all gave prominence to efficiencies. Bill C-913 played the trump card: efficiencies could overrule anti-competitive effects. Not surprisingly the Committee consideration of Bill C-91 contains clear statements of government intent: “Competition itself is not an end, but is rather the most effective means of stimulating efficiency and productivity and Canadian industrial growth … we have to be cognizant of efficiency, international competitiveness and fairness.”
The national champions philosophy underlying the efficiency defence may have prevailed at the Supreme Court but its Superior Propane ruling got a lot of public attention because it impacted retail energy costs. Liberal MP Dan McTeague was able to navigate a private member’s Bill C-249 through the House of Commons in 2003, watering down the efficiency defence to the point of irrelevance.
Bay Street pushed back by reminding everyone of the industrial strategy behind the Mulroney legislation. Analysts pointed out that retail prices should not always be the bottom line in considering allocative efficiency in an advanced economy. They argued that consumers were not always retail customers but other businesses in the supply chain. To them, it was not self evident that consumers are always more important than shareholders.
McTeague’s C-249 foundered for months in the Senate (perhaps an interesting tale to tell) before a federal election in May 2004 wiped the order table clear. It never came back.
Mergers rarely get litigated in a small country like Canada, so it wasn’t until 2015 that another efficiency defence case grabbed public attention. This time it was the Supreme Court’s decision in the Tervita case rooted in a small scale merger of two hazardous waste companies operating a total of three disposal sites in remote British Columbia.
The Tervita case is noted mostly for the slap down the Court gave the Competition Bureau for (in the Court’s view) a less than rigorous effort to prove anti-competitive impact on prices on one hand or to appreciate the the efficiency gains on the other. The merger was approved.
The fallout of that decision within the competition law community was a nearly unanimous call to overrule the Supreme Court through legislative amendment.
Last month the Liberals made a down payment on legislative changes to the Act in its omnibus budget bill, but it didn’t include the efficiency defence. Likely we will hear more about that during the 44th Parliament.
In the meantime the $26 billion Rogers-Shaw deal will keep merger law in the spotlight.
When that deal was brought before the CRTC last year to review the $5 Billion cable and satellite TV assets, the efficiency defence did not apply under the Broadcasting Act. Nevertheless, the rhetorical signature of Rogers’ pitch to the Commission strongly resembled the Mulroney era justification of the efficiency defence: that in the face of strong global communications competitors, Canadian companies must increase scale and investment. It’s similar to an argument that one Bay Street analyst posed hypothetically about a Bell-Corus merger of programming assets.
Oddly, this “national champions” argument didn’t need to be made to the CRTC.
The Commission kept it simple by ruling that retail price competition in cable and satellite retail was unlikely to be lessened, given the assurances provided by Rogers which is only replacing Shaw in markets that are new to Rogers. The Commission also ruled that corporate consumers —meaning the other media companies that buy and sell programming with a merged Rogers-Shaw— were not going to be disadvantaged once the Commission’s existing regulatory guardrails were strengthened.
The Competition Bureau clearly thinks that the situation is different in the $4 billion wireless segment of the overall deal (the wireline ISP business does not seem to be an issue).
For now, Rogers-Shaw has everyone’s attention and the open window on legislative reform provides an opportunity for important political decisions about industrial strategy and competition principles.
That’s a good thing or at the very least entertaining.
Competition Bureau Commissioner Matthew Boswell has without doubt put his organization on the map, an agency that until recently most Canadians had never heard of.
Boswell’s decision as the nation’s competition prosecutor to apply to the Competition Tribunal for an order blocking the $26 billion Rogers-Shaw merger is detailed in a 179 page brief (plus exhibits) posted online. Bottom line: Boswell says the transfer of Shaw’s $4 billion Freedom Wireless business in Ontario, British Columbia and Alberta to Rogers would “substantially lessen competition” in the mobility market, in violation of section 92 of the Competition Act.
The Bureau application took many by surprise, including consumer advocates opposed to the merger. Perhaps this was because on March 2nd ISED Minister François-Philippe Champagne (responsible for approving the transfer of federally regulated radio spectrum in this kind of a merger) publicly signalled that Rogers needed to sell off at least part of Freedom.
In response Rogers dutifully lined up an offer from Xplornet, with at least two other bidders chomping at the bit.
From a distance, it looked like the deal was getting approved. But on May 9th Boswell surprised everyone by saying the Xplornet proposal wasn’t strong enough to continue Freedom’s competitive impact on the wireless market.
Parsing Boswell’s document it appears that the Bureau gave Rogers and Shaw a heads up back in October that for competitive reasons Rogers could not expect to hang on to Freedom. But at the same time the Bureau expressed skepticism that the buyers of a stand-alone wireless operation could exert competitive pressure on mobility prices in the absence of a fibre wireline business providing backhaul transport for wireless traffic, as well as the potential to offer bundled wireline and wireless subscriptions to consumers.
We don’t know if Rogers and Shaw agreed with Boswell’s assessment about the viability of wireless as a stand alone business (although analyst Mark Goldberg has noted that Freedom’s biggest competitive impact is in Ontario where Shaw has no supporting wireline).
We do know that Shaw wanted out of the wireless business because it couldn’t afford the massive investment required to fund the next generation 5G technology. The crucial exchange of correspondence is redacted.
Where does this leave Ed Rogers’ deal?
The Bureau appears to be saying that Shaw can’t sell Freedom to a “big three” telco like Rogers (this would also apply to Telus or Bell).
The Bureau also says Shaw can’t sell Freedom to Xplornet because it is not a strong enough wireline-wireless operation, even though their investors obviously think they can make a go of it. How about rival bids to operate a stand-alone wireless business? Probably not.
That seems to leave P.K. Péledeau’s Québecor as a possibility. Although Québecor brings a solid telco business and deep pockets to the table, it doesn’t own matching wireline assets in Freedom’s coverage areas. So would it pony up an additional $20 billion to buy Shaw’s wireline business too?
The Bureau seems to be hoping for a perfect buyer for Freedom: a telco with a strong regional wireline business to match up to Freedom’s wireless coverage, as well as capital to invest in 5G. And it can’t be Telus, Bell or Rogers.
Or perhaps the Bureau thinks there isn’t a merger deal here at all.
If that’s the case, it’s off to the Tribunal and we can expect Canada’s competition law trial of the century.
A poll commissioned by the Globe and Mail has found that 55% of Canadians support the Liberal government’s push to regulate the Internet, while 37% are opposed. Support was strongest in Québec, opposition strongest on the Prairies. On an age demographic axis, support trended older rather than younger.
Heritage Minister Pablo Rodriguez is navigating three Internet bills through the House. The Online Streaming Act C-11 will apply the objectives of the existing Broadcasting Act —to create, finance and promote Canadian media content—- to global streaming and content hosting sites like Netflix and YouTube .
The Online News Act C-18 will compel Facebook and Google to pay a better price to news organizations for journalism posted or indexed on their sites.
Both Bills are at Second Reading in the House of Commons. A third regulatory scheme dealing with harmful content posted on the Internet is being discussed by the Minister’s blue ribbon committee and is likely months away from being tabled as legislation.
The Nanos Poll tested opinion for the three bills combined, but only asked for views on the individual pieces of legislation in the case of the C-11 Streaming Bill. Support was higher for this Bill on its own: 67% in favour and only 22% opposed despite a barrage of criticism over the last year from Conservatives and cyberlibertarian critics. This level of support suggests the public is further ahead than politicians, critics and even the Press which continues to cover the Bill as hotly controversial. Support for C-11 was highest in Québec, but otherwise support and opposition did not vary widely between regions.
The public debate will likely reach a fever pitch if the third piece, an Online Harms Bill, is introduced.
The government’s first steps towards managing toxic online speech in a 2021 working paper followed the German model of policing individual posts for harmful content with the preferred method of enforcement being take-down orders.
That approach got a lot of blowback, even from those (myself included) who don’t count themselves as free speech absolutists or cyberlibertarians. The pragmatic challenges of a government regulator drawing red-lines on billions of social media posts are considerable, especially if the go-to remedy is a take-down order followed by appeals and counter-appeals. The platforms themselves would likely protect themselves by over-filtering and over-censoring.
The Minister re-booted the entire process and appointed an expert committee. McGill University’s Taylor Owen, a high profile member of that committee, just published a paper under the banner of the Public Policy Forum and co-written with former Supreme Court Chief Justice Beverley McLachlin.
The McLachlin-Owen report emphasizes a preventative “systems” approach that incents social media platforms to be transparent to the public on how they filter and promote content. Importantly, they recommend a liability backstop “duty of responsibility” for the platforms to do a better overall job of reducing harmful posts without attaching corporate liability on a post-by-post basis.
It would be naive to think that any harms legislation can entirely avoid dealing with uncooperative platforms through coercive regulatory responses, be they fines or take down orders, but the McLachlin-Owen preventative approach is likely to get broader popular support than a straight-up policing of speech.
MediaPolicy.ca 