A proposal to impose a levy on Internet Service Providers (ISPs) like Rogers and Shaw Communications Inc. to fund the creation of new media content in Canada is harmful, according to recent arguments heard by the Canadian Radio-television and Telecommunications Commission (CRTC). The proposal of a three percent levy on Canadian ISP revenues has the stated purpose of promotion of relevant Canadian cultural material for the World Wide Web.
While this proposed levy seeks to accomplish a very Canadian purpose of proliferating high quality Canadian programming online, an Angus Reid poll shows that 79% of Canadians themselves feel that this levy will be “unnecessary and/or inappropriate” and will end up being passed down to consumers. The statistics also indicate that almost 65% of Internet users in Canada have viewed streamed or downloaded short internet videos in the past 30 days.
The legality of this levy would rest on the determination of the status of ISPs with respect to the Broadcasting Act, and whether ISPs can be legally taxed under the Act. The common ISP arguments against the lawfulness of the levy include: their role as “pipes” and not broadcasters; their function as mere facilitative medium for the customers to access the Internet; they do not buy, package or sell programming or any other Internet content; their treatment so far by the CRTC as telecommunications providers; and, their regulation through provisions of the Telecommunications Act since 1996. It is also argued that since the Internet content is binary code, which is packet switched and delivered to the customers, it is different from broadcasting.
The Broadcasting Act defines the term “broadcasting” as “transmission of programs by radio waves or other means of telecommunication for reception by the public by means of broadcasting receiving apparatus” and qualifies “program” as "sounds or visual images, or a combination of sounds and visual images, that are intended to inform, enlighten or entertain — but does not include visual images, whether or not combined with sounds, that consist predominantly of alphanumeric text." In the 1999 CRTC Report on New Media, it was asserted that most internet services do not involve such transmission and that services available on the Internet do consist predominantly of alphanumeric text, thus failing to fall within the scope of the Broadcasting Act. The Internet was deemed a regulatory-free zone through the CRTC 1999 new media exemption order. In the 1997 US Supreme Court case of Reno v. American Civil Liberties Union, it was affirmed that the Internet is not broadcasting because it is not faced with the spectrum scarcity problem that mandates the heavy regulation of broadcasters.
However, with the changing face of Internet transmission, it is possible that, should the CRTC impose a levy, the Canadian courts may depart from the American lead. In a 2003 landmark case of Bahlieda v. Santa, the Ontario Superior Court Justice Helen Pierce concluded that material made available through the Internet constitutes broadcasting for the purposes of Libel and Slander Act. Michael Geist warned that the case shouldn’t be deemed to create a new overall definition of broadcasting. He emphasized the distinction between considering the Internet as broadcasting for the purposes of the Libel and Slander Act, and considering the Internet under the Broadcasting Act absolutely. However, is it nevertheless possible that the emerging adoption of the Internet as substitutes for radio and television may necessitate its categorization as a broadcaster.
Even if it is decided that ISPs can be legally levied, there is a concern that deals with the overall purpose of the levy. Even though it aims at taxing only the ISPs, there is a good likelihood that customers will be burdened with a corresponding increase in Internet costs. Why should customers suffer as a result of the levies without receiving any substantial benefit in return? Also, if the CRTC wants Canadian video producers to thrive in the online medium, should those producers not be creating programs that “attracts the eyeballs of the world” instead of exerting an additional burden on the ISPs and Internet customers?