Are ISPs Broadcasters?

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?

4 Comments
  1. On the one hand, I agree with Reshika that it is consumers who would most likely bear the cost of the proposed levy. ISPs are there to make profit and would certainly pass some or probably all of the levy to ultimate users of the Internet.

    On the other hand, it might be unfair to say that ultimate consumers would not
    benefit from such a levy. The levy’s purpose is to ‘encourage the promotion of relevant Canadian cultural material for the World Wide Web’. Shaping and presenting Canadian identity to the world is an important objective and although no single consumer per se benefits from it, Canadians, as a nation, do.

    If the public at large were to benefit, then the public would have to pay for that benefit. Furthermore, if ISPs were to pass most of the costs associated with the levy to consumers, then imposing a levy on such providers would not sound that unreasonable.

    However I am unsure whether the size of the levy is appropriate. What makes a 3% levy the right number?

  2. I share Anna and Reshika’s concern that a levy on ISPs would ultimately end up being shifted to the customer. The distaste customers have for this type of arrangement highlights an issue that ISPs and artists are struggling with at the moment – how to foster and compensate artistic work in the current internet climate. With the advent of peer-sharing networks, downloading and sharing of artistic works has eroded revenues that would have otherwise gone to producers and artists (for a discussion of contentious P2P networks, see http://www.iposgoode.ca/2008/10/new-zealand-isps-to-cut-off-internet-access-for-p2p-file-sharing/ and http://www.iposgoode.ca/2009/03/the-pirate-bay-an-ocean-away-from-google/). Internet users who have been raised in this environment may struggle to switch to a system where content is available on a pay-per-transaction basis.
    On the other hand, a levy on ISPs such as the one suggested above might be one way to address the concern – even if the levy ends up being passed on to customers, the producers and artists will be financially supported and it might “feel” free to internet users. At the very least, the idea deserves discussion.

  3. Interesting write-up!

    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.

    Are you sure that you have properly understood what the Reno case said? At issue in that case was whether the regulation of indecency in traditional broadcasting was analogous to the regulation of indecency on the Internet. The absence of spectrum scarcity was one of the ways in which the two were different. (Others were pervasiveness, in Sable, and the more complex understanding of the reason for regulating broadcasting set out in Red Lion.) By contrast, not only is the issue before the CRTC a rather different one, the things being compared are different (audiovisual content on different platforms) and the context is, of course, utterly different (interpretation of the Broadcasting Act and of related statutes). So I am not sure that it is accurate to talk of “following the U.S. lead”, insofar as there is no U.S. lead to follow — as a legal matter, this is very much bound up in our understanding of Canadian statutes.

    As the Libel and Slander Act (Ontario) was at issue in Bahlieda, and not the federal Broadcasting and Telecommunications Acts, Professor Geist sounds correct on this point. I doubt that Bahlieda provides much more guidance than does Reno.

  4. The link to Bahlieda v. Santa points to the Ontario Court of Appeal decision, not the Superior Court decision.

    Nonetheless, the Court of Appeal decision IS the correct decision to link to.

    As, the Superior Court’s decision can no longer be cited as ‘good law’ in light of the Court of Appeals’ clear ruling at paras. 6 and 7:

    “In our view, the motions judge erred in several respects in finding that there was no genuine issue for trial. Section 7 of the Act provides that subsection 5(1) and section 6 apply only to “broadcasts from a station in Ontario”. She makes no findings of fact, including no finding as to the essential question of whether the broadcasts were from a station in Ontario. On that basis alone, in our view, the application should have been dismissed. In addition, however, we note that the experts’ opinions conflicted on a number of issues, including whether the word “dissemination” can properly apply to information distributed by internet and whether internet publication is immediate and/or transient. Summary judgment applications are not a substitute for trial and thus will seldom prove suitable for resolving conflicts in expert testimony particularly those involving difficult, complex policy issues with broad social ramifications.

    The conflicting expert opinions raise considerations that are germane not only to deciding whether internet publications are a broadcast within the meaning of the legislation, but also to determining whether subsequent viewing of the internet message by third parties amounts to a republication of the material.”

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