Federal Court of Appeal rules that ISPs are not "broadcasters"

Stu Freen is a JD candidate at Osgoode Hall Law School

The Federal Court of Appeal recently released a decision holding that Internet Service Providers (ISPs) are not considered to be broadcasters within the meaning of the Broadcasting Act and are therefore not subject to the same levies that are imposed on traditional TV and radio stations to support the creation of Canadian programming. The Court endorsed a view of ISPs as “utterly ignorant” information conduits that play no editorial role in the transmission of programs. The decision represents the nail in the coffin for Canadian creators who had hoped to get a piece of the internet pie, and also points to an increasingly pressing need for legislators to re-work the broadcasting regulatory scheme as a whole.

The decision comes as a response to a reference Order from the Canadian Radio-television Telecommunications Commission (CRTC), the government agency in charge of regulating broadcasting and telecommunications.  Last June, the CRTC rejected calls to impose levies on ISPs. However, the Commission decided to refer the question of whether the Broadcasting Act applies to ISPs to the Federal Court of Appeal because it felt the issue was an important one that should be decided by the Court. It is the result of that reference that has just been released.

A three judge panel of Justices Noël, Nadon and Dawson came down firmly on the side of a coalition of ISPs that included Bell, Rogers, Cogeco, Telus and Shaw. The Court essentially ruled along the same lines as the earlier Supreme Court decisions of Society of Composers, Authors and Music Publishers of Canada v. Canadian Assn. of Internet Providers, 2004 SCC 45, and Electric Despatch Co. of Toronto v. Bell Telephone Co. of Canada, (1891), 20 S.C.R. 83, where the Court held that telecommunications providers are basically just “dumb pipes”.

The FCA decision draws attention to the fact that Canada’s media regulation scheme is not very well suited for new media in the 21st century. The decision, along with the Broadcasting Act itself, endorses a very traditional model of broadcasting. In this traditional model there is a sender and there is a receiver, such as a radio station and a home listener. The broadcaster editorializes the content and transmits it to the listener, who passively accepts the content. It is a “push” model in the sense that the broadcaster pushes the content out to the public.

Push models are relatively easy to regulate. There are only a few broadcasters, so they can easily be monitored and levies are simple to collect. If the CRTC wants to promote Canadian content in this model it has to impose stronger regulations on the limited number of broadcasters that exist.

The problem is that neither Parliament, the CRTC nor the Federal Court of Appeal have considered the fact that media is shifting from a Push model to a “Pull” one. In a Pull model, viewers actively seek out content themselves, rather than being passive consumers. It may be trite, but the future is on-demand. Internet sites like Youtube are pull models because users choose what they want to watch when they want to watch it. All of the major Canadian television networks now have websites where viewers can stream the latest television shows on demand. Just yesterday Netflix announced that they will be launching an on demand service in Canada. Hulu and Google News are just two more (of many) wildly popular on-demand media sites.

Unlike Push models, Pull models of media consumption are extraordinarily difficult to regulate. After all, when users are picking the programs they want to watch there is no way of forcing Canadian content on them. Canadians will in the near-future have the option of consuming all American programming all the time, without even being exposed to Canadian advertising.

The big winners in the Pull model will be ISPs, who will benefit from the increased traffic associated with more users downloading content on-demand. The big losers? Canadian creators, and ultimately Canadian culture and identity as a whole. Despite what the CRTC seems to think, the Pull model is not destined to be an ancillary model of delivering “bonus” content alongside broadcasting. It is set to be the main business model, and will be very soon.

Parliament and the CRTC need to ensure that once media distribution shifts to a Pull model there is a regulatory system in place that will provide funds to subsidize the creation of Canadian content. ISP levies were potentially such a system, but they now appear to have effectively been ruled out.

  1. Was there any question that “pull” on-demand video falls under the Broadcasting Act? The CRTC has been regulating video on demand for more than a decade. It’s not what this case was about.

  2. Sure, but my point is this: The Cultural Group has asked for levies to be imposed on ISPs because the traditional broadcasting model is going the way of the dodo. As internet-based pull video becomes the standard (and not the exception), it’s going to be increasingly difficult to subsidize the creation of Canadian content through the existing framework. This case illustrates that trying to regulate ISPs through the Broadcasting Act is like fitting a square peg into a round hole. Nevertheless, Canadians need a modernized system to ensure that there will be Canadian voices left in the on-demand market.

  3. That’s a fine point to make, but your factual grounding was in the argument that Parliament did not consider on-demand programming and the Broadcasting Act does not regulate it. That is clearly not the case. The CRTC has the authority to regulate on-demand programming, as it does today and has done for a decade, and has the authority regulate on-demand programming over the Internet, which it has decided to exempt from regulation. The Federal Court of Appeal did not challenge any of that; it only reviewed the Broadcast Act’s authority to regulate content-neutral ISPs, as opposed to other Internet actors, and found that content-neutral ISPs don’t transmit programs to end-users.

    If you are making the more modest point that content-neutral ISPs themselves are the only point in the chain that can be regulated, that video is migrating to an Internet delivered by content-neutral ISPs, and that content-neutral ISPs must therefore be regulated under the Broadcasting Act then, without getting into the merits of the FCA’s decision, one must ask to just what sort of regulation you would propose that the CRTC subject content-neutral ISPs.

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