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Intellectual Property

Internet tax fair way to regulate embattled broadcast industry

An internet tax to fund Canadian content could help level the playing field for traditional broadcasters that are suffering from reduced advertising revenue and rampant piracy online, Toronto intellectual property litigator Kevin Fisher tells AdvocateDaily.com.

The National Post recently covered a Canadian Radio-television and Telecommunications Commission (CRTC) report that proposed new legislation that would force “equitable contributions” from any service provider that makes money in Canada by providing access to content.

However, the story says the contributions may be non-monetary, pointing out that the regulator’s hands have been tied by the federal government’s repeated pledges not to impose an internet tax in this country.     

Fisher, a partner with Gardiner Roberts LLP, says this “middle of the road” approach will just entrench the competitive advantage enjoyed by over-the-top content providers such as Netflix and Hulu which currently operate in Canada without any compulsion to contribute revenue towards the production of Canadian content.

“I can’t get my head around how the CRTC expects to bolster Canadian culture without protecting the industries that are supporting it. At the same time, they’re allowing foreign companies to come in unregulated and untaxed,” he says.

“It’s one thing to have competition but it’s quite another to have the two sides playing by different rules. There has to be an internet tax in the future. It’s an easy and fair way to generate revenue,” Fisher adds.  

The status quo, whereby traditional broadcasters and television providers pitch in to fund homegrown content, is unsustainable for a variety of reasons, says Fisher, who points out that domestic cable subscriptions are declining at an accelerating pace every year.

“The Canadian television industry is getting crushed and its problems are only growing,” he says. “It’s harder for them to keep up with changes in technology and they need a regulatory regime that gives them more tools to act faster.”

After extensive consultation with stakeholders, the CRTC report called for new regulations to catch more players in the system, including broadband providers, and suggested they could contribute one per cent of their revenue towards content.

“It’s very important to remember that the growth in broadband is not being driven by email, it’s being driven by video content,” CRTC chairman Ian Scott told the Post. “The reason those (internet service providers) are in business, virtually 70 per cent of their wireline traffic is video and audio programming, 25 per cent of the wireless traffic is video and audio programming.”

The proposed changes would also reduce the burden on Canadian television providers that are currently required to contribute five per cent of their revenue, but when it comes to online services such as Netflix or YouTube, the CRTC suggested contributions should be made in “appropriate” and potentially non-monetary ways, rather than tying them to a cut of revenue.

“We need to bring everyone inside the tent, and then through binding service agreements we can establish a regulatory framework that is equitable but that ensures everyone is making a contribution to the system,” Scott explained.

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