The Broadcast and Telecommunications Legislative Review Panel released its much anticipated report yesterday with a vision of a highly regulated Internet in which an expanded CRTC (or a renamed Canadian Communications Commission) would aggressively assert its jurisdictional power over Internet sites and services worldwide with the power to levy massive penalties for failure to comply with its regulatory edicts. The recommendations should be rejected by Innovation, Science and Industry Minister Navdeep Bains and Canadian Heritage Minister Steven Guilbeault as both unnecessary to support a thriving cultural sector and inconsistent with a government committed to innovation and freedom of expression.

The report is at its strongest when dealing with issues related to access to the Internet, consumer rights, net neutrality, and enhancing public participation in communications regulation. On those fronts, the government would do well to consider implementing many valuable recommendations that would increase competitiveness and lead to more inclusive regulatory hearings. Moreover, the wise decision to reject a levy or tax on Internet access services will allow those who feared increased Internet and wireless costs to breath a sigh of relief.

Yet the strengths of the telecommunications and consumer rights portions of the report are overshadowed by a stunning set of recommendations related to Internet content, some of which are unlikely to survive constitutional scrutiny, likely violate Canada’s emerging trade commitments, and rest of shaky policy grounds. If enacted, the Canadian Internet would be virtually unrecognizable with the CRTC empowered to licence or require registration from a myriad of Internet services, mandate what Canadians see on those services, and intervene in commercial negotiations. The 235 page report will require several posts to address all of its aspects and implications (including notable CBC and copyright reforms), but this post seeks to set out its broad-based content regulatory vision and make the case that the panel’s plan should be firmly rejected by the government.

The foundation of the content section of the report is the decision to regulate all media content, which includes audio, audiovisual, and news content delivered by telecom. In doing so, the report envisions unprecedented government and regulatory intervention into the delivery of news services. It argues that there are three types of services that provide this content that require regulation where they access the Canadian market:

Curators – services that disseminate media content with editorial control (broadcasters and streaming services such as Netflix, Spotify, and Amazon Prime)

– services that disseminate media content with editorial control (broadcasters and streaming services such as Netflix, Spotify, and Amazon Prime) Aggregators – cable companies, news aggregators such as Yahoo News

– cable companies, news aggregators such as Yahoo News Platforms for Sharing – services that allow users to share amateur and professional content such as YouTube, Facebook and other platforms

The panel recommends that all of these kinds of companies be regulated (either by way of licence or registration), be required to contribute to Canadian content through spending percentages or levies, and comply with CRTC regulations on discoverability that would include regulatory rules on how prominently Canadian content is displayed within the service. The CRTC would be empowered to decide whether to exempt services from regulation with the power to levy huge penalties for failure to comply with its decisions (described as “high enough to create a deterrent foreign undertakings”).

Services would also be required to disclose consumption data to the CRTC, so that the regulator would know what Canadians are watching or reading online. The regulator would be entitled to establish binding codes of conduct that cover resolution mechanisms, transparency, privacy and accessibility. It would also govern the commercial relationship between services and content producers, with the panel noting “it is essential that the CRTC be given the explicit jurisdiction to regulate the economic relationships between media content undertakings and content producers, as well as between media content undertakings.”

The regulatory power over news aggregators would be even greater. The panel recommends that the CRTC impose requirements on media aggregators as it would determine which Canadian news sites are trusted, require links to those sites, and include rules ensure that those links are prominently displayed. Moreover, the CRTC would be entitled to regulate the economic relationship between news producers and Internet platforms. The panel argues:

A very small number of dominant social media platforms are a critical source of audiences for news media organizations. As a result of the imbalance in bargaining power, news content creators are unable to individually negotiate terms over the use of their content by social media platforms. The CRTC should also have the jurisdiction to determine or approve terms of trade where it considers that this is necessary to address an imbalance of power in news content. These terms could include much more than the ambit of the rights granted or the basis for compensation. They could also include requirements to make audience data available to content producers.

The report also ventures into numerous other areas: regulation of artificial intelligence and big data, privacy, digital sales tax, recommendations for legislation to hold digital providers liable for harmful content on their sites, and future regulation that may encompass what is displayed or available in app stores, operating systems, and devices. Indeed, the report states:

In addition, app stores and devices, along with the operating systems, application programming interfaces and preloaded applications, play an essential role in determining what content or services are accessed on the Internet. As such, they can significantly influence the discoverability of Canadian content. Some content and service providers are now selling devices that can prefer their own affiliated media content services. For example, early announcements regarding HomePod speakers seemed to imply that they will only give users access to Apple Music and iTunes and not to competing online music services, such as Spotify. In this context – to the extent that undertakings curate (as a primary purpose), aggregate, or enable the sharing of audio or audiovisual content, or alphanumeric news content – they should be subject to discoverability requirements.

The panel’s vision is to create a Canadian regulatory framework that knows no physical boundaries – the CRTC empowered to apply its power to any site or service anywhere in the world used by Canadians – and with few limitations as the regulator would dive deeply into mandated payments, what content is displayed, what news can be trusted, and what Canadians view or download. Yet for such sweeping change, the report rests on remarkably thin arguments and evidence.

Some of the data is simply inaccurate or misleading. For example, the panel claims that Netflix generates $1.6 billion in revenue annually in Canada, when the company reported that the actual number is roughly half that amount. The panel also trumpets that it is not recommending a Netflix tax. That statement predictably led to media coverage claiming there is no Netflix tax recommendation, but with the licensing regime that would include a mandated requirement to spend a percentage of revenues on Canadian content, that clearly represents a “Netflix tax” as the term is widely understood.

The basis for the most sweeping reforms are framed as a matter of cultural sovereignty, with the panel arguing for the need for Canada “to continue to assert its cultural sovereignty and Canadians can continue to express their identity and culture through content.” However, at yesterday’s press conference, both chair Janet Yale and panelist Monique Simard instead emphasized the need to support Canadian jobs when asked to reconcile the industry data that confirms record amounts of film and television production in Canada.

Alternatively, the panel argues that it is simply a matter of those that benefit from the “system”, must contribute to it. But as I argued earlier this week, broadcasters and broadcast distributors enjoy a wide range of regulatory benefits in the system and their contributions are essentially a regulatory quid pro quo. The Internet services are not part of this system. We do not condition access to the Canadian market as requiring mandated contributions – no one speaks of a “clothing system” or “toy system” or “sports system” – but the panel believes that for the Internet simply having some Canadian users requires sites and services worldwide to pay into Canada’s culture system.

In fact, the panel acknowledges that “Canadians create and consume more types of content than ever before.” So this isn’t about creating Canadian content. Rather, it is about certain professions creating content and imposing a massive regulatory infrastructure in order to support that policy goal. As I argued earlier this week, the problem with this approach is that ticking the right boxes that ensure Canadians represent “key creative personnel” has nothing to do with Canadian cultural sovereignty, much less ensuring access to Canadian stories. Yet while the panel emphasizes “the importance of story”, when confronted with the question of whether current Canadian content rules achieve that objective, it states “it is time to review the model for supporting Canadian content, but not the definition of Canadian content.” In other words, it is prepared to overhaul the regulatory rules for creating and delivering Canadian content, but not even consider the rules that determine what qualifies as Canadian content.

The panel’s case for why it should regulate news services and platforms is similarly thin. It boldly states that “the CRTC must be able to monitor and address issues concerning news content made available by means of telecommunications, regardless of format. This would include online versions of newspapers.” But why those platforms? The panel states:

Advertisers now view these online companies effectively as media companies that directly compete for their advertising dollars. That is why Internet platform providers should be brought under the Broadcasting Act to the extent that they enable the dissemination or sharing of audio or audiovisual content, or alphanumeric news content.

That’s it? A constitutionally questionable foray into regulating news because advertisers view online companies as media companies? Surely a stronger justification is needed now (and an even stronger case will be needed to address the inevitable constitutional challenge should the government follow this recommendation).

The panel not only ignores the constitutionality of widespread speech regulation, but it is also sidesteps Canada’s trade commitments. On the same day that the panel released its report, the government tabled Bill C-4, the bill to implement the Canada-U.S.-Mexico Trade Agreement. Article 19.17 of the agreement prohibits parties from adopting measures that would hold Internet services liable for harms that arise from content posted by their users. Nevertheless, the panel recommends legislation to create liability for Internet services from the harms that arise from content posted by their users.

If the legal concerns were not enough, the panel fancifully maintains that all of this regulation will come at no cost to Canadian consumers as if no one has to pay for massive new regulations, licensing, payments, reporting requirements, and commercial intervention by the CRTC. Such a scheme may result in millions for some creators, but there should be no doubt that the costs will be borne by individual Canadians, who will face increased subscription costs, reduced competition as some services avoid the highly regulated Canadian market, and fewer content choices.

My column this week anticipating the panel concluded with the following:

Should the government regulate those providers and creators, it will be engaging in perhaps the most extensive speech regulation Canada has ever seen on the demonstrably false premise that doing so will level the playing field, support Canadian stories, or save a production sector that is thriving in the internet age.

While the panel report does a nice job of addressing telecom and consumer issues, its vision of speech, content and news regulation is far worse than anticipated. Those recommendations should be soundly and unequivocally rejected as at odds with industry data, harmful to the affordability of Internet-based services, and inconsistent with Canadian fundamental rights and freedoms.