The battle over the future of Canadian broadcasting and telecommunications is quickly emerging as a hot-button policy issue, with a government-mandated review of the law recently garnering thousands of public responses. While recommendations from an expert panel are not expected for months, Canada’s broadcast regulator, the CBC, and several high-profile cultural groups are lining up behind a view that Canadian culture is facing an existential crisis. Among the ideas being proposed are new taxes on internet and wireless services, mandated Cancon requirements for Netflix and the prioritization of Canadian content in search results from online services to enhance its “discoverability.”
There are unquestionably real communications policy issues in Canada for Innovation, Science and Economic Development Minister Navdeep Bains and Canadian Heritage Minister Pablo Rodriguez to grapple with: Some of the world’s highest wireless prices hamper adoption and usage, privacy safeguards have failed to keep pace with online threats and public-interest voices say they don’t feel heard at the Canadian Radio-television and Telecommunications Commission (CRTC) under chair Ian Scott.
At the same time, Canadian cultural groups are raising dystopian fears that if Canada maintains an open market for online video services, it could mean the end of Canadian content and bankruptcy for Canadian broadcasters.
These fears are not new. For decades, the prospect of U.S. content flowing across the Canadian border has been viewed as a threat, leading to policies that amounted to creating a Canadian broadcast wall. Canada adopted rules that permitted replacing U.S. television signals with Canadian ones (so-called simultaneous substitution), the blocking of U.S. satellite television services and tight restrictions on foreign investment in the broadcasting sector.
Many of those same arguments for protecting the domestic industry are today repackaged for the internet, with Netflix viewed as an unregulated behemoth that threatens to overwhelm the Canadian broadcasting sector and destroy some of the funding mechanisms that have been used to support Canadian film and television production.
Yet the data indicate that there is no Cancon funding crisis. According to the most recent numbers from the Canadian Media Producers’ Association, the total annual value of the Canadian film and television production sector exceeds $8-billion, its largest amount ever. Spending on Canadian content production has hit an all-time high at $3.3-billion. In fact, the increase in foreign investment in production in Canada has been staggering. Before Netflix began investing in original content in 2013, total foreign investment (including foreign location and service production, Canadian theatrical production, and Canadian television) was $2.2-billion. That number has more than doubled in the past five years to nearly $4.7-billion.
Not only is there no crisis, but much like U.S. President Donald Trump’s pledge that someone else will pay for his border wall, Canadian creator groups similarly posit that their new funding proposals will be paid for by big telecom companies or foreign internet giants. Their recommendations are replete with plans to regulate online video services and require that they contribute millions toward Cancon creation funding. They also want a new tax imposed on both broadband and wireless services to fund Cancon, arguing that those taxes would replace the declining support from Canadian broadcasters, as well as direct financial support for the CBC from companies such as Google and Facebook.
There surely remains an important role for public support of Cancon, but the subsidization model of the past in which cable companies and broadcasters paid to support Canadian content production was at least premised on the fact that a cable subscription provides no more than access to broadcast content. Yet the internet offers a limitless array of possibilities that have nothing to do with broadcasting, making it difficult to justify a levy on service providers.
Plans for the government’s assistance to the news-media sector remain controversial, but they rightly adopt the position that if the media need public support and the government believes it is in the public interest to do so, funding should come from general revenue as part of broader government policy, not through a myriad of taxes and levies that run counter to other policy goals.
The unsurprising reality is that the new tax and regulation proposals will ultimately leave Canadian consumers paying the bill. New digital sales taxes would be paid by consumers, not companies that merely collect the applicable taxes. New taxes on Netflix to pay for Cancon would invariably lead to increased monthly subscriber costs and/or smaller content libraries to meet the new Cancon quotas. New taxes on ISPs or wireless services would lead to even higher prices and reduced affordability.
In other words, rather than embracing the opportunities that come from unprecedented global demand for scripted television programming and competing for the attention of Canadian viewers, some prefer to place their bets on a digital wall consisting of new taxes and regulations. And Canadian consumers are going to pay for it.