The debate over the federal government’s plan to reform the Broadcasting Act has focused primarily on new regulations for internet streaming services such as Netflix and Disney+. Those services face the prospect of mandatory payments to support Canadian film and television production, rules to make Canadian content more “discoverable” and requirements to turn over confidential corporate information to the broadcast regulator. While Canadian Heritage Minister Steven Guilbeault has told the House of Commons that the bill seeks to safeguard cultural sovereignty, the reality is that it represents a surrender of Canadian ownership and control over the broadcasting system.
The current Broadcasting Act begins with a declaration of Canadian broadcast policy, identifying at least 20 different priorities that range from access to both English and French programming to the role of the CBC. At the top of the list is Canadian ownership, affirming “the Canadian broadcasting system shall be effectively owned and controlled by Canadians.” Yet Mr. Guilbeault’s bill discards the provision and removes any reference to Canadian ownership and control in the law.
The government has responded to concerns about the change in approach by arguing the basis for Canadian ownership requirements comes not from the policy declaration, but rather from a long-standing government direction that non-Canadians are ineligible to hold broadcast licences. That direction has been implemented in multiple decisions by the Canadian Radio-television and Telecommunications Commission (CRTC). However, the direction could easily change with a different government and the resulting CRTC approach would look to a new Broadcasting Act with no reference to Canadian ownership for guidance.
That suggests there is a clear link between the change in policy and the possibility of foreign ownership of the Canadian broadcasting system. But the beginning of the end of the Canadian ownership and control requirements is about far more than legal or procedural developments. Rather, the government has effectively acknowledged that by mandating that foreign streaming services be part of – and contribute to – the Canadian broadcast system, that system can no longer be effectively owned and controlled by Canadians.
Mr. Guilbeault maintains that the removal of the policy is immaterial since licensing requirements still apply to broadcasters and can be used to ensure that they remain in Canadian hands. Yet the obvious trajectory of the new Canadian system is to shift away from the licensing system. Broadcasters in the licensed world will increasingly look at the unlicensed internet world that is free from foreign investment restrictions and conclude that they prefer the unlicensed system.
The issue could become particularly acute if Canadian broadcasters are forced to compete with the large foreign players for Canadian content as all participants race to meet their regulatory Canadian content requirements. The disadvantages of remaining Canadian-owned might mean that broadcasters consider surrendering their licences in favour of switching to streaming-only services that remain unlicensed and have the advantage of no foreign ownership limitations.
As a result, the Canadian market is likely to feature an increasingly prominent foreign ownership presence, not only in the form of foreign streamers, but also Canadian-originated streamers that become foreign-controlled through new investment. While the largest broadcasters may hold out given the regulatory advantages granted to licensed broadcasters over streaming services, they could respond by lobbying the government to remove the remaining restrictions, resurfacing old arguments about a “level playing field,” and claiming that the licensed system cannot compete against unlicensed domestic and foreign streaming services that can access capital from anyone in the world.
The irony is that there are viable alternatives that would allow the government to maintain the long-standing Canadian ownership principles and still ensure that Canada benefits from the presence of foreign streaming companies. The government could guarantee more revenues for Canadian productions from companies such as Netflix through tax policy, including mandating the collection and remission of sales taxes. It could also use existing tax credit policies that are an essential part of the production sector to mandate that recipients meet new requirements on promotion and adjust current eligibility requirements to make investment by foreign services in Canada even more attractive.
In other words, rather than seeking to shoehorn internet streamers into the broadcast system despite obvious differences and significant repercussions, it could rethink the evident blunders in the latest reform bill. Staying on the current path spells the end of Canadian ownership and control of the broadcasting system as a policy priority, and it opens the door to its end as market reality as well.
Michael Geist holds the Canada Research Chair in Internet and E-commerce Law at the University of Ottawa, Faculty of Law.
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