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Politics Foreign firms have unfair advantage over Cancon, committee hears

Witnesses at parliamentary hearings on the future of local news are repeatedly casting U.S.-based Internet giants as villains in the Canadian media landscape, offering a hint of the battle to come later this year at a full-blown study on the future of Canada's cultural industries.

At the first seven meetings of the Heritage committee of the House of Commons on local news, there were recurring complaints that Facebook, Google, Netflix, Apple and other large foreign-based firms are unfairly competing with Canadian companies, both big and small. Witnesses and parliamentarians pointed out that the foreign firms largely avoid paying taxes in Canada and hardly invest in the creation of quality local content, even as they reap large profits.

"I've sat with groups here in the last two weeks in my office, and all they complain about is Yahoo, Facebook and Google," Conservative MP Kevin Waugh, who was a sportscaster at CTV Saskatoon before going into politics, said during a recent committee meeting.

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In an interview, Liberal MP and committee chair Hedy Fry said ongoing hearings on the future of local media have raised a crucial question: "Will the digital platforms play on the same playing field as other broadcast media have to play, or are they just going to get a free pass?"

The issue is set to take on additional importance as Heritage Minister Mélanie Joly has launched broad consultations on all laws and policies that govern Canada's $48-billion cultural industries, stating "everything is on the table" to fix a broken system.

Under the current regime, U.S. Internet giants largely operate outside of the cumbersome and costly regulations imposed on Canadian broadcasters and distributors. Netflix, Facebook and others don't charge sales taxes on their monthly subscription fees or the advertising they sell to Canadian clients, unlike Canadian broadcasters.

At the Heritage committee, a number of witnesses complained the advertising pool is drying up, and that they need to find new sources of funding.

"You had a situation where you had one healthy division and one less healthy division, now you have a situation where the healthy division isn't as healthy and the less healthy division is even less healthy," said Kevin Goldstein, BCE's vice-president of regulatory affairs.

A union representing journalists and workers in the communications industry called on the government to spend all of its advertising dollars in Canada as a first step.

"We don't feel that the government has to increase advertising spending, but that it should begin by investing in Canadian and Quebec companies instead of in Facebook or other platforms, since that money goes to multinationals that do not pay taxes or help produce local and regional news," said Pascale St-Onge of the Fédération nationale des communications.

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NDP MP Pierre Nantel admitted that he had placed advertising on Facebook during the last election, but said the firm doesn't deserve a break.

"The Americans are currently making the most money, as they are not charging a sales tax on their advertising contracts. That's despicable," Mr. Nantel said at the committee.

In an interview, he accused the firms of failing to act as "good corporate citizens."

"Can we ask Google, for example, to help out community stations? Can they do something else than accumulate big piles of cash?" Mr. Nantel said.

Officials from various cultural industries are now getting ready for the Canadian Heritage consultations that will start after Labour Day.

Sources in Canada's media industry said they expect the issue of foreign competition will be front and centre at their presentations to the expert panel appointed by Ms. Joly.

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In a recent appearance before the Heritage committee, officials from Rogers suggested they are not operating on an even footing under the current system.

"These are global companies with global scale," said Colette Watson, vice-president of television and broadcasting operations for Rogers Media. "We operate in the world's best country, but it doesn't have the kind of scale those companies have."

While the current Liberal government has yet to take a firm stand on a possible tax on Netflix, some experts wonder whether Canada even has the legal ability to obtain revenues from foreign entities.

"Even if you decided that Netflix and other providers of audio-visual material to Canadian computers were a potential source of subsidies, it's not clear to me that, legally and technically, you can find a way to do it," said Richard French, a professor at the University of Ottawa and holder of a chair on business and public policy.

Ms. Fry said she expects the Heritage committee will extend its study into the fall. There have been no witnesses to this point from U.S. firms.

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