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Sean Speer: Canadian creators don’t need protection. They’re already winning

Commentary

If ongoing public concerns about the COVID-19 pandemic have overwhelmed most other policy and political issues for the past year, it may be a peculiar sign of progress that there’s a new political maelstrom brewing about the government’s legislation to regulate online content. 

Bill C-10, which was tabled in November 2020 and is now making its way through the legislative process, aims to extend Canadian content provisions (typically referred to as “CanCon” rules) to online streaming services like Netflix or Disney+.

The legislation’s underlying goal to address the asymmetrical treatment between traditional Canadian broadcasters and over-the-top streaming services is not unreasonable. But the government’s solution is wrong and is seemingly getting worse.

Canada’s broadcasting policy framework was conceived in the mid-1960s during a period of limited competition, airwave scarcity, and heightened cultural nationalism. The policy regime that came out of this era amounted to a “grand bargain” between the federal government and Canadian broadcasters whereby Ottawa granted the domestic industry protection from foreign competition in exchange for mandated investments in Canadian content. The Canada Radio-television and Telecommunications Commission (CRTC) was established in 1968 in large part to oversee and support this political economy arrangement.

The internet effectively killed the bargain. It has solved the problem of airwave scarcity and in turn eroded the need for (and ability of) the CRTC to manage its licensing requirements. The market has become increasingly dynamic, fragmented, and beyond the reach of the regulator. New over-the-top streaming services (such as Amazon Prime, Apple, and Netflix) are reshaping how cultural content is produced, promoted, disseminated, and ultimately consumed.

Our anachronistic regulatory model hasn’t kept pace. The CRTC continues to expect Canadian broadcasters to live up to their end of the original bargain, including, for instance, an ongoing requirement that they contribute at least 5 percent of their annual broadcasting-related revenues to the creation and production of Canadian programming. Yet the over-the-top streaming services aren’t subject to such rules. The CRTC exempted them in 1999 for various reasons including the practicality of imposing Canadian content requirements on foreign-based, internet companies in a global market that was changing “at a rapid rate.”

Online streaming services operate according to a simple premise: buy and produce content that consumers want.

Excluding the internet from regulation was, in hindsight, an inspired decision. One might argue that it was among the most important (and yet underappreciated) policy choices of the Chrétien government.

It has contributed to a burst of creativity, innovation, and new opportunities for Canadian creators and producers by massively expanding their market reach to a global audience. It is, in effect, a powerful case study of the growth-enhancing potential of deregulation.

This point is worth emphasizing: the large-scale opportunities represented in a deregulated internet is a direct challenge to the inherent protectionism of the “grand bargain.” The current broadcasting policy framework assumes that Canadian broadcasting and cultural players cannot compete in a free market system. It presupposes that we need to build a regulatory moat around the Canadian market and just be satisfied with our modest domestic audience.

The 1999 “new media” directive has enabled us to test this hypothesis. The real-life experience of the past 20 years or so has shown that it’s overwhelmingly wrong. There’s much greater global demand for Canadian content than policymakers or the regulator assumed. Canadian shows such as Anne with an “E,” Paw Patrol, Orphan Black, The Next Step, and Schitt’s Creek are a powerful rejoinder to the defensiveness and provincialism of the regulatory status quo.

Another consequence of the directive though is that it has led to an asymmetry between traditional Canadian broadcasters and the online streaming services with whom they are competing. It’s a government-induced distortion that has created what’s sometimes described as a “two-tier system.” Most analysts and experts agree that this is unsustainable and needs to be addressed.

It’s causing a competitive disadvantage for Canadian broadcasters who must still comply with silly, confusing, and costly government mandates even as they face growing competition from online streaming services that operate according to a simple and overriding premise: buy and produce content that consumers want. It’s no surprise therefore that traditional broadcasters have experienced a significant decline in their market share.

Something needs to be done. Basically everyone agrees. The question, of course, is what?

There are generally two options to level the playing field: one, liberalize the system for traditional broadcasters; or two; try to bring online streaming services within the Canadian content regime.

Bill C-10 chooses the second option. It aims to extend the reach of CanCon requirements to the internet.

There are two major problems with this approach. The first is it neglects the huge potential from reconceptualizing Canada’s broadcasting and cultural policy framework from thinking inward to looking outward. Canadian creators and producers don’t need government protection. They’re competing and winning in the global market enabled by the internet. Bill C-10 basically reflects a defensiveness and protectionism that recent history tells us is unjustified and possibly counterproductive. It’s a solution in search of a problem.

The second is that there’s no clear limiting principle to extending CanCon rules to internet-based content. If one believes that the internet ought to be subject to such requirements, it’s far from obvious how the government might differentiate between a Netflix show or a popular YouTube channel or an individual’s social media feed. Their market reach may be different but otherwise it’s hard to intellectually distinguish when the overriding goal is the protection of Canadian content.

This isn’t abstract point: it’s at the centre of the recent controversy over the Trudeau government’s bill. The original legislation exempted “user-generated content” — think for instance individual social media posts — from government regulation. In fact, a justice department “explainer” of the bill still reads: “Users of social media who upload programs for sharing with other users and are not affiliated with the service provider will not be subject to regulation.” The message was that Ottawa is targeting Netflix rather than individuals’ cat videos.

Yet in recent days the government has amended the bill to remove this exemption and in turn contributed to growing concern that if the legislation is ultimately passed, it will lead to creeping regulation of freedom of expression. As currently drafted, it would give the government the power to regulate individual posts on Instagram, YouTube, Facebook, and TikTok as if these individuals were themselves broadcasters. New attempts by Heritage Minister Steven Guilbeault to assure Canadians that these powers will be exercised judiciously has only further confused things.

A common critique is that the Trudeau government has used a legitimate public policy challenge — the asymmetry of the application of CanCon rules between Canadian broadcasters and online streaming services — as a political tool to narrow the terms of public debate.

It’s hard to know the government’s motivation but it’s just as easy to think that imposing regulations on user-generated content follows logically from its view that CanCon regulations ought to extend from the analog world to the digital world. It’s not enough to capture Netflix and the other big players. They’re just the low-hanging fruit.

The idea that CanCon rules must apply to online content is an inherently licentious undertaking. The internet’s dynamism necessarily requires a degree of hyper micromanagement. It’s, by definition, a recipe for never-ending mission creep.

A simpler solution is to accept that the “grand bargain” is over. It’s not coming back and Canadian creators and producers don’t need it anyway. The right way to level the playing field therefore isn’t to extend CanCon rules to the internet but instead to extend the internet’s de-regulation model to Canadian broadcasters.

Eliminating CanCon rules wouldn’t mean the end of Canadian content. It just means that it would be driven by consumer demands rather than bureaucratic diktats. And there’s good reason to think that there’s significant global demand for our content. Federal policymakers ought to have more faith in Canadian creators and producers and less in their own ability to regulate the internet.

Blair Gibbs: Voters give the benefit of the doubt on COVID-19 — up to a point

Commentary

It will be years before the personal pain and emotional experiences of this pandemic make way for a dispassionate assessment of what was done well and which countries had the best response.

Polling suggests the public will give governments the benefit of the doubt for once-in-a-century pandemics, making them non-political events. But only until it becomes clear your country is not keeping up.

The slow roll-out of vaccines contributing to today’s awful third wave of COVID-19 infections is now dominating Canada’s political debate. Prime Minister Justin Trudeau’s Liberal government could soon be experiencing the reverse scenario to the Conservatives in Britain, who endured widespread criticism at the outset, only to be lauded a year later for the best vaccine roll-out of any major country.

Two areas will reverberate down the years as Canadians try to make sense of their government’s record. Firstly, to what extent the country’s lack of domestic vaccine manufacturing capacity left it woefully ill-equipped for the pandemic and for quickly deploying the most effective tools to allow the economy to reopen sooner.

Secondly, whether the support schemes did their job and if the fiscal impact — and the cratering of the public finances — could have been a different story if government spending had not already been so high.

On the first question, if more onshoring is deemed necessary in a world where globalised supply chains seize up in a crisis, then it should not be allowed to become a partisan issue because these capabilities have to be developed over decades.

Unlike the human impact in lives lost, the raw fiscal cost of this pandemic is tangible.

The recent federal budget boosts life sciences spending by $2.2 billion over seven years, including allocating $59.2 million over three years for bio-manufacturing of vaccines, and calls domestic vaccine capacity “essential to our national security.” A striking statement that by implication means it took a global pandemic for the federal government to recognise a key element of its national security was not really optional. These are the industrial foundations that the U.K., France and even smaller nations like Australia have invested in for years, but this needs bipartisan commitment and something akin to a modern industrial strategy.

The second question is more difficult, because every country has taken a massive fiscal hit and the policies used to fund the furlough schemes and keep businesses afloat were adopted in haste and will be evaluated at leisure. Few dispute that schemes like CERB, or something like it, were needed. The stimulus spending made the lockdowns tolerable, and the lockdowns — to a degree that is still contested — contributed to slowing the virus’s spread and saving lives. But was it enough? And if it wasn’t, what else might Canada have done that it could have realistically afforded in 2020?

Unlike the human impact in lives lost, the raw fiscal cost of this pandemic is tangible and if the price to pay for tackling it was national debt at World War II levels, and increased taxes for perhaps a decade or more to come, it is important to know if the fiscal response worked. Did it save businesses from going under or just forestall it by a few months?

One way to gauge how this pandemic has affected businesses is to ask them. The consultancy I work for, Public First, surveyed companies in Canada to understand how they had been affected and what they thought about the government’s response. In a representative national survey of businesses conducted earlier this month, a majority (59 percent) of businesses report their revenues have declined compared to 2019, against just a fifth (19 percent) who say they have stayed the same. The impact seems to have been worse on smaller businesses, with a quarter of firms employing fewer than 10 people saying their income is down by more than half and almost a third of sole proprietors saying their income has declined by over 50 percent.

There is a lucky minority of businesses who say their revenue has grown since the same period in 2019, but these are more likely to be larger companies. In a hint to the long-term legacy of what the pandemic has done to customer behaviour, almost 1 in 6 businesses said “the COVID-19 pandemic caused my firm to lose customers and become unprofitable.” Again, this is a statement that more smaller companies agreed with.

Given these results, it is not surprising that businesses generally think the government has not done enough. When respondents were asked about the government’s handling of the pandemic a nuanced picture emerges.

A majority of businesses supported the early action to close the borders and there was general support for the idea that provinces were left to decide too much and the federal government should have played a bigger role. However, respondents split 46 to 18 in support of the statement “the Canadian government prioritised making emergency payments to individuals at the expense of direct support for businesses” (with 35 percent neither agreeing or disagreeing) which might suggest that there is underlying resentment among business owners.

The vaccine failure seems to have been noticed. By 64 percent to 12 percent Canadian businesses agreed that “the Canadian government was not fast enough in securing shipments of COVID-19 vaccines and has taken too long to approve vaccines for use.”

And in a question that could have delivered a much more impressive result last year, 43 percent agreed that “the Canadian government handled the pandemic far more successfully than other countries” (with 30 percent disagreeing).

In a possible sign of Canada’s deep-seated reasonableness, 60 percent of businesses surveyed agreed that “the Canadian government was not well prepared for the pandemic but did an OK job in the circumstances.” This is the benefit of the doubt that may end up saving the current government from major political blowback, although vaccine progress in next few months will decide whether that last question will deliver a radically different result by the fall.

As the federal budget unveils a raft of new support schemes for employees and businesses, this poll gives a sense of the pandemic’s impact on the “real” economy and it is clear that businesses have been hugely impacted already and many of them feel let down. It is also striking that despite the generous taxpayer support provided by provincial and federal governments since last spring, the lockdowns were more than many Canadian businesses could weather, and for plenty of companies they have already drowned. Each of these failed businesses is a human story of a lost dream, of life savings being wiped out and new opportunities lost, and it will have an electoral impact eventually.

There may be another federal election before it becomes clear how the pandemic has materially affected businesses, and how much the support schemes have cushioned ordinary voters. But we do know there are hundreds of thousands of people who will never recover economically from COVID-19, even if they avoided contracting the virus themselves.