Ian Scott’s television viewing is a diet heavy on news with a healthy side order of sports. When he does watch scripted television, it might be the CBC comedy Kim’s Convenience or perhaps the occasional Murdoch Mysteries drama.
“I actually don’t watch a ton of programming outside news and sports,” says the genial former telecom executive in an interview with the Star.
What Scott watches may not be consequential, but his thoughts on what Canadians watch matter. As the influential chair of the Canadian Radio-television and Telecommunications Commission (CRTC), he is responsible for setting and enforcing the rules in Canada’s broadcast and telecommunications industries.
That guidance is needed now more than ever in a digital age where television choice has never been more prolific — with foreign online platforms such as Netflix, Amazon and Hulu competing for eyeballs with legacy broadcasters, those mainstream domestic brands that were kings of the analog universe, including CTV, Global, Citytv and the CBC.
“We need new tools, we need a new approach,” Scott says about the current state of broadcasting regulations. “We have to come up with a model so that everyone who is deriving a benefit from the system contributes.”
Television viewers have never had it so good in the new platinum age of television, where A-list movie stars now gravitate toward the small screen.
But domestic broadcasters say they can’t compete, especially with outmoded legislation that creates an unlevel playing field. They are appealing to regulators like Scott to fix the problem. At stake, they say, is the ability to produce Canadian content and culture — allowing Canadians to tell stories to each other and the world.
Broadcasters have long argued, for example, that online platforms such as Netflix don’t pay into the Canadian Media Fund (CMF), which goes toward Canadian programming. They are also not required to collect federal sales taxes, which critics say is unfair to domestic programmers who do.
Scott agrees with broadcasters who say online platforms should contribute to creating Canadian content. Cable companies now pay 5 per cent of their revenue into the CMF. The European Union, in sweeping legislation on the digital economy, is also requiring online platforms to put a portion of their revenues into domestic programming.
“If you are deriving revenue from the country, you should be making a contribution,” Scott says.
But he is also quick to say that “Netflix is not the enemy.”
The problem, he says, is that the current broadcast system is “based on a walled garden. If you want a licence, it comes with obligations. That doesn’t work in a world where a significant amount of product is being delivered by the internet.”
Scott argues that simply requiring the foreign online platforms to contribute in the same way as legacy broadcasters is not the way to go.
“How that number is determined should vary by platform,” he says. Requiring platforms to pay into the media fund may not be the answer. It could be a different percentage, or it could be based on other contributions, he says.
“What we’re saying is that it should be equitable. Not identical. You can say, well, why doesn’t Netflix pay 5 per cent. But is that equitable? Can you apply that to YouTube or Snapchat? We need a new set of tools to be able to look at the industry, at different business models and how they can make a contribution.”
What those tools will look like still has to be worked out. He gives the examples that Netflix and Amazon are making significant investments in Canadian production, so that could be seen as a contribution. Legacy broadcasters such as Quebecor’s Vidéotron produces significant French-language programming. And the English networks have reliable, trusted news programming.
“They all offer something. But they don’t all have to be the same. What should be the same is that they be subjected to the same regulatory process,” Scott says.
Netflix, meanwhile, has already said it would be unfair for Ottawa to force it to contribute to the fund.
“It would effectively force foreign online services to subsidize Canadian broadcasters,” they argued in a submission to a federal panel looking at overhauling the Broadcasting Act.
Scott’s ideas are also part of a submission to the panel, chaired by former Telus executive Janet Yale, that will make final recommendations in January. But arguably, he is the single most influential voice.
Yale urged an audience at the Canadian Telecom Summit this month to “think big” when it comes to revising broadcasting laws.
“We must think not about what will serve Canada and Canadians well for the next few years, but for the next full generation at least.”
What will be decided will have an impact on Canadian culture and the ability to tell our own stories. The CRTC has a mandate to ensure that Canadians continue to produce Canadian content. Funding those productions has become more difficult as cable operators have seen decreased revenue from cord cutting and the rise of online platforms. The less revenue cable operators make, the less goes into the Canadian Media Fund to produce Canadian culture.
For this, Scott has something of a radical solution: Why not require that internet service providers who are profiting from the increased use of online video put 1 per cent of their revenue in the CMF?
“People ask what’s the connection. Why broadband? Because 60 per cent of the traffic is video. Why wouldn’t they make a contribution. They’re certainly benefiting. This is where the traffic is being carried and it makes perfect sense.”
Insisting that the new fee “isn’t a tax,” Scott has already met with pushback from the cable industry and it is doubtful that Prime Minister Justin Trudeau’s government will want to add another perceived tax onto broadband.
Ottawa has already been reluctant to institute a “Netflix tax” requiring online platforms to collect federal sales taxes like other domestic networks. However, Quebec and Saskatchewan have been collecting provincial sales taxes since the beginning of the year.
A report released Fridayby U.K.-based analysts Comparitech Ltd. estimates that Canada is the fifth-most important market in the world for Netflix, with 6.3 million subscribers and $942 million in revenues annually. The GST alone on that one company would be $47 million based on those figures, not including the various provincial sales taxes.
According to the Canadian auditor general, Ottawa lost $169 million in GST revenue in 2017 because of its reluctance to force streaming companies to collect taxes, a figure that would almost certainly be higher today because of the move by consumers to digital services.
But Scott says the decision to impose HST requirements on online platforms is ultimately up to the Department of Finance, and is not under his mandate.
“What we need is a new tool kit and certainly the funds to do it,” Scott says. “Having online platforms is a two-way street. It does provide a conduit for Canadian stories to reach the world. On the other hand, there is advertising revenue coming out of the system because of cord cutting and less money going to support Canadian content. None of this will happen without funding. And we’re suggesting a different way. But whatever way we go, it has to be different from what we’re doing now.”
Tony Wong is the Star’s technology reporter covering big tech, disinformation and regulation. Follow him on Twitter: @tonydwong