Recent Development in Telecommunications

In February 2012, the Supreme Court of Canada (SCC) ruled that Internet broadcasting is not subject to current regulatory authority under the Broadcasting Act.

The high court's decision in Alliance of Canadian Cinema, Television & Radio Artists v. Bell Aliant Regional Communication LP adopted both the decision and reasoning of the Federal Court of Appeal judgment that it was reviewing.

"We therefore agree with [Federal Court of Appeal Justice] Noël J.A.'s answer to the reference question, namely, that ISPs [Internet service providers] do not carry on 'broadcasting undertakings' under the Broadcasting Act when, in their role as ISPs, they provide access through the Internet to 'broadcasting' requested by end-users," the court wrote.

The case finds its origins in a Canadian Radio-television and Telecommunications Commission (CRTC) hearing on media exemptions during which arose the question of whether ISPs were subject to regulation. The CRTC referred the question to the Federal Court of Appeal.

As the SCC saw it, ISPs were only conduits to the Internet and therefore not subject to regulation as broadcasters.

"The Act makes it clear that 'broadcasting undertakings' are assumed to have some measure of control over programming," the court noted.

In their role as conduits, ISPs did not engage the Broadcasting Act's policy objectives, including the cultural enrichment of Canada, the promotion of Canadian content, establishing a high standard for original programming, and ensuring that programming is diverse.

"When providing access to the Internet, which is the only function of ISPs placed in issue by the reference question, they take no part in the selection, origination, or packaging of content," the court wrote.

Although the Broadcasting Act did define "broadcasting" as any "transmission of programs," it did not implicate an entity that merely provided the means of transmission. Indeed, the court concluded, only the actual sender of the message could be seen as transmitting it.

"It is the person who breathes into the instrument the message which is transmitted along the wires who alone can be said to be the person who 'transmits' the message," the court wrote. "The owners of the telephone wires, who are utterly ignorant of the nature of the message intended to be sent, cannot be said ... to transmit a message of the purport of which they are ignorant." [Emphasis added by court]

The decision means that ISPs, including Bell Canada and Rogers Communications Inc., are not at risk of paying levies that cultural groups had been asking the CRTC to impose on ISPs to fund the development of Canadian new media broadcasting content. It will also help the CRTC, which has been struggling to determine the scope of its jurisdiction in the digital age.

A decade ago, the Internet was off limits for the CRTC. But today it is facing complex questions like whether it should regulate "over-the-top" providers of content, such as Netflix — questions that are of paramount concern, for example, to cable providers, conventional broadcasters and pay-for-view channels that rely on being the first point of entry for film libraries.

There's also the possibility of a regulatory turf war between the CRTC and Canada's Competition Bureau. Observers are speculating about whether the Bureau will continue to leave it to the CRTC to actually enforce some of the things about which they have expressed concern, like vertically integrated companies sharing content with competitors.

Making matters worse, the federal government and the CRTC have yet to truly confront the conflict between traditional policies and the realities of the Internet age. How digital technologies will impact on historical Canadian content policy has a variety of implications for broadcasters and others.

Media content no longer flows through discrete channels, where networks broadcast television shows, movies are shown in theatres and books are sold in stores; rather, movies, music and books, to name but a few, can all be expressed in the same binary code and transmitted as digital information over the same fibre optic, coaxial, or copper cables.

The difficulty is that the legal and regulatory framework for the evolution of digital media is still nascent in Canada. The result is that lawyers in the telecommunications and related fields are operating in a tentative environment that features fast moving dynamics and business models that are not stable, an environment that makes it difficult for the profession to help clients formulate informed strategic decisions.