PublicationTorkin Manes LegalPoint

Online Streaming Act Receives Royal Assent Triggering Regulation of Online Streaming Services under Canada’s Broadcasting Regulatory System

 

On April 27, 2023, Bill C-11, An Act to amend the Broadcasting Act and to make related and consequential amendments to other Acts (the “Online Streaming Act”) received Royal Assent. Most notably, the Online Streaming Act updates Canadian broadcasting policy to take into consideration the current make-up of Canadian society, extends the application of the Broadcasting Act, 1985 (Canada) (the “Broadcasting Act”) to online streaming services and grants new powers to the Canadian Radio-Television and Telecommunications Commission (the “CRTC”) to regulate Canada’s contemporary broadcasting system. On the heels of the Royal Assent, the CRTC has released the Regulatory Plan to modernize Canada’s broadcasting system (the “Regulatory Plan”) that outlines how the CRTC will consult with Canadians to build and implement a new regulatory framework pursuant to the policy objectives of the Online Streaming Act, as well as launching three public consultations.

The amended Broadcasting Act and the CRTC’s new regulatory framework will drastically change the way in which online streaming companies do business in Canada. They will have new obligations to support the Broadcasting Act’s cultural and social policy goals, which include the creation of Canadian content. At the same time, the Canadian broadcasting system also affords online streaming services access to funding and other government programs to assist in the creation of such content.

Regulation of Online Undertakings

Since 1999, the CRTC has applied a “wait and see” approach to the regulation of new media undertakings to determine the significance of such undertakings on the Canadian broadcasting system, as well as to not stifle the growth of the nascent industry. Over the last 20 years, the CRTC continued to exempt new media undertakings that were not affiliated with Canadian licensed broadcasting undertakings. However, as online streaming services became permanent and preferred choices for Canadians to access audio-visual and audio content instead of legacy broadcasters, the CRTC struggled to extend its jurisdiction to these services without explicit legal authority under the Broadcasting Act.

Application of the Broadcasting Act to Online Undertakings

The Online Streaming Act amends the Broadcasting Act to provide explicit language and policy goals that enable the CRTC to regulate undertakings for the transmission or retransmission of programs over the Internet for reception by the public by means of broadcasting apparatus (“Online Undertakings”).

It is expected that Online Undertakings would be generally comprised of entities that transmit or retransmit programs of a “professional quality”, including Netflix, Prime Video, Apple TV+, Disney+, CTV, CBC Gem, Global, CityTV, Crave, QUB for audio-visual programming, and Spotify, iHeartRadio, CBC Listen, Apple Music, Google Play Music, TIDAL, Deezer for audio programming.

However, since the first reading of the Online Streaming Act into federal parliament of the previous Online Streaming Act (Bill C-10), Digital content creators, including YouTubers, streamers and influencers (“Digital Creators”), objected to the potential overreach of the Online Streaming Act. These Digital Creators fear the CRTC would subject them to onerous regulations, including contributing to the production of Canadian content, and the CRTC would impose algorithmic discovery requirements for Online Undertakings that would compromise their visibility and views on their streaming platforms. The Broadcasting Act has never applied to content creators, including Digital Creators, but rather broadcaster undertakings (television and radio broadcasters) and broadcasting distribution undertakings (satellite, fibre-to-home and cable companies).

The amendments do not increase the scope of the Broadcasting Act to Digital Creators either. To clarify such scope, the Online Streaming Act adds a specific provision that states that the Broadcasting Act shall not apply in respect of a program that is uploaded to an online undertaking that provides a social media service by a user of such service for the transmission over the Internet and reception by other users of the service. Such users are presumably Digital Creators. Moreover, while not articulated expressly in the Online Streaming Act, the CRTC has stated in its “Myths and Facts about C-11, the Online Streaming Act” that the Broadcasting Act will not apply to YouTubers and Podcasters. As discussed below, following the CRTC’s public consultations in phase one of the Regulatory Plan, the CRTC will hopefully determine which Online Undertakings will be exempted from the application of the Broadcasting Act.

Other persons excluded from the definition of Online Undertakings include:

  1. Social media services that do not have programming control over such transmission;
  2. Theatres, concert halls or other venues for the presentation of live performing arts;
  3. Educational institutions, public libraries or museums; and
  4. Businesses that provide programming to clients with information directly related to that business as a service ancillary to their primary business.

The New Obligations of Online Undertakings

Online Undertakings will be subject to many of the same obligations of the other participants of the Canadian broadcasting system, including:

  1. Encouraging the development of Canadian content;
  2. Contributing and assisting with the promotion, discoverability of Canadian programming in both official languages, as well as Indigenous languages;
  3. Making maximum use, if a Canadian Online Undertaking, or greatest practical use, if foreign Online Undertaking, of the Canadian creative and human resources in the creation, production and presentation of Canadian programming;
  4. Supporting the Broadcasting Act’s social, cultural and linguistic policy goals; and
  5. Making its programs accessible without barriers to persons with disabilities.

However, unlike broadcasting undertakings, Online Undertakings will not require a license. According to the Regulatory Plan, the CRTC states that Online Undertakings will be required to register with the CRTC to operate in Canada.

Moreover, Online Undertakings, especially those that transmit audio-visual programming, transmit the programming of Canadian broadcasting undertakings. As such, the amended Broadcasting Act introduced obligations on Online Undertakings to promote fair negotiations, ensuring discoverability of Canadian programming and delivery of programming at affordable rates.

The details as to how Online Undertakings—and indeed all broadcasting undertakings--will adhere to these new requirements will be set out in orders and regulations enacted by the CRTC following extensive consultations as discussed in greater detail below.

The CRTC’s New Powers

Order and Regulation Making Powers

The amended Broadcasting Act provides order making powers of the CRTC. Some of the orders that would apply to Online Undertakings, include:

  1. Requirements to remove barriers to access to persons with disabilities to programming;
  2. Carriage of emergency messages;
  3. Requirements for an Online Undertaking that provides programming services of other broadcasting similar to broadcasting distribution undertakings (cable and satellite companies); and
  4. Provision of specific information to the CRTC, including financial or commercial information, information related to programming, information related to program expenditures, and information related to audience measurement.

In addition to its existing powers to enact regulations, the CRTC also gains the power to make regulations that would impose on broadcasting undertakings a requirement to make expenditures with respect to supporting the broadcasting policy objectives, including the creation and promotion of Canadian Content and public consultations. Previously, the CRTC could bind broadcasting undertakings to make commitments to programming expenditures as a condition of license. As potentially unlicensed broadcasting undertakings, the CRTC may regulate the Online Undertakings to commit to program expenditures for Canadian content as a percentage of its revenue (as it has previously required of broadcasting undertakings) or contribute to the Canada Media Fund. Such order and new regulation making powers will set out conditions of service that will ultimately replace the conditions of license to which current broadcasting undertakings are subject.

Administrative Monetary Penalties

Prior to the amendment of the Broadcasting Act, the CRTC’s enforcement powers were impractical. It could only revoke the license of a broadcasting undertaking for any non-compliance with its conditions of license or the Broadcasting Act; a power that the CRTC has rarely exercised. The amended Broadcasting Act enables the CRTC to impose administrative monetary penalties on persons who commit a prescribed violation under the Broadcasting Act, including:

  1. Violating the CRTC’s orders or regulations;
  2. An online undertaking not negotiating in good faith with respect to the carriage of programming of a broadcasting undertaking; and
  3. Not adhering to the CRTC’s accessibility regulations.

Individuals may be fined up to $25,000 for the first violation, and of not more than $50,000 for each subsequent violation, and for any other person (including incorporated entities), $10,000,000 for a first violation and of not more than $15,000,000 for each subsequent violation.

The Regulatory Plan

On May 8, 2023, the CRTC unveiled its three-phase Regulatory Plan that details how the CRTC will consult with Canadians to establish a modernized regulatory framework.

Continuing into the Spring of 2023, the first phase consists of (i) the publication of an information bulletin to the current stakeholders of the broadcasting system with respect to the transition to the new regime, and (ii) public consultations dedicated to establishing how the CRTC will regulate Online Undertakings and how the legacy players of the Canadian broadcasting system, including the Online Undertakings, will contribute to support such system.

On May 12, 2023, the CRTC launched three public consultations:

The details of the proposals of the CRTC with respect to each will be outlined in a later article.

Starting this fall and into the winter of 2024, the second phase consists of more public consultations on (i) fee regulations for Online Undertakings, (ii) the definition of Canadian and Indigenous content, (iii) tools to support Canadian music and other audio content, (iv) programming and supports for video content; namely to, assess tools to develop, support, and promote Canadian and Indigenous content on all platforms, and (v) protecting Canadian consumers, namely to review ways to protect consumers and include broadcaster codes of conduct and mechanisms for complaints. We anticipate that any modifications to the definition of Canadian content would reverberate across the greater media production sector in Canada by impacting eligibility for federal, provincial and territorial production and service tax credits. Finally, by late 2024, the third phase concentrates on the implementation of the new regulations and policy decisions.

Next Steps

The Regulatory Plan hits the reset button on many fundamental concepts and frameworks of the current regulatory model. Consequently, online streaming companies have unprecedented opportunity to advocate for a new regulatory system that advances the updated goals of the Broadcasting Act while ensuring online streaming companies continue to thrive. Additionally, online streaming companies should consider how they may reap the many benefits that flow from participating in Canada’s broadcasting system as a broadcasting undertaking, such as access to funding from the Canada Media Fund. We recommend that online streaming companies participate in the three public consultations whose deadlines are rapidly approaching.

Torkin Manes LLP will continue to monitor and provide updates on further developments with respect to the public consultations, hearings and the CRTC’s orders, regulations, and decisions resulting from the foregoing consultations.

For more information with respect to the Online Streaming Act and its impact on your business, please contact Cameron McMaster of Torkin Manes’ Technology, Privacy & Data Management Group.

Expertise