Should ISPs be subject to Broadcasting Act?

Internet service providers in Canada are gearing up for a Supreme Court hearing that will determine whether they should be subject to the Broadcasting Act and therefore regulated by the Canadian Radio-television and Telecommunications Commission.

The reference case was initially before the Federal Court of Appeal to determine whether “retail Internet service providers (ISPs) carry on, in whole or in part, ‘broadcasting undertakings’ subject to the Broadcasting Act . . . when, in their role as ISPs, they provide access through the Internet to ‘broadcasting’ requested by end-users?”

That question arose through a 2008 review and public consultation on the regulator’s 1999 new media exemption order. It provided a Broadcasting Act exemption for “new media broadcasting undertakings.”

During those consultations, a number of organizations identified as the “cultural group” — consisting of the Alliance of Canadian Cinema, Television, and Radio Artists, the Canadian Media Production Association (formerly the Canadian Film and Television Production Association), the Directors Guild of Canada, and the Writers Guild of Canada — argued for lifting the exemption.

The group argued Internet users can acquire broadcast content online, which means ISPs are in fact broadcasting undertakings. In their view, the ISPs should therefore have to contribute financially to a fund aimed at promoting domestic new media content.

Although the CRTC expressed its disagreement with the cultural group’s view, it nonetheless opted to refer the issue to the Federal Court of Appeal.

For its part, the court ruled in the ISPs’ favour.
“In providing access to ‘broadcasting,’ ISPs do not transmit programs,” wrote Justice Marc Noël on behalf of justices Marc Nadon and Eleanor Dawson.

“As such, they are not ‘broadcasting’ and therefore they do not come within the definition of ‘broadcasting undertaking.’ In so holding, I wish to reiterate . . . that this conclusion is based on the content-neutral role of ISPs and would have to be reassessed if this role should change.”

The cultural groups subsequently sought leave to appeal from the Supreme Court of Canada. It granted that request on March 24, but as per the top court’s tradition, it didn’t disclose its reasons for taking the case.

Michael Koch, a partner at Goodmans LLP, says it’s interesting that the Supreme Court has granted leave in a number of loosely related cases, all of which likely address an effort to sort out issues of Internet behaviour.

Aside from the ISP reference matter, the top court also agreed to hear two other appeals, both of which address questions of the applicability of copyright law to online transactions involving video game and music sales.

Koch, who represented MTS Allstream Inc. at the CRTC in relation to the case, says the Broadcasting Act reference matter boils down to the following issue: is provision of the means of communication sufficient to make the ISP a broadcasting undertaking?

“Obviously, this issue is of great interest because we’re seeing a lot more in the press these days about what some of us refer to as ‘over-the-top’ broadcasting,” says Koch, citing Netflix as an example of that.

“So in a world where Canadians may — and I say may because I think we’re still in early days — start to get more of their entertainment and information over the Internet, I think it’s not surprising that the Supreme Court of Canada wants to make sure that we have it right in terms of who is subject to the Broadcasting Act, which is the issue here.”

George Addy, a senior partner at Davies Ward Phillips & Vineberg LLP and former executive vice president and chief general counsel at Telus Communications Co., says he finds the theory that underlies the cultural group’s position peculiar.

“What they’re suggesting, in effect, is that every piece of equipment — every facility, if you want — between the producer of content and the consumer of the content is part of a broadcasting undertaking, and I find that troubling and strange,” says Addy.

“If you take their theory to its logical conclusion, it means that everything between that producer of content and my eyeballs is part of a broadcasting undertaking.”

That would, of course, include the computer that takes the signal and converts it into audio and video; the router that’s taking the ISP and delivering it to the computer; and even a satellite dish and its manufacturer, he says.

“If you took that to its conclusion, you can think of all the corporate names that would now be looped into broadcasting — everybody that makes a computer, everybody that makes a dish. Everybody that makes equipment between those two spots, under their theory, could be included under a broadcasting undertaking.”

All of this leads Addy to believe that what the case is really about for the cultural group is an attempt to have ISPs included in the regulatory umbrella “so that they can extract compulsory investment in Canadian content.”

Meanwhile, Koch suggests the reference case may also signal a shift in approach by the CRTC. He says it has traditionally been uncommon for the regulator to refer legal issues to the court. Instead, it typically takes its own position on the issue and makes a corresponding decision despite any conflicting opinions, leaving it up to the losing party to pursue an appeal.

“Under this chairman, Konrad von Finckenstein, he decided to refer the legal issue to the court and he subsequently referred another legal issue to the court on the subject of the CRTC’s jurisdiction to levy a value-for-signal payment,” Koch notes.

“So it’s interesting that he’s taking a somewhat different approach to resolving legal issues as they come before the commission. It’s certainly within the commission’s jurisdiction to determine legal issues, yet he’s decided to refer these to the courts.”

Koch also suspects the Supreme Court is eager to clarify the status of all parties operating on the Internet — whether they be intermediaries or otherwise — under key federal legislation such as the Copyright Act and the Broadcasting Act.

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