Evidence of meeting #128 for Industry, Science and Technology in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was copyright.

A video is available from Parliament.

On the agenda

MPs speaking

Also speaking

Andy Kaplan-Myrth  Vice-President, Regulatory and Carrier Affairs, TekSavvy Solutions Inc.
Robert Malcolmson  Senior Vice-President, Regulatory Affairs, BCE Inc.
David Watt  Senior Vice-President, Regulatory, Rogers Communications Inc.
Cynthia Rathwell  Vice-President, Legislative and Policy Strategy, Shaw Communications Inc.
David de Burgh Graham  Laurentides—Labelle, Lib.
Mark Graham  Senior Legal Counsel, BCE Inc.
Dan Albas  Central Okanagan—Similkameen—Nicola, CPC
Kristina Milbourn  Director, Copyright and Broadband, Rogers Communications Inc.
Michael Chong  Wellington—Halton Hills, CPC
Jay Kerr-Wilson  Legal Counsel, Fasken Martineau, Shaw Communications Inc.

3:55 p.m.

Laurentides—Labelle, Lib.

David de Burgh Graham

Correct me if I'm wrong, but the majority of countries that have these systems require a court order somewhere in the process. I don't believe the submissions from FairPlay requested a court order.

3:55 p.m.

Senior Vice-President, Regulatory Affairs, BCE Inc.

Robert Malcolmson

There are a variety of regimes around the world.

As Mark mentioned, I think there are 42 countries that have site blocking regimes of one form or another. Many of them do involve a court order; others are administrative regimes.

What we're proposing is an administrative regime through the CRTC under the Telecommunications Act, under an existing provision of that statute that would require us to go to them in any event. That's why we're there.

It is a quasi-judicial process in which an independent regulator, not an ISP, is making the determination as to which sites should or shouldn't be blocked. It is a process that has all of the usual checks and balances that one would expect through a judicial process.

3:55 p.m.

Laurentides—Labelle, Lib.

David de Burgh Graham

I have time for one last question, which will be for all of you.

What efforts have been made to identify the reasons behind piracy in the first place? It's very well to go after the pirating sites, but there is a consumer demand for it. Have we looked, for example, at the availability of Canadian content? If you're looking at any media market in Canada, there is much less available here than in pretty much any western country. Is that perhaps part of the problem?

4 p.m.

Liberal

The Chair Liberal Dan Ruimy

I'm sorry but I'm going to have to jump in on that one. You don't have any more time left. We can maybe come back to that question.

We are going to move to Mr. Albas.

You have seven minutes.

September 26th, 2018 / 4 p.m.

Dan Albas Central Okanagan—Similkameen—Nicola, CPC

Thank you, Mr. Chair.

I would like to thank all of the witnesses for coming in and sharing the views of their organization.

I'd like to start with TekSavvy.

Mr. Kaplan-Myrth, your presentation and that of the Canadian Network Operators Consortium, who came to this committee last week, made it very clear that smaller ISPs such as your own do not support the enhanced anti-piracy measures proposed by some of the other witnesses here. Why do you think there is such a divide between the two positions?

4 p.m.

Vice-President, Regulatory and Carrier Affairs, TekSavvy Solutions Inc.

Andy Kaplan-Myrth

Well, as I said by way of introduction, we are not rights holders. We're not media companies; we are just the Internet service providers. I think that if Internet service providers were very concerned about illegal content on our networks, we likely would not start with copyright. There is probably other more pressing illegal content on our networks, which might concern us much more which we may be talking about blocking or addressing in some way.

The reason we're talking about copyright is that the large ISPs in this country are mostly vertically integrated media companies as well, and they have interests on the media side.

4 p.m.

Central Okanagan—Similkameen—Nicola, CPC

Dan Albas

Can you give us an example of the kinds of things you think we should be focused on, versus some of the other concerns?

4 p.m.

Vice-President, Regulatory and Carrier Affairs, TekSavvy Solutions Inc.

Andy Kaplan-Myrth

Well, I don't think we should be focused on blocking other content, because now we're running up against network neutrality in our common carriage roles.

My point is that if we were going to look at illegal content, we would be talking about terrorism content. You know, there are bad things out there.

We carry the bits, and we do that because we're common carriers. We carry the bits without looking at them. Just as you can pick up the phone and speak to another person and say whatever you want on that phone line and that phone company won't cut off your call because of the words that you say, we will carry the bits.

I think the large ISPs are preoccupied with copyright in particular, and website blocking to enforce copyright, because of their interests on their media sides.

4 p.m.

Central Okanagan—Similkameen—Nicola, CPC

Dan Albas

I'll turn to Rogers, Bell or Shaw.

The Canadian Network Operators Consortium, of which TekSavvy is a member, in their testimony last week referred to large ISPs, like you, as being vertically integrated. Can you please describe what they meant by the term in relation to your business?

4 p.m.

Senior Vice-President, Regulatory, Rogers Communications Inc.

David Watt

Certainly. A vertically integrated company, in our context, is one that owns content, and then as you go up, it is vertically integrated because that content is then distributed through the distribution arm, whether it be the wireless company or the cable company. It's vertically integrated in that sense. It goes up the chain. It's not a horizontal integration of a different service. It is a service that you own, which is then distributed by an entity that you own as well.

I will say, though, that it is essentially a red herring, the vertical integration argument. We are here today as content owners, and we have every right to protect the content we own. The CRTC in Canada has very strict rules, as Andy has mentioned, in terms of common carriage and net neutrality. There is no confusion in the sense that we are able to favour our content on our distribution arm. That's not the case. It is treated equally with the content of people who do not have a distribution arm.

I don't really understand the argument. I can see that the economic argument, you're saying, is possibly that you want to protect your content. You don't want that stolen. You want to have compensation for it. At the same time, when people are able to access the stolen content, they have less incentive to subscribe to your distribution arm. That's absolutely true. In terms of content, we have to protect that, and we have a commercial interest in having people stay connected to our cable arms. But the country also has an interest in having them stay connected to our distribution arms.

Rogers, in the terms of our cable distribution plan, contributes roughly just a little less than $500 million a year to the creation of Canadian content. People have focused on the 5% contribution to the media fund and the copyright payments that we make, but we also pay $500 million a year to Canadian programmers in affiliation fees. These are Discovery, TSN, Sportsnet, MuchMusic, and HGTV. Of that $500 million, on average 44% of every dollar of revenue of those programmers is spent on Canadian programming, so there are significant ramifications.

4:05 p.m.

Central Okanagan—Similkameen—Nicola, CPC

Dan Albas

While I totally appreciate the observation, Mr. Watt, I think we're starting to move away, because Ms. Rathwell said very clearly that this is about copyright. There are other regimes, and I think we're starting to tread into some others.

You did raise net neutrality specifically. In previous applications that FairPlay has put forward, it has said that the proposed site-blocking plan would not violate net neutrality. However, don't the principles of net neutrality currently prevent companies like yours from removing or throttling the sites yourselves?

4:05 p.m.

Senior Vice-President, Regulatory, Rogers Communications Inc.

David Watt

Yes, they do, but the key point to remember is that net neutrality is the free flow of legal content. We're discussing illegal content here. In all legal content there's equal treatment of the bits, but with respect to illegal content over the web, that type of content is not accorded the same rights.

4:05 p.m.

Central Okanagan—Similkameen—Nicola, CPC

Dan Albas

Would not requesting a government body to have the power to instruct, let's say, an action to take something down be precluded under net neutrality and appear to be a backdoor violation, though?

4:05 p.m.

Senior Vice-President, Regulatory Affairs, BCE Inc.

Robert Malcolmson

I don't think in any way, shape or form that would be a violation of net neutrality under a reasonable interpretation of what net neutrality is. As Mr. Watts said—and I think Minister Bains has said it himself—the concept of net neutrality is the free flow of legal content over the Internet. If a government body, for example, ordered someone to take down terrorist content, would that be a violation of net neutrality? I don't think anyone around this table would say so.

4:05 p.m.

Central Okanagan—Similkameen—Nicola, CPC

Dan Albas

I would agree with you on that, but again—

4:05 p.m.

Senior Vice-President, Regulatory Affairs, BCE Inc.

Robert Malcolmson

Just let me finish.

If it can be proven that the content that's being disseminated on the Internet is illegal—i.e., stolen—I don't think it's unreasonable for a content provider, regardless of whether they are vertically integrated or not.... Quite frankly, this has nothing to do with vertical integration. It's about protecting Canada's cultural and content industries, which employ 630,000 Canadians and generate lots of legal revenue for the benefit of the country. I don't think in any way, shape, or form—

4:05 p.m.

Central Okanagan—Similkameen—Nicola, CPC

Dan Albas

But again—

4:05 p.m.

Liberal

The Chair Liberal Dan Ruimy

Thank you.

Sorry, but we're way over time. I'm sure we will be able to come back to that.

Mr. Masse, you have seven minutes.

4:05 p.m.

NDP

Brian Masse NDP Windsor West, ON

Thank you, Mr. Chair.

Thank you for being here.

Mr. Kaplan-Myrth, I appreciate your presentation. Having a consistent mechanism is obviously something that should be done. This doesn't have to wait for this committee process to review something, send it to the minister and get back. It's a regulatory change that can and should take place, and I can't understand why it's so difficult to deal with.

I do want to deal with an issue, though. Piracy has been brought to our attention again. I live in an area that has had, over the years, everything from ONTV, which came from the United States, to smaller direct TV boxes for which program cards used to be used.

Obviously, Canadians are motivated to go to online privacy. Bell, Rogers, and Shaw, why do you think your own customers, who you supply service to, are choosing piracy options even through your own feed streams versus using the other services you offer? There needs to be a connection or a discussion about that, especially with Bell. You have noted 15% in your submission here. You're claiming it's $500 million to $650 million in lost revenue. Why do you think it is that your own customers are not choosing your own services and are instead deciding to go to piracy?

4:10 p.m.

Senior Vice-President, Regulatory Affairs, BCE Inc.

Robert Malcolmson

I will start, and others may have comments.

I think some consumers have grown up in the age of the Internet where content is widely available for free online, and if they can access it, they don't give a second thought to whether they are accessing something that someone else owns a copyright on. It's available; they consume it.

Oftentimes critics of ours will say that if we made our Canadian content, for example, available at more reasonable prices, people would then consume it. They lay the problem at our doorstep.

I will give you a practical example. That's not the problem in our experience. There's a show called Letterkenny, which is an originally produced Canadian comedy that is very popular. It's available on our over-the-top platform CraveTV. I think all four seasons of it are available on Crave for a subscription price of $9.99 a month. If you want to consume Letterkenny legally, it costs you less than 30¢ an episode to get it.

We are making Canadian content available online the way people want to consume it and at reasonable prices, yet piracy continues to grow.

4:10 p.m.

NDP

Brian Masse NDP Windsor West, ON

Quickly, Shaw and Rogers.

4:10 p.m.

Vice-President, Legislative and Policy Strategy, Shaw Communications Inc.

Cynthia Rathwell

I would echo what Rob said. I think price is also a bit of a red herring. We offer various packages. We offer pick and pay. We've gone through a huge metamorphosis of our businesses over the last few years in terms of the way we address consumers, and we're making huge investments in networks and advanced platforms for the reception of advanced broadcasting services as well as world-class infrastructure for Internet.

There is the issue of a segment of the population who just want something for nothing. To go back to what we're producing, we're competing with a product that remains highly regulated, and notwithstanding that this is a copyright discussion, I echo the comments of all of the others at the table here, and it was in my opening remarks as well. What we do as a business is very intertwined with other policy objectives and it sustains the whole Canadian broadcasting system.

4:10 p.m.

NDP

Brian Masse NDP Windsor West, ON

I want to get Mr. Watt in on this.

Maybe you can start. I would like to have an answer on this in the remaining time.

How would you rank your companies with regard to the CRTC's decision on skinny packages? I take the points you're making here, but I would like to get you to comment on the public record as to how you think your companies have behaved with the introduction of the CRTC skinny package to consumers.

There is an emergence of an illegal market in piracy, as you have raised here today, and I think it's a dual relationship that's going on here, so I would like to hear how you would rank your rollout of the skinny package as well as the previous....

4:10 p.m.

Senior Vice-President, Regulatory, Rogers Communications Inc.

David Watt

For Rogers, I would rank our rollout of the skinny package as having been a success. We rolled it out on time, as required. It is now the foundational package of all of our cable TV packages.

We start with our starter package at $25. For Rogers, we include the “four plus one” U.S. signals in that $25 price point. It is the building block on which all of our packages with higher tiers are built. There is demand for it. People take the narrow package. The problem, though, even there, is that $25 is a bare-bones cost. It might recover the cost; it might not. It's on the edge. But you're having to compete, then, against IP streaming services. You'll see them out on street corners—$12.95 a month with 1,000 channels—and it's all content that has been stolen. Okay, it comes with a 20-second lag over the original feed, or the quality of it might be only 90% of ours, but that is very difficult to compete with. It is a price issue, and that's a problem we face.

4:10 p.m.

Kristina Milbourn Director, Copyright and Broadband, Rogers Communications Inc.

I think the bind for the consumer needs to be borne in mind as well. In many instances, these pirates are operating with such impunity that they have storefronts available in shopping centres or kiosks in malls. Many times, people don't even realize that they're not transacting with a legitimate BDU provider. I think that's part of the growing cultural adoption of this type of streaming service, where it's not clear at all, at times, in the mind of the consumer, that they're doing anything wrong.