International Trade Committee on Sept. 20th, 2017

[Pam Dinsmore]

As you probably know, the commission has a digital media exemption order, which exempts the likes of Netflix from regulation. It doesn't have the same obligations that our own Canadian broadcasters have. There would have to be some sort of requirement put into that exemption order on Canadian content. It does distribute some Canadian content. We know it has deals with Canadian producers, and that's good, but it doesn't have any formal requirements at this point. It doesn't have to have any to be subject to the exemption order.

[The Chair, Liberal, Mark Eyking]

That wraps it up, Mr. Dhaliwal.

We're going to move to the NDP now. Madam Ramsey, you have five minutes. Go ahead.

[Tracey Ramsey, NDP, Essex, ON]

Hello, everyone. I apologize for being late. I had to present something in the House. I do appreciate your testimony.

Mr. Lenz, I certainly appreciate your being here during harvest season. I represent a rural riding. I know how critical this time of year is.

The report that you mentioned, are you able to submit that to the committee, please? It's quite detailed around the things you mentioned, and they are things we have heard before at this committee around the non-tariff barriers, so if you could please submit that, it would be appreciated.

[Jason Lenz]

Sure.

[Tracey Ramsey, NDP, Essex, ON]

My question to Mr. Malcolmson and Ms. Dinsmore is really about NAFTA and about telecommunications and the cultural exemption we have here.

How important is it for Canadian negotiators to maintain a clear cultural exemption in a renegotiated NAFTA?

[Rob Malcolmson]

Why don't I start, and Pam will no doubt add?

From our perspective, it's extremely important. The cultural exemption has served our broadcasting system very well. We have a Canadian broadcasting ecosystem that some in other countries would marvel at in terms of its ability to create and disseminate truly homegrown Canadian content, when we live next door to the largest entertainment production capital of the world. It's that cultural exemption that's allowed us to achieve that. It's allowed us to achieve that through things like simultaneous substitution, which I mentioned in my presentation. That allows over-the-air stations to monetize their content by substituting Canadian ads over U.S. ads. It's achieved that through the restrictions on foreign ownership, so that we have a Canadian-owned and controlled ecosystem. It's really that cultural exemption that's the umbrella that covers our complete ability to have that owned and controlled, made-in-Canada ecosystem.

[Pam Dinsmore]

I think if we didn't have the cultural exemption, it would be very hard for our, sort of, indigenous Canadian broadcasters to survive. It would be very hard to maintain our Canadian rights market. The whole underpinning of what we know as our broadcasting system would probably fall apart, so it's extremely important.

[Tracey Ramsey, NDP, Essex, ON]

Okay. Thank you.

I also represent a border riding, so I know about international roaming rates and things that happen when you even get too close to the border, because we have the Detroit River that's quite narrow between Detroit and Windsor down there. I really want to ask you about that cross-border transfer of digital information.

What concerns did you have with the USTR recommendations to lift the restrictions on measures that regulate cross-border data flows and do not require the use of installation of local computing facilities?

[Pam Dinsmore]

Is that in reference to roaming and roaming charges?

[Tracey Ramsey, NDP, Essex, ON]

Yes.

[Pam Dinsmore]

We have well-established agreements for roaming with many partners in Mexico and the United States. These are commercially arrived at. We believe that previously there were a lot of customer irritants about roaming, but in the last couple of years, certainly, our company has introduced a product called “Roam Like Home”, which is really a seamless approach to roaming. Basically, as you enter the States you pay a daily charge, but you're otherwise on your existing roaming plan in Canada, and for example, in the U.S. it's $6.00 a day, but after the 10th day, the rest of the month is sort of free.

I know that in the EU there are no roaming charges between countries there. But in our view, the kind of solution we've come up with here in Canada and the kind of solution that we offer to our customers is more than acceptable.

[Tracey Ramsey, NDP, Essex, ON]

Mr. Malcolmson, in your presentation you mentioned piracy, and my colleague asked you about that as well. I hear what you're saying about this potential blocking of piracy sites, and I'm wondering if you could elaborate on who you think would determine which sites to include. Of course, we're under tremendous pressure from the U.S. to completely allow more of an open system.

I know one of you referenced the “notice and notice” versus the “notice and take down”. I missed that portion, and I apologize. Is it that you are advocating to keep the notice and notice system that we have in Canada? We heard about that earlier this week. Do you have any thoughts from that which you could share with us?

[Rob Malcolmson]

We think that notice and notice works, but like any solution it's not necessarily perfect. We will continue to support it, but our view is that if we are really going to tackle piracy, as I said, the most efficient and effective solution is to require ISPs to block egregious piracy websites. You asked who would make the determination. In our view an independent agency would be charged with that task. You certainly wouldn't want the ISPs acting as censors as to what content is pirated content. But, surely, an independent third-party agency could be formed and could create a blacklist of pirate sites, and then the ISPs would be required to block them. That's, at a high level, how we would see it unfolding, perhaps overseen by a regulator like the CRTC.

[Tracey Ramsey, NDP, Essex, ON]

Ms. Dinsmore.

[Pam Dinsmore]

Just to weigh in on the notice and notice, I can tell you that since that regime has been formalized in the Copyright Modernization Act, the amount of usage has increased. For example, back in 2015 we handled over 1.5 million notices in the course of a year. In 2016, we handled over 2.5 million notices, about 200,000 notices a month. The fact is the notice and notice regime is being used and incrementally so year over year, I think it is....

Certainly, we're always open to talking about measures that might improve the system and we'll have that opportunity come November when we kick off the review of the act. Certainly there are a lot of participants in the system as we speak.

[The Chair, Liberal, Mark Eyking]

Thank you.

We're well over time, but it was good stuff. We're going to move over to the Liberals again.

Mr. Peterson, you have the floor.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

Thank you, Mr. Chair.

Thank you, everyone, for being here. I will ask Mr. Lenz a quick question.

I think you alluded to 21% of your sales going to Mexico and the U.S. Is that combined?

[Jason Lenz]

Yes.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

That's good. That's a large chunk.

You mentioned the SPS rules and how you thought the TPP was a good model. Are there improvements you would like to see in that provision in the TPP if we go for it or in NAFTA ? Is it pretty good the way it is or are there things we can tweak even in that model?

[Jason Lenz]

No. We view what has already been negotiated in that TPP as a very good starting point for the modernization of the NAFTA rules around SPS. In our view that's probably, as I said, a very good starting point and it works for our industry right now.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

Okay. That's good. Thank you for that.

I want to quickly talk to the telecoms here a little about culture. Some of my colleagues have touched on it already. Clearly, we're living in a different age now than we were when NAFTA was first drafted, and I think there's been a dramatic impact on our cultural industries and Canadian content.

What steps do you think we could take to ensure that Canada's cultural industries—television, movies, music, however you want to describe it—will be able to thrive in whatever new agreement comes. I mean not only survive but actually thrive. Of course, there's also a global market now for Canadian productions and I'm wondering how we could perhaps use NAFTA to tap into that if we can.

What recommendations do you have generally that might be able to achieve those goals?

[Rob Malcolmson]

I'll tackle one specific issue first that you should think about.

As the dissemination of content moves online—as you say, we're moving out of the traditional ecosystem—we've launched an online product called CraveTV, which is our answer to Netflix. It's been very successful in its own right, although not on the scale of Netflix. Netflix has five million subscribers in Canada. It charges $10.99 a month and doesn't charge or remit HST. Crave, on the other hand, just using Ontario as an example, operates at a 13% cost disadvantage in terms of its pricing. You asked how we can facilitate the strengthening of domestic content disseminators here and now in an efficient manner. One way to do that would be to require the Netflixes of the world, the Googles and Facebooks of the world, to charge and remit tax on the same basis that Canadian entities do. That's one.

Then, again, you asked about the opportunities for export. As Canada's largest broadcaster, we're very enthusiastic about those, but the domestic ecosystem needs to be fixed first. I referred to local TV. Local TV needs help, and there are ways to help it. As I said, allowing it to charge a subscription fee would be one way, and at the same time—in the context of NAFTA—that might be of appeal to your American partners. Their border stations could charge as well.

Those are two quick, efficient fixes. Pam may have other views.

[Pam Dinsmore]

More generally, we have to work very hard to keep our carve-out. That's crucial, and that's really what everyone's asking for. The fact that there's the ability to retaliate on the U.S. side if we introduce new measures is probably something we'd like to do away with, so it wasn't subject to that. Even at a bare minimum, just the mere fact of being able to keep this reservation, or rather this carve-out exception in these discussions is, I think, the most important thing.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

It's fair to say Canadians don't tell their story too well, so we need to make sure that whatever comes to this is protected.

There's obviously capital investment that needs to be made when it comes to digital as well, ensuring that facilities-based investment is available in the context of NAFTA, and huge capital investments that both of your companies need to make to ensure that the networks are viable. Do you see NAFTA as being able to improve that relationship—that regime—at all?

[Rob Malcolmson]

I guess we worry about NAFTA resulting in subsidized access by non-Canadian entities to the networks that Bell and Rogers and Telus have built in Canada. Our preoccupation is ensuring there isn't an unintended consequence here as a result of the renegotiation of NAFTA that results in Verizon, for example, being able to come to Canada and ride on the Bell or the Rogers network. In our mind that would make no sense. We've built strong networks. We've invested in them. They employ thousands of Canadians. I know our preoccupation is making sure NAFTA doesn't detract from a very successful domestic facilities-based model.