[This commentary was also published at CARTT.ca]
If the internet had
been something that was created from scratch, rather than a rapid and almost
spontaneous evolution of technology and networks, governments around the world would
have played a much bigger role in its development and deployment. It likely, too, would have been much less the
global network that it is today and much more a collection of inter-connected
national networks. Controlled
cross-border exchange of information, entertainment and commerce would likely
have been the norm. And... we'd have an online media world that closely resembled
the traditional, tightly controlled one.
In effect, though, the
internet arrived uninvited and, for some, at least from a video content point
of view, remains an unwelcome guest. Nonetheless,
it's already permanently re-shaping the way we distribute and consume media.
English Canada has a significant
cultural affinity to the United States and we have consumed a diet that has consisted
of a lot of American fare for more than 50 years. Of late though, on all fronts, from our
Canadian English-language broadcasters through to new digital distribution
channels like iTunes and YouTube, we've super-sized our consumption of foreign
content.
In the conventional
system, Canadian content requirements ensure, at least to a degree, that
Canadian producers and talent have a role to play and a vehicle to tell
Canadian stories to Canada, and, on a good day, through foreign sales, to other
parts of the world. There are, however, no corresponding requirements when it
comes to alternative distribution channels.
Across all distribution channels, Canadian audiences are increasingly
turning their attention to foreign content (primarily of U.S. origin) and we
face an increasing attention trade deficit.
We're accustomed to thinking of trade deficits mainly in economic terms,
and that's true here, but our attention trade deficit also comes with an undeniable
cultural impact.
When broadcaster
dollars go to buying foreign content, that takes money out of the country - and
doesn't help our domestic creative industries any. But it is far worse in the online world. When Canadians acquire foreign-produced content
directly from foreign-owned content aggregators like Apple, Google, Amazon,
Microsoft and others, there's no Canadian middleman involved.
When fees are
involved, they go to the aggregator.
When the content is ad-supported, Canadian advertisers increasingly are
following Canadian eyeballs and buying space on these foreign sites. The fragile Canadian content ecosystem is
by-passed and, other than traffic flowing across our network plumbing, we're
passive observers to the whole exchange. No Canadian company profits from the
transaction, the government receives no tax revenue, and dollars flow out of
the country. These lost dollars can't be
channelled back into our content creation industries - and our ability to tell
culturally relevant stories is diminished.
Foreign entities, of
course, have no obligation - and, arguably, little interest - in Canadian
content, and, while our independent production model has been a great success,
the result has been that few Canadian content producers have the scale or
catalogue depth to attract the interest of foreign players. On the home front, we have very few Canadian
content marketplaces or aggregators to showcase Canadian content to Canadians
or the world.
Many nations today are
now developing national digital strategies that - they hope - will shape the
future of the internet in many ways.
Australia, France, Germany, Great Britain are among the countries that
have already released digital strategies.
Even tiny New Zealand released the second
version of its strategy in 2008.
The scope of such
strategies is broad. Content, though,
does not have a significant presence in most of these strategies - and that's
actually not that surprising. While none
of these countries is immune to the unprecedented influx of foreign content
that the internet has made possible, these countries are, with the exception of
New Zealand, the dominant economic power within their primary spoken language
within their geographic region. Germany and France, in particular, enjoy the
advantage of limited content in German or French that is foreign-produced.
Our content funding today
is, in large part, tied to the old broadcast-centric system and this doesn't
encourage development in new forms of entertainment that exploit new
capabilities on new distribution channels.
The new Canada Media Fund will address this to some degree but we don't
know yet what its newly formed policies (or their impact) will be.
We can't - and
shouldn't - try to force Canadian content down consumers' throats. But we can - and should - take active steps
to ensure that there is a viable Canadian digital content eco-system. That includes Canadian-owned marketplaces and
aggregators, both to showcase Canadian content but also to give us an economic
stake in the game regardless of whose content is being consumed.
This isn't a call for
regulatory intervention, but, as part of our national digital strategy, we do
need to address this problem. Losing the
battle for attention from Canadian eyeballs may happen anyway, but if we don't
act soon to offer alternatives to Canadian consumers, it will be a virtual certainty. That, compounded by a lack of capabilities to
help Canadian content reach a global audience, could be the death knell of our
creative industries.
I will be
moderating a panel at the CFTPA's Prime
Time in Ottawa conference this week on the need for a national digital
strategy from the content creator's point of view.
I support the Canadian content industries and salute those who have done much with little. There's much of which to be proud. Today, though, the Canadian broadcasting system is in crisis. Mostly, it is caused by a failure to adapt quickly enough to a rapidly changing world. That's been exacerbated by the current economic situation, too. But some of it is caused by injurious and spiteful infighting between players in the system that ends up confusing, frustrating and alienating the consumer.
Every player in the system has a role and has responsibilities as defined by the Broadcasting Act. Beyond that, though, ever player also has an unwritten obligation to Canadians. That obligation is to continually evolve as needed to preserve our Canadian content industries and our creative voice in the world - and to do so collaboratively when necessary. At the moment, I think all sectors are falling short of this obligation. We're seldom innovators, we often lag. It's tough to innovate when you're a small player, as Canada is in this space. Innovate when possible, follow when practical, but don't follow so far behind that you become irrelevant - and, sadly, that's the dangerous reality we face today. No one wants to see what we have collapse - but perpetuating a failing system through piece-meal changes isn't going to succeed for long. The entire system - and everyone in it - needs to change their ways of doing business - and needs to do that now. Five years from now we won't look back at the great "fee for carriage" or "value for signals" battle of 2009 as the salvation of local TV. The problem is systemic, regardless of the outcome of this specific battle. We're far more likely to look back to 2009 and ask ourselves why we didn't do something to really fix the problems while, arguably, we still had a chance.
The Canadian TV industry isn't naturally an economically viable ecosystem where each player can succeed on its own and still fulfill a cultural responsibility. It never has been and it may never be in the future. When models break - as they are now - the answer isn't simply to drain money from one sector of the ecosystem and pump it into another. That's a last-ditch "life support" approach, not one that promotes a sustainable future. It's a band-aid on a much bigger problem and the answer to such extreme problems always lies in taking radical and decisive action, not applying first-aid to slow the bleeding while hoping that the problem will heal itself.
I certainly don't speak for BDUs but if I did here's what I'd say to conventional broadcasters:
You buy content and sometimes you create it yourself. You sell advertising that you wrap around
that content. Then you give that away
for free over the air (and often on the Internet, too). You hope that at the end of the day the
advertising revenue you receive exceeds the costs of content and distribution -
and for the longest time, it did just that, handsomely.
The airwaves are a public good. In exchange for a right to use a portion of that scarce resource, you must carry some Canadian content. The CRTC says so. Fair enough, right?
Lately, though, you like to spend more and more of your money on U.S. content. If a U.S. broadcaster is airing the same program as you at the same time, I must replace the U.S. signal with your signal so that you preserve the advertising effectiveness of the content in which you've invested. You benefit greatly from that. The CRTC says I must do that. Fair enough.
I spend massive amounts on wire (cable / IPTV) or birds in the sky (satellite) and distribute your signals for free, helping you to reach a larger advertising audience (and therefore allowing you to charge higher advertising rates). I do that on a localized basis (to the extent that I am able). You benefit greatly from that. I must do that. The CRTC says so. Fair enough.
As part of the broadcasting system, I must contribute back to the industry. A percentage of my revenue comes right off the top and goes to the CTF to help create the Canadian programming that you wrap your advertising around. You benefit greatly from that. I must do that. The CRTC says so. Fair enough.
I also administer and contribute to independent production funds to help you finance content creation through outright grants and/or equity investments. You benefit greatly from that. I must do that. The CRTC says so. Fair enough.
Local programming is hurting. You spend so much on foreign content that you can't afford to spend enough on local stations and content. I now also make contributions to the Local Programming Improvement Fund (LPIF) specifically to help "maintain and improve the quality of local television programming". You stand to benefit from that. I must do that. The CRTC says so. Fair enough.
So, through the CTF and the independent production funds I make a significant financial contribution to support your operations already - and not just your conventional OTA operations but also your profitable specialty channels, too. And, through the LPIF I further support your local OTA endeavours.
And let's not forget the taxpayer. In the case of the CBC, the taxpayer provides direct funding. And those CTF funds? They're provided in part by the Department of Canadian Heritage - using taxpayer dollars. Let's not forget about Telefilm Canada, for that matter.
With respect to your local conventional signals, my value proposition has always been to make those signals available to those who choose not to use an antenna, can't pick up a strong enough signal from an antenna, or for whom an antenna is not an option. We are part of a unique symbiotic relationship, whether you appreciate it or not. You create a product and I distribute it for you at no charge to you. You benefit greatly from this, and so do I, even though it's something I must do. The CRTC says so.
Apparently that's not enough for you. Now you want to change the equation. You want me to pay to distribute your content. But wait a second. The Canadian dramatic, comedy and documentary content you carry is paid for in part by me through my CTF contributions. Don't our independent production funds also make it possible for you to finance many of these projects? As for local content, isn't that what the LPIF is all about? Directly or indirectly, the BDUs and the customers of BDUs are already paying to help create the content you use so that you have something to wrap your advertising around. That begs the question: whose content is it anyway???
Now you want us to pay for that content again when we distribute it on your behalf. Remember, too, that the consumers who are your customers but not mine - that is, the over-the-air consumers - don't pay anything directly into the system and, other than through general tax coffers, don't fund content creation at all (local or otherwise). The same goes for those who watch your content free on the Internet. So the people to whom you give your content for free return little, while those to whom I deliver the content on your behalf indirectly pay much of the freight. Your business may not be healthy, but it likely wouldn't even exist in today's world without my customers.
You try to sound fair. You say you'll consider giving up mandatory carriage in return for a negotiated fee for your signals. That might be fair enough - except that you're also asking that I black out U.S. signals that carry the same content as you if we can't reach a deal. If I do that, we both lose. You won't get the distribution I give you and your ad rates will plummet. I won't be able to offer consumers what they want, and my subscribers will drop like flies (and with that, the funds available through the LPIF, the CTF and the independent production funds upon which you depend will significantly decrease). Over-the-air signals aren't an option for many (and will be an option for even fewer with the transition to digital OTA guidelines that are now in effect) so if we go down that road we'll be denying many Canadians timely, affordable and legitimate access to content that they want to see.
Your model is broken. I won't dispute that. But mine is breaking too. In ten year's time we will both be largely unrecognizable, if we exist at all. Today, though, could you survive without me? I doubt it. Could I survive without you? Maybe. Maybe not. Is your current proposal apt to accelerate our potential demise without solving any of the underlying problems? Absolutely. Can we work together to innovate and find new ways to survive - and perhaps even prosper together as we once did? I think so. We both need to innovate, individually and collectively, to survive, not waste valuable time, energy and money fighting each other.
You're backing me into a corner. Whether I absorb the new fees you are seeking, or pass them on to the consumer, my business will suffer significant harm. Worse though, if I don't give in to your demands, the consumers that you and I are both in business to serve will suffer the most. They're already leaving the system, and your current approach will just drive them out the door more quickly and in even great numbers.
You've done little to adapt to change. Your record of innovation is abysmal. Yes, I admit, I could do much better, too, in that regard. But rather than fix your own problems, or find new ways to operate and engage Canadians, you'd prefer to see my business suffer further damage in order to put a bandage on your gaping - and probably terminal - wounds. If you don't want to adapt, fine, stick to your crumbling little world. But don't penalize those who want to change - and that includes many Canadian content producers who want to do more with their content - except that you all too often demand all of the content rights across all platforms and media. Be part of the solution, not part of the problem. If you don't want to innovate, don't stop those who do. Develop reasonable Terms of Trade with the content producers so that they can work with us and others to (re-)engage that audience in new and innovative ways.
The Canadian broadcasting system is an artificially sustained ecosystem that we are all part of. It's important to Canada and Canadians from an industrial point of view, and it's important to Canada and Canadians from a cultural point of view. We're all in this together, but "a house divided against itself cannot stand". Let's fulfil our roles and responsibilities but let's also fulfil our unofficial obligation to Canadians by working together to innovate and prosper in the 21st century with appropriate new models. Let's not disregard that obligation by fighting each other as we try to perpetuate out-dated and obsolete ways of doing business. We do so at the expense of Canadians - and of the future.
]]>On Friday [May 29, 2009], NDP Digital Affairs Critic Charlie Angus tabled a new bill to amend the Telecommunications Act with an eye to restricting the abilities of network operators to perform network management and thus, the reasoning goes, ensure so-called net neutrality. Specifically, the amendment states that "telecommunications service providers shall not engage in network management practices that favour, degrade or prioritize any content, application or service transmitted over a broadband network based on its source, ownership, destination or type." Net neutrality is a complex subject and there's much that can be discussed with respect to this bill but for the moment I'll focus only on one of its aspects.
In addition to a few specific safety - and security - related exemptions, the bill specifically would allow providers to "manage the flow of network traffic in a reasonable manner in order to relieve extraordinary congestion." But here's where the problem lies - as always, the devil's in the details. The health of any network is dependent upon on-going reactive and proactive network management. That such management should be reasonable is certainly a valid concern, but tying such management only to situations vaguely defined as "extraordinary congestion" is a recipe for disaster. Ordinary congestion is a problem, too. Beyond that, who's to decide what constitutes "extraordinary congestion?" And what would constitute management in "a reasonable manner" in such a situation? There's little likelihood that any consensus could be reached on clear and lasting definitions for either of those terms.
To understand the full implications of strictly limiting network management to exceptional situations, we need to take a step back from idealistic rhetoric and consider how networks - and customer usage patterns - evolve. In a perfect world, supply (network capacity) would always exceed demand (the load imposed on the network by its users). The reality is, though, that network capacity isn't organic, and doesn't expand in direct correlation to demand. The expansion of network capacity is capital-intensive and occurs incrementally at periodic intervals in different places at different times. Demand, on the other hand, increases constantly, and grows not just through the addition of more users to the network but also through increased consumption by existing users as a result of the introduction of new functionality or increasing usage of existing services. Sometimes this can be anticipated and accommodated in advance, sometimes it can't. Congestion - extraordinary or otherwise - is a fact of life with any network from time to time and failure to manage it in an appropriate manner does a disservice to the consumer.
Many net neutrality advocates demand that, as was historically the case, all traffic (packets of data) should be treated with equal priority. That's a nice ideal, but we need to realistically recognize that in an environment where demand can exceed supply, that's not always possible. In such situations, priority should be given to time-sensitive content. For instance, only some video content is truly time-sensitive. If the consumer is watching the content as it is delivered, that's important and the delivery of packets should not be degraded lest the experience suffer. If, however, the content is being downloaded for later viewing (as is the case, for example, with most peer-to-peer content) then some additional latency (delay) should be tolerated and considered reasonable if it is done so for the benefit of more time-critical content.
The beauty of a sophisticated network like the internet is that we can prioritize some traffic over other traffic. A dumb network can't do that. Conventional telephone networks are a perfect example of a dumb network that is engineered to meet reasonable peak volumes. However, if too many customers attempt to place a call at the same time, and thus exceed the existing capacity of the network, "extraordinary congestion" will occur. Some will get a dial tone, some won't. The telephone network can't differentiate between the relative importance of the various calls that would be made, and therefore who will get access to the network and who won't becomes a matter of luck and timing. Admittedly, on local telephone networks, this situation seldom arises anymore, but it is illustrative of the difference between what can happen when demand exceeds capacity on a dumb network versus what can be done with an intelligent network.
Don't get me wrong - I strongly agree that we need to combine well-defined public policy with reasonable, transparent and accountable behaviour on the part of the service providers. As well, network management shouldn't be a long-term substitute for on-going capacity expansion to meet demands. Unfortunately, this bill misses the mark. To dictate that we should prohibit network operators from providing a better overall experience through the use of the capabilities inherent in a smart network is just plain dumb.