How do you solve a problem like Netflix?

When new Bell Media head Mary Ann Turcke told a telecom conference that Canadians accessing US Netflix through VPNs were “stealing,” she added to the cacophony of Canadian broadcast voices trying to solve the problem of Netflix.

But what is the problem, exactly?

First of all, it’s debatable that VPN use to circumvent geoblocking is “stealing.” And beyond that, it’s debatable that the problem is Netflix as opposed to a broadcasting model that’s evolving faster than the regulations governing it.

Mat Brechtel
Mat Brechtel
Mat Brechtel is a lawyer with Bull Housser in Vancouver specializing in intellectual property rights. “From my review of the Copyright Act I haven’t seen a section that would make it illegal.”

Until a test case is brought to court, he thinks its legality will remain an open question unless new legislation is passed to specifically address circumventing geoblocking, similar to the section added to make illegal circumventing digital locks on CDs and DVDs, for example.

“It might be possible to use the argument that using a VPN is technological protection measure avoidance [same as digital locks], so the argument might be that it’s caught by that section of the Copyright Act, but I don’t think that’s likely. I think where we’re at right now, it’s not against any of the Copyright Act to use a VPN,” said Brechtel.

“Frankly I’d love to see someone try to argue that it’s against that section of the Copyright Act, but I think ultimately they’d end up losing.”

It’s unlikely even Turke is interested in criminalizing the audience, circa the 2003 music recording industry. Her remarks seemed intended to educate the public, many of whom aren’t aware — or don’t care — that circumventing geoblocking is an issue at all.

What IS the issue?

Michael Hennessy
Michael Hennessy
Michael Hennessy, the outgoing head of the Canadian Media Production Association, which represents the independent producers who own much of the content we see on our television screens, defines what that issue is: “The whole broadcast business is based on territorial rights. A broadcaster gets certain rights to a  program for a certain period of time and they monetize that program through a platform or platforms.”

Some of that money goes to the broadcaster, some to the cable carries, some to producers and creative rights holders. “If you use a VPN to access US Netflix, what happens is that money is not going back to the Canadian rights holders and you’re reducing the revenues that used to flow into the system.”

How do you sustain a Canadian broadcasting system when Canadians aren’t getting the money from shows Canadians watch? So far Canadian networks don’t seem to be looking at homegrown shows as the solution.

Hennessy is no advocate of a widely discussed “Netflix tax” to bring funds into the industry from the unregulated streaming service, but he believes there is a need for a robust discussion on whether and how to regulate “over the top” services like Netflix in the Canadian broadcast world.

The CRTC’s recent Talk TV hearing wasn’t that robust discussion — and in fact Netflix and Google testimony was stricken from the record when they refused to provide the CRTC with requested information. If that’s the stick the CRTC has to work with — saying “LALALA CAN’T HEAR YOU” — there may need to be a whole lot of carrots to bring streaming services to the table of those discussions.

Right now, the carrot seems to be coming from outside the regulated system. Netflix is a relatively new player in commissioning original content; House of Cards debuted in 2013. They’ve started putting money into Canadian productions such as Trailer Park Boys, Degrassi and Between, with more waiting in the wings. Is regulation necessary if they end up willingly having more original Canadian content at any one time than, say, Global does?

One of these things is a lot like the others

Right now it’s Netflix causing so much “sky is falling” rhetoric from various players in the Canadian TV industry, but it’s really the shift in content delivery that has some of us seeing a future where Canadian broadcasters are the dinosaurs and streaming video the comet. If the Canadian industry were nimble and innovative they might not have waited years after Netflix’s arrival to bring out their own streaming services — services that weren’t even launched in a way that was competitive with the US behemoth. Even now, some industry players shortsightedly dismiss YouTube as cat videos and Amazon as a minor player.

Regardless, Hennessy points out that the dividing line between streaming services and broadcast is getting thinner and thinner as the means of providing content moves further towards broadband — including mobile, streaming and IPTV — versus cable.  “Does that mean where we see all growth and evolution of the broadcasting system we aren’t going to regulate at all, but we will continue to have taxes and regulation in the bricks and mortar world?” Hennessy asks.

And as the difference between streaming and broadcast becomes more technical than practical, have we already, without real debate or thought, decided that foreign ownership of our industry is OK with us?  Another question Hennessy has is: “If we’re willing to allow the largest future broadcasters to enter Canada on an unregulated basis, why do we have foreign ownership rules placed on Canadian broadcasters?”

What can be done? What should be done?

If something is to be done to force a service like Netflix into the regulated system, lawyer Brechtel  says the CRTC is limited by its mandate, but the federal government could introduce laws to make circumventing geoblocking illegal, for example, or go to the extreme of trying to block sites like Netflix if they don’t cooperate with Canadian broadcasting regulations.

Brechtel thinks that step is likely premature. “VPN, geoblocking, and Netflix are new technologies that probably aren’t ripe for some hammer of a legislative intervention to come in. It’s probably worth letting the industry mature a bit before anyone decides what should or shouldn’t be done.”

He doesn’t buy the argument that restrictions on access to sites such as US Netflix would put Canada in the same league as countries like China who block access to sites for ideological reasons, pointing out that Canadians’ freedom of speech has restrictions too, but that isn’t equivalent to blocking tanks in Tiananmen Square. “It’s all a matter of degrees.”

“We get people calling all the time who’ve been the victims of all sorts of online bullying or violence and all sorts of things. Unfettered internet use can be just as harmful as over-control. So it raises a lot of difficult questions. As we go through it, it’s good to tread lightly until we understand the effects of what we’re doing.”

“The legislative balance chosen for the TV broadcasting era might not be the right balance for the internet era,” said Brechtel. “If we really want to keep a focus on Canadian content we’re going to have to find a new mechanism to do it.”

“It’s a new area and it’s very grey. All the more fun for people like me.”