Google, CRTC chief spar over calls for online regulations

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A landmark hearing into the future of Canadian television began with a grilling of online giant Google Inc. about its impact on traditional broadcasters, as some stakeholders call for new regulations on the growing ranks of Web-based competitors.

The global Internet search leader was the first major player on Monday to appear at Let's Talk TV, a sweeping review of the television industry rules launched by Canada's federal broadcast regulator. Google is pressing to keep content from its popular YouTube site unregulated in Canada, arguing doing so would set "an extremely dangerous precedent" that could upset the international video marketplace.

"If Canada started doing this, it is not difficult to imagine other jurisdictions would follow suit," said Jason Kee, public policy and government relations counsel at Google Canada.

The Canadian Radio-television and Telecommunications Commission (CRTC) convened two weeks of in-person consultations to answer a host of questions about the future of the television industry, including whether video streaming services such as Netflix or YouTube should be forced to contribute to creating Canadian content, as domestic broadcasters do.

These sites are exempt from regulations, but have emerged as major competitors to traditional broadcasters, drawing a growing number of eyeballs and prompting some Canadians to cut their cable and satellite services altogether. Companies such as Netflix and Google argue rules forcing them to pay back a fraction of their Canadian revenues would amount to a tax on the Internet.

Mr. Kee trumpeted the six billion hours of video watched on Google each month, noting that 90 per cent of videos uploaded in Canada are watched by viewers outside the country. YouTube allows creators to make videos without relying on "intermediaries," he added.

But when CRTC chairman Jean-Pierre Blais asked for numbers on how much Canadian content is on YouTube, Mr. Kee replied he "would have to have internal discussions" before disclosing such data.

A series of testy exchanges followed as Mr. Blais pressed for detailed predictions about advertising revenues for video, or a measure of how much of YouTube's Canadian content is composed of cat videos versus higher-quality video, and received similarly hesitant replies, such as, "I'm going to have to get back to you."

"You're very much at the antithesis of [Google's] open platforms," Mr. Blais told Mr. Kee, prompting laughs from observers.

Traditional television providers "still rule the roost" in terms of subscribers and viewing hours, but online players have a big impact, said Brahm Eiley, president of Convergence Consulting Group, who researches the television and technology industries. The percentage of household TV subscriptions peaked in 2012 and has since begun to decline, and the CRTC is showing signs of taking that influence seriously.

"Whether [the CRTC] puts through the regulation or not, things have changed. The tenor has changed," Mr. Eiley said.

Netflix has tried to play down fears, saying in a submission that data show "Canadians are not abandoning traditional broadcasting for OTT [over-the-top] services in great numbers."

But Mr. Eiley predicts Netflix's Canadian revenue should exceed $300-million in 2014, and estimates Google is now generating "above $1-billion a year" in Canadian ad revenue, though it is unclear how many ad dollars it may be taking away from television.

Companies such as Google have begun hosting slick events in Canada to promote online video ads, similar to the events traditional broadcasters have held to drum up advertiser interest in their programming for years. And video advertising shows great potential, with 44 per cent of Canadians saying they watched an online commercial for a brand or product in the last month, according to Ipsos Reid research released last year.

Several stakeholders are suggesting successful online streaming services should help fund Canadian programming. On Monday, the Ontario government recommended "new media" broadcasting should share in the requirement to support Canadian creators, in a bid to even out the playing field between traditional TV and new competitors.

"To put a blunt face on it, you're inviting the CRTC to regulate Google, YouTube and Netflix, aren't you?" Mr. Blais asked Kevin Finnerty, assistant deputy minister at Ontario's Ministry of Tourism, Culture and Sport.

"In fact, what we recommend is that new media broadcasting activities be regulated," Mr. Finnerty replied. "We did not recommend that the Internet be regulated."

Amazon and Netflix were also invited to appear on Monday, but Amazon declined and Netflix rescheduled for Sept. 19.

Pick-and-pay debate

The first day of Let's Talk TV also included some opening arguments in the much-anticipated debate over whether Canadian cable and satellite companies should be required to sell channels on a "pick-and-pay" basis, rather than bundling them in packages.

A representative of the Competition Bureau suggested that "consumers should have the ability to choose the channels they value, and that they should only have to pay for the channels they choose."

But Candice Molnar, the CRTC's regional commissioner for Manitoba and Saskatchewan, pressed the Bureau about concerns that some viewers could pay more, as the prices of individual channels could rise if the cost of carrying them is spread less widely.

"We think that prices could go down. They could also go up," said Renée Duplantis, who holds a chair in economics at the Competition Bureau.

With files from Susan Krashinsky

With files from Susan Krashinsky