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Netflix gets pass on being regulated - for now

Netflix Chief Executive Officer Reed Hastings speaks during the launch of streaming internet subscription services for movies and television shows to televisions and computers in Canada, at a news conference in Toronto September 22, 2010.


Netflix Inc. will remain out of the reach of Canada's broadcast regulator – for now.

The Canadian Radio-television and Telecommunications Commission said on Wednesday that there is still no conclusive evidence that Internet-delivered television services such as Netflix are disrupting the traditional broadcast business in Canada.

The report was the result of a fact-finding mission the CRTC launched in May to look into such "over-the-top" TV services. Because of "inconclusive results," the CRTC will not begin regulating broadcasting on new platforms.

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"The traditional broadcasting system continues to support Canadian programming even as services emerge to deliver content to Canadians in new ways," the CRTC said in a release.

The last time the CRTC looked at its policy on new media, just two years ago, it said there was an "absence of established viable business models" for Internet TV. Now, the CRTC recognizes there is a business in streaming TV. Just over a year after Netflix launched in Canada, the company says it has more than one million subscribers.

That created some tension in the industry, since both cable and satellite companies and the TV broadcasters must pay into funds to aid the production of Canadian programming. Netflix's streaming service competes with those companies, but the company does not have to pay into the Canadian TV kitty.

In February, industry executives banded together to form the Over the Top Services Working Group, asking the CRTC to look into the issue.

"Internet distribution of broadcasting services is here to stay. It will grow. It's more than just Netflix," said Alain Gourd, chair of the Working Group. "… It won't break the bank at this point. But eventually there will have to be some form of public policy review."

Netflix has maintained that the Internet should remain unregulated. In response to Wednesday's news, spokesman Steve Swasey said: "Any decision that gives consumers more choice is fine with Netflix."

The CRTC is not shying entirely from the question of new media. Last month, it issued a new code of conduct for "vertically integrated" companies (those that own both TV broadcasters and cable or satellite services). It stipulated that they could not offer content made for TV on an exclusive basis online or on mobile phones.

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"I don't think you can regulate these over-the-top services, and I don't think the CRTC should try," said Ken Engelhart, senior vice-president of regulatory for Rogers. "They should gradually de-regulate the regulated [cable and satellite]platform in response to the competition on new platforms."

In a statement, CTV parent and Bell satellite owner BCE Inc. said: "We continue to believe there should be regulatory symmetry between domestic broadcasters and foreign [over-the-top]broadcasters. So we see the CRTC's decision to revisit the issue next spring as a positive step, and one in which we'll certainly take part."

The CRTC said it will make the over-the-top fact-finding mission an annual event starting next May. It will also discuss the issue at a meeting with industry leaders in November. Mr. Gourd said his group was pleased that the CRTC "started a journey" to continually monitor new media trends.

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