By: Bram Abramson, McCarthy Tétrault LLP

 A founding member of the Montréal Media Policy Group (MMPG), Bram Abramson is now an associate in the Business Law Group at McCarthy Tétrault LLP in Toronto. His practice focuses on telecommunications, broadcasting, media, and information technology matters.

Prior to his legal studies, Mr. Abramson worked as senior financial analyst for the Canadian Radio-television and Telecommunications Commission; as senior analyst and research director for a prominent telecom industry research firm based in Washington, DC; and as virtual conference director for an international NGO based in Montréal. Mr. Abramson has published articles in journals such as Telecommunication Policy, Television & New Media and Media, Culture & Society.

Mr. Abramson received his BA in Communications from Concordia University in 1995, and his BCL and LLB from McGill University in 2007. He was admitted to the Ontario bar in 2008 and is a member of the Law Society of Upper Canada, the Canadian Bar Association and the Ontario Bar Association.

On 15 October 2008 the Canadian Radio-television and Telecommunications Commission (the “CRTC”, or “Commission”) issued Broadcasting Notice of Public Hearing CRTC 2008-11, entitled Canadian Broadcasting in New Media (the “Notice”).  Organizations and groups of organizations—including provincial culture ministries and citizens’ groups; creators’, producers’, and distributors’ guilds and associations; broadcasters; and access providers—filed nearly 100 formal written submissions in response to the Notice.  Many individual Canadians submitted additional comments.  Next week, the Commission will begin oral hearings at which it will canvas some of these submissions in greater detail.

This New Media proceeding has been widely framed in popular media as a hearing into regulating the Internet—that is, into whether the Commission should revisit its 1999 decision to exempt from regulation all non-text audiovisual material delivered over the Internet.  (The Broadcasting Act requires that the CRTC either regulate audiovisual content, defined as “broadcasting” content, or decide formally to exempt it.)  That framing, however, is only partly accurate.  In the Notice, the Commission indicated that the purpose of this proceeding was to review two exemption orders.  One was, indeed, the 1999 exemption for broadcasting content delivered and accessed using the Internet.  But the other was a 2007 exemption for broadcasting content received by way of mobile devices using point-to-point technology—in other words, on-demand mobile broadcasting.  Understanding that the scope of the New Media Proceeding extends to reexamining both fixed and mobile Internet and other mobile broadcasting content is important for two related reasons.

Mobile Devices

First, it is important in terms of mobile devices themselves, which account for an increasing proportion of technology-mediated communication.  With new entrants (following Industry Canada’s 2008 spectrum auction) and a new class of location-based services (following the CRTC’s order to upgrade Wireless Enhanced 9-1-1 service) promised for next year, the wireless sector’s ubiquity is likely to increase.  Delivery of video content to mobile devices is a new and growing line of business for this sector, and “walled-garden” or “on-deck” delivery through built-in menu items is one of the key approaches that wireless providers have adopted for such delivery.  Whereas Internet access is generally an open platform which lets users access any content or applications whose rightsholder has secured an Internet connection for it and permits it, mobile devices provided by Canadian wireless providers have thus far been closed platforms.  While many such devices also include Web browsers, the programming choices available directly to users as discrete menu items and optimized for wireless use are those that the wireless service provider has chosen to make available.  Users of these closed platforms have on-deck access only to the content and applications that the wireless provider has selected.

With respect to audiovisual content delivered to mobile devices, wireless service providers thus sit in between programming suppliers, on one hand, and users, on the other.  This arrangement is very similar to the one which exists in the cable and direct-to-home satellite (collectively, “broadcasting distribution undertaking” or “BDU”) sectors, particularly with respect to their affiliated pay-per-view and video-on-demand services.  Like a BDU provider, the wireless providers occupy a position that looks much like a bottleneck, because they control the physical device over which programming is delivered.  BDUs are regulated, among other reasons, to ensure that they do not take advantage of their position as access providers in a way that prefers the content they themselves own (to the detriment of their content competitors) and to ensure that programming created by Canadians can make it to the air notwithstanding the substantial cost advantage enjoyed by U.S. programming.  Wireless service providers, on the other hand, are not currently regulated with respect to these issues, which have been deemed important in the cable and direct-to-home distribution contexts as a matter of policy.   A number of interveners have therefore asked the Commission to consider, during the oral hearings starting next week, whether wireless providers who choose the programming menus available to their subscribers should be regulated in a manner similar to existing broadcasting undertakings.  Smaller and independent Canadian television services have suggested that, in the current unregulated environment, they find it even more difficult to be made available by wireless service providers than by cable and DTH distribution undertakings.  So the first important reason to remember that the New Media proceedings pertain both to Internet and to mobile audiovisual content is that the issues and bottlenecks associated with the open Internet are different than those associated with closed mobile devices.

Set-top Boxes

The second, and related, reason is that, even on the Internet, not everything is an open platform.  Internet access itself may fit that description, an issue which the CRTC’s Telecommunications Act proceeding on Internet traffic management (in which comments from the public are due six days after the New Media hearings begin) will help decide.  But the open-closed distinction runs to devices other than smartphones, too.  In particular, it provides a way of thinking about the set-top boxes fed by the Internet, plugged into television sets, managed by third-party service providers like Apple and Microsoft, and sold in electronics stores.  Some of these set-top boxes are open platforms in which users can connect to the content or content services of their choice.  However, many of them function much like mobile devices.  They serve up the content menus chosen by a service provider, who can continue to configure or manage the box’s content offerings via the Internet.

To users, the difference between a Shaw or Vidéotron set-top box that offers an on-demand service and the on-demand services offered by a VUDU or AppleTV set-top box is—like for mobile devices configured with a mobile video service—mainly one of fee structure and of what content is available.  In either case, the device is marketed and sold in Canada to Canadians, runs a menu of content chosen by a service provider, and is locked technologically against additions, changes, or substitutions to the menu.  As Los Angeles Times new media columnist Jon Healey put it last month in describing two new set-top box offerings:

What neither device can do is take users wherever they might happen to want to go.  Vivek Pathela, Netgear’s general manager of home and consumer products, said the company would update the boxes regularly with new sources of video, but users won’t be able to add to the list themselves.  And there are a few notable missing pieces: Hulu, which is absent for technical and business reasons (Pathela said they’re working on a licensing deal), Flickr and MySpace.

Internet-enabled set-top boxes typically provide access to at least one of four types of broadcasting content:

•    All offer locked studio programming provided through a third-party content aggregator such as Netflix, BLOCKBUSTER ONDEMAND (which acquired competitor Movielink and then, in January 2009, entered a joint marketing agreement with competitor CinemaNow), or Amazon Video-on-Demand.

•    Some offer the mix of user-generated and studio-produced content provided by services such as YouTube, which features both uploaded and contracted content, or MetaCafe, by including these in their menu items.

•    At least one offers an unlocked (third-party) interface allowing users to contract independently with new programming services and add them to the set-top box menu.  To our knowledge, VUDU’s recently-added Rich Internet Application (“RIA”) platform is the only Internet device with access to studio programming that is marketed and sold with such an interface.

•    Most offer access to the user’s home video and audio library.

Although the emphasis in these devices is clearly on locked professional programming provided through a third-party aggregator, the business model for such devices remains an open question.  For instance, while most are dedicated devices similar to a digital television decoder, similar functionality and content partnerships are also being built into gaming platforms like Microsoft Xbox, Blu Ray DVD players, and, soon, into a handful of high-definition television sets.  Still other hybrid devices, like the TiVO which combines cable- and Internet-delivered programming, and the Sezmi device which promises to combine Internet-delivered programming with an over-the-air antenna, have also begun to make their mark.  Finally, content aggregators that provide libraries of on-demand films, television network programming, and individual television shows to set-top box users often also make such programming available through the open Internet, reducing the risk that such programming be exclusive to purchasers of one device as opposed to another.  A number of closed- and open-source solutions like Slingbox and Boxee exist to allow users to fashion their own set-top-box-style devices that take advantage of what is available either freely over the Internet, or via a third-party aggregator’s Internet “window”.  However, there is no guarantee that rightsholders will continue to pursue the dual open-Internet, closed-device strategy that reduces the risk of exclusivity.

Of the above devices, only one (AppleTV) has secured the necessary rights and made itself available in Canada today.  However, others will soon follow, and many have already expressed a commitment to entering the Canadian market in the future.  As Chris Albrecht of respected industry blog NewTeeVee put it, wrapping up his December 30th end-of-year summary of 2008 and predictions for 2009:

[T]he real battle in 2009 will be when these services move further into the mainstream and begin to butt heads with the cable and telephone companies providing Internet access. How much will metered broadband access and bandwidth caps put the squeeze on this burgeoning new way to deliver video? And what other ways will cable and telcos leverage their existing home presence? And will cable’s Tru2way eliminate set-top boxes altogether?

It’s amazing to think of how far set-top boxes have come in less than a year. But all that activity is just the calm before the very big (and very fun to watch) video storm coming in 2009.

The question of whether and, if so, how the regulator should intervene in the market for closed mobile devices, or closed set-top boxes, has little to do with net neutrality or traffic management.  These activities fall squarely under Canada’s Broadcasting Act, and directly into the scope of the CRTC’s New Media proceedings.  That is why framing the New Media hearings as only about whether “to regulate the Internet” means missing a big piece of the story.

 In addition to the open Internet, the proceeding’s scope includes other broadcasting activities.  These include closed-platform media, whether delivered and accessed through devices using the Internet, or received by way of mobile devices.  Where new media broadcasting terminates at closed devices, its content menu is determined by service providers, not users.  The New Media hearings provide the Commission with an opportunity to consider whether rules about granting an undue preference or ensuring shelf space for domestic content should affect service providers’ discretion in closed-device settings, too.  A clear answer at this juncture would allow the Commission to establish a framework before many of those who intend to sell such devices to Canadians begin doing so.