Tuesday, June 14, 2011

Now SOCAN Seeks Interim Internet Tariff. Who’s Next? Will CPCC Seek Interim Tariff for its Proposed "Memory Tax"?

When the Copyright Board - just hours before Christmas of 2010 when Christmas came early to Access Copyright - awarded Access Copyright an interim tariff worth about $48 million over three years, it was perfectly predictable that this would be a precedent that - even if not strictly speaking a legal precedent because the Board is not a Court - would be a loose canon. The fact that AUCC - with its enormous budget for the current board hearing - and others with less but still substantial means - did nothing by way of an apparently easily successful and relatively (compared to the Board proceedings) very inexpensive judicial review application was very disappointing, to put it mildly, to many.

Well, the next broadside shot has now been fired by SOCAN, which wants its turn at an interim tariff. See here and here SOCAN’s application) and here (SOCAN’s pres release). This interim tariff follow up comes even sooner than expected. Naturally, it relies on the Access Copyright Christmas decision.

I’m sure that the CPCC also is now getting big ideas about an interim tariff for its proposed memory tax proceeding, if that goes forward.

In its Tariff 22 proceeding that goes back to 1995, SOCAN is now suddenly asking for an interim tariff on the parts of it that now supposedly relate to audiovisual webcasts and user generated content ("UGC").

SOCAN's proposed interim application appears at first blush to be even less reasoned and substantiated than Access Copyright's controversial interim tariff application that was approved on December 23, 2010 - just 18 hours before Christmas - on the basis of no actual “evidence”, such as an affidavit not based on hearsay, that would pass muster in a court. That said, the absence of evidence and other major gaps in its case did not hurt Access Copyright - and no judicial review was sought, as I keep saying. See my blog around that time for numerous comments.

In this case, there could also be substantial legal issues involving jurisdiction and extraterritoriality, not to mention liability. And the expected legislation that will likely receive fast passage in this majority Government in the next year could profoundly affect this tariff - at least re re UGC. This potentially and explicitly targets such entities as Netflix, Apple TV, Sony. Facebook, and last - but hardly least - YouTube - which is owned by Google. These are potentially fierce foes that may not be amenable to the vicissitudes of the Copyright Board process, which often include notoriously unnecessary and intrusive but still mandatory interrogatories and time frames that unpredictably range from delays of several years to extremely tight deadlines of a few days. They may not welcome an interim tariff on the basis that it “would give businesses some assessment of the royalty payments necessary to run their operations” as SOCAN’s press release suggests.

It will be fascinating to see how these entities - or the associations of which they are members - respond to this. I suspect that they will not be pleased.

This maybe be another illustration of why it's little wonder that Canada is deprived of innovative internet roll-outs due to multiple and highly redundant layers of rights imposed by the Copyright Act and implemented by the Copyright Board, which takes pains to value each of them separately and make them cumulative. And, except for occasional “consolidation”, each of these rights gets a separate hearing. And, unlike the USA, Canada has “neighbouring rights”, which means more or less doubling and duplicating everything that SOCAN does. A consolidated hearing is not necessarily a simpler or cheaper hearing. They can become very complicated and not always save money for all parties. In some cases, consolidation can create considerable additional costs for a party with a very narrow issue and interest.

Canada - as an economic unit - is not obviously any larger or economically more enticing to these giant foreign companies than California, which has a population of 4 million or so more than Canada. The marginal regulatory cost of entry into California for these companies is zero. In Canada, it's enormous - at best - and could obvious be deal breaker at worst. There is even talk of forcing Netflix to face the CRTC.

Why would any rationale entity pay potentially millions of dollars in legal fees and disbursements to be required years from now to pay large tariffs retroactively for rights that that don't even exist in the USA - and now maybe have to pay an “interim tariff’ in the meantime that may not ever be effectively refundable?

Why bother?

Michael Geist makes a similar point about Apple’s iCloud service. I’m sure that the Canadian collectives are salivating at the prospect of the clouds coming to Canada. Even if it turns out that there are good jurisdictional and other arguments to keep the collectives and the Copyright Board at bay, these services may have to potentially spend six or seven figures to do so. It’s easier and likely  more economically rationale to just block Canada, as Pandora, Hulu, etc.  have done to date.  And doubtless many others more to come.

• legislation that is already far more generous in most ways to copyright owners and more costly to users than American legislation;
• bandwidth caps;
• throttling; 
• enormous Copyright Board and even potentially CRTC hearing costs; and,
• now the prospect of interim tariffs at the Copyright Board -

It's no wonder that Canada is slipping quickly into the internet and innovation rearguard.


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