The federal broadcast regulator has ordered Netflix to hand over Canadian subscriber and other closely held data, threatening during a tense hearing Friday to revoke its exemption from regulation if the U.S. based streaming service refused to comply.
“You operate under an exemption order that requires you to provide information,” Canadian Radio-television and Telecommunications Commission chair Jean-Pierre Blais told the company’s global public policy director Corie Wright.
“The commission is ordering you to provide the number of subscribers that you currently have in Canada by 5 p.m. Ottawa time Monday. “Failure to provide the information puts at risk your exemption.”
After Wright’s repeated requests for confidentiality guarantees the chair called for a break in the hearings into the future of the country’s broadcasting system.
Wright ultimately said she would attempt to respond to the commission’s series of orders for information, but could need more time.
She said her concern was not about disclosure to the regulator, but whether it could guarantee that the information would be kept confidential even if a third party requested the data under a public interest argument.
“Given the nature of this information, we’re just trying to be very careful. I’m sorry if there’s any appearance we’re unwilling to do it,” Wright said.
The CRTC could not provide a guarantee, but said it routinely guards proprietary business data that could affect a company’s competiveness.
“We are treating you like every other applicant,” Blais said. “You are not entitled to special treatment.”
Vice chair Tom Pentefountas said Netflix makes millions from Canadian consumers and shouldn’t have to be ordered to disclose data. He also suggested that the information would buttress Netflix’s argument that it’s a strong contributor to the development of Canadian programming.
He also referred to news reports saying Netflix agreed to pay a 2 per cent video on demand tax in France as part of its launch there this week and would give French content preferred status.
The hearings that wrapped up Friday are a precursor to what will likely be broad changes to rules governing broadcasters. The federal government has indicated that Canadians should have more choices in unbundled cable and satellite TV packages.
Changes are to be in force before the end of next year, although some could be phased in.
The commission will also consider whether to allow local facilities-based broadcasters to decommission over the air TV transmitters, whether simultaneous substitution of Canadian ads over U.S. spots should be eliminated, and if Web services need to be regulated. Prime Minister Harper has made it clear that he would not support a so-called Netflix tax.
More than 100 groups and companies appeared before the CRTC commissioners over the two week hearing, including Google and integrated media and telecommunications giants Bell Canada, Rogers and Telus.
Wright said fast-growing Netflix, which as a Web-based service operates under an exemption from rules and levies applied to conventional broadcasters, is an innovative force that would be stifled by regulation.
She said the move would limit consumer choice by increasing barriers to entry for new services and cement the dominance of the incumbent players.
Wright also said Netflix has driven creation and consumption of new Canadian content and raised the global profile of homegrown programming and talent.
“We’ve pro-actively licensed Canadian content, not because anybody told us to, but because we thought our members would enjoy it,” she said.
As an over-the-top (or Internet) provider, Wright said Netflix has no physical presence or staff in Canada and sales tax does not apply.
Consultants have estimated that the company will take in $300 million in revenue in 2014 from a subscriber base in Canada of about four million.
While the CBC, for example argued before the commission that Netflix and other foreign streaming services should be required to pay a percentage of their revenue into a Canadian content development fund supported by licensed broadcasters, Wright said that would amount to a subsidy of old media at the expense of innovative new entrants.
And she said payments would not be reciprocal since Netflix as an unlicensed operator cannot draw from the fund.