Tariff 22 Opening remarks

Today Copyright Board hearings began into Tariff 22, SOCAN's proposal (scroll down to 'Tariff 22') to charge royalties for the use of music on the Internet. Tariff 22 has been before the Copyright Board before, in a case that went all the way to the Supreme Court of Canada. The SCC ruled in 2004 that SOCAN could not charge ISPs for the use of online music insofar as they were only the conduit for communication of the music. That decision was part of what SOCAN is calling Phase I of their efforts to get royalties for online music.

While most ISPs may fall outside of this tariff, there are still lots of people that SOCAN wants to charge. They are now pressing ahead with Tariff 22 in what they are calling Phase II, the attempt to set the rates of the tariff for various types of uses, including "permanent and temporary downloads, on-demand streaming, audio webcasts, webcasts of radio or TV station signals and communications via game sites".

At the hearing today, SOCAN and seven objectors presented their opening comments.

SOCAN outlined the proposed tariff (scroll down to 'Tariff 22'), and made several last-minute changes to their proposals:

• for amateur podcasters whose programming is less than 20% music and who have no revenue, SOCAN proposed a $60 annual fee
• they reduced their proposed $200 monthly fee for campus and community radio to a $90 monthly fee
• they now propose that a low-use category be made available for simulcasters.

The Canadian Association of Broadcasters, the CBC, Iceberg (a music streaming service), a group of cable and telcos, the online gaming industry, and the National Community and Campus Radio Association all presented objections. Many objectors were concerned about SOCAN's methodology for calculating the tariff, its basis on percentage of expenses or percentage of revenue, and the types of uses it might encompass. Here are a few additional highlights:

The Cable and Telcos argued that downloading of music in online stores or onto cell phones constitutes a point-to-point communication, not communication to the public, and therefore should not fall under the tariff.

The CBC and the National Campus and Community Radio Association argued that they should not have to pay an additional fee to simulcast existing radio programming. They argue that they are using the same material to reach the same audience and should therefore not be charged twice; that they are simply transferring an existing practice onto a new medium; that they are simply following their audience onto a new technology, and that the tariff should be technologically neutral.

CRIA and Apple argued that no fees should be charged for previews of music in online stores and the like, since such previewing only increases the sales of songs and therefore pays for itself.

The Entertainment Software Alliance argued that the gaming industry prearranges all payments for any music they use in games and, especially, that games - even online ones - to not involve transmission of music to the public since the music is not transferred over the Internet but is loaded with the game software onto individual computers.

The National Campus and Community Radio Association argued that the original proposed tariff would amount to about $30 000 per station - far too much for small stations with budgets of $10 000, and even for bigger stations - and would simply cause those stations to stop broadcasting on the Internet.

There did not appear to be any representatives for amateur podcasters.

Bernier decision on local competition

Industry Minister Bernier has reviewed the CRTC's April 2006 decision, which set certain standards that had to be met before regulation of Bell and other major local service provider's local phone service pricing would be ended. Those regulations stopped Bell from raising or lowering its local prices too much or too quickly. One fear was that Bell might lower local service prices drastically, pushing newer phone services from new companies or VoIP companies out of business.
Bernier also announced that restrictions on "win-back" calls (where your old phone company calls you up and tries to convince you to return to the fold) from phone companies would be lifted. Companies were previously prevented from making "win-back" calls for a period of three months after a user switched services.
He has also called for the implementation of one of the Telecom Policy Review Panel's decisions: to create a Telecom Consumer Agency, which would take complaints from consumers regarding telephone services.
These announcements fall in line with the Telecom Policy Review Panel's recommendation to rely to a greater extent on "market forces" and to create a Telecom Consumer Agency.
Bernier's decision is good news several groups. First, it may lead to lower prices for local phone services from Bell and other incumbents. This will benefit people who stay with those big phone companies, rather than switching to some of the newer phone services. For those who switch, the end of "win-back" restrictions might lead to annoying phone calls from the old phone company, but, on the flip side, they might also lead to better offers. Bernier says "in a competitive sector, there is no reason to prevent consumers from getting the best offers."
The creation of a Telecom Consumer Agency will be good news for consumers, as it may be able to pressure companies for better phone service. On the other hand, the agency may not have adequate power to challenge dominant players that will soon be playing at full strength.
Most of all, the announcements are good news to Bell and other major phone companies, who will be in a better position to compete with newer services.
The decision isn't good news for the newer phone companies, who will now have to go up against a unrestrained giants with huge sources of revenue and dominant market positions. This could mean a loss to consumers as well, of innovative services and packages offered by competitors.