David Kent is a partner in the Toronto law firm of McMillan Binch and a member of its Litigation, Knowlaw and Competition Groups.

The controversial issue of Internet television broadcasting has taken another sharp change of direction. It may be worthwhile to take a deep breath and take stock of where things now stand.

When iCraveTV folded its tent and shut down in early 2000, it appeared that the issue had gone away. But the appearance of wannabe Internet broadcaster JumpTV that summer put the issue squarely back on the front burner.

JumpTV

JumpTV, like iCraveTV before it, wants to take over-the-air TV signals and stream them over the Internet. The problem is that JumpTV does not want to ask for permission from either the broadcasters or the program owners involved. Instead, it wants to use the compulsory licence provisions of section 31 of the Copyright Act to unilaterally retransmit broadcast signals in return for paying a royalty set by the Copyright Board.

Unlike iCraveTV, JumpTV did not simply launch a service. Instead, it applied to the Copyright Board to set a special royalty for it. Broadcasters and program owners from both sides of the border signalled their opposition and filed objections to the JumpTV licence application.

The retransmission regime

The section 31 retransmission regime has historically been used by cable operators and, more recently, by DTH satellite services. It was introduced for 1990 as part of Canada’s Free Trade Agreement obligations with the United States. It was originally designed to ensure that cable operators, who were then using broadcast television programs for free, would begin to pay to do so.

Is the Internet covered?

JumpTV claims that it is not really different from a cable or DTH operator and should get similar access to the compulsory licence regime. But it’s not that simple.

First, it is not at all clear that section 31 applies to Internet broadcasts. When iCraveTV unilaterally launched its website in December 1999, doing exactly what JumpTV proposes now to do again, it was immediately met with litigation in Canada and the U.S. by broadcasters and program owners. The Canadian litigation challenged iCraveTV’s assumption that section 31 applied. The Canadian litigation quickly settled on the basis of iCraveTV’s exit from the business, so the issue was never formally resolved.

A second problem reflects the wide-open nature of the Internet itself. Any compulsory licence available under the Canadian Copyright Act is only good in Canada. It provides no protection in other countries. U.S. broadcasters and program owners quickly obtained restraining orders against iCraveTV because its site was readily available in the U.S. and it therefore infringed U.S. copyright laws. Its inability to set up an effective firewall at the Canadian border was part of its undoing.

Broadcasters’ concerns

Broadcasters and program owners from Canada and the U.S. oppose JumpTV’s attempt to act without their permission. Why are they so upset? The answer lies in the differences between Internet and traditional cable/DTH technologies and regulation and the impact those differences have on programs and programming.

TV programs are generally distributed on the basis of specific territories and media. For example, a program may be licensed for free over-the-air television broadcast in Ontario. The unilateral Internet transmission of television signals, however, undermines that model.

First, it eliminates the program owners’ ability to separately sell the Internet rights for a given program. Second, it establishes an alternative viewing opportunity for the retransmitted broadcaster’s signal in which JumpTV’s advertising competes with the broadcasters’ advertising. Third, to the extent some broadcasters have set up their own websites which include their own news and other programs, it means that JumpTV will be competing with broadcasters using the broadcasters’ own property. Fourth, to the extent JumpTV is unable to restrain access to its website, it may dilute or eliminate markets for programs in other countries.

Cable and DTH remain highly regulated in Canada. Some of the problems associated with retransmission have been addressed by those regulations. But the CRTC has declined to regulate Internet broadcasting. Thus the checks and balances of the system within which cable operates when using its compulsory licences to retransmit television broadcasts are absent when it comes to JumpTV.

JumpTV’s licence application to the Copyright Board was an attempt to resolve the legal question of whether Internet retransmitters are entitled to the section 31 compulsory licence. JumpTV filed its materials earlier this year, and the participants exchanged a large number of written interrogatories seeking information about the others’ operations and positions. Most of these were aimed at finding out more about JumpTV’s proposed business and technical operations, as it had not at that point launched a service. Some of these questions were answered, but the Copyright Board directed JumpTV to provide more and better answers.

Those answers never came. Instead, on Oct. 10, just after the deadline for providing more information, JumpTV simply withdrew its retransmission licence application. JumpTV stated that it was abandoning the banner advertising model upon which its application was based, but that the details of any new model were not yet clear.

And not just its new business model is unclear. JumpTV has so far declined to say what it will do if it decides to move to a subscription-based model. Will it apply again to the Copyright Board or will it, like iCraveTV, simply launch on the assumption that the existing tariffs paid by cable and DTH will cover it? Canadian Association of Broadcasters president Michael McCabe has already stated that a switch from an advertising to a subscriber business model will not diminish broadcasters’ opposition to JumpTV’s plans.

Government consultations

Hovering over all of these licensing and legal issues is the federal government’s review of Internet television retransmission. Earlier this year, the government released a consultation paper describing the issues, identifying options and seeking stakeholder input. The large number of submissions forced the government to push back the reply period until late October.

The results of the government’s consultation process may go a long way to clarifying the section 31 debate. JumpTV’s withdrawal from the Copyright Board process means that the issues are more likely to be resolved by policymakers through legislation than by regulators through adjudication.

Whatever else is clear (or not), the Internet retransmission story isn’t over yet. JumpTV may launch or go back to the Copyright Board. Broadcasters and program owners may sue or oppose a licence application. The government may take steps to resolve this matter once and for all, although when it might do so is unknown. In the meantime, we can only watch and wait.

MCMILLAN Binch represented Canadian broadcasters in the iCraveTV litigation and represents the Canadian Association of Broadcasters and others in the JumpTV proceedings before the Copyright Board. This article contains general comments only. It is not intended to be exhaustive and should not be considered as advice in any particular situation.

-www.mcbinch.com