Creating Canada's Digital Content Advantage

Summary

Digital innovations hold the promise of a better tomorrow. A more competitive economy. Better healthcare. Innovations in education. A safer public. We need only recall how many digital innovations have transformed our world in the last ten years to envision how much promise digital innovations hold for so many elements of society in the future.

A digital strategy that fulfils that promise must address two key challenges: how to encourage the creation of the Canadian digital content Canadians want, and how to ensure there will be high–speed broadband networks capable of distributing that content to all Canadians. As the Government's consultation document states: "Those who get it right will find ways to meet the needs of Canadians as citizens, consumers and creators, and in doing so, will drive the uptake of infrastructure and devices, distinguishing Canadian digital offerings in a crowded global marketplace." Addressing these challenges will require Government action in key areas.

Traditionally, Governments promote public policy objectives through a combination of regulation and targeted support through subsidies or tax incentives. In the borderless digital environment, the regulatory mechanisms that have historically protected and promoted Canadian media content may be less effective. Targeted public investment in the digital economy can ensure that the growth of Canadian digital content keeps pace with the development of foreign, particularly American content, ensuring a Canadian perspective and presence among the best in the world on digital media platforms.

But how should Government invest public resources? A continuation of the mixed public/private approach that has served the broadcast sector for many decades will ensure that the market drives innovation and competition while those public interests which are not served by the market are addressed and the broader needs of the Canadian public are served.

Within this approach, government strategy can be most effective if directed both at a level that stimulates competition, innovation and experimentation, as well as at supporting organizations and institutions which can act as catalysts for the industry as a whole thereby leveraging the public investment to encourage a larger more–competitive Canadian creation and distribution industry. These organizations would have some key characteristics:

• Focal points for Canada's creative community
• Innovators in digital media platforms and services
• Capable of sourcing (producing, commissioning, curating), aggregating and distributing digital content from as broad an array of the Canadian mosaic as possible
• Owners of or capable of building strong, trusted Canadian content brands which can connect large audiences to diverse Canadian content
• Creating content that can reflect the diversity of Canada and promote Canadian culture

Ensuring that this Canadian digital content reaches Canadians will require high–speed networks capable of delivering heavy bandwidth content like Internet Television, in an affordable way. Public policy that encourages the migration of television to the Internet can, in fact, accelerate the adoption of digital technology generally with wide ranging benefits in other sectors. The success of developing this delivery system depends on several key requirements:

• Removing barriers to widespread adoption of broadband technologies by:
  • Increasing broadband access and retail price competition
  • Requiring billing transparency for broadband services
  • Prohibiting discriminatory traffic management practices
  • Offering lower network costs for off–peak usage
• Ensuring that rural and remote communities with smaller populations enjoy the same digital benefits as urban Canadians.
• Reserving sufficient radio spectrum to support advanced infrastructure development for future needs.

Submission

CBC/Radio–Canada's digital advantage

CBC/Radio–Canada has been at the forefront of digital technology since day one:

• Our websites — CBC/Radio–Canada and Radio–Canada (in French only) — are the most frequented media sites in the country in their linguistic markets with 5.2 and 1.8 million unique visitors per month respectively;
• We were the first in Canada to stream audio online;
• The first to stream video on mobile devices;
• Today, virtually all of the content we produce is available online, by way of live streaming or on–demand podcasts;

Take a show like Q, for example. It is on CBC Radio One and Sirius Satellite Radio, or you can watch it on our television network bold. You can also get it by regular or video podcast, or interact with the show on YouTube, Twitter, Facebook, or MySpace.

• We were the first company in North America to freely distribute content via bit torrent technology;
• Radio–Canada launched TOU.TV, Canada's largest French–language entertainment Web television site in January 2010. It launched with over 2,000 hours of programming available from a bevy of Canadian and international public broadcasters and independent producers and recorded over 745,000 connections in its first week. In its first six months of operation, TOU.TV has registered more than 13.5 million video connections.
• Our iPhone apps are amongst the best in the world.
• We offer over 2000 hours of archival material on numerous platforms (now you can listen to the first radio broadcast in Canada… on demand, on your smartphone!)
• We leverage social media sites — Twitter, Facebook, YouTube, Flickr.
• And our content is amongst the most downloaded on iTunes Canada.

Our success in new media has been led by our own creative workforce and, increasingly, by multiple partnerships with a myriad of leaders of the new media world. Our aim is not to be an isolated island of expertise but rather an integrated, organic part of the larger web culture just as we are an integrated, organic part of the larger Canadian culture. Similarly we are reshaping our internal structure so that we are no longer organized as separate television, radio and online services. We are progressively moving to an integrated structure that provides audio, video and text–based content on whatever platform the public chooses to access it.

CBC/Radio–Canada has and will continue to explore and evolve with whatever technology Canadians and the world are ready to embrace. We are, therefore, delighted that the government has launched its Consultation Paper on a Digital Strategy for Canada. It is timely and CBC/Radio Canada looks forward to participating in the consultation and in the implementation of the eventual strategy.

What follows are some high–level thoughts about directions the strategy could take. We would, of course, be enthusiastic to provide more detailed feedback should occasion arise.

Creating Canada's Digital Content Advantage (Strategy 4)

A national digital economy strategy can ensure that Canada becomes a global digital technology leader. A key component of that strategy will be building a strong and globally competitive Canadian digital media content industry. Content — high quality, relevant content that consumers want and need — is the locomotive that will drive adoption and, ultimately, drive Canada's digital innovation and digital advantage. A key objective of the digital economy strategy, then, should be to ensure that Canadians have access to digital content that is compelling, creative and in high demand. This submission offers the Corporation's thoughts on how Canada can achieve this objective.

We believe that the focal point for government action needs to be an effective Internet television policy. Increasingly, the digital content that consumers want is video, which requires large amounts of bandwidth. According to Cisco's June 2010 Visual Networking Forecast: "Internet video is now over one–third of all consumer Internet traffic, and will approach 40 percent of consumer Internet traffic by the end of 2010, not including the amount of video exchanged through P2P file sharing. The sum of all forms of video (TV, video on demand, Internet, and P2P) will… exceed 91 percent of global consumer traffic by 2014."

The incentives to invest in content that would drive broadband adoption have never been so challenged. Internet piracy throttled the recorded music industry and now hangs over the head of TV. Free, ad–supported models can't viably support many newspapers so offer little hope for capital–intensive TV content industries. Subscription models have proven resilient for the specialty TV industry, but, pending resolution of a referral to the courts, the largest producers of content, conventional broadcasters, still face barriers to access it and the single largest producer of Canadian content, CBC/Radio–Canada, has been denied it.

Compounding the challenging economics of content creation is the continuing need for measures to support original Canadian content. Contrary to popular belief, digital doesn't diminish the need for support measures to ensure Canadians have opportunities to create original content. Whether analog or digital, TV remains a hits business that requires enormous amounts of upfront capital to produce content and as a result, foreign content producers in the largest markets have an enormous competitive advantage in Canada. If we want to ensure a vibrant creative sector in Canada's digital economy, support measures will continue to be necessary to promote investment in original content.

Content Regulations and Legislation in an era of borderless Digital Media

There is concern among some industry experts that a number of the regulatory and legislative mechanisms that have historically protected and promoted Canadian media content may not be effective in the digital environment. The private sector needs to continue to make significant investments in original content if we are to find innovative content that will engage Canadians and drive broadband adoption. If the analog model of private sector investment was based on micro rules restricting access in favour of incumbents and imposing exhibition content quotas on the privileged few, then the digital model may rely on greater competition from new players, symmetrical expenditure quotas that are equitable among competitors and more flexibility and freedom over content investments. As they did in the traditional broadcast environment, public policy makers will need to target financial support towards the creation of content in key areas of the digital economy.

In the short term, no viable advertising–based business model has yet emerged for new platforms like Internet television, and may not for some time. Given this reality, the economics of creating quality Canadian digital content will become increasingly unfavorable, putting Canada's place in the digital economy at risk.

The fact is, whether its railways, highways or television transmission, building significant national networks has required government investment and significant political will, yet the benefits to the public are enormous. So, if some degree of subsidy is required, at least in the medium–term, how can Canadians ensure they will get maximum impact from their financial investment in Canadian Internet television and other forms of digital content? The Canada Media Fund, with its focus on multi–platform content creation, is an important step. Another important part of the new digital economy strategy should be focusing public support in areas where it can generate the greatest impact.

Identifying Catalysts for Digital Media Growth

Clearly, compelling content that consumers need or want is one such area. One way of targeting public support is to identify organizations and institutions that can act as catalysts for stimulating a stronger Canadian digital content industry as a whole. As hubs for creativity and innovation, these organizations can foster the growth of new businesses while accelerating the production and presentation of Canadian content. This will not only meet domestic needs but will project a strong image of Canadian culture to the world.

Effective digital content catalysts should possess some of the following five key characteristics.

1. They should be focal points for Canada's creative community
Canada's writers, actors, directors, musicians and artists — supported by thousands of Canadians working in the production industry — have the skills and the expertise to lead Canada's digital content revolution. What they need is support to leverage their talents and maximize the impact of their work, focal points where groups and individuals feed off each other's ideas, and create, in effect, a crucible of content–generation.

2. They should have an extensive capability for promoting Canadian media content.
An effective catalyst would have extensive capability for sourcing (producing, commissioning, curating, facilitating), aggregating and distributing Canadian media content, content that is of a professional quality that compares favourably with the best in the world that the web makes available, but is also a reflection of Canadian reality and values.

3. They should be innovators in digital media platforms and services.
Building a stronger digital content industry will require making that content available to as many Canadians as possible, in the ways they want to be reached. Effective catalyst organizations should be pioneers in offering content and services across an ever–widening range of digital media platforms.

Some catalysts should have public service mandates that encourage them to move into technologies that increase access to their content despite economic constraints. Such organizations can take risks and experiment with new business models because they are not driven entirely by bottom–line considerations, but by the requirement to deliver content and services deemed essential to Canadians. Few private sector companies will take risks in creating content specifically by and for remote, Aboriginal and ethno cultural communities, for example.

4. They should possess a strong Canadian content brand
As the Government's consultation document notes, Canadian content producers "continue to struggle to attract audiences given the extensive amounts of foreign content available online." In an increasingly content–crowded media landscape, a strong Canadian content brand can serve as a beacon, signalling to audiences where they can find content relevant to their Canadian experience. A strong, trusted brand is also a significant competitive advantage in digital media markets where many of the sources of content are unknown and untested.

5. They should create content that reflects the diversity of Canadian voices.
Canada's size, as well as its tremendous regional and cultural diversity is its greatest strength as well as its cultural challenge. With a diverse population dispersed across a large country and demographic shifts that continue to transform society, shared experiences can help build social cohesion. With Canadians enjoying digital access to just about any cultural product created anywhere in the world, the need for a space to bring large numbers of Canadians, virtually, together around national debate, common public heroes or major cultural and sporting events has never been greater. In addition, Canadian digital content needs to be available in both official languages as well as in aboriginal languages. To be a digital media catalyst requires the scope, the mandate or the business incentive to meet these requirements.

Building a World–Class Digital Infrastructure (Strategy 3)

Supporting Internet Television is Key

World class, ultra high–speed broadband infrastructure is essential to delivering not only the digital content Canadians want, but also the economic and social benefits of services such as e–learning, tele–medicine, and e–government. Both wired and wireless broadband Internet are the road, rail and airway of the digital economy. Without it, Canada's entrepreneurial spirit, innovative solutions and vast creativity will not flourish. Canadians fundamentally get the importance of broadband to our future.

Yet despite the need for broadband, Canada finds itself in an unfavourable position. Once a leader in broadband, we now lag by international standards. Why? Surprisingly, much of the answer is in the economics of television.

Driven by public policy in an era before broadband, cable television was rolled out to more communities and homes across Canada than just about any other country in the world. This gave Canada a jump–start because that second wire running into the home provided an alternative option to incumbent telephone companies; a much needed competitive force that most other countries in the world didn't have the benefit of. That broadband lead was sustained for some time because the coaxial cable wire is far superior in delivering faster broadband speeds than the twisted pair copper wire of telephone companies that most people in the world rely on. Yet now, broadband in Canada is at a crossroad.

Broadband providers are faced with hard investment decisions that are not necessarily in their economic interests. Cable is faced with building a broadband service that could cannibalize its TV service. Conversely, telephone companies need to lay fibre to the home (or at least close to it) at enormous expense in order to effectively compete with the broadband speed of cable. Coupled with these major investment decisions is the reality that enormous entry barriers will prohibit more than the existing two wireline providers in the home. Broadband wireless options will be a complement, but will likely never match the speed and reliability of wired options needed to reliable deliver bandwidth intensive applications like television.

Television (and video content) is enormously bandwidth intensive. Video currently represents about half of all Internet traffic and will grow to over 90% in a handful of years. Despite this though, very little time is actually spent watching video content on the Internet: 1 hour per user per week or about 15 minutes per Canadian. This is but a small amount of the 26 hours a week Canadians spend watching television, yet it represents all that is great about the future of viewing: non–linear, infinite choice, recommendation engines and innovations to come that we can only imagine. If a mere fraction of Canadian television viewing moved online, it would be the catalyst for building next generation broadband that would have enormous ancillary benefits to the overall digital economy.

Internet television is the leader. It is also the threshold. Networks capable of supporting Internet video will also be able to support the other applications and services required to build a thriving digital content industry. Where Internet television leads, innovation will invariably follow.

Ensuring that rural and remote communities are not left behind

The Government has recognized that broadband Internet access is an essential infrastructure for Canadians. To ensure that rural communities are not left behind it has committed to funding Internet connectivity under the Broadband Canada: Connection Rural Canadians program. This should continue. It is vital that broadband Internet — and the new Canadian content it offers — not contribute to an urban/rural divide. That will undermine the very reason for Canadian content in the digital economy.

This means that the objectives previously identified for broadband technologies must apply to rural and remote communities: broadband speeds capable of delivering real–time Internet TV; competition to ensure low cost and innovation; transparency in billing; neutral traffic management; and fairness in usage charges.

Ensuring sufficient radio spectrum to support advanced infrastructure development

While the auctioning of radio spectrum is a valuable resource for government, a purely market–driven approach to the allocation of spectrum risks hampering Canada's long–term digital growth. Mobile wireless is important to be sure, however, there are other socially important uses for spectrum as well, including broadcasting. While these may not currently generate significant revenue, they can provide other social benefits to Canadians. For this reason, a balanced approach that mixes market and policy or "social good" considerations is required.

Government should also consider giving other users (i.e., application developers and content suppliers) non–discriminatory access to scarce spectrum. This is especially important in the mobile wireless environment in which operators are in a position to act as gatekeepers for both applications and content. Non–discriminatory access would encourage both innovation and a diversity of Canadian perspectives.

Recommendations

In support of the development of a successful digital economy strategy, CBC/Radio–Canada submits the following recommendations.

1. Content Will Drive Digital Adoption

Place emphasis on promoting a vibrant media content industry that produces and makes available world class content that is relevant to Canadians. To do that, adapt the regulatory framework to take account of digital realities (a new balance of regulation, expenditure quotas and subsidy); invest in digital content catalysts that lift and leverage the creative community and can attract and promote to large numbers of Canadians to digital content; invest to ensure the content reflects the whole country, that no one should be left behind.

2. Internet Television is the Accelerator

Television is today the most powerful cultural vehicle in western societies. The digital environment provides benefits to consumers of television that can be harnessed to accelerate adoption.

3. A Transparent Internet

Internet traffic should not be targeted for unreasonable or unnecessary restrictions. Experimentation and innovation will result in new uses for Canada's digital infrastructure and permit the successful emergence of different demands for bandwidth. This should be encouraged because it will ultimately lead to increased availability to digital Canadian content, and more choice of such content for Canadians. For this reason, if Internet traffic must be managed, such management must be transparent and not unreasonably discriminatory.

4. Bridge the Rural Broadband Divide

The Government has recognized that broadband Internet access is an essential infrastructure for Canadians. To ensure that rural communities are not left behind it has committed to funding Internet connectivity under the Broadband Canada: Connection Rural Canadians program. This should continue. It is important that broadband Internet — and the new Canadian content it offers — not contribute to an urban/rural divide.

5. Ensure Sufficient Radio Spectrum to Support Advanced Infrastructure Development

While the auctioning of radio spectrum is a valuable resource for government, a purely market–driven approach to the allocation of spectrum risks hampering Canada's long–term digital growth. Mobile wireless is important to be sure, however, there are other socially important uses for spectrum as well, including broadcasting. While these may not currently generate significant revenue, they can provide other social benefits to Canadians. For this reason, a balanced approach that mixes market and policy or "social good" considerations is required.

6. Financial Flexibility

Investments in public broadcasting are an effective vehicle for financing original digital content and innovative services to enhance consumer choice in the digital economy. However, CBC/Radio–Canada's ability to invest in and respond to market changes in the digital environment is encumbered by a number of existing financial policies outside its control. Increased flexibility in this area would permit CBC/Radio–Canada to respond to more opportunities and partnerships in a rapidly evolving digital era. The net result of which would be the production and distribution of a greater amount of original and innovative digital Canadian content.

Conclusion

Canada has the raw material to become a world leader in the digital economy. It has the expertise, and the creative talent to thrive in this industry. CBC/Radio–Canada will do its part to by continuing its leadership role in the creation of leading–edge digital content across all platforms. We believe that an effective national digital strategy which focuses public resources on key public policy objectives will further ensure a strong presence for Canadian entrepreneurs, creators, and Canadian audiences.

Contact

For more information contact:
Shaun Poulter
Senior Director, Government Relations
CBC/Radio–Canada
Telephone: 613 288–6233
Email: Shaun Poulter