ARCHIVED -  Public Notice CRTC 1999-84

Public Notice

Ottawa, 17 May 1999

Broadcasting Public Notice CRTC 1999-84

Telecom Public Notice CRTC 99-14

New Media

TABLE OF CONTENTS   Paragraph

Introduction 1

Attributes of new media 12

The Commission's approach to new media 26

A Canadian presence in new media 60

How conventional broadcasting and telecommunications are affected by new media 90

Offensive and illegal content 117

Appendix 1
Chronology of convergence-related initiatives

Appendix 2
Glossary

Summary

Earlier this year, the Commission concluded its public consultations under both the Broadcasting Act and the Telecommunications Act, regarding the range of communications and information services referred to as "new media."

Parties to the proceeding assumed new media to be services delivered over the Internet and the Commission does not consider it necessary to define the term further.

In 1996, Industry Canada estimated that as many as 650 businesses, employing as many as 17,000 people, were active in multimedia, including new media. Other studies suggest that there may be more than 1,000 such firms. Whatever its actual size, it is clear that the multimedia industry is vibrant and growing, with the numbers of firms and services expected to grow significantly as more Canadians acquire personal computers (PCs) and seek access to the Internet.

This section of the document summarizes the Commission's determinations following the proceeding noted above.

The Commission's approach to new media

To date, there has been uncertainty about whether new media services constitute broadcasting in light of the breadth of the definitions of "program" and "broadcasting" as set out in the Broadcasting Act. The Commission agrees with those parties who stated that such uncertainty could be problematic for the developers and producers of new and emerging services. It therefore provides the following views about the scope of the definition of "broadcasting" in the Act and sets out its approach to new media.

The Commission considers that the majority of services now available on the Internet consist predominantly of alphanumeric text, and, therefore, do not fall within the scope of the Broadcasting Act and are thus outside the Commission's jurisdiction.

Among the services that also do not fall within the scope of the definition of broadcasting are those where the potential for user customization is significant, i.e., services where end-users have an individual, or one-on-one, experience and where they create their own uniquely tailored content. The Commission considers that these types of services do not involve the transmission of programs for reception by the public and are, therefore, not broadcasting.

The proceeding also made it clear that some new media services fall under the Broadcasting Act's definitions of "program" and "broadcasting." These include digital audio services and audio/visual signals.

For those undertakings that offer new media services that do fall under the definition of broadcasting, the Commission has concluded that regulation is not necessary to achieve the objectives of the Broadcasting Act. It will issue, by 30 June 1999, a proposed exemption order without terms or conditions in respect of all undertakings that are providing broadcasting services over the Internet, in whole or in part, in Canada.

Accordingly, the Commission will not regulate new media activities on the Internet under the Broadcasting Act.

A Canadian presence in new media

In the Commission's view, there is no apparent shortage of Canadian content on the Internet today. Rather, market forces are providing a Canadian Internet presence that is also supported by a strong demand for Canadian product.

The Commission notes that a number of initiatives and funds have been developed in both the public and private sectors to help finance and support Canadian new media product.

For these reasons, the Commission concurs with the majority of participants that there is no reason for it to impose regulatory measures to stimulate the production and development of Canadian new media content.

How conventional broadcasting is affected by new media

The Commission considers that new media have not had any detrimental impact on conventional radio and television audiences. The Commission is of the view that the effect of new media on television audience size will be limited at least until such time as high-quality video programming can be distributed on the Internet.

The Commission also agrees with most participants in the proceeding that there is no evidence that the Internet has had any negative financial impact on the advertising revenues of traditional broadcasters. In fact, radio advertising revenues have increased since 1993, and television advertising revenues have grown steadily over the past twenty years.

Illegal and offensive content

The Commission acknowledges the expressions of concern that have been made about the distribution of offensive and potentially illegal content on the Internet.

The Commission notes that Internet Service Providers (ISPs) and their industry associations, in conjunction with government agencies and other organizations, have made efforts to develop codes of conduct to help combat the distribution of offensive material. It considers that more could be done for example, by establishing complaint lines and industry ombudsmen and developing international cooperation with law enforcement agencies. The Commission also notes that effective content filtering computer software is being developed. Such software will assist those who wish to control access to material that they feel is inappropriate.

The Commission acknowledges the views of the majority of parties to the proceeding that generally-applicable Canadian laws, coupled with self-regulatory initiatives, rather than the Broadcasting Act are more appropriate means for dealing with offensive material in new media. The vast majority of such content, particularly hate propaganda, is beyond the regulatory jurisdiction of the Broadcasting Act because it consists predominantly of alphanumeric text. As such, it falls outside of the definition of a "program" set out in the Act. In keeping with the overall policy stated earlier, significantly customized content does not fall within the definition of broadcasting and that content which is broadcasting will be exempt from regulation.

Telecommunications

The Commission considers that access by competitive providers of Internet services to the facilities they require to offer services is an important concern. In a 1998 decision (Telecom Decision CRTC 98-9), the Commission decided it would approve the rates and terms under which incumbent cable and telephone companies provide higher speed access to their telecommunications facilities to ISPs. The Commission will set out its general regulatory approach to rates and terms for such cable carrier higher speed access services in the near future.

Introduction

1. On 31 July 1998, in Broadcasting Public Notice CRTC 1998-82 and Telecom Public Notice CRTC 98-20 (the Public Notice), the Commission announced that it was initiating a proceeding under both the Broadcasting Act and the Telecommunications Act calling for comments on the rapidly expanding and increasingly available range of communications services collectively referred to as "new media."

2. The Commission held a three-phase process for the submission of written comments by interested parties. This proceeding was unprecedented in terms of the broad spectrum of individuals, industries, and interest groups from whom the Commission received comments. The call for comments produced well in excess of 1000 contributions from individuals, multimedia companies involved in the production and distribution of new media products and services, as well as the traditionally regulated industries and their industry associations that are familiar and active participants in Commission proceedings.

3. Many of the submissions came from individuals, groups and industries that had not previously appeared at or participated in Commission proceedings. Their submissions were most useful in informing the Commission during its deliberations on the prevailing technical and market realities in which new media players operate.

4. In addition, the McLuhan Program E-Lab unit, on behalf of the CRTC, hosted an on-line forum that stimulated comment from a wide range of individuals from across the nation and around the world on issues that were germane to the matters under consideration in this proceeding.

5. At the two oral phases of the public hearing held, respectively, during eleven days last November and December and two days last February, the Commission heard close to one hundred parties on the subject of new media.

6. In the Public Notice, the Commission stated that the purpose of the proceeding was to develop a comprehensive record to assist it in answering the following questions:

a) In what ways, and to what extent, do new media affect, or are they likely to affect, the broadcasting and telecommunications undertakings now regulated by the Commission?

b) In what ways, and to what extent, are some or any of the new media either broadcasting or telecommunications services?

c) To the extent that any of the new media are broadcasting or telecommunications, to what extent should the Commission regulate and supervise them pursuant to the Broadcasting Act and the Telecommunications Act?

d) Do the new media raise any other broad policy issues of national interest?

7. This document responds to these questions. The following section describes the general attributes of the new media sector that emerged throughout the written and oral phases of the proceeding. These attributes are intended not only to describe the emerging new media sector, but are also key elements that contribute to the Commission's determinations that follow later in the public notice.

8. The Commission wishes to underscore that this proceeding made clear the rapid change that has occurred in this industry within a very short time frame. This pace will undoubtedly continue. It also considers that the development of new media services will not necessarily be "linear" in their evolution toward audio and video applications. Rather, they may develop in ways not yet contemplated. As a result, by necessity, this report provides a snapshot of this important and evolving industry at this stage of its development.

9. Section 3 of this report presents the Commission's determination that it will not regulate new media activities under the Broadcasting Act. Therefore, it will issue, by 30 June 1999, a proposed exemption order without terms or conditions in respect of all undertakings that are providing broadcasting services over the Internet, in whole or in part, in Canada.

10. The remaining sections provide discussion of some key policy issues of national interest, including the impact of new media on conventional broadcasting and telecommunications, support for Canadian new media content, and the availability of illegal and offensive content on the Internet.

11. This process has provided the Commission with a substantial record of information and viewpoints on the four general questions posed by the Commission, as well as on other important issues. The Commission wishes to thank all parties for their views and participation.

Attributes of new media

12. The development of digital technologies has led to the emergence of new media which can combine elements such as text, graphics, data, fixed images, audio, full motion video and animation and deliver them to exhibition devices such as personal computers (PCs) or television sets. The distinguishing features of new media are its use of digitization, interactivity and interconnected networks.

13. In 1996, Industry Canada estimated that 650 Canadian multimedia firms had created over 17,000 jobs. Other studies, such as those conducted by the Canadian Human Resources Council, estimate that there may be more than 1,000 such firms. Most multimedia firms are privately held and small, with 80% having fewer than 25 employees. The industry is concentrated in the metropolitan areas of Quebec, Ontario and British Columbia, but other regions are also developing significant amounts of Canadian new media content.

14. The term "new media" can refer to a diverse range of communications products and services, which include but are not limited to video games, CD-ROMs, electronic-mail (e-mail), on-line paging services, faxing, electronic commerce, IP telephony, and services delivered over the World Wide Web and the Internet. In the Public Notice initiating this proceeding, the Commission stated that as a working definition:

New media can be described as encompassing, singly or in combination, and whether interactive or not, services and products that make use of video, audio, graphics and alphanumeric text; and involving, along with other, more traditional means of distribution, digital delivery over networks interconnected on a local or global scale.

15. Parties to the proceeding assumed new media to be services delivered by means of the Internet. Given its regulatory approach, as set out earlier, the Commission does not consider it necessary to further define new media. Throughout this document, the Commission uses the term new media services to be those that are delivered by means of the Internet.

16. Parties to the proceeding brought a great deal of new information to the Commission relating to the new media industry in Canada. A number of factors relevant to the new media industry in Canada on which there was a high degree of agreement on the record of the proceeding are summarized below. Some of these attributes, particularly those that are integral to the Commission's policy direction for new media, are discussed in greater detail in other sections of this public notice.

17. The new media industry in Canada is highly competitive. Both the industry and the market for new media products and services are vibrant and growing, with the number of firms and services expected to expand considerably as the penetration of information technologies increases. There is significant participation by individuals and organizations, as well as by existing broadcasting undertakings, in the creation and distribution of Canadian new media products and services.

18. One of the key factors in the growth of the market for new media products and services is the increasing penetration of information technologies. Canada has a relatively high level of penetration of computers in the home and in the workplace when compared with other OECD countries. In 1997, Statistics Canada estimated that 36% of Canadian households were equipped with PCs, an 11% increase over 1996. In September 1998, Ekos Research estimated that close to 60% of households owned at least one PC.

19. Canada also has one of the lowest costs for consumer access to the Internet when compared with those in other OECD countries. A huge rate of growth in Internet use can also be noted. The October 1997 Statistics Canada Household Internet Survey revealed that 42% of connected households spent over 20 hours per month on-line, with 61% connecting at least seven times a week. The survey also found that the most common uses were sending e-mail (77%) and accessing information (71%). In turn, a study undertaken by Communications Management Inc. (CMI) filed in this proceeding estimated that, by 2001, approximately five million Canadian households, or 40% of households, will have access to the Internet, double the number of households which had Internet access in 1998. According to CMI, most of the growth will take place in households that already have PCs, as modems and Internet access features are added.

20. A wide range of both public and private initiatives are working together to facilitate the growth of new media in Canada. For instance, the Community Access Program (providing public access to the Internet in urban and rural communities), the Computers for Schools Program and the SchoolNet Program have hastened the availability of access to Canadians in rural areas and public facilities across Canada. Canadian educational institutions are actively involved in the development of educational and training programs that take advantage of Canadian technological and creative abilities.

21. The availability of funds through the federal and provincial governments, as well as certain private sector initiatives, provide valuable core funding to the Canadian new media sector for both industry and content development. Accordingly, most participants considered that a requirement to contribute to the production of Canadian content through a levy is unnecessary and could even be detrimental to the Canadian new media sector.

22. New media content creators operate within a highly diversified industry. Players range from traditional media extending their brands to the Internet, to non-media companies seeking to use the Internet to promote their services, to universities, libraries and individuals. As a result, the production of new media content can range from very simple text and graphics, all the way to elaborate graphics and streaming audio and video. Much of the content on the Internet, Canadian or otherwise, is currently made up predominantly of alphanumeric text. Although there appears to be a trend towards an increase in the use of audio and video elements either, singly or in combination, the ability to deliver long-form programming of an acceptable technical quality is emerging slowly, most particularly with respect to video.

23. Much of the Canadian new media content available complements either the existing programming of those Canadian broadcasting undertakings involved in new media or provides a means for expressing a diversity of viewpoints to niche audiences or others who perceive that they are not adequately represented by traditional media in all of its forms. Portal operators make available a considerable amount of Canadian new media content that is of local and regional interest.

24. Participants provided statistics indicating that Canadian web sites represent about 5% of all Internet web sites. The availability of a number of Canadian search engines provides relatively easy access to Canadian new media content. French-language content represents about 5% of total Internet content.

25. In addition, the Commission considers that, due to the nature of the networks that comprise the Internet, spectrum scarcity is not an issue and the development of high bandwidth infrastructure is proceeding at a relatively rapid pace, although its deployment appears to be proceeding more slowly. The Commission is of the view that these developments are proceeding on the basis of business considerations and financial investments made by firms in the marketplace, as well as through the efforts of Government in funding the development of these technologies.

The Commission's approach to new media

26. Many parties to this proceeding agreed that there is a need for greater regulatory clarity and certainty regarding services that are being offered by way of the Internet. In this respect, parties submitted that there is a need for the Commission to move beyond the statements included in its 19 May 1995 report to Government entitled Competition and Culture on Canada's Information Highway: Managing the Realities of Transition (the Convergence Report).

27. In the Convergence Report, the Commission noted, among other things, that the current Broadcasting Act will likely capture many of the new and emerging services. Since that report was released, neither the Commission nor other government bodies have clarified what approach or treatment should be applied to such services.

28. Parties differed on whether the Broadcasting Act applies at all to new media undertakings and the services they provide. Some parties argued that most new media services are beyond the scope of "broadcasting" as defined in the Broadcasting Act and that the Commission should settle any uncertainty to that effect. Others argued that none of the services delivered over the Internet are consistent with any notion of broadcasting that would have been contemplated by the Broadcasting Act.

29. Interpretations on this point were varied. For instance, the vast majority of individual Canadians who participated in the on-line forum that was initiated at the outset of this proceeding, as well as the numbers of individuals who e-mailed the Commission during the course of the proceeding, submitted, in essence, that there should be no regulatory oversight of these services by the Commission pursuant to the Broadcasting Act.

30. Certain parties, however, argued that most new media services would qualify as "broadcasting" and the undertakings that provide them as "broadcasting undertakings" under the definitions set out in the Broadcasting Act.

31. Putting those differing interpretations aside, parties were generally consistent in the view that there is a compelling need for the Commission to provide more clarity and certainty as to the approach that it intends to develop with regard to new media. They argued that the uncertainty surrounding this issue creates difficulties for developers and distributors of such services in accessing capital markets and in bringing new and innovative services to the Canadian market.

32. The Commission agrees that there has been uncertainty as to whether new media services constitute broadcasting in light of the breadth of the definitions of "program" and "broadcasting" under the Broadcasting Act. The Commission also agrees that such uncertainty could be problematic for the developers and providers of new and emerging services. In the following section, the Commission provides its views as to the scope of the definition of "broadcasting" in the Act and sets out its approach to new media.

Is new media "broadcasting"?

Statutory Definitions

33. "Broadcasting" is defined in section 2 of the Broadcasting Act as follows:

[a]ny transmission of programs, whether or not encrypted, by radio waves or other means of telecommunication for reception by the public by means of broadcasting receiving apparatus, but does not include any such transmission of programs that is made solely for performance or display in a public place.

34. The term "program" is in turn defined in section 2 of the Act as:

[s]ounds or visual images, or a combination of sounds and visual images, that are intended to inform, enlighten or entertain, but does not include visual images, whether or not combined with sounds, that consist predominantly of alphanumeric text.

Explicit statutory exclusions from the definition of broadcasting

35. The Commission notes that, as stated above, much of the content available by way of the Internet, Canadian or otherwise, currently consists predominantly of alphanumeric text and is therefore excluded from the definition of "program". This type of content, therefore, falls outside the scope of the Broadcasting Act. Accordingly, the remainder of this section contemplates Internet content that consists only of audio, video, a combination of audio and video, or other visual images including still images that do not consist predominantly of alphanumeric text.

36. It was submitted, among other things, that information displayed on the Internet can be considered to be solely for display in a public place and therefore excluded from the definition of "broadcasting". Certainly, the Canadian public expressed its view that the Internet has a unique ability to foster citizen engagement and public discourse. While the Commission agrees, it considers that the Internet is not in and of itself a "public place" in the sense intended by the Act. Programs are not transmitted to cyberspace, but through it, and are received in a physical place, e.g. in an office or home.

37. The Commission considers, however, that the exception to the definition of "broadcasting" for programs transmitted for display in a public place would apply, as suggested by one participant, to a particular service delivered via the Internet that is accessible by end-users only in a terminal or kiosk located in a public place, such as a public library.

Technological neutrality of "broadcasting"

38. The Commission notes that the definition of "broadcasting" includes the transmission of programs, whether or not encrypted, by other means of telecommunication. This definition is, and was intended to be, technologically neutral. Accordingly, the mere fact that a program is delivered by means of the Internet, rather than by means of the airwaves or by a cable company, does not exclude it from the definition of "broadcasting".

39. Some parties argued that there is no "transmission" of content over the Internet, and therefore, there is no "broadcasting". The fact that an end-user activates the delivery of a program is not, in the Commission's view, determinative. As discussed below, on-demand delivery is included in the definition of "broadcasting". Further, the Commission considers that the particular technology used for the delivery of signals over the Internet cannot be determinative. Based on a plain meaning of the word, and recognizing the intent that the definition be technologically neutral, the Commission considers that the delivery of data signals from an origination point (e.g. a host server) to a reception point (e.g. an end-user's apparatus) by means of the Internet involves the "transmission" of the content.

40. Some parties submitted that the definition of "broadcasting receiving apparatus" was not intended to capture devices such as personal computers or Web TV boxes when used to access the Internet. The Commission notes that the definition of "broadcasting receiving apparatus" includes a "device, or combination of devices, intended for or capable of being used for the reception of broadcasting". The Commission considers that an interpretation of this definition that includes only conventional televisions and radios is not supported by the plain meaning of the definition and would undermine the technological neutrality of the definition of "broadcasting". In the Commission's view, devices such as personal computers, or televisions equipped with Web TV boxes, fall within the definition of "broadcasting receiving apparatus" to the extent that they are or are capable of being used to receive broadcasting.

Transmission of programs for reception by the public

41. It is therefore necessary to consider whether the transmission of sounds or visual images (or a combination of sounds and visual images) that do not consist predominantly of alphanumeric text by means of the Internet can be said to involve the transmission of programs for reception by the public.

42. A number of parties submitted that content that is "customizable" does not constitute "broadcasting". The Commission notes that parties have used the term "customizable" to mean different things. For example, some parties cited the non-simultaneous characteristic of Internet services as a basis for which such services cannot be considered to be "broadcasting".

43. The Commission considers it important to distinguish between the ability to obtain Internet content "on-demand" - the non-simultaneous characteristic of Internet services - and the ability of the end-user to "customize", or interact with, the content itself to suit his or her own needs and interests.

44. In the Commission's view, there is no explicit or implicit statutory requirement that broadcasting involve scheduled or simultaneous transmissions of programs. The Commission notes that the legislator could have, but did not, expressly exclude on-demand programs from the Act. As noted by one party, the mere ability of an end-user to select content on-demand does not by itself remove such content from the definition of broadcasting. The Commission considers that programs that are transmitted to members of the public on-demand are transmitted "for reception by the public".

45. The Commission considers, however, that some Internet services involve a high degree of "customizable" content. This allows end-users to have an individual one-on-one experience through the creation of their own uniquely tailored content. In the Commission's view, this content, created by the end-user, would not be transmitted for reception by the public. The Commission therefore considers that content that is "customizable" to a significant degree does not properly fall within the definition of "broadcasting" set out in the Broadcasting Act.

46. By contrast, the ability to select, for example, camera angles or background lighting would not by itself remove programs transmitted by means of the Internet from the definition of "broadcasting". The Commission notes that digital television can be expected to allow this more limited degree of customization. In these circumstances, where the experience of end-users with the program in question would be similar, if not the same, there is nonetheless a transmission of the program for reception by the public, and, therefore, such content would be "broadcasting". These types of programs would include, for example, those that consist of digital audio and video services.

Proposal to exempt all new media broadcasting undertakings

47. Section 9(4) of the Broadcasting Act requires the Commission to exempt broadcasting undertakings from the licensing requirements in the Act if the Commission is satisfied that compliance by these undertakings with these requirements will not contribute in a material manner to the implementation of the broadcasting policy for Canada.

48. The record of this proceeding indicates that the Internet has given rise to new avenues and forms of expression and communication for Canadians, amongst themselves and others in both French and English. The proceeding also highlighted the often local and regional nature of many of the services. They provide valuable sources of information and other services to many Canadians that are otherwise unavailable. Moreover, the demand for Canadian information and other services has led to the development of search engines and aggregation sites that facilitate access to Canadian services.

49. Furthermore, the Commission considers that to impose licensing on new media would not contribute in any way to its development or to the benefits that it has brought to Canadian users, consumers and businesses.

50. In light of the foregoing, the Commission is satisfied that compliance with Part II of the Act, and any applicable regulations made thereunder, by persons carrying on new media broadcasting undertakings will not contribute in a material manner to the implementation of the policy objectives set out in section 3(1) of the Act.

51. Accordingly, the Commission will issue a proposed exemption order without terms or conditions in respect of all undertakings that are providing broadcasting services over the Internet, in whole or in part, in Canada.

52. In addition, in light of the Commission's view with respect to "customizable" content delivered by the Internet expressed above, it considers it appropriate to review in the near future its current exemption order with respect to video game programming undertakings.

Telecommunications issues

Competitors' access to carriers' facilities that are closest to the end user

53. Internet service providers consider that the most immediate need is for Commission involvement in resolving access issues remaining with respect to facilities that are closest to the customer ("last mile facilities"), including higher speed access. It was submitted by others that the Commission must ensure that such Internet service providers understand that tariffing such access is a transitional step, and that Internet service providers should invest in their own facilities. With respect to this position, it was stated that, under current legislation, this approach would effectively require Internet service providers to be Canadian-owned to supply high speed Internet services. Further, this would also amount to the government assuming what should appropriately be business investment decisions by forcing investment to be made in "transmission facilities" and away from "exempt transmission apparatus" such as routers, servers, and software.

54. The Commission agrees that it is important that potential providers of competitive retail level Internet services have access to the facilities of carriers that are dominant with respect to such facilities. For example, the Commission has addressed such issues in Telecom Decision CRTC 98-9, Regulation under the Telecommunications Act of Certain Telecommunications Services Offered by "Broadcast Carriers", 9 July 1998. In that Decision, the Commission decided it would approve ("tariff") the rates and terms on which incumbent cable and telephone companies provide higher speed access to their telecommunications facilities with respect to competitive providers of retail level Internet services. The Commission anticipates that it will issue, by 30 July 1999, its decision on the general regulatory approach to such higher speed access services when they are offered by cable carriers.

55. However, in light of the nature of the arguments made, the Commission wishes to clarify that it does not agree with parties suggesting that the Commission's objective is that all ISPs, providers of local exchange services or other service providers must own or operate transmission facilities and so become "facilities-based" carriers. The Commission has stated its objective of promoting facilities-based entry in respect of switched services in particular (such as local exchange and long distance services). However, this objective does not exclude resale. While the Commission considers that facilities-based competition is important to the realization of sustainable competition, it also recognizes that not all service providers will invest in the transmission facilities that qualify them as "telecommunications common carriers" under the Telecommunications Act.

User Access to the Internet

56. Various parties raised issues relating to the affordability and universality of new media services. Certain parties discussed the importance of an "electronic public commons" and addressed the various facets of Internet access with reference to an "access rainbow" of various levels (carriage and devices, software, content and services, service providers, literacy facilitation and governance). Parties indicated that literacy and computer skills and the cost of terminal equipment are more important to the achievement of universality in new media than is the case with traditional telecommunications services. Because many Canadians do not have literacy skills sufficient for Internet use, these Canadians will never have access to the benefits of this medium. A partial solution is to explore ways to use new media to advance literacy skills and, hence, Internet accessibility. Another participant considered the government should clarify and elaborate on its commitment to develop a national access strategy in respect of electronic networks.

57. Some of the points raised by parties go beyond the Commission's mandate under the Telecommunications Act. The Commission is currently examining certain telecommunications issues related to access and its affordability in the proceeding initiated by Telecom Public Notice CRTC 97-42, Service to High-Cost Serving Areas. The Commission intends to address issues relating to whether access to the Internet should be considered as "basic" service for subsidy purposes in its decision in that proceeding.

Rationalizing interconnection and unbundling arrangements for various service providers

58. It was argued that the Commission should indicate that it will begin a proceeding to rationalize all interconnection and unbundling arrangements, and should include the issue of interconnection and unbundling rules for Internet service providers in that proceeding. This was based on the view that such a proceeding is required in order to realize the benefits of facilities-based competition in all areas. Other parties, while agreeing that all interconnection and unbundling decisions should be consistent with the Commission's fundamental competition principles, considered that it may be useful to conduct a review if more issues come before the Commission and it is not clear how fundamental competition principles would apply.

59. The Commission notes that it has addressed a number of interconnection and related issues on a case by case basis and, as a result, varying regulatory arrangements are in place in respect of different service providers. Further, the Commission recognizes that, with continuing developments in technologies, market structure and service provider arrangements, a comprehensive review of all interconnection and unbundling arrangements is appropriate. The Commission anticipates that such a review will begin in the near future.

A Canadian presence in new media

60. Under its mandate to implement the policy objectives set out in the Broadcasting Act, the Commission has imposed Canadian exhibition and expenditure requirements on traditional broadcasters, as well as requirements for distribution undertakings to contribute financially to the production of Canadian programming. This was done in recognition of the fundamental importance of broadcasting to Canadian sovereignty and cultural identity and the realization that market forces alone would not provide a significant amount of Canadian broadcasting content. Canada's small domestic market makes it difficult to finance the creation of competitive Canadian programs. Whereas U.S. producers can recover the majority of their production costs through domestic licence fees, the licence fees earned in Canada by most Canadian program producers represent only a fraction of their total production costs.

61. The economies of scale that exist in the United States make American programming less expensive for Canadian broadcasters to acquire than Canadian programming. At the same time, American programming has tended to attract larger Canadian audiences than Canadian programming because of its higher production values and well-established star system. This has particularly been the case for English-language television. American broadcasters cannot provide their programming directly to Canadian viewers except in situations where off-air signals are directly receivable. This has resulted in a system whereby profitable non-Canadian programming is purchased by Canadian broadcasters to subsidize the cost of Canadian programming.

62. Similarly, in English-language radio, before the advent of Canadian content regulations, it was difficult for Canadian sound recordings to get airplay in Canada because they were competing against more heavily-financed and promoted "hits" from the United States and other countries.

63. The Commission confirms that its policies and regulations for conventional broadcasting services remain appropriate.

Canadian Content on the Internet

Availability of Canadian Content

64. In the Public Notice, the Commission set out a number of questions related to Canadian content on the Internet. Specifically, the Commission was interested in participants' views on the availability and visibility of Canadian new media content and whether any incentives or regulatory measures were needed to prompt existing or new industry participants to develop, produce, promote and distribute Canadian new media content and services.

65. Differing views on the need for public intervention to foster the development and production of Canadian new media content were discussed at the hearing. Some parties saw no need for any intervention at all, arguing that government should not interfere in any way because there is no shortage of Canadian new media content, no access problems for producers or consumers, and the new media industry is developing rapidly.

66. Other participants, however, favoured some form of support for the production and distribution of new media content, although the majority of these participants clearly preferred an incentive-based approach to one involving regulation. To increase the level of support for Canadian new media content, a number of initiatives were recommended. Among these were direct funding programs targeted specifically at Canadian new media content, various tax incentives to support the new media industry, content-specific industry development initiatives, and activities to stimulate consumer demand for new media content.

67. A few parties argued that a regulatory approach is the only way to ensure that Canadian new media content is produced, promoted and guaranteed a place of prominence on the Internet. The main suggestions for regulatory measures included: (1) requiring ISPs to contribute a portion of their annual revenues to content development funding; (2) requiring ISPs and/or content aggregators to ensure shelf space and a place of prominence for Canadian new media content; and (3) requiring Canadian ISPs to provide links to Canadian web sites.

68. In the Commission's view, the circumstances that led to the need for regulation of Canadian content in traditional broadcasting do not currently exist in the Internet environment. Market forces are providing a Canadian presence on the Internet that is also supported by a strong demand for Canadian new media content. Participants provided statistics indicating that Canadian web sites represent about 5% of all Internet web sites.

69. Admittedly, the sheer amount of content available on the Internet makes it difficult to measure Canadian-based content. However, parties demonstrated that a strong Canadian presence exists on the Internet through reference to some of the following: (1) the impressive number of Canadian web sites that exist; (2) key partnerships that have developed between some ISPs and Canadian content creators for the specific purpose of generating a supply of Canadian content; (3) the expansion of many traditional Canadian media businesses to the Internet; and (4) the search tools available that make it easier to locate Canadian content on the Internet.

70. Further, during the hearing, many broadcasters illustrated how they use their web sites to cross-promote their traditional Canadian broadcasting services. There also appears to be a significant demand for local and regional Canadian content on the Internet. Many Canadian television and radio stations distribute some of their local news programming through their web sites.

71. In light of the above, the Commission concurs with the majority of participants that there is a significant amount of Canadian new media content and services available on the Internet today and ample business and market incentives for its continued production and distribution. In fact, many parties submitted that regulation would serve to hinder, not help, the production and distribution of Canadian new media content. Therefore, there is no policy rationale for the Commission to impose regulatory measures to stimulate the production and distribution of Canadian content.

Visibility of Canadian Content

72. The issue of how Canadian new media content producers will acquire visibility for their content was discussed at the hearing. Concern was expressed that a few large content aggregators who might gain dominant positions could act as gatekeepers to the most heavily trafficked web sites on the Internet.

73. Parties disagreed on the urgency of this threat. Some producers claimed to have already been asked to pay for access to search engines or portals. However, many of the content aggregators that appeared before the Commission denied that anyone is charging for access. Instead, they indicated that Canadian content is always in demand because of the Internet's virtually limitless capacity to carry it. Others have argued that producers are demanding and receiving significant compensation in return for the right to mirror or cache their sites on a particular portal or server. Many also noted that there are a number of Canadian content aggregators and portal sites that are being established that could lead Canadian consumers easily to Canadian content.

74. In the Commission's view, there was no convincing evidence submitted throughout the hearing process to suggest that visibility of Canadian content on the Internet is a problem and, therefore, no policy rationale to pursue regulatory measures to support access to Canadian content on the Internet.

75. The Commission is aware that the likely explanation as to why Canadian content is flourishing on the Internet today is because the Internet is still primarily a text-based information medium with a strong appeal to local and regional interests. The type of content that is predominant on the Internet has low production values; it is relatively inexpensive to produce; and it is in demand by Canadians who want access to local, regional and national information in such areas as weather, sports, current affairs and social services. If the Internet remains primarily a text-based, information medium, then it is likely that market forces alone will continue to provide an adequate supply of Canadian content.

76. Many expressed concern about the preservation of funding resources for high quality Canadian programming in the future new media environment. A broad spectrum of participants recommended different funding initiatives to support Canadian new media content. These included direct government funding of new media content, in the form of grants, loans, and equity investments. A number of refundable tax credits were also recommended to cover such new media expenses as investment in new media production, labour, research and development, and capital costs. Several parties also recommended that Section 19 of the Income Tax Act, which provides advertisers in Canadian publications with deductions equal to the costs of their advertisements, should be applied to new media.

77. The Commission notes that a number of funds have already been developed in both the public and private sectors to help finance Canadian new media content. Funds such as The Multimedia Fund administered by Telefilm Canada, the Stentor and Bell New Media funds and recent funds announced by Industry Canada have been targeted toward Canadian new media content in the entertainment and educational genres.

78. The Commission also acknowledges the work that is being done to develop initiatives to support Canadian new media content and to nurture the Canadian new media industry by such government departments as Canadian Heritage, Industry Canada and the Department of Foreign Affairs and International Trade. Among a number of noteworthy initiatives has been the government's "Connecting All Canadians" agenda, which was announced in the 1998 Budget. This agenda has six pillars or areas of emphasis for national leadership in new media which are intended to ensure that, among other things, all Canadians will have access to new media, Canada will be a leader in electronic commerce, and Canadian content will occupy a place of prominence on the Internet.

79. Funding initiatives may be particularly necessary for the French-language new media market, which is significantly smaller than the English-language market. Francophone new media developers are faced with higher production costs than English-language producers because they often have to create a product in both languages and develop more costly marketing and distribution strategies to expand their market. Export options are also more limited in the francophone market. Not surprisingly, the level of French-language content on the Internet is quite low when compared with English-language content.

80. Nevertheless, it is worth noting that the federal and Quebec governments have been working to address this issue and have established funds that are targeted specifically at French-language new media production. In addition, despite the challenges it has faced, the new media industry in Quebec is one of the most vibrant and well-developed in Canada. The Commission also notes the availability of a number of French-language search engines that provide access to information in French.

The Future of Canadian Content on the Internet

81. There was a wide divergence of views among parties on how the future of the Internet might unfold and the impact that this will have on traditional media and on Canadian content.

82. Many predicted that the future new media environment could differ greatly from that of traditional broadcasting. For one thing, the notion that the Internet might some day be a substitute for traditional television and radio broadcasting is predicated on the assumption that it will be capable of delivering broadband content. As mentioned previously, this will depend upon, among other things, significant advances in bandwidth and processing speeds as well as the resolution of major intellectual property issues. Several parties also pointed out that no new medium has ever completely displaced a previous medium and it could be that television and radio will continue to co-exist with the Internet, although perhaps in altered forms.

83. Even if the Internet does become the dominant medium for reaching mass audiences, it cannot be taken for granted that the economic model that governs traditional broadcasting, whereby Canadian broadcasters can acquire discrete Canadian rights for American programming, will exist on the Internet. This will depend on, among other things, whether or not geographic rights markets for content on the Internet will emerge.

84. Some feel that it is more likely that production companies such as Disney, Fox or MGM will have their own servers located in the United States that will distribute video products cheaply and effectively direct to other countries around the world. If there is no need for intermediaries, then Canadian programmers or distributors may not be able to access the rights to non-Canadian intellectual property. This could have an impact on the production of Canadian programming if revenues from the exhibition of American programming are no longer available to Canadians. In any case, the business model for the Internet would be significantly different from that of traditional television. The business model could be driven by Canadian content, eliminating the need for the regulation of Canadian content although not necessarily the need for public funding of this content.

85. By contrast, other parties predicted that the emergence of geographic boundaries for intellectual property rights on the Internet is imminent. Several parties also pointed out that some fundamental differences in the new media environment are likely to provide Canadians with advantages that did not exist in conventional broadcasting. For instance, some argued that the economies of scale in distribution that have existed for U.S. content creators in traditional broadcasting will not exist to the same extent in the new media environment. The advantage of the Internet is that anyone can place their product or program on a server and immediately gain access to a global audience. Similarly, technologies such as computer animation are already resulting in lower costs for some types of production and further technological innovations may continue this trend.

86. There will also be many more outlets for alternative voices and niche services that may be able to develop an audience or market base. An example was given at the oral hearing of a Canadian artist who developed a following in Japan where he sold some of his paintings via the Internet.

87. Many Canadians will increasingly have access to a diversity of content and services that might not have been available to them through conventional broadcasting. This may benefit Canadians who belong to communities of interest that have not been well-represented by mainstream media. This also raises the question of whether the Internet will ever have the ability to create mass audiences in a manner similar to that of conventional television, which is driven by mass-oriented entertainment programming, or whether the sheer number of "channels" offered by the Internet will always result in fragmentation. While some spoke of mass market Internet services, others were of the view that the successful content creators on the Internet will be the ones who target narrower communities of interest such as sports fans, art and music lovers, youth culture, and so on.

88. Finally, many consider Canada is ideally positioned to achieve success in the new media market because of its expertise and strengths in several of the creative and knowledge-based industries that fuel this growing industry including telecommunications, software development, digital animation and multicultural/multilingual content creation.

89. In light of all of the above, the Commission does not consider that it needs to impose any regulatory measures to support the development, production, promotion and distribution of Canadian new media content and services. On balance, while there may be both advantages and disadvantages in the future new media environment, the Commission is confident, based on the record of this proceeding, that the industry is moving in a direction that will result in a strong Canadian new media industry and a strong Canadian presence on the Internet. Most noteworthy was the expression of excitement and energy that was communicated by those who discussed their work in new media. The Commission does not intend to impede this creative energy through unnecessary regulatory measures but rather to encourage the continued leadership and innovation of the Canadian new media sector.

How conventional broadcasting and telecommunications are affected by new media

90. One of the issues raised by the Commission in its Public Notice was whether, and if so, to what extent new media are now, or may be expected to become substitutes for existing broadcasting services and their distribution systems. It was argued by some parties that a high degree of substitutability could threaten regulated broadcasters' revenue sources and significantly impede their ability to fulfil their obligations under the Broadcasting Act.

91. The vast majority of participants agreed that, in the short term, traditional media and new media services should be considered to be complementary rather than substitute services. Participants noted key differences from both a consumer's and a supplier's point of view when comparing traditional and new media.

92. From the consumer's perspective, new media services provide interactive and mostly unscheduled access, while traditional media offer mostly one-way point-to-multipoint programming. Many participants also noted that the quality of new media video is not of the quality available from traditional media. That situation is expected to remain until extensive technological developments allow for improved quality.

93. From a supplier's perspective, new media offer a market where basic content can be produced and distributed at relatively little cost. New media offer, among other things, consumer-specific messaging, an unlimited number of distribution channels and a borderless distribution system through the Internet. This is in contrast to the traditional media industry which is characterized by limited channel capacity, a high degree of mass appeal programming, and high distribution costs and barriers to entry. The Internet, which today has a penetration rate of approximately 20%, compared to the much higher penetration rates of television and radio, cannot yet deliver mass Canadian audiences.

94. There was considerably less consensus among participants regarding the longer term substitutability of new and traditional media services and distribution systems. Some argued that there is no evidence that the Internet will be capable of supporting the delivery of anything near broadcast quality video within the next decade.

95. Still other participants were of the view that new media services will become substitutes for traditional media services within a shorter time frame. Some suggested this could possibly occur within seven years.

96. While views vary considerably, the Commission agrees with most participants that key technological developments must take place before new media services and distribution systems compete more directly with traditional media. Should broadcast quality video and audio services become available, other factors need to be considered before new media services and distribution systems can be considered to be substitutes. Such factors include the cost of exhibition devices, the general appeal of the service offerings, customers' willingness to pay, as well as PC and Internet access penetration rates.

97. The Commission notes, however, that new media may evolve in ways that are entirely different from the current forms of conventional broadcasting. For example, they may simply co-exist with and complement conventional media, as in the cases of books, radio and television.

Impact of new media on conventional broadcasters

98. In order to establish whether new media activities are having, or can be expected to have, a negative impact on the financial well-being of regulated broadcasting services, parties discussed the major business models presently used. It was generally agreed that definitive on-line business models have yet to emerge in the nascent new media industry. Participants to this proceeding generally agreed, however, that there are three major types of business models: advertising-driven, subscription-based and transaction-driven. It was also generally agreed that most revenues are currently derived from advertising and transactions, while subscription-based models have so far rarely proven to be successful.

99. A number of participants recognised that traditional media firms undertaking new media ventures benefit from significant competitive advantages that are generally not available to new entrants. One of the key opportunities afforded traditional media firms is the ability to re-purpose their intellectual property for the Internet, thus allowing for the amortization of costs over a larger audience. Traditional media firms active in both industries can also expand their established brands, packaging, publishing, marketing and content integration skills to the Internet, deriving a sizeable advantage over firms that have yet to develop the same level of brand recognition and managerial expertise. Finally, the new media industry provides new avenues for traditional media growth. For instance, new media players that advertise on traditional media create an increased demand for new media services which, in turn, creates an increased demand for traditional avenues of distribution, such as telephone lines and cable access.

100. Nevertheless, some participants expressed concern about the potentially negative impact that the new media industry may have on the revenue sources and the audiences of regulated broadcasters. There was a general consensus that any such impact would result mainly from three factors: 1) a loss in radio and television audiences to new media; (2) a loss in traditional media advertising revenues to new media advertising; and (3) to a lesser extent, a loss in traditional media advertising revenues due to the growth in electronic commerce.

Impact of new media on traditional media audiences

101. Some participants considered that, in the short term, new media services will mostly compete for the time that Canadians have traditionally allocated to leisure activities. Other parties, however, submitted that significant declines in traditional media audiences are already taking place. It was argued that the average number of hours that listeners tuned to radio dropped between 1993 and 1997 and that younger Canadians are listening to less radio.

102. With respect to radio audiences, the Commission notes that the reference to a slight decrease in radio audiences between 1993 and 1997 does not present cause for concern since yearly fluctuations in audiences generally take place. It may be more relevant to note that, according to BBM data, the overall amount of radio listening by Canadians has increased slightly over the past two decades, even in the face of increased competition from other media such as television and computers. There is, therefore, currently no obvious evidence of an impact on listening to conventional radio as a result of the emergence of new media.

103. It was also submitted that there has been a decline in the amount of conventional television watched by Canadians in general. BBM data indicate a gradual overall decline in per capita hours of viewing for Canadians of approximately 1.7 hours per week, from a total of 24 hours per week, since 1986. Some participants were of the view that in the mid to longer term, as current technological constraints are addressed and as more Canadians gain access to the Internet, an increasingly large number of Canadians will substitute the Internet for traditional media.

104. Time spent in front of the television is a function of a combination of factors including demographics, lifestyle, cost and price structures, the introduction of substitute services and distribution systems, the general appeal of programming, as well as the penetration rates of PCs and Internet access. The reasons for the overall gradual decrease in television viewing over the past decade are complex and cannot be attributed to any one factor. Specifically, the Commission considers that participants have not demonstrated that new media services have thus far had a significant and detrimental impact on traditional media audiences.

Impact of new media advertising on traditional media advertising

105. A number of participants active in the new media industry stated that advertising revenues are critical to their financial success. At this time, it is estimated that the value of the Canadian on-line advertising industry stands at approximately 1% of that in the U.S. However, many noted that the industry is still regarded as being in an exploratory phase, experimenting with both U.S. and Canadian sites. Participants generally considered that, while the Canadian on-line advertising market could be expected to continue growing, such growth has to date been slow relative to that in the U.S. One of the reasons given was that advertisers can reach Canadian and other Internet users on U.S. sites, an indication of the global nature of the medium.

106. Several participants also noted that a serious impediment to the growth of on-line advertising results from the absence of sophisticated and consistent measuring tools. Such tools are used to inform the advertisers of the proportion of their target audience that is reached for a given dollar amount invested in advertising. While a broad industry effort has been initiated to develop voluntary standards for audience measurements, advertisers are taking a cautious approach to on-line advertising until such tools are widely available.

107. Most participants were of the view that new media advertising has not, thus far, had a negative impact on the traditional media advertising industry in any significant way. Some consider that the "advertising pie" is getting larger, with the new media industry reaping incremental advertising dollars due to the increased sales that Internet advertising generates. The participants considered that the greater value of reaching more targeted audiences and getting more activity from those audiences as a result of the advertising is being recognized.

108. It was also submitted that when advertisers recognize the consumer migration to new media, this will drive further development of new media and attract more customers away from traditional broadcasters to the Internet. The suggestion was made that, when this occurs, the value of advertising on the Internet with this large consumer base will be recognized and may unleash a wave of advertisers onto the Internet, with a dramatic negative impact on traditional media advertising budgets. However, there was no evidence submitted that points to such a sudden and large shifting in advertising resources to new media.

109. The Commission agrees with most participants that there is currently no evidence that the Internet has had a negative impact on the advertising revenues of regulated broadcasters as a result of the growth in on-line advertising. Analysis of the financial returns of radio broadcasters reveals increasing annual growth in radio advertising revenue since 1993.

110. Similar data from annual financial returns for the television industry indicates a steady growth in advertising revenues over the past two decades with minor slowdowns during the recessions of the early 1980s and 90s. Accordingly, there does not appear to be any obvious impact of the growth of Internet advertising on advertising dollars committed to the television industry.

111. In addition, there may well be increased efficiencies and cost savings as a result of technological developments, that will lead to more money being available for advertising in all forms.

Impact of electronic commerce on traditional media advertising

112. Participants at the hearing generally agreed that electronic commerce has involved mostly business-to-business rather than business-to-consumer transactions. A December 1998 Internet Survey conducted by A.C. Nielson revealed that only 17% of Internet users made on-line purchases in 1998. Issues such as online security, fraud and privacy were cited as concerns that continue to discourage many consumers from venturing on-line to shop. This is, however, an area that will continue to grow and evolve.

113. Some participants expressed concern about the potential negative impact of the growth of electronic commerce on the advertising base of traditional media. It was suggested that electronic commerce could significantly affect the manner in which advertising is bought and sold on traditional media. For instance, it was argued that an increase in the number of cars sold on-line could lead to a reduction in the number of retail outlets for cars, thus likely reducing the number of advertisers who buy commercials on television and radio stations.

114. While the Commission considers the scenario presented above to be plausible in the mid to longer term, it notes that no evidence has been submitted to substantiate that traditional media's advertising revenues have in any way been negatively impacted by the advent of electronic commerce thus far. In fact, it is equally plausible that the total advertising dollars will increase because of stimulation by electronic commerce.

Impact of new media on telecommunications

115. Some parties submitted that the new media are affecting telecommunications undertakings through the substitution of "telecom analogous" services, such as e-mail and Internet telephony for traditional telecommunications services, as well as fax and circuit-switched telephony. Telecommunications undertakings are also being affected by the new media through the convergence of data and voice networks and the dramatic demand for data carriage brought on by the explosive growth in Internet use. These changes require telecommunications undertakings regulated by the Commission to adopt the new technologies to remain competitive. In a similar vein, it was noted that the deployment of new telecommunications transport technologies, while enabling the offering of new media content services, is also changing the way current services, such as voice long distance, are being offered. Various providers of retail level Internet Services submitted that competitive access is crucial to the success of the Canadian new media industry and that the Commission should ensure a competitive infrastructure for new media services.

116. The Commission notes that carriers and other service providers are responding as they consider appropriate to new transmission and other technologies. Because new technologies generally are not adopted across the industry on an instantaneous basis, the impact of these technologies also manifests itself over a period of time, and the Commission takes this into account in setting its regulatory agenda. For example, the Commission has been aware that, for various reasons, including changing technology (notably the move to packet technologies, which is also one of the attributes of the Internet transmission protocol), it would likely become necessary to review the current regime of contribution subsidy payments. Recently, the Commission began a proceeding to review this subsidy regime, which supports affordable basic telecommunications services (Telecom Public Notice CRTC 99-6, Review of Contribution Collection Mechanism and Related Issues, 1 March 1999).

Offensive and illegal content

117. Most parties to the proceeding acknowledged the presence of both offensive and potentially illegal content on the Internet. Where parties differed to some extent was in how best to deal with this type of content. Most agreed that Commission regulation of participating undertakings and the services they provide is either inappropriate or unnecessary. While the majority argued that issues of social concern, such as hate propaganda and obscenity, are most appropriately dealt with under existing Canadian laws, they also supported industry self-regulation as an effective means of addressing offensive content, either through codes of conduct or other self-regulatory mechanisms. They also pointed to a number of tools currently on the market, such as content filters and blocking devices, which exist to protect children from content that might be harmful to them.

118. However, a number of parties expressed concern about the ease with which both offensive and potentially illegal content can be accessed and disseminated. Some called upon the Commission to regulate this type of content. Of those expressing concerns, a number agreed that while the Criminal Code contains tools for dealing with illegal content, using those tools can be a lengthy and arduous process. A number of parties suggested that additional powers should be given to the Canadian Human Rights Commission to combat certain hate propaganda and other activities prohibited by the Canadian Human Rights Act. Some argued that stronger codes of conduct, including procedures for notice and take down of offending web sites, should be developed by industry groups.

119. Most parties, while concerned about offensive and potentially illegal content on the Internet, were reluctant to endorse regulation that would restrict access to information or rights of rebuttal on the medium.

120. It was also suggested that the Commission and Government work with a variety of partners, in both the public and private sectors and on both domestic and international levels, to deal with the issue of "illegal and undesirable activity" on the Internet. The Commission notes that government agencies and ISP industry representatives are currently discussing these matters.

121. The Commission acknowledges the expressions of concern about the dissemination of offensive and potentially illegal content over the Internet. It also acknowledges the views of the majority of parties who argued that Canadian laws of general application, coupled with self-regulatory initiatives, would be more appropriate for dealing with this type of content over the Internet than either the Broadcasting Act or Telecommunications Act. The vast majority of such content, particularly hate propaganda, is beyond the regulatory jurisdiction of the Broadcasting Act because it consists predominantly of alphanumeric text. As such, it falls outside of the definition of a "program" set out in the Act. In keeping with the overall policy stated earlier, significantly customized content does not fall within the definition of broadcasting and that content which is broadcasting will be exempt from regulation.

122. The Commission also notes that Internet service providers and their industry associations, in conjunction with both government agencies and other organizations, have made efforts to develop codes of conduct that would assist in combating the dissemination of offensive and potentially illegal material. The Commission encourages these groups to continue their work in developing standards and procedures for dealing with such content. The Commission considers that more can likely be done in the area of illegal content by, for example, establishing complaint lines and industry ombudsmen as well as developing international arrangements. Such arrangements could include co-operation between law enforcement agencies for providing notice and take down of web sites disseminating such content.

123. The Commission also believes that users can assist in controlling access to web sites that may be inappropriate for children. The existence of content filtering software that is relatively inexpensive and, in some cases, free of charge, is a useful tool for controlling access by children to unsuitable material. The Commission notes that, like most other aspects of new media, effective content filtering software is developing rapidly.

124. Lastly, the Commission notes that, as with most other media, awareness and knowledge of the benefits that can be obtained from the rich diversity of content available on the Internet, as well as of the existence of offensive content, can be a powerful tool in the hands of users. Organizations such as the Media Awareness Network, a Canadian not-for-profit organization, are dedicated to media education and media issues affecting children and youth. Useful information can be obtained from such groups. The Media Awareness Network, for example, can be accessed on the Internet at http://www.media-awareness.ca

Secretary General

Appendix 1 (not available)

The diagram on the following page illustrates the chronology of the regulatory and policy initiatives leading up to the CRTC's policy on new media

This notice is available in alternative format upon request, and may also be viewed at the following Internet site: http://www.crtc.gc.ca

APPENDIX 2

Glossary of New Media Terms

Browsing
Viewing World Wide Web sites and often following links to other sites.

CAPs (Community Access Points)
The Internet can be accessed in a variety of public places in communities across Canada. "Terminals", computers with internet access, are normally found in libraries, schools and other public buildings and are available for use by the general public subject to certain usage guidelines produced and enforced by the group which owns and operates the terminals. Government assistance has supported and facilitated the establishment of many of these CAPs.

CD ROM
A Compact Disc is capable of storing large amounts of electronic data. If a CD ROM reader is attached to a computer then the user can access that data. ROM stands for Read Only Memory, meaning that the data on a CD ROM can only be viewed and used but not changed. CD ROM writers, however, allow data to be changed and are becoming much more common.

E-mail
E-mail or Electronic Mail is the most common use of the Internet. Messages can be sent from one user to another over the network almost instantaneously. Documents or other content may be attached to e-mail messages and also sent to other users. E-mail passes through the network via Simple Mail Transfer Protocol (SMTP).

FTP
Computer files may be moved (downloaded or uploaded) through the Internet using File Transfer Protocol (FTP).

Freenets (various other names)
These groups provide services for little or no charge and are a way for members of a specific community to discuss, and provide information or assistance on topics of importance to the group itself. Freenets operate much like ISPs although, since they charge little or nothing for the services they provide, they are often more limited in what they can offer users.

Internet
The Internet is a distribution system that is capable of handling a wide variety of data (text, pictures and sound) in any number of formats. In order to move through the Internet, however, data and requests for data made by users must adhere to sets of rules called "protocols." The Internet is a distributed, inter-operable, packet-switched network which predominantly uses the TCP/IP protocol.

· A distributed network has no one central repository of information or control, but is comprised of an interconnected web of "host" computers, each of which can be accessed from virtually any point on the network. An Internet user can obtain information from a host computer in another province or another country just as easily as obtaining information from across the street and often with little knowledge of the location of its source.

· An interoperable network uses "open protocols" so that many different types of networks and facilities can be transparently linked together, and allows multiple services to be provided to different users over the same network. The Internet can run over virtually any type of facility that can transmit data, including copper and fibre optic circuits of telephone companies, coaxial cable of cable companies, and various types of wireless connections.

. packet-based technologies transmit information over a network by splitting up the data into small chunks, or "packets." Each packet may take a completely different route through the network depending on congestion and distance. As packets reach their destination they are reassembled into their original form.

IAP
Internet Access Provider. See Internet Service Provider

ISP
Internet Service Provider. A company or other organization which provides access to the Internet to its customers via one or a combination of dial-up lines (similar to telephone service), coaxial cable ISDN, xDSL or other dedicated lines. The most typical example is a home user who pays a fee to connect to the ISP's server. The connection is made by a "modem" which makes the electronic data from the home user's computer transmittable over a telephone line. The data then passes through the telephone company's facilities in the same way as a normal telephone call. The "call" is received by the ISP which "routes" the user's requests for information to the server that is "hosting" the desired data. Note: The computer of an ISP customer is ordinarily never actually "on-line", it simply sends requests and receives information via the ISP's servers and routers.

Intranet
An Intranet operates almost identically to the Internet but is normally shielded off from access by the general public and the rest of the Internet by electronic barriers called "firewalls". Other Intranets may be entirely self-contained and not accessible at all over the Internet by normal means. An Intranet can be considered essentially to be a small privately owned and operated Internet.

Newsgroups (also called Usenet)
Focused discussion groups (newsgroups or Usenet) are conducted by Network News Transport Protocol (NNTP). Each of these groups has a specific topic for discussion and a set of principles that guide discussion that are usually set out in FAQs (Frequently Asked Questions).

Portal
A web-site that accumulates a wide variety of proprietary content and links that it offers to users, sometimes on a subscription basis. A portal also organizes and provides links to a great deal of non-proprietary information elsewhere on the Internet. Portals often provide Internet search features (see search engines) and maintain links to other media organizations to supply users with additional news and entertainment content.

Protocol
A set of rules or an entire "language" which sets out what form content must be in to be sent and received accurately and the way in which that content is transmitted.

Search Engine
Many Internet sites offer the user the ability to search their databases for links to web pages, news group articles, FTP sites or other Internet content.

Surfing
See browsing.

TCP/IP
The Transmission Control Protocol/Internet Protocol defines a common structure for Internet data and for the routing of that data through the network. It is this protocol that makes it possible for data (Internet content) to be transmitted via any type of infrastructure (i.e. telephone cable, optical fibre, etc.)

World Wide Web (www)
World Wide Web pages are one type of content that may be requested and distributed on the Internet. Web pages are made up of "hypertext" which links together a combination of pictures, sounds, text and other sites. Web pages, or collections of pages by one author(s), which are called web sites, are based upon the rules of Hyper Text Transfer Protocol (http). Web pages are viewed in a type of software called a "browser" (browsers may also be used to view other types of Internet content as well).

Certain small programs may also be part of a web page. These programs, or "apps" (applications), are normally used to enhance the other features of a web page or site, such as causing pictures to move or a sound to be played. A more sophisticated type of application is used to search databases such as those owned and operated by the various "search engines." www applications are not created in hypertext but are usually written in compatible computer languages.