Island Linux Bits and Bytes of Technology

In the aftermath of the CRTC's hearing on a consumer wireless code and the government's announcement of its plan for future spectrum auctions, a debate has raged over the competitiveness and health of the Canadian wireless market. Scotia Capital released a report last week titled "Canadian wireless myths and facts" that argued the Canadian market is healthy and that "it is time for the regulators to declare victory on the policies they adopted five years ago". Meanwhile, Open Media issued a report titled Time for an Upgrade: Demanding Choice in Canada's Cell Phone Market that places on the spotlight on many of the ongoing problems in the market, with a particular focus on consumer complaints. The report includes many recommendations for regulatory and policy reform.

The reality is that both the regulators and politicians have either expressly or impliedly acknowledged that the Canadian wireless market is uncompetitive. Last week, Industry Minister Christian Paradis promoted the government's past moves on wireless competition, but admitted that "there is much more to do." Meanwhile, the Competition Bureau told the CRTC in its submission on the wireless code of conduct that:

certain impediments continue to diminish the effect of competitive forces in this industry. First, certain industry practices have tended to impose costs on consumers who wish to avail themselves of competitive alternatives. Second, consumers are not always provided with sufficient information in an adequately clear manner to make informed purchase decisions.

This post seeks to extend the debate and respond to some of Scotia Capital's claims. It identifies ten reasons why there is ample evidence that the Canadian wireless market remains woefully uncompetitive when compared with peer countries around the world with higher costs, price gouging, and restrictive terms.


1.    Canadian Carriers Enjoy the Highest ARPU in the World

While there many ways to calculate the competitiveness of a wireless market, the one that matters most to the carriers and business analysts is ARPU, the average revenue per user.  By that standard, Canada is the most carrier-friendly market in the world as the carriers extract higher revenues from their users than any other country. The Scotia Capital report points to declining voice ARPU in Canada, claiming "this was largely due to competition and data/text substitution." The reality is that competition has little to do with declining voice ARPU as it is dropping around the world (Europe, U.S.) with changing usage patterns. 

Moreover, it is total ARPU that matters, not voice ARPU. On that front, Scotia Capital notes that ARPU for Bell, Rogers, and Telus has been largely unchanged since the entry of the new wireless competitors (Bell is up slightly, Rogers and Telus down slightly). When compared to other countries, Canadian ARPU stacks up as the highest in the world. The CRTC's Communications Monitoring Report 2012 shows Canadian ARPU as tied with Japan as the highest among eight leading economies (Canada, US, UK, France, Germany, Italy, Japan, and Australia) (Figure 6.1.9). In other words, despite new entrants designed to spur greater competition, the incumbent providers are still enjoying world-leading ARPU, which is indicative of a market sorely lacking in strong competition.


2.    Higher Consumer Prices than Peer Countries

Scotia Capital trumpets Canadian pricing, noting that a comparison of plans reveals that they are cheaper than those found in the U.S. Yet the comparison with the U.S. ignores the many other peer countries where Canadian consumer prices remain higher. In fact, the U.S. comparison is convenient since it stands as one of the only countries where Canadian prices compare favourably in some studies. The CRTC's Communications Monitoring Report 2012 provides data comparing wireless service pricing across three levels - basic users, average users, and premium users - in Canada, the U.S., UK, France, Australia, and Japan (Table 6.1.1).



The CRTC report finds that Canadian prices are on the higher end across each category. For basic users, Canada ties with the U.S. as the most expensive country (double the price of the UK). For average and premium users, Canadian prices were the third most expensive among the surveyed countries. While the U.S. was more expensive in both of those categories, Canada was far more expensive than the UK and Australia in every category and more expensive than France and Japan in two out of three categories. 

Moreover, last August the U.S. Federal Communications Commission released its third annual International Broadband Data Report, which compares broadband services as required by a U.S. law. Canada ranked 26th out of 37 countries for the cost of smartphone data based on plans with usage limits. Canada did not even rank in a comparison of countries with no usage limits since no such plans could be found. In other words, concerns that Canadian prices are high is no myth.



3.    Still Gouging, Part One: Enhanced 9-1-1 Costs

A clear indication of an uncompetitive market are fees to consumers that are relatively uniform across the major carriers but that bear no relationship to actual costs (in a competitive market, carriers might be expected to reduce those fees to closer to actual costs in order to lower prices and attract more consumers). For example, the incumbents all charge their subscribers 75 cents per month for enhanced 9-1-1 services.

But as WindMobile told to the CRTC during the consumer wireless hearings (para 10084), the actual cost for E-911 service is closer to ten cents. WindMobile does not include a separate fee for E-911 on its service, choosing instead to bear the cost. However, it pays a monthly tariff rate for E-911, which it told the CRTC was "around seven to 11 cents." Assuming the tariff rate more closely reflects actual cost, the 75 cent charge to consumer represents an enormous markup. Consider the costs to Canadian consumers: assuming an actual cost of 10 cents per month, the carriers generate 65 cents profit per subscriber per month. With roughly 25 million subscribers with the incumbent carriers, that is an extra $180 million in annual revenue after costs are covered.

4.    Still Gouging, Part Two: High Roaming Costs

A 2011 OECD study captured national headlines after it found that Canadian carriers had the most expensive data roaming charges in the world. The study looked at the cost of using 1 MB in a single session for a traveler assuming they travel to all OECD countries. The result left Canadians paying the most at an average of $24.61. By comparison, Greek consumers paid $4.17 and Iceland customers paid $4.42. The OECD average was $9.48. The report included several other baskets of roaming data with Canada typically ranking among the most expensive (with the exception of 20 MB packages).

In the two years since that study, Canadian carriers have introduced various measures to address roaming costs, but the persistent stories of roaming sticker shock remain. For example, last week the CBC reported on a B.C. family that ran up $22,000 in charges for 12 hours of YouTube streaming while in Mexico. While critics of the story argued that Rogers never actually billed the full amount and noted that cheaper roaming packages were available, left unsaid was any explanation for how charging $30 for one MB as a pay-per-use charge is anything other than gouging. Indeed, other countries have taken action against high roaming fees with the European Union placing price caps on data roaming and opening the door to greater competition on roaming rates next year by separating domestic service from roaming service. The OECD has also recommended that countries take action, including the possibility of wholesale or retail price regulation.

5.    Still Gouging, Part Three: Regulatory Recovery Fees

A long-time staple of the Canadian wireless market was the system access fee, which misleadingly suggested a fee for accessing the network that was mandated by the government or the CRTC. In fact, the fee was not a regulatory requirement, but rather an effort by the carriers to disguise the actual costs of their plans as it shifted nearly six dollars each month to a separate fee item. Some carriers dropped the system access fee in 2009, though a multi-billion dollar class action lawsuit continues to wind its way through the courts.

Rogers replaced the system access fee with a monthly government regulatory cost fee.  These costs would be a cost of doing business in just about any other sector, but for Rogers it is a chance to charge for spectrum licensing, CRTC contributions, and local number portability.  Other carriers have dropped the system access fee, but maintain an assortment of other fees for device setup, unlocking (see below for more), and rate plan changes. 

6.    Three Year Contracts Are Not Correlated to Smartphone Adoption

The Scotia Capital report touts the value of three-year contracts, arguing that "we think the three-year contract has actually led to low handset prices that helped smartphone penetration in Canada." Yet the evidence doesn't appear to support claims that there is a correlation between three year contracts and smartphone adoption. Comscore just released its 2013 Mobile Future in Focus report which indicates that Canada is ranked third for smartphone adoption, trailing Spain and the UK, but ahead of France, Italy, Germany, and Japan (no other countries are listed). 

If Scotia Capital were right, one would expect three year contracts in other countries with leading smartphone adoption such as Spain and the UK.  But Spanish incumbent carriers have actually reduced handset subsidies in recent months and new entrants have aggressively promoted two-year contracts with a better subsidy than that offered in Canada (the iPhone 5 is available for free from Yoigo, a new entrant, with only a €25 per month cost). Meanwhile, the UK banned three year contracts in 2011, making a two-year contract the longest permitted and requiring all carriers to offer one-year deals. With countries ahead of Canada in smartphone adoption rejecting the three-year contract, claims that it is needed to help smartphone adoption simply isn't supported by the experience elsewhere.

7.    Mandatory Unlocking of Phones Does Not Delay Market Entry of New Devices

During the recent CRTC hearing on a consumer wireless code, Bell claimed that a rule mandating unlocked phones would delay entry of new devices into the Canadian market. The company told the CRTC (para 8041):

I don't know because I'm not Apple but we were discussing, for example, would Apple have allowed -- if Canada had a rule that mandated unlocking, would we be one of the first countries to get the latest iPhone? I don't think so. I think they would want to launch it in other countries. I'm not saying that it wouldn't come to Canada. So I don't want to overexaggerate to say they wouldn't ever. What I'm saying is if we had a rule like that, I think it's going to put Canadians getting iPhones, the next generation iPhone later if it was a mandated requirement.

Yet there is no evidence to suggest that Apple would delay entry into the Canadian market due to an unlock requirement. JF Mezei of Vaxination Informatique notes in his final submission to the CRTC:

The incumbents argued that Apple's iPhone would not be available as quickly in Canada if a requirement it be sold unlocked were made. For the iPhone5 launch, Hong Kong (which requires unlocked handsets) was part of the original list of locations (including Canada and USA) which got the iPhone5 on launch day (Sept 21). Italy and Finland [which also require unlocked handsets] got the iPhone a week later on the same date (Sept 28th) as the other western European countries.

Not only are the claims of delayed market entry unsubstantiated fear mongering, but the exorbitant fees for unlocking should be factored into the analysis.  Bell charges $75 to unlock a device and admitted to the CRTC that "we absolutely could do it for less. We choose not." (para. 7916). That fee - effectively an additional $2 per month charge on a three year contract to unlock a phone - poses a significant additional cost for consumers and helps lock consumers into the high roaming fees discussed above.

8.    Actual Canadian Mobile Speeds Are Slower than Peer Countries

Canadian wireless providers have trumpeted their new LTE networks, yet recent data from Akamai still indicates that Canadian mobile data speeds are far slower than many peer countries. The most recent Akamai State of the Internet report (2012, Q3) includes data on carriers around the world. There is data on one Canadian carrier, which badly trails both average and peak speeds when compared to China, Hong Kong, Singapore, Austria, Belgium, Czech Republic, France, Germany, Greece, Hungary, Ireland, Israel, Italy, Lithuania, Netherlands, Russia, Spain, UK, Australia, and New Zealand.  The CRTC reported similar slow speeds (based on Akamai data) in its 2012 Communications Monitoring Report (figure 6.1.8), with Canadian mobile data speeds slower than all other countries in the comparison group.

9.    Fewer Subscribers Per Capita in Canada Than Peer Countries

Canadians may love their cellphones, but there are far fewer subscribers in Canada on per capita basis than in other countries. The CRTC's 2012 Communications Monitoring Report reported that Canada had the lowest mobile subscription penetration among Canada, the U.S., UK, France, Germany, Italy, Japan, and Australia (Figure 6.1.5). While higher penetration rates (well over 100 subscriptions per 100 inhabitants) may be expected from European countries where roaming between countries in close proximity is widespread, Japan and Australia are islands and the U.S. market is not driven by roaming outside the country. Yet the U.S. (106 per 100), Japan (101 per 100), and Australia (130 per 100), all rank well ahead of Canada's 78 per 100. With prices high and contracts long, Canadians are often locked into a single provider and less likely to subscribe with more than one device.



10.    Canadian Carriers are Inefficient Users of Spectrum

The incumbent carriers continue to claim that they need more spectrum, yet Canadian carriers have hoarded more spectrum than their counterparts in practically any other country. In 2011, the CTIA, the lead association for U.S. wireless companies, compared the amount of spectrum with the number of wireless subscribers to determine how many subscribers are served per MHz of spectrum allocated. In a comparison of ten leading countries, Canada ranked last in spectrum efficiency. While the U.S carriers used one MHz to nearly 740,000 subscribers, the Canadian rate was 90,992 subscribers per MHz. The Canadian market was the smallest of the 10 countries (which would reduce the number of subscribers per MHz), but the data suggests that Canadian carriers could do far more to maximize current spectrum holdings and reduce their costs in the process.

I'm a big fan of Chris Selley, the National Post writer behind Full Pundit, a daily look the Canadian editorial and opinion columns (last year Selley was also a vocal supporter of the much-needed Fire Ron Wilson campaign). The Full Pundit features a summary of the most notable editorial writing in Canadian media accompanied by quotations from the original works. I'm quite sure that Selley does not ask for permission to quote from those other works since fair dealing for news reporting purposes permits their use without the need to do so. Yet if someone wants to post a quote from Selley or anything else written by the National Post, they are now presented with pop-up box seeking a licence that starts at $150 for the Internet posting of 100 words with an extra fee of 50 cents for each additional word (the price is cut in half for non-profits).

For example, in yesterday's Full Pundit, Selley quotes John Graham in the Globe on the death of Chavez:

“Illiteracy has all but disappeared. … Education and free health care are almost universally available. … Improving the quality of life for millions at the bottom levels of society is no small achievement. He also imparted to these millions a sense of dignity about themselves and pride in their leader’s often bombastic rhetoric.”

If you try to highlight the text to cut and paste it, you are presented with a pop-up request to purchase a licence if you plan to post the article to a website, intranet or a blog. The fee would be $150. In other words, the National Post is seeking payment for text in an article that was itself copied from the Globe. Of course, it is not just Selley's work as many articles quote from other articles or sources (for example, this Post article on Taylor Swift is primarily quotes from Vanity Fair.  If you highlight a chunk of text, the licence message pops up). If you click no to the pop-up, you cannot copy the text. If you click "quit asking me", the request stops.

None of this requires a licence or payment. In fact, the amount of copying is often so insubstantial that a fair dealing analysis is not even needed. Last year, the Federal Court of Canada ruled that several paragraphs from a National Post column by Jonathan Kay posted to an Internet chat site did not constitute copying a substantial part of the work. If there was a fair dealing analysis, there is no doubt that copying a hundred words out of an article would easily meet the fair dealing standard. In fact, the Supreme Court of Canada has indicated that copying full articles in some circumstances may be permitted.

The National Post is using iCopyright as its licensing service.  The company provides a fair use statement that simply does not reflect the law, suggesting that fair dealing may not apply to the use of work that may generate revenues, is not highly creative, was available under licence, is something more than a footnote, or is posted to the Web. None of these are conditions that exclude the application of fair dealing and the recent Supreme Court of Canada decisions make it clear that the required broad and liberal approach would cover the excerpt copying for which iCopyright seeks payment. All media organizations rely on fair dealing to support a free and robust press. Those same organizations should not be undermining those hard earned users' rights by raising unnecessary licensing demands.

Industry Minister Christian Paradis this morning unveiled a series of new measures related to spectrum auctions. The long-overdue 700 MHz spectrum auction will be run in November 2013. A full list of background docs and policies can be found here.

The government is characterizing its Bill C-56 as an anti-counterfeiting bill, yet this week NDP MP Charmaine Borg framed it more accurately as "ACTA through the backdoor." During Question Period on Monday, Borg asked Industry Minister Christian Paradis directly if the bill paves the way for ratification of the discredited treaty:

Mr. Speaker, last July the European Parliament rejected the anti-counterfeiting trade agreement over serious concerns about the regressive changes it would impose on intellectual property in the digital age. Yet on Friday, the Conservatives introduced a bill in the House that would pave the way for the ACTA without question. Canadians have concerns about goods being seized or destroyed without any oversight by the courts. Will the minister now be clear with Canadians? Are the Conservatives planning to ratify ACTA, yes or no?

Paradis refused to respond to the ACTA ratification question:

Mr. Speaker, we are very happy to have introduced an anti-counterfeiting bill in the House. Counterfeiting is a growing problem in Canada. Counterfeiting deceives Canadians and is linked to security-related issues. So it was our duty to modernize the legislation to ensure that we can end counterfeiting, so that Canadians are not deceived, and to provide better security.

Borg tried again with a direct link between Bill C-56 and ACTA:

Mr. Speaker, a number of countries have rejected this unacceptable agreement. The anti-counterfeiting trade agreement - ACTA - was drafted behind closed doors and would incriminate the daily users of cultural content. This agreement will turn our border officers into instant copyright experts, without the adequate legal support. Canada must seriously study the problem of counterfeiting. However, the failure of Bill C-30 means that Canadians do not have faith in this Conservative government. Is Bill C-56 not simply a way to support ACTA through the back door?

Paradis ducks the question once again:

Mr. Speaker, let us be clear: Bill C-56 is a way to support and protect Canadian families.
Counterfeiting is a growing problem that must be stopped. Counterfeiting deceives Canadians and poses risks to the safety of Canadians. We must ensure that the legislation is updated and appropriate in order to equip the authorities with effective tools to fight counterfeiting, which is exactly what was introduced on Friday. If the NDP is responsible, I hope they will support us.

The 52 page bill requires careful scrutiny, but the NDP is right for drawing attention to the elephant in the room. ACTA has been rejected in Europe and stands as a discredited agreement. Despite that, Bill C-56 is fundamentally a bill designed to allow Canada to implement ACTA.

The movie Argo may have picked up the biggest prize in last week's Academy Awards ceremony, but it was the Best Documentary Short winner that had many on the Internet buzzing.  Inocente, a film about a 15-year old homeless girl who dreams of becoming an artist, took home the Oscar and in the process became the first Internet crowdsource funded film to win Hollywood's biggest award. Last year, the film raised $52,527 on Kickstarter, a crowdsource funding website that has raised over US$100 million to support the creation of independent films.

My weekly technology law column (Toronto Star version, homepage version) notes that the emergence of crowdsource funding - or crowdfunding - points to the power of the Internet as an important source of financial support for independent creators, whether film makers, musicians, software programmers, or authors.  Crowdfunding enables creators to raise funds through small contributions from the public by publicizing their project using the Internet and social media sites. Crowdfunding success stories encompass new products, companies, and community initiatives, but movies have fared particularly well.  


Kickstarter is the best-known crowdfunding site, having raised huge sums of money and seen the films funded by its community enjoy commercial and creative success.  By the end of this year, over 100 Kickstarter-funded films will have been released theatrically in North America. In 2012, three Kickstarter funded films ranked among the best reviewed films of the year with six films - two documentaries, a live action short, and three documentary shorts - garnering Oscar nominations.

The live action short nominee, Buzkashi Boys, was the work of Montreal-based filmmaker Ariel Nasr. Nasr turned to Kickstarter to help complete his film about Afghanistan and the community responded with over $27,000 in funding. After the film received its nomination, Kickstarter users provided another $10,000 to cover travel costs for the stars in the film to travel from Kabul to Hollywood.
 
While Kickstarter attracts the lion share of crowdfunding attention, Canadians may face some challenges in using the platform due to payment restrictions. A 2012 report commissioned by the Canada Media Fund points to many homegrown alternatives, yet few have gained much traction. A notable exception is DocIgnite, a site run by the Hot Docs festival in Toronto that identifies works-in-progress that would benefit from crowdfunding.

The barriers to Canadian crowdfunding extend beyond payment problems and sparsely populated websites. Legal uncertainty about venturing into crowdsourced investment has limited the ability of Canadian creators to tap into their home market.

Canadian sites are typically based on a donation model in which there is no expectation of financial return, though some creators offer incentives and gifts in return for support. The United States has opened the door to an investment model that would allow for crowdfunding investments that could result in revenue sharing or the issuance of stock in the project or company.

The Ontario Securities Commission just closed a consultation on the issue with many potential safeguards being considered. These include registration requirements, investment limits, disclosure obligations, and "cooling off" periods that would allow investors to back out of an investment.

The failure of Canadian crowdfunding sites to keep pace with sites such as Kickstarter unsurprisingly means that creators are forced to look south of the border for financial support. Given the many success stories, Canadian funding agencies may soon begin to factor crowdsourced support into their programs.

For example, agencies could shift some of their support toward a matching funds approach that encourages creators to look beyond the conventional funding mechanisms. By tapping into Kickstarter-style initiatives, creators could benefit from greater financial assistance just as the funding agencies use crowdfunding as an external review process, leveraging the public's willingness to back a project with their own support.

The Canadian introduction of Anti-Counterfeiting Trade Agreement compliance legislation on Friday appears to have come in direct response to a new U.S.-led effort to revive the discredited treaty. When the European Parliament overwhelmingly voted to reject ACTA last July, many declared it dead. But is not dead yet: it is badly damaged and will seemingly never achieve the goals of its supporters as a model for other countries to adopt and to emerge as a new global standard for IP enforcement. But for the U.S., which spent years pressuring ACTA participants to strike a deal, the strategy now appears to revive the agreement by at least garnering the necessary six ratifications for it to take effect.

The current ACTA signatories are Australia, Canada, Japan, Korea, Mexico, Morocco, New Zealand, Singapore, and the U.S. The European Union and Switzerland are out. Japan formally acceded in October 2012, which means the U.S. must find four more countries out of the remaining seven for ACTA to take effect.  Canada is a clear target, as evidenced by the USTR 2013 Trade Policy Agenda released on Friday. It states:

The United States continues to encourage Canada to provide for deterrent level sentences to be imposed for IPR violations, as well as meet its Anti-Counterfeit Trade Agreement (ACTA) obligations by providing its customs officials with ex officio authority to stop the transit of counterfeit and pirated products through its territory.

Canada has no ACTA "obligations" - how could it given that the treaty is not in force and Canada has not ratified it - but the U.S. pressure paid quick dividends with the introduction of Bill C-56, which is clearly designed to put Canada into a position to ratify the agreement.

The Canadian government today introduced a bill aimed at ensuring the Canada complies with the widely discredited Anti-Counterfeiting Trade Agreement. Despite the European Union's total rejection of ACTA along with assurances that ACTA provisions would not resurface in the Canada - EU Trade Agreement, the new bill is designed to ensure that Canada is positioned to ratify ACTA by addressing border measures provisions. The core elements of the bill include the increased criminalization of copyright and trademark law as well as the introduction of new powers for Canadian border guards to detain shipments and work actively with rights holders to seize and destroy goods without court oversight or involvement.

While the bill could have been worse - it includes an exception for individual travelers (so no iPod searching border guards), it does not include patents, and excludes in-transit shipments - the bill disturbingly suggests that Canada is gearing up to ratify ACTA since this bill addresses many of the remaining non-ACTA compliant aspects of Canadian law.  Moreover, it becomes the latest example of caving to U.S. pressure on intellectual property, as the U.S. has pushed for these reforms for years, as evidenced by a 2007 Wikileaks cable in which the RCMP's National Coordinator for Intellectual Property Crime leaked information on a bill to empower Canadian border guards (the ACTA negotiations were formally announced several months earlier). [Update: On the same day the Canadian government introduced Bill C-56, the U.S. Government issued its Trade Policy Agenda and Annual Report, which calls on Canada to "meet its Anti-Counterfeit Trade Agreement (ACTA) obligations by providing its customs officials with ex officio authority to stop the transit of counterfeit and pirated products through its territory"]

A full examination of Bill C-56 is forthcoming, but its introduction raises four immediate issues: that Canada is moving toward ACTA ratification, that it is pursuing policy based on debunked data on counterfeiting, that the bill could have serious harmful effects with border guards forced to serve as copyright experts without court oversight, and the increased criminalization of copyright and trademark law.

 

First, this bill provides a clear signal that Canada will move forward with ACTA notwithstanding some doubts over whether there is even sufficient global support to allow it to take effect (six ratifications are needed). ACTA is toxic in Europe, where officials now go out of their way to assure the public that ACTA is dead and that any new agreements will not involve efforts to revive it. ACTA has also faced serious opposition in other negotiating countries, including Switzerland (which has not signed it), Australia (where a Parliamentary Committee recommended against ratification), and Mexico (where the Senate rejected it in 2010). ACTA was promoted as a "gold standard" agreement on counterfeiting, yet the failure to garner support from many participants has left an agreement that is often cited as an example of how not to engage in international negotiations.  Given the global opposition, Canadian support for ACTA is disappointing.

Second, the government is framing this legislation as being geared toward countering harmful counterfeiting activities. Where counterfeiting raises health and safety concerns, no one would oppose measures to address it. Yet it should be noted that the data on counterfeiting has been regularly debunked as inaccurate and overstated. The U.S. General Accounting Office examined the issue in 2010 and concluded that the oft-quoted estimates are not reliable and cannot be substantiated to a data source. A year later, the Social Sciences Research Council released a major piracy report (funded by Canada's IDRC) that found little evidence of organized crime involvement in piracy activities. In 2012, the CATO Institute posted another assessment of the piracy claims, which it found were unsupportable.

Similar suspect data has been regularly used in Canada. For years, the RCMP cited figures of $30 billion in losses due to counterfeiting, but upon closer examination (using the Access to Information Act), the claims were found to be fatally flawed, based on little more than a single bullet point in a slide presentation from an industry group. The RCMP no longer cites the figure (and the bill's press release notably does not provide an estimate), but the Canadian Chamber of Commerce's IP Council still often uses it. Counterfeiting is certainly a serious issue, but the industry has consistently failed to provide reliable data to allow for a meaningful assessment of the problem and potential solutions.

Third, the decision to grant border guards increased powers without court oversight or review raises serious concerns. Customs officials are not copyright and trademark experts, yet they may now be forced to assess infringement cases including determining whether any copyright exceptions apply. If they fail to do so, it may result in wrongful seizures or detentions of works.  The bill opens the door to detention of works (they cannot be imported or exported) if created without consent of the copyright owner and if they infringe copyright. Yet there many works that are made without consent of the owner but rely upon exceptions such as fair dealing.  Those may result in disputes over whether the works infringe, which is an issue best left to the courts. With this bill, customs officials will now make the determination and send the works to the copyright owner to consider whether they think it infringes copyright.

Moreover, there is a danger that parallel imports, which are not counterfeit product, may be targeted. Those products provide pro-consumer benefits of enhanced competition since the goods are legitimate but enter the market through alternative channels. The provisions also greatly expand border controls to both imported and exported goods (current controls are limited to imported goods), but there has been no evidence that Canada is a significant source of counterfeit product. There is also far greater information disclosures, with rights holders now able to ask for greater information sharing and assistance on imports and exports.

The bill will likely be promoted as protecting public health, however, there is a danger that the provisions could be used to stop the entry of legitimate generic medicines. Sean Flynn highlighted the concern in an ACTA analysis of border measures and trademarks:

The problem with trademark infringements is particularly complex and worrying for generic medicines. Generic labels are required to be similar to the brands. They must use the same words identifying active ingredients, the same warnings and indications and other information. In addition, they often desire to have similar packaging and presentation as the brand drugs to help patients switch between brand and generic with comfort. Requiring border officials to identify which medicine labels are too “similar” to allow into the market is bound to lead to many more supply interruptions than if the measures were limited to criminally counterfeit products that intentionally use identical marks.

Similar concerns were raised by European scholars in their analysis of the ACTA provisions.

Fourth, the bill shifts toward an increased criminalization of copyright and trademark law.  It adds copyright and trademark offences to the criminal code as well as establishing the possibility of prison terms for trademark infringement.

This is a 52 page bill that makes numerous changes to the Copyright Act and Trade-Mark Act, requiring careful study. Yet the starting point is to move Canada toward ACTA, to create new border measures powers that could have adverse consequences on legitimate activity, and to extend the criminalization of copyright and trademark law in Canada.

Industry Minister Christian Paradis was in the news this week (Globe, Post, Cartt.ca) urging foreign telecom companies to consider investing in the Canadian market in order to beef up the competitive environment. Paradis is right to court the big foreign players, who would bring capital, buying power that the current Canadian carriers can't match (potentially leading to better deals on devices), and the ability to leverage their global networks to offer better roaming rates. Foreign telecom companies should view the Canadian market as attractive, given some of the highest ARPU (average revenue per user) rates in the world (see CRTC Figure 6.1.9). Yet they will likely give Canada a pass due in part to failed government policies. These include:

1.    Ongoing foreign investment restrictions in the telecom sector. The government has removed restrictions for the smaller players (anyone with less than ten percent market share), but those companies are less than ideal as a market entry point given the use of spectrum that is incompatible with devices such as the iPhone, incomplete network coverage, and limited geographic footprint. The larger players - Bell, Telus, and Rogers - are far more attractive but are off-limits due to the continuing foreign investment restrictions. The solution is obvious: the complete removal of all foreign investment restrictions in telecommunications.

2.    Ongoing foreign investment restrictions in the broadcast sector.  Even if the restrictions on foreign investment were lifted in the telecom market, the restrictions in the broadcast sector would likely keep Bell and Rogers out of the hands of a foreign entity.  As I've argued before, Canada should also remove the broadcast restrictions, since Canadian broadcast licensees will follow content regulations and regulatory obligations regardless of their nationality.

3.    Failed spectrum policies. Paradis indicated that the 700 MHz spectrum auction will take place by the end of 2013. This is the same auction that was supposed to happen last year and that was completed by the U.S. in January 2008.  If the auction slips to early 2014, that will place Canada six years behind the U.S. in allocating this spectrum. The conclusion for a foreign carrier looking at the Canadian market is clear: the government just isn't serious about creating the framework to allow for vibrant wireless services.

4.    Missing digital economy strategies. Closely linked to the other failures is the absence of a digital economy strategy, despite repeated promises of one.  If the government can't articulate its vision for Canada's digital future, why would it expect a foreign company to do so?

Canada needs foreign investment to address the competitive shortcomings that plague the wireless sector.  But it will take more than speeches to encourage entry.  Rather, it will require policy action by the government to address the myriad of barriers and shortcomings in the Canadian legal and regulatory framework.

As reports of yet another government security breach emerge, NDP MP Charmaine Borg has at least tried to kickstart the government's dormant private sector privacy reform efforts with a private member's bill that would add mandatory security breach disclosure requirements to the law along with new order making power. The government's own privacy reform bill - Bill C-12 - has languished for years with no real effort by Industry Minister Christian Paradis to move it forward. Moreover, the bill has some serious faults, with no penalties for security breach, no update to the Privacy Commissioner's powers, and provisions that make organizations more likely to disclose personal information without warrant during an investigation.

Bill C-475 is a far better proposal with amendments to PIPEDA with more clear cut security breach disclosure requirements along with order making power that is backed by significant penalties for compliance failures. Those provisions would do far to ensure greater respect for Canadian privacy law and give Canadians the assurance of notifications in the event of security breaches. What the bill does not do, however, is address the other side of the privacy coin, namely the failure of government to hold itself accountable for the personal information it collects and now regularly seems to fail to safeguard.

The government's recent decision to kill its online surveillance legislation marked a remarkable policy shift. The outcry over the plan to require Internet providers to install surveillance capabilities within their networks and to disclose subscriber information on demand without court oversight sparked an enormous backlash, leading to the tacit acknowledgment that the proposal was at odds with public opinion.

While many Canadians welcomed the end of Bill C-30, my weekly technology law column (Toronto Star version, homepage version) notes the year-long battle over the bill placed the spotlight on an ongoing problem with the current system of voluntary disclosure of subscriber information: Internet providers and telecom companies disclose customer information to law enforcement tens of thousands of times every year without court oversight.


The law permits these disclosures with no reporting requirements or accountability mechanisms built into the process. According to data obtained under the Access to Information Act, the RCMP alone made over 28,000 requests for customer name and address information in 2010. These requests go unreported - subscribers don't know their information has been disclosed and the Internet providers and telecom companies aren't talking either.

Bill C-30 would have introduced new reporting requirements for these disclosures, which might have allowed for insights into what Internet providers and police are doing with subscriber information. The proposed reporting requirements needed some tweaking - there was nothing to stop police from by-passing the reporting requirements by voluntarily collecting the information - but the commitment to increased transparency on personal information disclosures was a long overdue reform.

Those provisions may have died with Bill C-30, but the government should move quickly to establish a statutorily mandated reporting system for disclosures of personal information by telecom and Internet providers.

Some Internet companies have voluntarily established transparency programs. Google was the first to do so, having posted transparency reports every six months since 2009. The company's latest transparency report provides information on requests to remove data from its search index, copyright complaints, and demands from governmental authorities for user data. 

The most recent Canadian data indicates that the company receives nearly 100 requests for user data each year from governmental authorities. Over the past 18 months, Google complied with only one-quarter of such requests.

Twitter recently followed Google's example by issuing its own transparency report. While the U.S. had by far the most requests for user data, Canada ranked third worldwide (tied with the United Kingdom) with 11 requests in the first six months of 2012.  Much like Google, Twitter complied with only a minority of requests.

While companies such as Google and Twitter voluntarily report requests for user data, Canada's telecom giants remain silent, offering no details on the number of requests, the rate of compliance, or how many Canadians are affected by the disclosures.

In fact, in the months leading up to the introduction of Bill C-30, Canadian telecom companies formed a secret working group designed to create an open channel for talks between telecom providers and government. Rather than focusing on customer privacy, those meetings included discussions on developing a compensation formula for the costs associated with disclosing subscriber information.

Both government and the providers should move to address Canada's telecom transparency gap. The government could revive the disclosure reporting requirements by including those provisions in either Bill C-55 (a warrantless surveillance bill tabled on the same day the government announced that it was killing Bill C-30) or Bill C-12 (the languishing privacy reform bill).

The telecom providers, led by Bell, Rogers, Telus, and Videotron, should follow the example established by Google and Twitter by closing the telecom transparency gap. Their customers deserve regular reports on their disclosure practices as well as aggregate data on actual disclosures of customer information without court oversight. 

Canadian and European officials traded public barbs yesterday over the inability to finalize the Canada - EU Trade Agreement. EU Trade Commissioner Karel De Gucht said unless Canada makes some additional steps, there will be no deal. Canadian officials responded that Europe has yet to meet Canada's core concerns.  The comments come after a ministerial meeting this month was unable to yield an agreement. De Gucht and Canadian International Trade Minister Ed Fast met in Brussels in November 2012, but those talks failed to solve the outstanding issues. The two ministers met again in Ottawa two weeks ago with a similar result.

While officials continue to put a brave face on the talks, the latest comments suggest mounting frustration at the unwillingness of either side to cave on key issues in order to strike a deal. The major remaining issues have been the same for months: agriculture, patent protection for pharmaceutical companies, investor access and protection, public procurement, automotive issues, and cultural protections.  Indeed, these issues were identified years ago as the major areas of disagreement (copyright was initially on this list but the defeat of ACTA removed it as an issue). 

Canadian officials likely view the deal as a good one for Europe and can't understand why it won't compromise on the remaining issues since even European officials acknowledge that Canada has given far more than it has received. European officials, meanwhile, presumably want to leverage their stronger position - Canada needs a deal more than Europe right now - to wait out the Canadians and win on all their issues. But were Canada to cave on everything it would leave an agreement with serious costs and questionable benefits. For example, giving in on pharmaceutical patent demands is a clear political loser - the changes would cost billions in additional health care costs just as Eli Lilly is suing the Canadian government (using NAFTA provisions) to demand that Canadian taxpayers pay the company $100 million in compensation for the loss of a patent case in court. Not an easy sale for the Canadian government (bad policy rarely is), even with better access for Canadian beef. As a result, CETA remains in limbo with the prospect that both Canada and the EU may soon find other trade negotiations more attractive.

In a surprising and troubling decision, the Ontario Court of Appeal has permitted a police search of a cellphone that was not password protected or locked during the course of an arrest.  The court found that the police had a reasonable belief that the phone might contain relevant evidence and it was acceptable to undertake a "cursory" examination of the contents of the phone. The court noted that "if the cell phone had been password protected or otherwise 'locked' to users other than the appellant, it would not have been appropriate to take steps to open the cell phone and examine its contents without first obtaining a search warrant." 

The decision raises serious concerns given the increasingly blurry line between smartphones and personal computers (the court found that this particular phone was not a "mini-computer") and the suggestion that the contents on a phone without password protection is "readily available to others." Canadians are surely entitled to expect that the contents on a private cellphone - whether locked or unlocked - are private and that police access to the content should require a warrant.

The business opposition to Canada's anti-spam legislation has added an unlikely supporter: the Canadian Recording Industry Association, now known as Music Canada. The organization has launched an advocacy campaign against the law, claiming that it "will particularly hurt indie labels, start-ups, and bands struggling to build a base and a career." Music Canada is urging people to tweet at Canadian Heritage Minister James Moore to ask him to help bands who it says will suffer from anti-spam legislation.

Yet Music Canada's specific examples mislead its members about the impact of the legislation. The organization offers seven examples posted below in italics (my comments immediately follow):

Bands and labels will struggle to build fan bases.

This is just rhetoric. It isn't a specific example and doesn't explain how the legislation will do this.

Social media may be hampered, and you may have to unsubscribe fanbases - because you can't confirm whether they continue to want to receive electronic updates. If you have electronic newsletters or mailing lists, you may need to remove recipients, because you no longer have consent to send them, and you're prevented from seeking consent electronically.

Social media based on consent won't be hampered as the law permits this form of marketing with consent. It is true that email marketing lists will shift to opt-in, but the existing lists mentioned by Music Canada are valid for three years after the law takes effect (meaning they will likely remain valid until 2017).  Contrary to what Music Canada says, the law does not restrict using electronic consent to update those existing lists during that time period.

An independent label wouldn't be able to "cold call" a venue through email or other electronic communication to recommend they have a concert featuring one of their artists. Bands would face similar limitations to self promotion.

There are several exceptions that allow for this form of marketing. Venues that place email contact information on their websites without a notice barring unsolicited commercial email can be sent relevant electronic communications by labels or bands. Moreover, third party referrals of bands will qualify for an exception, labels or bands with a prior business relationship with a venue can use the business-to-business exception, and labels or bands with personal relationships can use those to send commercial emails to venues. This covers the vast majority of these communications, but if Music Canada is saying that spamming venues in the rare situations not covered by an exception is a key marketing strategy, perhaps it is time for a new strategy.

Your digital distribution of such things as music, videos, and e-zines delivered by email or instant messaging may trigger the legislation, especially if they contain links to additional corporate information like your website or logo.

So what? As long as you have consent, there is no concern.  In other circumstances (distribution to radio stations, etc.), the communications are covered by exceptions.

Social media campaigns may be crippled. Express consent will be required before forwarding communications to neighbours, schoolmates, acquaintances, colleagues, and certain extended family members.

Untrue. Social media campaigns based on consent are not blocked by the law. Moreover, there is an exception for personal relationships that would likely exempt the need for express consent for neighbours, schoolmates, acquaintances, colleagues, and certain extended family members.

You may need to invest in expensive processes to comply with the new across the board
requirements for express consents, disclosures, and unsubscribe formalities.

Privacy law already requires organizations that collect, use, and disclose personal information to maintain processes that respect opt-out requests. Surely Music Canada is not suggesting that its members breach current privacy laws by failing to invest in the systems needed to properly track the personal information they collect along with opt-out requests.

You may also need to make substantial investments in new tracking and compliance systems or face the threat of class action law suits from the expected CASL litigation trolls under the new private right of action.

As noted above, compliance with current privacy law requires systems to respect opt-out requests.  With respect to the threat of lawsuits, there is a certain irony that the industry that introduced lawsuits against individuals for file sharing (CRIA members first commenced such actions in 2004) and brought us the Sony Rootkit debacle is now concerned with lawsuits against its own members for failing to abide by an anti-spam and spyware law.

Hollywood crime dramas are infamous for the scene when an accused is taken to a local police station and permitted a single phone call to contact a relative or lawyer. While the storyline is myth - there is no limit on the number of phone calls available to an accused or detainee - a recent Alberta case established a new, real requirement for law enforcement. After a 19-year old struggled to find a lawyer using the telephone, the court ruled that police must provide an accused with Internet access in order to exercise their right to counsel.

Christopher McKay, who faced a driving while under the influence charge, told police that he wanted to exercise his right to legal counsel. McKay’s cellphone and other personal belongings were placed in a police locker when he arrived at the station. McKay was told there was a toll-free number available to contact a lawyer as well as White and Yellow pages that could be consulted. He called the toll-free number but was unable to find assistance.

My weekly technology law column (Toronto Star version, homepage version) notes that what followed was the product of a demographic deeply familiar Hollywood movies and reliant on the Internet. McKay assumed that he had used his single phone call and did not consider using directory assistance (411), which he did not think was a "viable search engine." Instead, he noted that Google was his main method to search for information.

Judge Heather Lamoureux of the Provincial Court of Alberta considered "whether Internet access should form part of police resources provided to detainees in order to facilitate a reasonable opportunity to exercise the constitutional right to counsel." After acknowledging that many teenagers view their smartphone, iPad and other devices as essential parts of their daily lives, she noted that Google is the primary source of information for everything from maps to medical care to access to lawyers.

In fact, the judge conducted a Google search for "Calgary criminal defence lawyer" and found that within seconds there was provided with a long list of potential local lawyers. Moreover, the judge noted that police routinely use the Internet for investigations and evidence gathering.

The Charter of Rights and Freedoms grants anyone arrested or detained the right "to retain and instruct counsel without delay and to be informed of that right." For this judge, the failure to provide Internet access meant that the Charter rights had been violated, concluding:

"In the year 2013 it is the Court's view that all police stations must be equipped with Internet access and detainees must have the same opportunities to access the Internet to find a lawyer as they do to access the telephone book to find a lawyer."

The decision will undoubtedly raise eyebrows among criminal lawyers and law enforcement officials, yet it continues a growing trend around the world that elevates Internet access to a quasi-legal right. In 2010, Finland became the first country in the world to make broadband Internet access a legal right for all citizens. A year later, a United Nations report concluded that disconnecting people from the Internet is a human rights violation.

For police, the decision may have resource implications, since providing Internet access will be more costly and cumbersome than pointing to a nearby telephone. It also points to how the Internet and new technologies force the continued rethinking of longstanding rules and practices as even Hollywood films may someday feature police directing an accused to an Internet-connected computer in order to exercise their right to counsel.

For the past month, business groups from across the country have waged an extraordinary campaign against Canada's anti-spam legislation. With the long overdue law likely to take effect by year-end, groups such as the Canadian Chamber of Commerce, the Canadian Federation of Independent Business, and the Canadian Marketing Association, have launched an all-out blitz to carve out large loopholes in the law and exempt highly questionable conduct.

My weekly technology law column (Toronto Star version, homepage version) notes that the business groups' chief concern is that the law moves Canada toward a stricter "opt-in" privacy approach that requires marketers to obtain customer consent before sending commercial electronic messages. The move will provide Canadians with greater control over their in-boxes, while also resulting in more effective electronic marketing campaigns for businesses.


Businesses claim the changes will be costly and out-of-step with the rest of the world, but the reality is that Canada is playing catch-up years after most other developed countries implemented similar safeguards.  The opt-in approach can be found in many countries including Australia, the United Kingdom, the European Union, and Japan, who have all recognized that weaker opt-out models (that permit marketing until a consumer proactively asks for it to stop) simply don't provide effective protection.

Moreover, the government has added numerous safeguards for business to the law. The general requirement may be opt-in consent, but there are many exceptions that allow for softer, implied consent. These include exceptions for existing business relationships, personal and family relationships, business-to-business emails, and third-party referrals. 

In fact, there is even an exception for email addresses that have been posted online without a notice that the poster does not wish to receive unsolicited commercial email. For companies seeking to develop lists of potential contacts, this exception ensures that will remain a possibility.

In addition to the exceptions, the business community has been granted years to comply with a transition period that could run to 2017 before a business must switch to opt-in consent for its existing customers.

Despite the numerous carve outs, the business groups claim that the law will result in significant new expenditures, including the need to maintain a database of opt-in consents and a website to allow for easy access to contact information and unsubscribe mechanisms. Yet those businesses are already required to maintain databases with opt-out information and electronic marketing without a website seems somewhat pointless.

Perhaps the most surprising demand from business groups is an expansive exception to a new requirement to obtain express consent prior to the installation of computer software.  The groups have asked the government to delay implementation of this rule indefinitely. Alternatively, they are seeking at least ten additional exceptions, including one that would permit surreptitious surveillance for private enforcement purposes.

The business groups' proposed provision would remove the need for express consent for the installation of any program designed "to prevent, detect, investigate, or terminate activities" such as the unauthorized use of a computer or the contravention of any law, whether Canadian or foreign. Once operational it would effectively legalize spyware in Canada on behalf of these industry groups and create a new mechanism for enforcing foreign laws in Canada.

The potential scope of coverage is breathtaking: a software program secretly installed by an entertainment software company designed to detect or investigate alleged copyright infringement would be covered by this exception. So too would programs designed to block access to certain websites, attempts to access wireless networks without authorization, or even key-logger programs that track unsuspecting users.

The anti-spam law was enacted with the promise of increasing consumer confidence in e-commerce by providing protections commonly found in other countries. With the latest round of lobbying, however, business groups are pressuring Industry Minister Christian Paradis to turn the law upside down by shifting from protecting consumers to protecting businesses.

The IIPA, the umbrella lobby group that represents the major movie, music, and entertainment software lobby groups, released its recommendations for the U.S. piracy watch list last week.  Those that thought passing Bill C-11 - the Canadian copyright reform bill that contained some of the most restrictive digital lock rules in the world - would satisfy U.S. groups will be disappointed. The IIPA wants Canada back on the piracy watch list, one notch below the Special Watch List (where the US placed Canada last year).


Despite the praise for Bill C-11 last year, the groups are right back in criticism mode and demanding reforms. The IIPA is now unsure if the enabler provision will help stop sites that facilitate infringement (despite the fact that its members have yet to use the provision) and concerned with the prospect of new exceptions to the digital lock rules. In fact, its criticisms of the rules for Internet providers (it wants a notice-and-takedown system, tougher rules on search engines that link to infringing content, and new rules to target repeat infringers) are so strong that the organization implausibly claims possible non-compliance with the WIPO Internet treaties.

Moreover, the IIPA wants to undo many of the Bill C-11 changes. It criticizes the new non-commercial caps on statutory damages, the expansion of fair dealing, the non-commercial user generated content provision, the educational exception for publicly available materials on the Internet, and the new exception for temporary copies for technological processes. In other words, the groups are wary of virtually anything designed to provide some balance in the law. There are other targets as well including copyright term extension and more criminal copyright provisions. The Canadian government is unlikely to cave this quickly on copyright, but these demands highlight the pressure that will emerge during the Trans Pacific Partnership negotiations and in bi-lateral discussions with the U.S.

NDP MP Charmaine Borg, the party's digital issues critic, has written to Industry Minister Christian Paradis to express concern over the draft anti-spam regulations, noting that they appear to circumvent the will of Parliament. The letter cites testimony from Industry Canada officials in 2010, who told the Industry Committee "what the legislation is trying to do is not allow a third party to give express or implied consent on behalf of another person."  Yet despite that position, the department has now proposed a third party referral exception.  Borg notes:

After defending their decision to exclude a third party referral exception from the bill, Industry Canada officials, two-years later, introduced the very same exception into the regulations. Yet it was the text of Bill C-28 - explicitly excluding a third-party referral exception - that received multi-partisan support in the House, Industry Committee and the Senate.  It appears that in the intervening two years since Bill C-28 received Royal Assent, Industry Canada has decided to regulate around the will of Parliament.


In light of these developments, Borg asks Paradis to respond to the following questions:

1.    What caused Industry Canada to change its mind about the inclusion of said exception between November 2010 and January 2013? 
2.    And, what example does this set for future legislative and corresponding regulatory processes? Will we see the Conservative government continue to use regulations to regulate around the will of Parliament?

As discussed in several posts on this blog, business groups have been actively lobbying for extensive changes to the anti-spam legislation. Borg's letter provides a timely reminder that further watering down the legislation may cause a significant Parliamentary backlash.

Justice Minister Rob Nicholson announced yesterday that the government will not be proceeding with Bill C-30, the lawful access/Internet surveillance legislation:

We will not be proceeding with Bill C-30 and any attempts that we will continue to have to modernize the Criminal Code will not contain the measures contained in C-30, including the warrantless mandatory disclosure of basic subscriber information or the requirement for telecommunications service providers to build intercept capability within their systems. We've listened to the concerns of Canadians who have been very clear on this and responding to that.

This shift in policy is remarkable, particularly for a majority government that has used crime as a legislative wedge issue. Almost one year ago to the day - on February 13, 2012, Public Safety Minister Vic Toews infamously told the House of Commons that critics of his forthcoming bill could stand with the government or with the child pornographers. Bill C-30 was introduced the following day, but within two weeks, a massive public outcry - much of it online - forced the government to quietly suspend the bill and now a year later openly acknowledge that it is dead.


I think there are at least four takeaways from the lawful access failure of 2012-13.  The first is that bad policy is hard to defend.  Successive governments (both Liberal and Conservative) have introduced lawful access legislation and consistently struggled to identify actual examples where the current laws are inadequate. Moreover, the rationale for these laws has constantly shifted - from terrorism to spam to child pornography to (most recently) cyber-bullying. The public can sense a failed policy and the current version of lawful access - with no real attempt to address legitimate privacy and oversight concerns as well as silence on who was going to pay the hundreds of millions in surveillance technology costs - was so bad that even supporters were forced to admit its overreach. In fact, even as the bill was declared dead, the director of CSIS acknowledged that "it's not absolutely critical for us to do our work."

Second, the lawful access experience in Canada becomes part of the growing number of Internet advocacy success stories. From the massive petition on usage based billing that spurred the government to effectively order the CRTC to reconsider the issue, to the gradual shift in copyright reform that resulted in more user-oriented provision than any comparable law in the world, Canadians have demonstrated that they are concerned with digital policies and will not hesitate to use social media and the Internet to speak out. To the government's credit, it paid attention to the lawful access backlash as Nicholson acknowledged the strong public opposition and the decision to respond to it.

Third, even with Bill C-30 dead, there is a problem with the current system of voluntary disclosure of customer information by ISPs. The lawful access debate placed the spotlight on the fact that ISPs disclose customer information tens of thousands of times every year without court oversight. The law permits these disclosures, but there are no reporting requirements or accountability mechanisms built into the process. Those are needed and the government should move swiftly to add this to the law, either within Bill C-12 (the PIPEDA reform bill) or Bill C-55, which was introduced yesterday.

Fourth, Bill C-30 may be dead, but lawful access surely is not.  On the same day the government put the bill out its misery, it introduced Bill C-55 on warrantless wiretapping. Although the bill is ostensibly a response to last year's R v. Tse decision from the Supreme Court of Canada, much of the bill is lifted directly from Bill C-30.  Moreover, there will be other ways to revive the more troublesome Internet surveillance provisions. Christopher Parsons points to lawful intercept requirements in the forthcoming spectrum auction, while many others have discussed Bill C-12, which includes provisions that encourage personal information disclosure without court oversight.  Of course, cynics might also point to the 2007 pledge from then-Public Safety Minister Stockwell Day to not introduce mandatory disclosure of personal information without a warrant. That position was dropped soon after Peter Van Loan took over the portfolio. 

Lawful access opponents should rightly celebrate the defeat of Bill C-30 and the government's recognition that it was a bad bill that was poorly justified. That said, lawful access will return. Law enforcement will continue to lobby for the reforms and Public Safety officials, who have shown little pretense of balance on this issue, will keep the file alive in the hope that it can be revived. Perhaps it will come as a single bill, though more likely the policies will be found in smaller pieces of legislation or non-legislative policies that are more difficult to identify and oppose.  Bill C-30 is dead, but the fight over Internet surveillance and foundational privacy principles such as court oversight for mandatory disclosure of personal information will continue for the foreseeable future.

Distributel, an independent ISP with services in Quebec, Ontario, Alberta, and B.C., has fought back in a file sharing lawsuit launched by NGN Prima Productions, opposing a motion to disclose the names of subscribers alleged to have engaged in file sharing. It appears that NGN is using Canipre to identify alleged file sharers, the same company that has supplied information to Voltage Pictures in its case involving thousands of subscribers at TekSavvy. Distributel did not oppose a similar request in November 2012, but says in court documents filed today that several factors led to a change in position when NGN filed another request for more names.

First, Distributel was concerned with how NGN treated its subscribers, demanding a $1500 settlement in a notice claiming that subscribers could face up to $20,000 in damages. Distributel noted the lack of evidence for the claim made by NGN, relying on an expert analysis of BitTorrent to highlight the shortcomings. Moreover, Distributel says NGN is engaged in copyright trolling, citing the misrepresentation in the potential liability (the law now features a cap of $5,000 for non-commercial statutory damages) and the settlement demands that far exceed actual damages.


Second, Distributel argues that NGN failed to meet the requirements for disclosure established in the BMG Canada v. Doe case by failing to demonstrate a bona fide claim. In support of its argument, Distributel points to "numerous errors, inconsistencies, and missing links" in the evidence. Geographic information included in the evidence was often erroneous and there was little evidence about how the information on Distributel subscribers was obtained.  Further, Distributel argues that significant evidence was not provided: no information on how much of the work was copied, no evidence that a substantial portion of a film was infringed, no evidence of which P2P networks were used, and no information on the subscribers' P2P pseudonyms.

Third, Distributel expresses concern with the targeting of smaller, independent ISPs. This particular case involves two other small ISPs (Access Communications, ACN) and the company argues that pursuing independent ISPs is unfair as it may affect consumer choice for Internet services.

Fourth, Distributel raises privacy concerns, including the lengthy delay from data collection until the time when this motion was raised. Moreover, NGN did not provide evidence that there are no other ways to obtain this information.

Fifth, Distributel cites the Voltage - TekSavvy case for the need for reasonable compensation for the expenses incurred by the ISP.  Distributel says that NGN has not provided for reasonable compensation in the draft order it presented to the court.

Distributel's decision to oppose the motion points to mounting ISP frustration with file sharing lawsuits that come after the government send clear signals that such actions were unwelcome.  While Bell, Cogeco, and Videotron did not oppose or challenge a case involving Voltage Pictures in 2011, more recently TekSavvy has fought for the right to notify its customers and to allow CIPPIC to intervene in a case involving thousands of subscriber names.  Distributel has taken the next step of reversing a prior position by opposing a motion for disclosure of subscriber names, sending a strong message that it will carefully examine the evidence and motives of rights holders before standing aside in the quest for subscriber information and inevitable settlement demands that follow.

For the past two days I've called attention to the shocking demands by business groups, including the Canadian Chamber of Commerce, the Canadian Marketing Association, and the Entertainment Software Association of Canada, to legalize spyware by permitting the secret installation of computer programs to monitor activities of Canadians suspected a potential contravention of the law (including laws such as copyright or any foreign law) or unauthorized use of a computer system (including wireless networks).

The Canadian Chamber of Commerce added its own submission to the government's consultation on the anti-spam regulations. The Chamber's key concern is the very foundation of the law: opt-in consent that requires businesses to obtain consent before sending commercial electronic messages (subject to a wide range of exceptions). The Chamber says:


Despite the enduring need to combat nuisance messages and malware, the multitude of compliance problems introduced through the "opt-in" approach to regulating commercial electronic messages and software needs further scrutiny.

The business lobby group therefore argues that opt-in should be dropped for business-to-business email altogether, that the government hold another round of consultations (thereby further delaying the law), and that the law be delayed for at least a year after the final regulations are published.

The opposition to the opt-in approach permeates throughout the organization, its affiliates, and members. For example, earlier this week the Niagara Falls Chamber of Commerce reacted to concern from a member about the spyware provisions by pointing to the law's opt-in requirements and asked "you don't think obligating business to get consent prior to sending a CEM is wrong"? (the complainant said no). Similarly, Graham Henderson, the CEO of CRIA/Music Canada, a Chamber supporter, claims that the law will pose an "immense threat to independent labels and young bands."

Despite these persistent claims that the opt-in approach found in the anti-spam law will greatly harm business (or apparently young music bands), the reality is that opt-in is the standard in most major developed countries.  For example, the Australian anti-spam law is based on an opt-in express consent model, with exceptions for opt-out consent based on an existing business relationship or a published email address (Canada has the same exceptions). As for the oft-repeated concerns that this will prevent cold calling via email, Australia has had this prohibition in place for nearly five years (along with a more restrictive third party referral system).

Similarly, Japan switched from an opt-out system to opt-in in 2009, after it found that the opt-out system simply doesn't work. The Japanese system is described as follows:

The legislation is clear: Full auditable and trackable permission to receive email marketing messages must be received prior to any send. Even though there is a clause that states that for-profit entities who publicly announce their own email addresses or who have a preexisting business relationship with the sender can receive commercial email, there is still a requirement for an affirmative act prior to receipt.

The European Union has had an opt-in consent model for a decade. It describes its own system as:

Article 13(1) of the Privacy and Electronic Communications Directive requires Member States to prohibit the sending of unsolicited commercial communications by fax or e-mail or other electronic messaging systems such as SMS and MMS unless the prior consent of the addressee has been obtained (opt-in system).

This requirement has been implemented throughout Europe.  For example, the Privacy and Electronic Communications (EC Directive) Regulations 2003 in the United Kingdom provides the following on the use of electronic mail for direct marketing purposes:

Except in the circumstances referred to in paragraph (3), a person shall neither transmit, nor instigate the transmission of, unsolicited communications for the purposes of direct marketing by means of electronic mail unless the recipient of the electronic mail has previously notified the sender that he consents for the time being to such communications being sent by, or at the instigation of, the sender.

3) A person may send or instigate the sending of electronic mail for the purposes of direct marketing where—
(a) that person has obtained the contact details of the recipient of that electronic mail in the course of the sale or negotiations for the sale of a product or service to that recipient;
(b)the direct marketing is in respect of that person’s similar products and services only; and
(c) the recipient has been given a simple means of refusing (free of charge except for the costs of the transmission of the refusal) the use of his contact details for the purposes of such direct marketing, at the time that the details were initially collected, and, where he did not initially refuse the use of the details, at the time of each subsequent communication.

In other words, Canada is not an outlier in adopting an opt-in model. The only major trading partner with an opt-out model is the United States, whose CAN-Spam Act is widely regarded as a failure. While there are variations in the specifics between countries, the opt-in approach has been implemented around the world without email marketing grinding to a halt. As noted yesterday, the comment period on the draft regulations may have closed, but it is not too late to tell Industry Minister Christian Paradis or your local Member of Parliament to reject demands from groups like the Canadian Chamber of Commerce that would gut the anti-spam bill.