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Technology law column by Michael Geist

Consumers Face Barriers in Taking Advantage of Wireless Competition

As Industry Minister Tony Clement prepares to provide an update on Canada’s digital economy strategy later this month, the state of competition within the Canadian wireless sector promises to play a prominent role.  Consumers have bemoaned the dominance of the big three carriers for years, leading to complaints about limited choice and high prices.

In recent years, however, the government has begun to map out a strategy to address the competitiveness concerns.  The 2008 spectrum auction opened the door to new competitors, with many launching over the past year.  Moreover, the prospect of removing foreign ownership restrictions is gaining traction and there are indications that additional spectrum will soon be made available.

While these changes have established a market with more providers, the ability for consumers to take advantage of greater competition remains a work-in-progress. 

From a pricing perspective, the incumbent providers maintain important advantages, particularly the ability to bundle wireless, landline, Internet, and television services into a single package featuring discounted prices that any new entrant would be hard-pressed to match.

In Search of A Compromise on Copyright

Last week marked the return of the copyright debate to the House of Commons as Bill C-32 entered second reading. Six months after its introduction, it became immediately apparent that all three opposition parties will be seeking changes to the bill in return for their support. Three issues stand out as the most contentious: digital locks, fair dealing reform, and the extension of the private copying levy.

Canadian Heritage Minister James Moore was quick to criticize opposition concerns, but garnering the requisite votes to pass the legislation will require compromise.  The good news is that there may be a path to finding common ground on each issue.
Digital Locks
The digital lock rules were easily the most discussed aspect of Bill C-32. The Liberals repeatedly emphasized the need for Canadians to have the right to circumvent for format shifting, making backup copies, and other consumer activities.  This would require changes to the consumer provisions in the bill and the general anti-circumvention provision, since both create barriers to these common consumer activities.

Facing Up to the Generational Privacy Divide

Last week hundreds of privacy regulators, corporate officers, and activists gathered in Jerusalem, Israel for the annual Data Protection and Privacy Commissioner Conference. The conference theme focused on the perception of a growing privacy divide between generations, with older and younger demographics seemingly adopting sharply different views on the importance of privacy.  

Many acknowledged that longstanding privacy norms are being increasingly challenged by the massive popularity of social networks that encourage users to share information that in a previous generation would have never been made publicly available for all the world to see.  Moreover, rapid technological change and the continuous evolution of online sites and services create enormous difficulty for regulators unaccustomed to moving at Internet speed.

Given these changes, the conference asked participants to question whether privacy norms are at a breaking point with conventional laws, regulations, and principles rendered irrelevant in the face of the generational and technological shift.

Consultation Lays Bare Divide Over Future of Canadian Book Industry

Late this summer, as thousands of Canadians were playing with their coveted new Apple iPads, the government quietly disclosed that it was conducting a regulatory review of Apple and its entry into the electronic book market.  The review caught many by surprise, with some left wondering why any government intervention was needed for another offering in the popular iTunes store.

The answer lies in Canada's longstanding cultural policy and the significant protections it establishes over the publication, distribution and sale of books.  These include restrictions on foreign entry into the Canadian marketplace that reserve majority ownership for Canadians on the premise that an open market would hamper the ability of Canadian authors, publishers and booksellers to compete.

Digital Advocacy’s “Weak Ties” Should Not Be Underestimated

Malcolm Gladwell, the best-selling Canadian writer for the New Yorker, recently turned his attention to the use of Twitter, Facebook, and the Internet for digital advocacy.  Gladwell dismissed claims that digital advocacy has been an effective tool, lamenting that "people have forgotten what advocacy is about."

He suggested that effective advocacy that leads to broad social or political change requires "strong ties" among people who are closely connected, committed to the cause, and well organized.  When Gladwell examined digital advocacy initiatives he found precisely the opposite - weak ties between people with minimal commitment and no organizational structure.

The Gladwell article was published two days after Canada, the United States, the European Union, and a handful of other countries concluded negotiations on the Anti-Counterfeiting Trade Agreement.  Although some issues must still be sorted out, the countries have agreed on a broad framework and announced that no further negotiation rounds are planned.

Why are U.S. Net Services Slow to Migrate North?

Netflix, the popular online movie rental service, launched in Canada last month, providing consumers with the option to download an unlimited number of movies and television shows for a flat monthly fee.  While the Netflix debut was marred by an ill-advised public relations stunt that involved actors masquerading as excited consumers, the long delays in migrating the service north once again raised questions over why popular online services rarely view Canada as a priority destination.

Canada's legal framework makes for a convenient explanation, but the reality is that subtle legal differences are rarely the primary rationale for business and marketing decisions.  Moreover, Canadian privacy, e-commerce, and intellectual property laws are compliant with international standards and recent surveys have found that business executives view Canadian protections as better than those in the United States.

As the Canadian government readies its national digital economy strategy, identifying the real reasons behind delayed entry into the Canadian market is a crucial piece of the puzzle.  

At least three explanations come to mind.

From Rhetoric to Reality: The Key Issues in Bill C-32

With the House of Commons back in session, there are indications that Bill C-32, the copyright reform bill, will emerge as a government priority.  Given the rhetoric since its introduction, it seems likely that some will seek to paint critics of the bill as anti-copyright, pirates, or radical extremists.  While the rhetoric may seek to delegitimize consumers and many Canadians vocal on the copyright issue, the reality is that many consumer and education groups have been far more supportive of the bill than proponents such as the music industry.

When C-32 was first introduced, many Canadians acknowledged that the government did a good job compromising on some very contentious issues (ISP liability, fair dealing, consumer provisions, statutory damages) but expressed concern that the bill’s digital lock approach represented a huge flaw that undermined many of the positive steps forward.  That reflects my view as well, since I believe that if a compromise on digital locks can be found, the bill merits broad support.

The most contentious issues in C-32 include:

1.   Digital Lock Provisions (anti-circumvention rules)

U.S. Uses Domain Names As New Way to Regulate the Net

Governments have long sought ways to regulate Internet activity, whether for the purposes of taxation, content regulation, or the application of national laws.  Effective regulatory measures have often proven elusive, however, since, unlike the Internet, national laws typically end at the border. Earlier this month, the United States began to move aggressively toward a new way of confronting the Internet’s jurisdictional limitations - the domain name system.

Domain names are widely used to ensure that email is delivered to the right inbox or to allow users to access a particular website.  The system includes a large database that matches the domain name (e.g. thestar.com) to a specific IP address (i.e. the location of the computer server).  The system is used billions of times every day to route Internet traffic to its intended destination. 

As every Internet user knows, inadvertently entering the wrong email or web address typically means that the email bounces back or takes the user to an unexpected destination. Legislators have now begun to consider the possibility of intentionally stopping access to certain sites by ordering Internet providers to block access to their domain names.

Media Mergers the Latest Stab at ‘Walled Garden’ Strategy

In the years before the emergence of the Internet, three online service providers battled in the United States for market supremacy.  America Online (later AOL), Prodigy, and Compuserve each adopted "walled garden" strategies that pinned their hopes on exclusive content to attract large subscriber bases.  

AOL ultimately won, becoming the largest online service provider in the world in the late 1990s. With tens of millions of subscribers, the company continued to bet on its walled garden approach, even as many people merely wanted their services to access the Internet.  Over the years, AOL saw its market share shrink dramatically, overtaken by an open Internet that offers infinitely more choice than any single company can.

While others attempted to erect their own walled gardens - Minitel in France, early Internet access on wireless devices that only pointed to company-approved sites and services - consumer demand for open Internet access consistently won out.

Millions at Stake in Education Copyright Battle

Thousands of Canadian students headed back to school last week with many facing rising loans to pay for tuition, books, and accommodation.  As students struggle to make ends meet, significant new costs loom on the horizon as a result of a battle brewing over copying in universities and colleges. 

The potential new costs stem from a tariff proposal by Access Copyright, the copyright collective that licences copying and course-packs on most campuses across the country.  Fresh off a legal victory at the Federal Court of Appeal in July that will generate millions of dollars for copying that occurs in kindergarten to Grade 12, Access Copyright has now proposed a new licencing scheme to cover copying and course-packs set at $45 per university student and $35 per college student. The proposed tariff represents a massive increase over current fees, which are $3.38 per full-time equivalent student as well as 10 cents per page for course-pack copying. 

The proposal has fueled enormous concern within the education community, both for its approach on core copyright issues and for the demands to increase fees at a time when many believe they should be going down rather than up.

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