Ole, Intellectual Property, and Taxing Canadian ISPs

Ole, a Canadian independent record label, put forward an often-heard and much disputed proposal to enhance record label revenues: Ole wants ISPs to surveil Canada’s digital networks for copywritten works. In the record label’s filing on July 12 for the Digital Economy Consultations, entitled “Building Delivery Systems at the Expense of Content Creators,” Ole asserts that ISPs are functioning as “short circuits” and let music customers avoid purchasing music on the free market. Rather than go to the market, customers are (behaving as rational economic actors…) instead using ISP networks to download music. That music is being downloaded is an unquestionable reality, but the stance that this indicates ISP liability for customers’ actions seems to be an effort to re-frame record industries’ unwillingness to adopt contemporary business models as a matter for ISPs to now deal with. In this post, I want to briefly touch on Ole’s filing and the realities of network surveillance for network-grade content awareness in today market. I’ll be concluding by suggesting that many of the problems presently facing labels are of their own making and that we should, at best, feel pity and at worst fear what they crush in their terror throes induced by disruptive technologies.

Ole asserts that there are two key infotainment revenue streams that content providers, such as ISPs, maintain: the $150 Cable TV stream and the $50 Internet stream. Given that content providers are required to redistribute some of the $150/month to content creators (often between 0.40-0.50 cents of every dollar collected), Ole argues that ISPs should be similarly required to distribute some of the $50/month to content creators that make the Internet worth using for end-users. Unstated, but presumed, is a very 1995 understanding of both copyright and digital networks. In 1995 the American Information Infrastructure Task Force released its Intellectual Property and the National Information Infrastructure report, wherein they wrote;

…the full potential of the NII will not be realized if the education, information and entertainment products protected by intellectual property laws are not protected effectively when disseminated via the NII…the public will not use the services available on the NII and generate the market necessary for its success unless a wide variety of works are available under equitable and reasonable terms and conditions, and the integrity of those works is assured…What will drive the NII is the content moving through it.

Of course, the assertion that if commercial content creators don’t make their works available on the Internet then the Internet will collapse is patently false.

As written about by Middleton in “What if there is no killer application?“, an early study in Littleton about how individuals use high-speed networks in the mid-90s found that customers were most engaged with amateur content production (i.e. that of their neighbours) and entranced by the communicative possibilities made available through broadband (i.e. e-mail and mailing lists). In essence, from this we can suggest that the empirical study demonstrated that the ideological and financial values placed on commercial cultural artifacts by bureaucrats and commercial content producers is less obvious than they (loudly) state. Further, the value of commercial content is arguably diminished even more in an environment where people spend increasing amounts of time engaging with the generative elements of the Internet, often referred to as amateur-dominated social media environments. In essence, the undertone that ISPs can only sell their data transmission services because of commercial content is at the very least shaky, and more likely to be empirically unsupportable if posed as a strong correlation between the value of transmission capabilities and commercial content availability.

Depressingly, Ole believes that a broadcast-based (historical) business model should be imposed on ISP transmission-based companies in an effort to regenerate the value of their (now somewhat devalued) intellectual properties. Specifically,

The ISP business model for the Internet could and should mimic that of Cable/ TV. Modern technology allows the ISP to identify what content is being used and then they can allocate the appropriate share to the creator or supplier of that content.

This would put ISPs in the situation of somehow being liable to the collection societies, and also require substantial telecommunications investment in labour and sunk capital to establish an (ineffective) network surveillance policy designed to monitor the amount of copywritten content flowing across Canada’s networks. Most likely, such a proposal would turn ISPs into content police and require the use of some kind of packet inspection equipment to survey Canadians’ data traffic, pick out that which is believed to be infringing, and pay some kind of monthly tax for the transport of customers’ content. This amounts to a suggestion that ISPs become content police on the basis that only by doing so would they evade being identified as encouraging copyright infringement. Ole is intimating that ISPs must implement surveillance one the networks if they are to avoid third-party liability.

There are systems on the market that claim they can analyze data traffic to develop ‘piracy’ indexes. CView is used by Virgin in the UK (though we’ve no idea how effective it is) and Audible Magic has been successful in forcing some ISPs and campuses to adopt their technology. In most cases, such content analysis technologies require the offloading of data traffic suspected of being infringing in high-traffic networks, doing a one-way hash of the data, checking the hash against known copywritten files’ signatures, and then aggregating the overall amount of infringement and particular cases of infringement on a per-file basis. This is substantial overhead for any party, especially one that is just trying to move data from one place to another. Moreover, any such massive dragnet analysis of content raises real questions of whether ISPs could then be considered ‘transport’ facilities; while presently there is substantial monitoring for particular protocol types, Canadian ISPs are not searching for particular content-types. This is an important distinction, insofar as ISPs can understand what application-types are generating traffic on their networks but not what those application-types are actually being used to transmit and receive. For all Canadian ISPs know, Canadians might have some strange obsession with massive downloading and sharing of Linux .ISO files and the entire Canadian population actually avoids downloading copywritten music.

There continue to be doubts concerning whether any kind of massive copyright-analysis engine could work – prominently by companies that actually sell the solutions and those that would be responsible for deploying these fears – and further whether such engines could ever competently detect fair use/fair dealing of some material. YouTube’s algorithms are relatively notorious for censoring uses of copywritten material falling under fair use and fair dealing provisions; what guarantee do citizens have that any algorithmic surveillance and monitoring system deployed on communicative networks would avoid the YouTube problem? Should the content creator-owner get restitution for fair dealing of works? How would this be adjudicated – by determining where the data was to and from (i.e. if to an educational institution, we must assume that it’s for fair dealing research purposes) or on a case-by-case challenge basis? Moreover, doesn’t the provision of funds for fair dealing uses modify the provisions of fair dealing, insofar as content creator-owners would receive a fiscal benefit even for fair dealing whereas presently fair dealing falls outside of their revenue traps?

Of course, even the suggestion that Canadian ISPs should be required to cough up money to content creator-owners is absurd in the face of a recent Federal Court of Appeals ruling that asserted that ISPs are not broadcasters. The question of ISPs’ status was punted to the Court by the CRTC, who wanted judicial guidance before it proceeds to determine whether ISPs can be legally required to establish copyright levies. Since ISPs fall under the Telecommunications, and not Broadcasting Act, they are seen as solved involved in providing,

the mode of transmission, they have no control or input over the content made available to Internet users by content producers and as a result, they are unable to take any steps to promote the policy described in the Broadcasting Act or its supporting provisions. Only those who “transmit” the “program” can contribute to the policy objectives.

Under this decision, so long as ISPs are not involved in discriminating against any particular content and thus making an input into the content made available on the Internet to and by users (i.e. so long as Canadian ISPs adhere to a form of network neutrality), any levy-based system is dead. The very system that Ole is advocating for has already fallen before the Court of Appeals.

Now, out of all of this, we might be expected to feel poorly for the content creator-owners that depend on selling and licensing content for their commercial success. I think that if we look at the history of these companies’ digital involvement, however, we quickly disenchant ourselves of this position. Major labels refused to license recordings to Napster and subsequently engaged in what Jessica Litman refers to as a process of “suing upstart new businesses into bankruptcy” to try and stem the Internet as a disruptive factor in their businesses. This saw content creator-owners financially assassinate Napster, Scour.com, iCraveTV, RecordTV, mp3.com, Aimster, Grokster, Streamcast, KaZaA, and others. Authors have gone after Google for the mere action of scanning books for search index purposes, a purpose that would enable authors to sell additional texts when the texts appeared through a Google book search. That the copying a text, even for fair-use purposes, is grounds for massive legal obstruction speaks volumes of content creator-owners general willingness to genuinely deal with the digital reality they are immersed in. Broadly, instead of working to establish a marketplace for digital manifestations of content creator-owner works there have been, and continue to be, mass efforts to shut down marketplaces that don’t grant total control to content owner-creators and their associated companies. As such, customers have become used to going to illicit sites that offer superior selection with fewer restrictions than label offerings. This indicates a failure in big content’s rent-seeking business model and the truth that modern customers are rational economic actors. It does not indicate that ISPs are somehow required to prop-up a rent-seeking model, nor a moral deficit on the part of customers.

Labels were, and remain, in a state of ontological insecurity that accompanies their plunging into a decade-long existential crisis: how can they maintain their rent-seeking behaviour in the face of disruptive technologies. Answers to this existential question are out of reach of most companies on the basis that their perception of the world markets preclude taking risks that could see a (necessary) cannibalization of short-term revenue streams for long-term survival. Unfortunately, while adherence to historical models was effective last decade in colonizing their futural existences – in assuring them of how to approach the world and guarantee particular revenue streams – that old model leaves them grasping at new rent-seeking behaviour instead of adopting novel business strategies. While we can all appreciate just how devastating existential crises can be on a personal level, when we consider the multi-billion dollar record industry we tend to have far less sympathy. Just as you or I are unable to let a crisis linger for a decade – we go to a therapist, get straightened out, and get back on our way – neither can these companies. At best we might feel pity as we watch them wallow in their crisis. At worst, we fear what they might crush as they roll around on the ground like starving dinosaurs and demolish other elements of civil society in their throes of panic and fear aimed at extinguishing the generativity seen as endangering their ontological security. They’ve already made a mess of copyright and cultural transmission possibilities; let’s hope they don’t damage the conditions of democratic communication itself while they’re working out their problems.

9 thoughts on “Ole, Intellectual Property, and Taxing Canadian ISPs

  1. I think the main problem with this blog entry is that it flattens all creators and rightsholders into a single constituency, into which it tosses “bureaucrats” for good measure. To see why this makes no sense we need not look much further than the fact that most of the creator groups, as opposed to record labels or copyright collectives, have in fact come out for some version or other of net neutrality. Ole is a useful straw man, but beating up on straw men will only get you so far.


  2. By the way, are you sure that the court case you mention had anything to do with “whether ISPs can be legally required to establish copyright levies”? You might reread it.


  3. @Skeptical
    Hi Skeptical,

    First, thanks for reading and commenting!

    The flattening of creators-rights holders wasn’t done smoothly, and doesn’t quite refer as you suggest. This is a failure on my own part (and short form I’ve used previously and carried over from previous posts). I often find that copyright holders argue, on ‘behalf’ of actual creators, that surveillance, DRM, and other unpleasantness is required for creators to keep creating. Of course, the holders are the ones who stand to profit, and the actual creators get near nothing (or nothing!) when the nastiness is implemented. Linking the creator-rights holder was very much a reference to that; certainly not all creators (and, though to a far lesser extend, not quite all rights holders) are of the opinion that copyright should continue to be extended and rent-seeking behaviour should be even more prominent.

    Further, many rights holders groups – and certainly those with substantial lobbying power in Washington, the UK, and to a lesser extent Canada – strongly support network neutrality (insofar as they want to deliver product to consumers) while simultaneously wanting to somehow either control or extract value from ISPs’ bit pipes. Thus, they stand on two sides of net neutrality: leave the net free, whilst at the same time find a way of profiting from it. Jessica Litman’s work exemplifies this, and we see such positions reiterated in Patry’s recent book, Moral Panics and Copyright Wars, as well as in Boyle’s 2008, The Public Domain: Enclosing the Commons of the Mind, to say nothing of the work of Lessig, Strangelove, and others.

    As such, while I certainly focused Ole – I attend to most companies, regardless of size or industry-type that propose packet inspection of content, for any reason – I don’t think that I was being particularly uncharitable. This is especially true having spoken with various executives of ISPs in Canada and abroad who note that there is a recurring problem of rights holders wanting some kind of surveillance apparatus on ISP networks to ‘combat piracy/see ISPs ‘give back’ some of the money owed’ and so forth. Ole is an example on the record today, but there are many other rights holders who maintain the same position.

    As for the court case, while it’s possible that we might see another effort to get ISPs to pay levies, content owners won’t be able to work through the Broadcast Act. Going through the Telecommunications Act to get a levy-based approach to the transport of copywritten work doesn’t strike me as plausible (though, once lawyers get involved, plausibility often goes out the window 😛 ). Geist, as well as various other net neutrality folk who have spent a lot of time and attention watching the New Media decision, are coming down strong in one direction and there aren’t prominent voices on the other side disputing their analysis. Once the full case is available online, and I’ve some time, I’ll dig through the whole thing but until then I’ll go with what has been written, and the little bit that I have read (primarily that ISPs are not under the Broadcast Act) and be comfortable with my position that content owners can’t require or force ISPs to apply levies.


  4. Like Skeptical, I have a problem with your over simplification. Copyright issues have been muddied thanks to imprecise and/or inaccurate definitions.

    The reason it’s so important (and necessary to correct errors of fact and implication) is the imprecision serves “the dinosaurs” by keeping the public confused as to what is actually going on.

    I take issue with calling ISPs “content providers”. Internet Service Providers provide bandwidth, not content. They have (or should have) nothing to do with content. Unfortunately the CRTC has contributed to the morass greatly by allowing the backbone carrier corporations to branch into ISP/Broadcast/cell/content market, which at best is an anti-trust situation.

    As you say, the Google Book Scan began as a fair use. The problem is that a single American copyright collective took it upon themselves to bring a class action suit– on behalf of all the authors of all the world– which resulted in a terribly misguided settlement granting Google
    (a) the right to scan all the books in the world for a nominal payout to publishers (not authors)
    (b) copyright on orphan works (works to which the copyright holder is unidentified/unfindable [my thinking is that these works need to be in the public domain, not copyright by Google]
    (c) the right to sell ebook versions of everything they scan, including work still under copyright, public domain, presumably under their own copyright.

    Governments around the world stepped in, as well as authors both in the US and around the world.

    As a writer I loved the idea of the fair use Google book scan but the settlement is the last thing the world needs. Bo corporate entity should be allowed to assume copyright on the sum of all knowledge. Not even Google.

    It is both terribly imprecise and misleading to lump content creators and rights holders together. The problems society is facing with the so-called copyright “reforms” are not creator driven. Creators and the large media “rights holders” have very different agendas.

    It isn’t creators who fought for the twenty year extension on American copyright term. Quite frankly, most creators don’t care if the term extends fifty or seventy years after their death. To corporations who with to hold copyright in perpetuity however it IS an issue.

    The “Record Industry” achieved power over recorded music by absolute control of the distribution system. They used this control to extort copyright from the actual creators, who could not distribute without them.

    Movie and TV companies do not create anything. Legislators may feel qualified to grant corporations “personhood” but no legislation is capable of granting a corporation creativity. Media corporations don’t create, they provide financing and distribution, and yet they come out of it with legal ownership of copyright.

    In book publishing mainstream publishers have lately been attempting to assume automatic ownership of IP rights for ebooks for books they have distributed under the old distribution model. This is why

    The primary goal of a corporate “rights holder” is to make money on their investment. They would prefer to lock the work up forever rather than release into public domain. Because then they make no profit, or worse, it competes with their revenue stream.

    Most creators would rather have their art disseminated for free rather than have it lost forever.

    Other than that: great article 🙂

    [after all that I do believe I’ll rework my comment for my “in the wind” blog]


  5. @Laurel L. Russwurm
    A note re: content creators: I’m note calling ISPs content providers and, in fact, oppose the position that they be identified as such. I’m a fan of ISPs being purely transport facilities (though with the merging of various content and transport companies the division is gradually becoming blurred). The position that ISPs are/should be seen as content providers is something that Ole pushed, not I.

    In terms of Google books, I get the issue with a lone jurisdiction making a world decision. That said, I honestly cannot grasp the issue with either orphan works (ie making them available through search, with the option of printing and a fund being set aside so that owners of the copyright can come for the funds at a later point) or the subsequent sale of books that are entirely unavailable and then splitting the funds with, against, copyright holders. Given the nature of copyright, while I’d love for authors themselves to get the money for when books are sold through the GBooks process, it goes to rights holders. This is my issue: rights holders mascarade as working on behalf of ‘creators’ and yet those same creators get nothing because of how the rights have been assigned.

    Ideally, we’d see a lot of the GBooks stuff actual moved to the public domain. However, even making it somewhat accessible is far better than the present mess that we’re in. As a writer, it would be absolutely delightful to actually get access to various out of print books. There are problems with the present solution, but at the very least it’s moved the ball forward: certainly no other organization in the world has the funds or desire to actually do what Google is doing (Microsoft being the key competitor, and who has largely [if not entirely] stepped out of the arena at the moment).

    The ‘lumping together’ of creators and rights holders is, as noted, more of a remnant of prior writings I’ve had here. Creators are not necessarily aligned with right holders, but prominent authors, singers, poets, etc are still very much in the camp of advocating for much stronger rights over content. I think it works against their interests, and certainly not all creators are for enhancements to copyright legislation, but not all isn’t the same as none. Despite this, I was really trying to make a play on how rights holders masquerade as working with/for actual creators.


  6. @Christopher Parsons
    Thanks for the clarification.

    As a writer, I don’t want to see any works lost, which is why I support serious copyright term reduction.

    Personally I don’t blame Google; they are a business, it would have been crazy to turn down the deal. I don’t have the slightest problem with Google scanning, printing and selling physical copies of orphan works.

    My problem: Google should not be able to lay claim to the digital copyright of orphan works. After a reasonable period orphan works should go into the public domain.

    Neither Google or any corporation should be allowed to remove work from the public domain and lay claim to the digital copyright. Corporate interests may sometimes coincide with public interest. But it is not a given.

    Google is NOT the only game in town. The wonderful Project Gutenberg has been using volunteers to digitize public domain work for quite some time now. We even have a Canadian branch that has digitized over 500 Canadian works ( http://www.gutenberg.ca/ )

    Only a strong public domain protects the interests of the public.


  7. @Laurel L. Russwurm

    My understanding (and, I haven’t followed this tremendously closely, beyond tracking what some of the Berkman folk have done around GBooks) is that the books that are orphaned are, presently, copywritten by whomever holds the copyright. Google isn’t so much assuming the copyright of them, as assuming the copyright remains to be held until the point when those works would ‘normally’ enter into the public domain. An orphaned work, unless the copyright is explicitly rejected, remains a copywritten work for the purposes of the law.

    In this sense, I don’t know that – from my understanding of the legalities of public domain and copyright – that anything has been taken out of the public domain, save for any cases where a rights holder has divested themselves of the copyright. If this is the case, then can they contact Google to have the rights changed, after demonstrating that they actually are the present rights holder under American law?

    I know of Gutenberg, but it has absolutely nothing on the capacity of Google and other multibillion dollar companies to massively digitize books. They’re doing good work, don’t get me wrong, but Google has a super fast and slick system that’s designed to blow through libraries in short order, in an automated fashion. My understanding is that the Gutenberg folks lack the resourcing of multibillion-dollar corporations that decide to get involved in digitizing culture.


  8. @The Music Void

    I worry that CView threatens to become a trojan horse in the UK. Fortunately, there are several ISPs (Orange being a particularly good example) who are absolutely, 100% opposed to the system groups like PRS are advocating for. At a copyright conference earlier this year one of Orange’s VPs noted that implementing what groups like PRS want would, effectively, require entirely redeploying the ISP’s infrastructure. Unfortunately the lack of lockstep on this issue by UK ISPs threatens to limit the effectiveness of ISP lobbying efforts (hmm…never thought I’d be advocating for ISPs walking in lockstep to advocate for something…:P)


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