Heritage Minister Mélanie Joly blunders through the dicey issue of Canadian content on Netflix in a press tour called “disastrous” by critics.

The arrival of Netflix Canada and its tens of thousands of alternative on-demand viewing choices has had defenders of Canadian culture up in arms ever since the American interloper showed up.

A little background:

For Canada, the dominance of their neighbor to the south has always presented a challenge to a country that fears having its cultural independence steamrolled and its official two-language experience watered down by an avalanche of English-language content. Canadian broadcasters and cable networks are governed by regulations that require they reserve at least 50% of their program schedule for Canadian content (the percentage varies slightly for the Canadian Broadcasting Corporation/Société Radio-Canada — Canada’s public broadcaster, and Canadian cable networks).

Because Canada is a much smaller media market than the United States, finding the money to produce enough high quality Canadian TV shows and movies has always been a challenge. Most recently, Canada’s telecom regulator, the Canadian Radio-television and Telecommunications Commission (CRTC) mandated that broadcasters spend 30% of their revenues on original Canadian content. As a result, many commercial networks and stations spend that money on cheap reality shows or news content to satisfy Canadian content requirements. While that fulfills the government mandate, it doesn’t always fulfill the demands of many Canadian viewers that prefer to watch something else.

Netflix’s streaming service in Canada competes directly with those broadcasters, as well as Canadian cable and phone company on-demand services, but is not subject to the same content laws because the 25-year old law governing broadcasting was written before there was the prospect of online streaming alternatives. In less than a decade Netflix has grown its original business renting DVD’s through the mail into a multi-billion dollar international streaming business that has deeper content acquisition pockets than any Canadian media entity.

The Liberal Party of Canada is trying to manage Canadian content rules now 25 years old, before the era of streaming video.

There is also a technology shift in play here. What exactly constitutes “media” is open to debate. Traditional broadcast media now competes with newly emerging, and largely unregulated digital social media (a-la Facebook, Twitter, etc.) and online over-the-top services (Netflix, Hulu, YouTube, etc.) Broadcasters are regulated in the public interest and have lived under that framework for decades. Upstart new media relies on an internet platform that has never been significantly regulated at all.

Efforts by the government and Canada’s creative community to get Netflix Canada to follow the Canadian content model has largely failed, and it seems unlikely Netflix will ever see itself tied down by content or language quotas. It flies in the face of Netflix’s marketing — giving customers unlimited access to the content they want to see, not what a bureaucrat in Montreal or Ottawa wants customers to see.

Netflix has hired some high-priced lobbyists to make sure their interests are represented before federal and provincial officials, and it has been a constant battle over the last two years as the service confronts content regulators, those upset about the service’s lack of French Canadian titles, and the desire by some of Canada’s political parties and provinces, Quebec notably, to subject Netflix to federal and provincial sales and value-added taxes (GST/HST).

The federal government, led by Prime Minister Justin Trudeau, has refused to impose these kinds of taxes on Netflix or other foreign-headquartered internet services, despite the fact many fellow members of the Liberal Party think it should. The Standing Committee on Canadian Heritage called for an internet tax last June, and content creator groups have lobbied the government hard to demand Netflix be required to substantially invest in homegrown Canadian productions envisioned, filmed, and produced by Canadians.

It has also the components you need to create a melodrama:

• a deep-pocketed and arrogant American corporation that made an inelegant entry into Canada and alienated the CRTC by refusing to disclose information to the regulator;
• a sense of an unfair playing field where Canadian companies face sales/use taxes while American companies like Netflix don’t;
• the ongoing fear among Canada’s Francophone community that their political and language sovereignty is under threat;
• the ongoing fear of Canadians that their cultural sovereignty will be washed away by an American cultural tsunami.

The Liberals’ Sacrificial Lamb: Canadian Heritage Minister Mélanie Joly’s Disaster Tour

Some Francophone tabloids in Quebec specialize is assaulting all-things-Liberal, especially Mélanie Joly.

Trudeau’s point person on the Netflix controversy in 2017 was Canadian Heritage Minister Mélanie Joly, who was swept into the political maelstrom during a cross-country tour to promote the government’s new Creative Canada cultural policy. By all accounts, it was an unmitigated disaster for the government.

Joly’s performance in Quebec — her home province where she serves as MP for the Ahuntsic-Cartierville riding in Montreal, managed what few thought possible — uniting critics from the province’s governing Liberals with the sovereigntist Parti Québécois and the left-wing party Québec Solidaire.

Mathieu Bock-Côté, writing in the Journal de Montréal, claimed Joly was guilty of “dereliction of duty.”

After Joly bizarrely asserted on Radio-Canada’s popular talk show Tout le monde en parle (“Everyone’s Talking About It”) that Vidéotron, Quebec’s largest cable operator with over 1.6 million subscribers was not a cable company, center-right tabloids Le Journal de Montréal and Le Journal de Québec, both specializing in attacking all-things-Trudeau, had a field day. One columnist labeled Joly “Mélangée Joly” ( All-mixed-up Joly). Her propensity to stick close to her index card talking points and repeat them over and over, regardless of the question asked, bemused columnist Richard Martineau, who wrote Joly sounded “like a living answering machine having a nervous breakdown.”

In Quebec, the debate over tax fairness shared the stage with concerns about how much attention Netflix will pay producing French Canadian content.

In hopes of assuaging concerns, Joly announced Ottawa would increase investment in the $349 million Canada Media Fund to make up for shortfalls from declining contributions based on decreasing revenue from Canadian cable operators. She also promised $125 million to promote Canadian productions abroad. Heads that first nodded in agreement over the announcement quickly froze after Joly also announced Netflix would be exempt from federal sales tax in return for a five-year commitment to invest $100 million annually in Canadian content and $25 million specifically for “market development” of French-language content, whatever that means.

The lack of any specific commitment on French language programming went over like a lead balloon and ignited a firestorm of criticism over the perception Joly was going to rely entirely on Netflix Canada to protect and manage francophone programming on its own terms.

“We are alarmed as Francophones because there is no guarantee that a part of this [$100 million annually] is going to francophone content,” said Gabriel Pelletier, head of the province’s producers’ union, the Association des réalisateurs et réalisatrices du Québec. “Cultural questions are definitely more sensitive and obvious in Quebec, but my colleagues in the rest of Canada have similar priorities. We need to be able to see ourselves and our own stories in cultural content. Our own distributors play by very strict rules, but here we are giving Netflix a red carpet and an open market. It could lead to the disintegration of our entire regulatory system, because Rogers and Bell might say ‘Why do we have to pay when Netflix doesn’t have to?”

Joly also made little headway defending the Liberal government’s sales tax policy exempting Netflix. Appearing on Cogeco-owned CHMP-FM in Montreal, Joly was questioned by center-right talk show host Paul Arcand over her claim the decision not to tax Netflix was based on the Liberals’ promise not to raise taxes.

“Tou.tv (Radio-Canada’s streaming film service] is taxed. Vidéotron’s Illico is taxed; we are not talking about adding a new tax, we’re talking about taxing a product thacrticismt already exists,” Arcand said. “Are you ready to remove the taxes for those two comparable [Canadian] companies?”

Joly did not specifically answer.

Cartoonists have been particularly vicious over the Netflix affair, portraying Joly as vapid or a camera-friendly tall, blond, 38-year old politician more style than substance. Some of her critics on the right — usually older middle-aged men, according to her defenders — ‘cross the line’ into sexism by repeatedly calling Joly “the majorette” — a reference to a baton twirling performer usually seen in marching bands during parades.

Despite the criticism, Joly rarely sat back and allowed those perceptions to go unchallenged.

A tradition among guests on Tout le monde en parle is to end their segment by reading aloud a card handed to them by a producer that succinctly summarizes their position. Viewers understand the words are written by the producer and not the guest, but Joly unilaterally decided to change her card. The original said, “It’s amazing that with all the digital media available, our politicians have stayed faithful to the cassette.” Joly replaced the word “cassette” with the word “innovation.”

Dany Turcotte, the show’s co-producer tasked with creating the cards, was not happy with Joly’s change.

“When someone changes the meaning of my cards, ça me met en t****,” using an expression that roughly translates to “that makes me f***ing angry.”

The NDP vs. the Liberals

After the embarrassing press tour ended, the issue went back on simmer mode until Feb. 5, when an opposition members of the NDP brought the issue forward once again during the House of Commons Question Time, where members can directly question the Prime Minister Justin Trudeau.

Julian

“The government seems more than happy to let web giants continue to make huge profits without contributing to the Canadian economy,” said MP Peter Julian (NDP-New Westminster/Burnaby, B.C.). “While the rest of the world is trying to make these companies pay, the Liberals are doing the opposite. They are making deals with Netflix and other companies, and offering massive tax breaks. Canadians pay their taxes and expect companies to do the same. When will the Liberals start making web giants pay their fair share?”

“Mr. Speaker, the NDP is proposing to raise taxes on the middle class, which is something we promised we would not do and have not done,” responded Prime Minister Trudeau. “We explicitly promised in the 2015 election campaign that we would not be raising taxes on Netflix. People may remember Stephen Harper’s attack ads on that. They were false. We actually moved forward in demonstrating that we were not going to raise taxes on consumers, who pay enough for their internet at home.”

“Mr. Speaker, is it fair that Netflix, Facebook, and other web giants have to pay neither sales nor income tax whereas Canadian companies in the same sector do?” followed up MP Guy Caron (NDP-Rimouski-Neigette/Témiscouata/Les Basques, Que.) “Around the world, other countries are trying to make sure that these web giants pay their fair share. Australia and the European Union are excellent examples. After all, it is those giants that are going to monopolize the advertising market and suck the lifeblood out of our print media. They are also responsible for the challenges facing print media. Instead of reining in the web giants and ensuring a level playing field for everyone, the Liberals want to make this preferential treatment official. When will the Liberals show some backbone and level the playing field?”

Trudeau

“Mr. Speaker, we are not going to raise taxes on Canadians. That is what the NDP is asking us to do,” responded Trudeau. “We recognize that the media environment and television viewing and production are changing rapidly. That is why we reached out and got Netflix to make historic investments in our content creators here in Quebec and Canada, to help them succeed in this changing universe. We have a great deal of confidence in our creators; the approach we have chose is a testament to that.”

In a later exchange, the issue of Netflix and taxation was debated by MP Pierre-Luc Dusseault (NDP-Sherbrooke, Que.) and Sean Casey, the Parliamentary Secretary to the Minister of Canadian Heritage:

Dusseault: My question primarily has to do with the Netflix agreement. Everyone is starting to understand how this agreement gives Netflix a tax advantage over its competitors. I want to follow up on this issue and on the government’s completely twisted logic. Last week, the government kept spouting the same empty rhetoric to explain why it decided to give Netflix a tax holiday. This tax holiday was granted in exchange for an investment, but there is no guarantee of this investment. Netflix is getting a tax holiday in exchange for the infamous agreement presented by the Minister of Canadian Heritage. This is what I would like to talk about today.

The government gave a foreign company a tax break for doing business in Canada without having to abide by same tax rules as its competitors. This company is doing business with Canadian consumers. When it sells a product to consumers in Canada, it does not have to charge GST or federal sales tax because the government is allowing this situation to continue. The government is allowing a company to sell a product, in this case a subscription to Netflix, without charging consumers any GST.

According to the government and its twisted logic, this is not a problem because that is just how things work. That is the government’s reason for not forcing Netflix to charge GST. It is possible to make Netflix charge sales tax because several other countries have already done so. Although Netflix is an American company that operates all over the world, it pays sales tax in some countries. Most countries actually have taxes associated with the sale of goods and services.

Dusseault

Canada can make Netflix charge sales tax. It is possible. The argument that the government cannot do this does not hold water. In fact, the government is not even using that argument. In the beginning, the Minister of Canadian Heritage said that it was too complicated and that it would require an international agreement to make Netflix charge sales tax. That is completely untrue.

Now the government’s argument is that it does not want to impose a new tax on consumers. Based on the government’s twisted logic, the GST is a new tax. This is like telling huge multinationals like Target or Walmart that when they come to Canada to sell their goods and services, they will not have to charge their customers GST at the checkout because that would be a new tax. This is like telling a new company that sets up shop in Canada that we cannot ask it to charge GST because that would be a new tax, and Canadians cannot afford any new taxes. That is the logic the Liberals are using today. In other words, they are saying that a foreign company or multinational that has a physical presence in Canada does not have to charge GST, although the store next door does.

Can my colleague explain how the government came up with this logic? How is the GST a new tax for businesses?

Casey: Mr. Speaker, I would like to thank my honorable colleague from Sherbrooke for giving us a chance to talk about the many benefits of the agreement with Netflix.This government strongly believes that the establishment of a new Canadian business in the film and television production sector by Netflix is wonderful news for Canadian creators and producers, and ultimately for our cultural industries as a whole.

The approval of this significant investment in Canada under the Investment Canada Act is yet another indication of our government’s strong commitment to growing Canada’s creative industries, with new investments that create more opportunities for creators and producers across the country. In fact, this major investment of a minimum of $500 million over the next five years on original productions in Canada will provide them with even greater access to financing, business partners, and ultimately new ways to connect with audiences across the globe.

Casey

Such an unprecedented investment by a digital platform in Canada, a first of its kind for Netflix outside of the United States, is yet another confirmation to the world that Canada is a great place to invest, attesting to the creative talent of this country and the strong track record of our cultural industries in creating films and television productions that really stand out.

It is important to make a distinction between the cultural activities of Netflix Canada, which has committed to investing a minimum of $500 million Canadian in the production of Canadian-made films and television series, with the activities of its U.S.-based video streaming service. These are in fact two separate kinds of cultural activities.

It is also important to reiterate that all businesses, including those involved in television and film production that set up and operate in Canada, must abide by the Canadian tax system, which includes GST. Given that Netflix Canada plans to operate a production company in Canada, it will have to comply with all GST-related rules, which could apply to its production activities in Canada.

Lastly I would like to point out that Netflix announced last week that it has acquired the award-winning Canadian film, Les Affamés, written and directed by Robin Aubert, one of the most unique voices in Quebec’s cinema, to be made available on the international market as early as this coming March. This represents the first of many Canadian films and television series to be acquired or produced by Netflix Canada as a result of its significant investment announced last fall.

Dusseault: Mr. Speaker, I know the parliamentary secretary is trying to draw a distinction between Netflix Canada and Netflix USA. I know the two are different. However, he avoided answering my question about Netflix USA subscriptions that are not subject to GST. That was probably intentional, so I would like him to comment on this specific issue. Netflix USA sells a product to Canadian consumers and, unlike its competitors, does not have to collect GST.

Can my colleague, the parliamentary secretary, explain to me why a foreign company is exempt from the tax rules that apply to Canadian businesses? Why are Canadian consumers not paying tax on Netflix subscriptions?

Casey: Mr. Speaker, Netflix Canada created a new film and television production company. This is great news for Canadian creators and producers. Once again, over the next five years, Netflix will invest a minimum of $500 million Canadian in original productions produced in Canada in English and in French for distribution on Netflix’s global platform.

Caron

Let us not forget that Netflix already has a strong track record of investing in Canadian producers and content, with recent examples including Anne and Alias Grace with the CBC, Travelers with Showcase, and Frontier with Discovery.

We believe that this significant investment in Canada demonstrates that Netflix is committed to continuing to be a meaningful partner in supporting Canadian creators, producers, and the Canadian creative expression.

A day later, Caron was ready to follow up with the Prime Minister.

“Mr. Speaker, when we ask him why web giants like Netflix and Facebook do not have to charge sales tax even though their Canadian competitors do, the Prime Minister says that he promised not to raise taxes for the middle class. We are talking about a tax that already exists, sales tax. We want fairness in the industry. It is unacceptable that the Prime Minister does not have the courage to ask web giants to pay their fair share. When will the Prime Minister understand that and insist on fair treatment for the entire industry?”

“Mr. Speaker, once again, as the NDP has said, web giants must pay their fair share,” responded Trudeau. “It is not web giants that the NDP wants to charge, it is taxpayers. The New Democrats want to make taxpayers pay more taxes. They want Canadians, Quebec and Canadian taxpayers, to pay more taxes for their online services. We, on this side of the House, promised not to raise taxes for taxpayers, and we are going to stand by that promise. If the New Democrats want to raise taxes for Canadians, they should say so instead of hiding behind talk of big corporations.”

“Mr. Speaker, he does not get it,” retorted Caron. “We are not talking about a new tax; we are talking about a tax that already exists and must be collected by Canadian competitors. He needs to follow the example of France, Australia, and many American states that have decided to make these web giants pay. Even here at home, the whole province of Quebec wants to do the same. Imposing on Bombardier a sales tax that is not required of Boeing would be unthinkable, so why do it in the online sector? Not only is the Prime Minister trying to justify these tax breaks, but he is going even further by making deals with those companies. When will the Liberals stop getting into bed with these web giants?”

“Mr. Speaker, once again, the New Democrats are misleading Canadians,” replied Trudeau. “They are talking about making web giants pay their fair share. It is not the web giants they want to pay more in taxes; it is taxpayers. We made a commitment to taxpayers that they would not have to pay more for their online services. We on this side of the House plan to keep that promise.”

Trudeau Settles the Matter… for Some

The issue of Netflix, taxation, and to some extent Canadian content has apparently resonated with the NDP, as their members return to press the issue with the Liberals again and again. But Trudeau’s steadfast response has made it clear his government intends to bury the issue once and for all.

In a sense, both sides are right. Canadian content regulations and protections for Canadian culture and the francophone community in Canada are at risk of being diluted by an onslaught of cord-cutting and new online streaming services that do not always recognize the sensitivity of these issues for many Canadians. As viewers gain new choices, especially those not subject to regulatory oversight, the dominance of American streaming services will be even more apparent than the dominance of Hollywood and American network television. Netflix is not in the business to cater to Canadian content quotas and likely never will unless the government mandates it.

French language content on Netflix will largely come from European producers and networks in France and to a lesser degree Belgium and Switzerland.

But Netflix’s enormous budget for content development does open the door to opportunities for Canadian productions with budgets Canadian networks like CBC, CTV, Global, TVA, and Radio-Canada can only dream about. Quality should trump quotas, and may the best productions win.

Canadian telecom companies have a pervasive presence in all forms of Canadian entertainment. Bell (Canada) owns Bell Media, which in turn owns CTV – Canada’s largest privately owned commercial network. City, which has network affiliates in Canada’s largest cities, is owned by Rogers, Canada’s largest cable operator (Rogers also owns Omni Television, a multicultural network). Global is owned by Corus Entertainment, which in turn is controlled substantially by Shaw Communications, western Canada’s largest cable operator. Canadian cable and telco-TV providers run their own streaming services which are subject to sales taxes, while foreign streaming companies like Netflix are not. There is a case to be made for a lack of a level-playing field.

But Prime Minister Trudeau is also correct stating that any new taxes imposed on Netflix Canada or other new entrants would immediately be passed on to subscribers and raise the price of internet services. The Liberals’ platform during the last election insisted that the party wanted universal access to affordable broadband service for all Canadians and no taxes on Netflix. For many consumers, the price of content and the price of access are essentially the same thing.

Netflix has thrown a “token” $500 million at the problem in hopes of placating its Canadian critics. It may be enough to satisfy Vancouver and Toronto, where many series and movies are filmed, and it certainly has “resolved” the matter for the Liberal government of Mr. Trudeau, but it seems unlikely to soothe the concerns of Quebec and its vocal and proud francophone community. Quebec could move forward and impose a provincial sales tax on Netflix at any time, and will likely continue to pose a challenge to Netflix Canada until the company seems more sensitive to the concerns raised in many quarters in Montreal, Quebec City, and beyond. The creative community of French Canada can deliver some excellent productions, so long as Anglophiles are willing to read subtitles. Netflix may have to spend more money to make certain those types of shows turn up on the service in the not too distant future.

The Canadian Radio-television and Telecommunications Commission is asking some hard questions of Quebec-based mobile provider Vidéotron, which began zero-rating preferred partner music streaming services last summer that allow customers to stream all the music they want without it counting against their data cap.

The CRTC is examining whether the practice violates Canada’s Net Neutrality policies, which insist all content be treated equally.

“If, as Vidéotron has stated, congestion is manageable and there is no meaningful risk of service degradation as a result of offering Unlimited Music service, explain why Vidéotron did not either increase or eliminate data usage caps for your broader customer base instead of zero-rating certain applications or services,” the CRTC has asked.

Unlimited Music allows customers to stream Spotify, Google Play Music, Deezer and Canadian-owned Stingray Music without it counting against a customer’s allowance. Other streaming services do count, potentially putting them at a competitive disadvantage.

Observers say zero-rating enhances a customer’s perception that data has a measurable financial value, often arbitrarily assigned by competitors in a marketplace. If providers charge an average of $10 per gigabyte, customers will gradually accept that as the base value for wireless data, despite the fact many providers used to sell unlimited data plans for around $30. Zero rating content can be used in marketing campaigns to suggest customers are getting added value when a provider turns off the usage meter while using those services. Stream 3GB of music and a provider can claim that has a value of $30, but provided to you at “no charge.”

In the United States, most providers generally offer “bonus data” allowances in promotions instead of focusing on individual services. But T-Mobile goes a step further, also offering Music Freedom, a zero-rated music streaming service of its own.

Consumer reaction to the services are mixed. If a customer is a current subscriber to the preferred content, they often perceive a benefit from the free streaming. But customers looking to use a service not on the list may consider such plans unfair.

The CRTC will be awaiting Vidéotron’s formal answer.

Canada’s largest wireless carrier and near-largest Internet Service Provider has just become one of Canada’s largest Net Neutrality advocates. How did that happen?

In an ironic move, Alphabeatic reports Rogers Communications today filed a letter with the Canadian Radio-television and Telecommunications Commission that supports a ban on providers exempting customers from usage caps when accessing content owned by the provider or its preferred partners.

The issue arose after Vidéotron, Quebec’s largest cable operator and significant wireless provider, began offering an Unlimited Music service that keeps the use of eight streaming audio services – Rdio, Stingray, Spotify, Google Play, 8Tracks, Groove, Songza and Deezer – from counting against a customer’s usage allowance.

The practice of exempting certain preferred content from usage billing, known as “zero rating,” is a flagrant violation of Net Neutrality according to consumer groups. Rogers now evidently agrees.

“The Unlimited Music service offered by Vidéotron is fundamentally at odds with the objective of ensuring that there is an open and non-discriminatory marketplace for mobile audio services,” Rogers’ CRTC filing said. “Vidéotron is, in effect, picking winners and losers by adopting a business model that would require an online audio service provider (including Canadian radio stations that stream content online) to accept Vidéotron’s contractual requirements in order to receive the benefit of having its content zero-rated.”

The practice of zero rating can steer users to a provider’s own services or those that agree to partner with the provider, putting others at a competitive disadvantage. That is what bothers the Public Interest Advocacy Centre, which calls the practice incompatible with an Open Internet.

Rogers has an interest in the fight. The company owns a number of commercial radio stations across Canada, many that stream their content over the Internet. None are exempt from Vidéotron’s caps.

Rogers’ advocacy for Net Neutrality is new for the company, and ironic. Rogers partnered with Vidéotron and Bell to offer its own zero-rated online video service for wireless customers until last August, when consumer groups complained to the CRTC about the practice.

Rogers may also be in the best position to judge others for the practice while finding a convenient loophole for itself. Its current promotions include free subscriptions to Shomi, a video streaming service, Next Issue, a magazine app, or Spotify, the well-known music streaming service. While Rogers won’t exempt your use of these services from its usage caps, it will effectively exempt you from having to pay a subscription fee for the service of your choice, which could provide the same amount of savings zero rating content would.

Abbes Nacef was not very happy when he opened his web browser a few days ago to see a message inserted at the top of his screen.

“Your Internet service has reached the maximum limit of allowable overage charges. If you wish to continue service, please contact our business office to discuss your account.”

Nacef, who lives in Monastir, a Tunisian city best known for its tourism, was surprised because it was the first sign his Internet account had gone over the limit.

“While you can get uncapped DSL in Tunisia, it is not very good service and in my area it is not offered,” Nacef told Stop the Cap!. “Most in our neighborhood rely on a wireless ISP service which is less costly than 3G or 4G mobile service, but is capped and charges roughly $25 for each extra gigabyte allotment.”

Nacef’s call to his provider was not pleasant. He had already accumulated almost $180 in charges for the month of August, most in overlimit fees. The culprit was quickly identified — Microsoft Windows 10, which took several attempts to reach Nacef’s computer over a challenging Internet connection. But Nacef also learned his computer was repeatedly requesting updates from Microsoft, including three software patches that would not complete and were sent over and over for almost two weeks.

“It was the fifth call my ISP had received about this problem, and they were very annoyed also because Microsoft Windows 10 assumes you will use their Edge browser which defeats the early warning messages from my ISP that usage limits are approaching,” Nacef said. “When I switched back to my old browser the bad news was there, but it was too late.”

His ISP has agreed to cut the charges in half and has warned all of its customers if they want Windows 10, the ISP will offer them a copy on a returnable USB memory device for free.

Nacef thinks the huge multiple download attempts to receive Windows 10 itself was responsible for most of the extra usage, but he is wary about the frequent software updates and the fact they are shared with other users by default.

That is what may have tripped up Rob DuGrenier who paid an exorbitant $150 this month for 1.5Mbps Internet service just to get a 75GB usage allowance for his immediate family in far northern Québec. The alternative was an overlimit fee of $20 for each 5GB allotment of usage over the usual 30GB allowance granted to “Power” users.

“Internet is not an option for our family for medical reasons, but this hurts,” DuGrenier writes. “It is definitely Windows 10 and there is something wrong with it because our ISP reports we are sending a lot more data than we are receiving, and there are no viruses or malware on the computers.”

Internet access is northern Québec is slow and costly.

His ISP now suspects Microsoft is using his connection to distribute software updates to a number of other users across northern Canada. When DuGrenier’s family disabled the option that opted them in to distributing Microsoft updates to other customers, upstream traffic dropped 98%.

“Were we sending Windows 10 itself all over northern Quebec and Nunavut? We just don’t know and Microsoft has not responded,” DuGrenier reports. “They have billions, I do not. They should be paying my Internet bill this month.”

The worst of the reported problems of bill shock are occurring in remote areas where Internet service can be a mixture of wired and wireless connections that are often slow and usually usage-limited. Windows 10 was designed to reduce bandwidth demand on wireless connections, assuming they would be metered. But how Microsoft detects which networks are wireless and metered and which may only partly be so is apparently a work in progress.

This morning, the Sydney Morning Herald reports at least one customer on a Pacific island was slammed with a catastrophically high Internet bill. Maureen Hilyard in the Cook Islands owes her ISP $390 this month, all because of automatic updates from Microsoft for Windows 10.

“In this context, where Internet access is both painfully slow and seriously expensive, these forced updates are almost literally forcing people off the Internet and are resulting in massive excess data charges,” EFA executive officer Jon Lawrence told the newspaper.

The Cook Islands

Hilyard is a customer of Bluesky, primarily a satellite Internet Service Provider that dominates the Cook Islands, which have no other options for Internet access. A basic account costs $31.50 a month, but that provides just 3.5GB of data for the entire month. Automatic overlimit charges of $0.03 per megabyte accrue after the allowance is used up.

The most likely victims of Windows-induced bill shock subscribe to usage-limited wireless or satellite Internet services. While many providers throttle the speeds of customers who reach the usage limit, others charge penalty rates. Microsoft has no way to know which is true. Instead, the company claims it looks for evidence of a wireless connection before performing updates and when it finds one, it assumes it to be metered. But wired connections stay firmly in the unmetered category, whether they are usage-capped or not. Customers are invited to choose by digging through confusing settings menus.

Even more problematic is the built-in peer-to-peer technology that gives Microsoft’s servers a break and uses your Internet connection to share the latest Windows software updates with other Windows users across town and beyond. Microsoft has offered no provision to track this usage, but users can opt out with this advice from the Sydney Morning Herald:

Users can tweak their Windows 10 system settings by enabling a “metered connection” by searching for “Change Wi-Fi settings” in the start menu, clicking on “Advanced Options” and enabling “Metered connection.” This lets Windows 10 know the Wi-Fi connection you’re on is capped, so instead of forcing a software update onto your PC or tablet, it will notify you first. You can then choose to delay the upgrade until you are on an uncapped connection, or until you’ve rolled over into a fresh month of data.

This workaround only applies to Wi-Fi connections, however, not Ethernet connections.

A second workaround actually comes in an update which Microsoft itself released. It’s a bit more fiddly though, as it involves manually uninstalling driver updates and then downloading a special troubleshooter app to prevent them from installing again automatically. The full instructions are available online.

The first legal “bricks of paper” arriving from Bell’s attorneys in the case of Bell v. Ordinary Canadian consumers arrived at the home of Jean-François Mezei of Pointe-Claire, Que.

A Manitoba university student and consumer groups who won their case against Bell’s preferential treatment of its mobile streaming video service are now being threatened with demands they personally cover Bell’s legal expenses as the phone company appeals the ruling in court.

The dispute involves Bell Mobile TV Service — a $5/mo optional add-on that allows Bell’s mobile customers to stream up to 10 hours of video programming, some of it from Bell-owned television networks like CTV, without it counting against the customer’s usage cap. Each additional hour costs $3. The service prices usage based on time, not data usage, which lets Bell stream very high quality video to customers. Competitors like Netflix do not have this option and their customers are billed based on the amount of data consumed, which is around 800 percent higher than what Bell Mobile TV charges.

University of Manitoba graduate student Benjamin Klass filed a complaint with the Canadian Radio-Television and Telecommunications Commission (CRTC) in 2013 accusing Bell of violating Net Neutrality and creating an anti-competitive marketplace for online video. ​Twelve of the 43 channels available on Mobile TV — including CTV, TSN and The Movie Network — are owned by Bell Media, a subsidiary, like Bell Mobility, of the media behemoth BCE.

Klass alleged the practice was a clear violation of Canada’s laws governing broadcasting: “No Canadian carrier shall, in relation to the provision of a telecommunications service or the charging of a rate for it, unjustly discriminate or give an undue or unreasonable preference toward any person, including itself, or subject any person to an undue or unreasonable disadvantage.”

The CRTC agreed with Klass and in late January ruled in favor of Klass’ complaint, giving Bell and Quebec-based Vidéotron (which offers a similar service) until the end of April to close them down in their present form.

BCE, the parent of Bell Mobility, told the CBC it was “shocked” by the CRTC’s ruling, suspecting the complaining groups mislead regulators into thinking Bell favored its own content over others.

“There’s a hint here that the government believes Bell Mobile TV delivers only Bell Media content,” spokesman Jason Laszlo said. “They should know we offer mobile TV content from all of Canada’s leading broadcasters in English and French.”

Laszlo added Bell-owned content only comprises 20% of Bell Mobile TV programming and that the ruling would deprive more than 1.5 million current Bell Mobile TV subscribers from getting the service after the spring deadline to shut it down.

The CRTC and consumer groups argue that is beside the point.

“At its core, this decision isn’t so much about Bell or Vidéotron,” CRTC chair Jean-Pierre Blais said at a breakfast luncheon in London, Ont., in late January. “It’s about all of us and our ability to access content equally and fairly, in an open market that favours innovation and choice. The CRTC always wants to ensure ­— and this decision supports this goal ­— that Canadians have fair and reasonable access to content. It may be tempting for large vertically integrated companies to offer certain perks to their customers. But when the impetus to innovate steps on the toes of the principle of fair and open access to content, we will intervene.”

Consumer group OpenMedia says Bell’s motivation isn’t to create a level playing field or provide customers with more options for online video. It’s about artificially inflating the cost of accessing services like Netflix and other independent video companies that are innovating away from the traditional pay television package.

“Bell is doing everything in its power to make the Internet more like cable TV,” said OpenMedia campaigns manager Josh Tabish. “They want the power to pick and choose what we see by forcing competing services into a more expensive toll lane online.”

Klass (Image: CBC)

Bell’s legal strategy going forward is an homage to the one American wireless companies used for years to avoid Net Neutrality.

Bell Mobility argues that Bell Mobile TV is a broadcasting service, not a telecommunications service and therefore doesn’t fall under the jurisdiction of the Telecommunications Act.

Since the CRTC was not receptive to that argument, Bell is taking the matter to the Federal Court of Appeal, asking it to overturn the CRTC ruling and grant the company court and legal costs paid for by the Canadian consumers that brought the original complaint.

Jean-François Mezei of Pointe-Claire, Que. is among them and has been the unhappy recipient of several parcels containing “bricks of paper” from FedEx he suspects is just the beginning.

Mezei has been tweeting about ongoing developments in the case, and asked Bell, “how come you have no press release bragging about how Bell Mobility is suing individual citizens who participated in [the CRTC complaint]?”

Klass told CBC News he hasn’t yet made up his mind how to respond to the court filing, but admitted it is unnerving.

“In that regard, it really strikes me as a method of intimidation,” he said. “Right off the bat, it has a chilling effect. It appears that Bell is simply pursuing the argument, that it unsuccessfully made to the CRTC, through the court.”