Last year, the Canadian Radio-television and Telecommunications Commission released its new media decision, which addressed the prospect of increased CRTC regulation of Internet activities. After days of hearings and thousands of pages of submissions, the commission side-stepped the pressure to "do something," maintaining a hands-off approach and punting the most contentious issue -- the prospect of a new levy on Internet providers to fund Canadian content -- to the courts.

The Internet levy proposal received strong support from several Canadian creator groups, who argued that given the video content streamed online, ISPs should be viewed as broadcasters within the Broadcasting Act. By treating ISPs as the equivalent of conventional broadcasters, they would be required to contribute to the act's policy objectives, which include promotion and support for Canadian content.

The ISPs unsurprisingly opposed the proposal, maintaining that they are mere conduits in the transmission of video content. They argued the levy proposal was illegal since they are regulated under the Telecommunications Act as telecom companies, not broadcasters.

The two sides faced off at the Federal Court of Appeal earlier this year and last week a unanimous court sided with the ISPs, ruling that providing access to broadcasting is not the same as broadcasting. It concluded that so long as ISPs maintain a content-neutral approach, they fall outside of the Broadcasting Act and should not be expected to play a role in promoting the policies found in the legislation.

The court relied heavily on a 2004 Supreme Court of Canada decision that examined many of the same issues through the lens of copyright law. In that case, the court was asked to determine whether ISPs could be forced to pay royalties for music communicated on their networks by subscribers. Canada's highest court said no, ruling "an Internet intermediary [who] does not itself engage in acts that relate to the content of the communication, but confines itself to providing 'a conduit' for information communicated by others" was not a communicator of the content and thus exempt from liability.

In considering whether ISPs can be treated as broadcasters, the court adopted a similar analysis, stating "a person whose sole involvement is to provide the mode of transmission is not transmitting the program and hence, is not 'broadcasting'."

Big win for Internet service providers

The case is a huge win for the ISPs and -- subject to an appeal to the Supreme Court of Canada or a legislative change -- puts an end to the ISP levy plan. The immediate reaction from the creator groups seeking the levy suggested that both are possible, as some indicated they are examining grounds for appeal, while others took the decision to mean that a change to the law was now a necessity.

The ISPs were understandably elated at the decision, yet there was some cautionary wording from the court, which emphasized the ruling was conditional on ISPs remaining content-neutral. Should ISPs play a more active role, their ability to claim mere conduit status would be lost and their role re-assessed.

That language provided a helpful reminder that ISPs who violate net-neutrality norms by engaging more directly in the content that runs on their networks run the risk of not only violating the Telecommunications Act, but also falling within the Broadcasting Act and facing a host of new rules and costs. In light of this decision, the temptation to prioritize content may be tempered by the bigger costs that could come with turning an ISP into a broadcaster.