The Canadian Radio-television and Telecommunications Commission backed down in its public spat with Netflix and Google yesterday, releasing public letters advising the two Internet giants that without the supporting evidence it was seeking, the CRTC will remove all Netflix and Google materials (including submitted documents and transcripts) from the public record. The Commission emphasized that it maintains the power under Section 16 of the Broadcasting Act to require disclosure of information and that participants cannot pick and choose the parts of the regulatory process they participate in. Yet rather than enforce that power, it has decided not to fight the Netflix and Google refusal to disclose information, instead opting for a regulatory right to forget.

For the two Internet companies, the sanction will likely be met with a collective shrug. Neither company asked to appear before the Commission and the removal of the written interventions should not alter the outcome of the TalkTV hearing. Indeed, Netflix and Google come away from the hearing with most of what they wanted. The prospect of a Netflix tax in Canada is dead, killed on the very first day by the Ontario government’s proposal for one and the subsequent political reaction that left no doubt that extra fees on online video providers is politically toxic. Moreover, the companies consistently maintained that their participation was voluntary and that they fall outside the regulated system. Chair Jean-Pierre Blais raised the prospect of more regulation in the Netflix appearance, but given that the CRTC quickly backed away from the issue when pressed, it too is dead as a potential reform or regulatory action (the CRTC even acknowledges the voluntary participation in the letters).

The CRTC’s decision to back away from a court fight is likely the function of several things. First, with no political or popular backing at the moment, this was a fight it was unlikely to win. Second, as the potential for a wider backlash against CRTC information demands grew, the Commission was anxious to stop the bleeding by sending a message to all regulated participants that it has the power to require information disclosure. Third, the CRTC was not anxious to regulate Netflix (as its letter makes clear). The absence of the Netflix and Google submissions actually renders it harder to make the case for regulation since there is insufficient data on the record to do so.

While the Netflix and Google issue is over for the moment, there is every reason to believe it will resurface in the future. The companies have drawn a line in the sand and left the Canadian regulator seemingly powerless to address the fastest growing part of the video market. Many Canadians clearly think that is a good thing, leading to an increasingly irrelevant regulator. Once the TalkTV consultation report is released, however, it seems likely that the CRTC will test its power, either through another review of its new media exemption (which incredibly may not include participation from the likes of Netflix and Google) or through a court reference on the scope of the Broadcasting Act.