Culture

by Timothy Geigner


Filed Under:
business info, canada, crtc, culture tax, tax

Companies:
netflix



Netflix/CRTC To Showdown Over Confidential Business Information The Government Refuses To Protect

from the northern-fights dept

We recently wrote about recent developments in Canada regarding the Canadian Radio-Television and Communications Commission looking to apply the same "culture tax" to Netflix and other internet services as is done to broadcasters of television programming. In case you're not aware, there are taxes in place in Canada, which broadcasters of mostly foreign (read: American) programming are required to pay, that go into a fund supposedly used to create more "Canadian" content. If that sounds strange and convoluted to you, you're not alone, but more on that later.

It appears as though things are getting a bit testy, with members of the CRTC Commission requesting Netflix hand over data on its subscribers, the content they watch, and hosted "Canadian" content, all while refusing to protect that proprietary information from the competition's eyes. Needless to say, Netflix refused.

A Netflix executive told the country's broadcast regulator on Friday before being ordered to hand over the confidential company information that regulating the internet to help boost Canadian content will only hurt consumers. In an occasionally tense appearance before the Canadian Radio-television and Telecommunications Commission, Corie Wright urged the broadcast regulator to let market forces dictate what consumers can watch.
Chiefly at issue was the Canadian government's refusal to affirm that it would keep Netflix's data confidential. In other words, the government was asking a private company to hand over sensitive business information with no assurance that the information wouldn't then end up in the hands of surely interested competitors. They might as well have asked the company to punch itself in the crotch, for all the sense it makes. All this, keep in mind, is geared towards determining if that committee will levy a tax on Netflix for the sin of having a lot of content Canadian consumers really want. Screw the market forces, just prop up our own culture from the outside.

And that really makes no sense. First of all, if Canadian content is bought and paid for with American dollars, how Canadian is it, really? It's practically begging for cultural diffusion, the very thing the tax is supposed to stave off. And the whole concept leads to some really silly comments, such as:
"Netflix's kind of late-1990s view of the internet as some unregulatable space was dragged into the 21st century and was put on notice," said Carleton University journalism professor Dwayne Winseck, who characterized Wright's appearance as "theatre." "The CRTC has a Broadcasting Act to live up to and Netflix ... has to have a respectful conversation in that light."
Ah, yes, the CRTC wants to pretend that the internet is a walled broadcasting system, like television, and it's Netflix that is living in days gone by? Beyond that, think of this from Netflix's point of view. The CRTC falls under the jurisdiction of the Canadian Parliament. It's government, in other words, answering to the Minister of Canadian Heritage, who is in turn responsible for Canada's arts, culture, media and sport. So, put simply, the part of the Canadian government that is responsible for encouraging the creation of Canadian arts and culture instead is saying, "Fuck it, just make Netflix do it."

And you can understand why. After all, actually doing the work themselves in creating a cultural marketplace, in fostering the Canadian arts, in promoting the education and training of film-makers and artists such that their work is desired by the Canadian public, sounds quite complicated. Telling someone else to do it for you must be much easier.


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  • identicon
    NovaScotian, 23 Sep 2014 @ 4:16pm

    CRTC vs Netflix

    As a Canadian who has always sneered at CRTC's Canadian Content provisions preferring to let the marketplace rule what's available, I practically cheered when the news reported that they'd said "no f'ing way" to the data request. What particularly surprised me during the initial exchange was that the commission members seemed surprised by this.

    If this all goes against Netflix and the CRTC wants to tax them, then I hope they discontinue Netflix in Canada for two reasons. First, it sets a dreadful precedent that an Internet company should be treated like a TV company, and second, they have a substantial following here in Canada and I'd like to see the CRTC eat the uproar if Netflix buzzes off. Of course most folks will still watch as before because a service will spring up in the US to let them do so via Tor, say.

    reply to this | link to this | view in chronology ]

  • icon
    Kyle Broflovski (profile), 23 Sep 2014 @ 4:23pm

    I know what they should do!

    They should rochambeau for it! That way it is fair for everyone. Canadian Parliment and Netflix would both get kicked in the nuts!

    I'd PayPerView that contest. Talk about an exciting government/private sector debate.

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 23 Sep 2014 @ 4:26pm

    We need another Neflix original series.

    I would love to watch something along the lines of: Bob and Doug McKenzie go to Ottawa. The evil CRTC commissioner (played by Max Von Sydow) attempting to overtake the world with his nefarious plan gets brought down by the inept McKenzie brothers who drunkenly stumble upon a semi-conscious Netflix lawyer in need of help.

    Link for anyone to young to get the reference: http://www.imdb.com/title/tt0086373/

    reply to this | link to this | view in chronology ]

  • identicon
    Andyroo, 23 Sep 2014 @ 4:29pm

    Living in the past

    This is what happens when government and their departments do not understand the technology they are trying here to control, they cannot control netflix it is an internet company not a broadcaster as many broadcasters and courts around the world have stated very clearly.

    Now if Canada wants to register them as broadcasters it is a different situation as this would give netflix a huge amount of content that they could easily access at very low cost compared to what they are paying now. I don't think the real broadcasters will be very happy about that and would scream at the top of their paid for voices, and I also like the other comment here who believes netflix would rather remove their servers from Canada and make it possible for Canadians to access via US servers just over he border.No business would ever release their secrets unless guaranteed that it would not be shared or made public, and that if it was the government would have an agreement in place before netflix released any info that they would pay netflix a few billion in damages without Netflix having to take them to court.

    This is what happens when the old system suddenly realises that they have ignored the internet for way too long and need to start playing fair with internet services. It is why copyright laws need to be abolished for personal use and why government's that are ignoring it will eventually have to admit they are wrong and copyright laws are wrong.

    reply to this | link to this | view in chronology ]

  • identicon
    Chris Brand, 23 Sep 2014 @ 4:31pm

    While I generally agree that these rules are stupid, and definitely agree that they have no place online, I disagree with some of your characterisation of what happened here.

    The CRTC (in their view) didn't "ask" for the. They ordered it. As a regulator that believes that Netflix is one of the companies they regulate, they get to order them about (whether Netflix actually is regulated by them is a different question, one that it seems likely the courts will be resolving in due course).

    As a government agency, subject to "Access to Information" legislation, they *Can't* guarantee confidentiality. Historically, they've tended to do an extremely (arguably *too*) good job of keeping the information provided to them by companies confidential, but there's no way they can legally guarantee to do so.

    It's also worth noting that Netflix did, in fact, provide them with at least some of what they asked for, while taking advantage of the opportunity to say that they were doing so voluntarily and that they don't concede that the CRTC does actually regulate them.

    reply to this | link to this | view in chronology ]

    • identicon
      JEDIDIAH, 23 Sep 2014 @ 7:37pm

      This is the same as the NSA nonsense.

      Yes. And the correct answer to give when a government asks you to violate the privacy of your customers is GET STUFFED.

      Fortunately, this is all very public. Netflix can object in public and let everyone know that the Canadian government is being abusive. This is a lot better than some of the attempts and forced information disclosure that have gone on lately.

      It's good that someone doesn't have to commit treason to bring this to light.

      reply to this | link to this | view in chronology ]

  • icon
    Whatever (profile), 23 Sep 2014 @ 4:48pm

    the CRTC wants to pretend that the internet is a walled broadcasting system, like television

    Wow, talk about not getting it.

    They don't think it's a walled anything. They think that anyone delivering content by subscription to Canadians should be subject to the same laws as any other cable provider / cable network / cable channel. They look at the internet as a different delivery method, not a law free zone.

    reply to this | link to this | view in chronology ]

    • icon
      Rikuo (profile), 23 Sep 2014 @ 4:56pm

      Re:

      "They look at the internet as a different delivery method, not a law free zone."
      In other words, a broadcast medium (one to many) in your mind, instead of what it truly is, a communications medium (many to many).

      reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 23 Sep 2014 @ 5:04pm

      Re:

      "They think that anyone delivering content by subscription to Canadians should be subject to the same laws as any other cable provider / cable network / cable channel."

      Subject to the same laws that turned television into a walled overpriced broadcasting system. IOW, they want to turn the Internet into what they have wrongfully turned television into by subjecting it to the same laws.

      "They look at the internet as a different delivery method"

      They look at it as a walled broadcasting system being delivered through a different method.

      "not a law free zone."

      No one is requesting the Internet have no laws. Laws that prevent fraud and deception through the Internet (ie: check cashing scams among many others) still apply. We just don't want laws that are intended to interfere with what consumers want and are intended to turn the Internet into an overpriced walled broadcasting system. You know, the same laws that monopolists have managed to buy by subverting the democratic process that have turned television into such a system.

      reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 23 Sep 2014 @ 5:08pm

      Re:

      They do though.

      They want to regulate a company that is not even in the country because their own dinosaur broadcasting industry didn't adapt even though it had years of time to do so.

      Netflix is not a cable provider / cable network / cable channel. Play it through to the end, even if they were to make a rule it is unenforceable. If I sub to a streaming service in sweden are they going to go there and try to force that company to give them private records too?

      The whole thing is absurd, archaic dinosaur thinking.

      reply to this | link to this | view in chronology ]

    • identicon
      DogBreath, 23 Sep 2014 @ 6:47pm

      Re:

      They think that anyone delivering content by subscription to Canadians should be subject to the same laws as any other cable provider / cable network / cable channel. They look at the internet as a different delivery method, not a law free zone.

      So they want Netflix to look like a duck, but I seriously doubt they'll ever get the benefits of being treated legally like a duck (i.e. [Andyroo, Sep 23rd, 2014 @ 4:29pm] "Now if Canada wants to register them as broadcasters it is a different situation as this would give netflix a huge amount of content that they could easily access at very low cost compared to what they are paying now. I don't think the real broadcasters will be very happy about that and would scream at the top of their paid for voices,").

      Even though this is taking place in Canada, as we discovered in the U.S, Supreme Court decision on Aereo, you're a duck for purposes of our legal opinion of being a broadcaster (which is legally binding), but you're not a duck when it comes trying to following the law and pay broadcast fees, because you're not a broadcaster. For further information, see: Catch-22.

      If I were Netflix, I'd pull out of Canada and tell the CRTC to DUCK off and go DUCK themselves.

      reply to this | link to this | view in chronology ]

      • icon
        Whatever (profile), 23 Sep 2014 @ 7:49pm

        Re: Re:

        Thing is, if Netflix pulls out, someone else will come into the space and will do it under the CRTC rules. That would likely be one (or more) of the existing legacy TV players, as the Canadian broadcast industry is very concentrated in the hands of a few companies who have been willing to play by the rules.

        Most channels from the US are available in Canada, but as "Canadian" versions, often partially or nearly fully owned by Canadian media players, and including Canadian content in the mix.

        The CRTC can actually pretty much make it impossible for Netflix to operate legally in Canada if they want. Netflix is standing up to them, but at the same time they likely realize that they are on very thin ice.

        reply to this | link to this | view in chronology ]

        • identicon
          DogBreath, 23 Sep 2014 @ 10:28pm

          Re: Re: Re:

          Thing is, if Netflix pulls out, someone else will come into the space and will do it under the CRTC rules. That would likely be one (or more) of the existing legacy TV players, as the Canadian broadcast industry is very concentrated in the hands of a few companies who have been willing to play by the rules.


          Companies playing by the rules that they had a hand in making... that doesn't sound fair, now does it? I'm sure they will crash and burn, while wasting an extraordinary amount of money doing it to be sure.

          Just because someone can do a thing does not mean they can do it well. This will eventually lead down the path of next to no one using said replacement, even when the government in power gives (sells) them the legal monopoly over such services by having laws in place that always favor those companies/conglomerates, who think they should be in charge.

          Netflix exists because the legacy players were unable and unwilling to provide such a service in the first place, not just because they thought of it first or placed money into the right politicians pockets.

          That my friend is why people go out of their way to go around such obvious and abusive power grabs all the time, and do not buy into the stock phrase "because it's the law".



          The CRTC can actually pretty much make it impossible for Netflix to operate legally in Canada if they want. Netflix is standing up to them, but at the same time they likely realize that they are on very thin ice.

          Legal or not, people still watch Netflix in China, I seriously doubt Canadian law will be an obstacle.

          reply to this | link to this | view in chronology ]

        • icon
          That One Guy (profile), 23 Sep 2014 @ 10:34pm

          Re: Re: Re:

          Thing is, if Netflix pulls out, someone else will come into the space and will do it under the CRTC rules. That would likely be one (or more) of the existing legacy TV players, as the Canadian broadcast industry is very concentrated in the hands of a few companies who have been willing to play by the rules.

          There's nothing stopping them from doing this now, so if it was really that easy, and they were really interested in doing so, I imagine they would have by now.

          reply to this | link to this | view in chronology ]

          • identicon
            Anonymous Coward, 1 Oct 2014 @ 5:25am

            Re: Re: Re: Re:

            t all depends if the losses from paying the tax or buying otherwise worthless Canadian content exceeds the losses from Canadian customers who wouldn't work around some half-hearted blocking put up as a fig leaf of compliance.

            reply to this | link to this | view in chronology ]

        • identicon
          Anonymous Coward, 24 Sep 2014 @ 8:36am

          Re: Re: Re:

          ...So why haven't they done it already?

          reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 23 Sep 2014 @ 5:17pm

    It has also been widely reported that the prime minister and the heritage minister have weighed in and said they would not uphold any new media regulation aimed at taxing Netflix.

    It's not going to happen. The industry IS going to have to adapt there is no way around it.

    reply to this | link to this | view in chronology ]

  • identicon
    CONartistServatives, 23 Sep 2014 @ 5:31pm

    my opinion

    A) they dont need see confidential records , when simple statistics could do....

    B) fuck conservatives and there need to know and control the public , shove off my net or you will never hold power again in canada PERIOD

    reply to this | link to this | view in chronology ]

  • icon
    scotts13 (profile), 23 Sep 2014 @ 6:32pm

    It may be that some Canadian politicians are about to discover people are more fond of Netflix than of them.

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 23 Sep 2014 @ 6:44pm

    "Culture Tax"

    While I am not generally in favour of the culture tax, it should be noted that, historically, it was there to respond to content dumping. Given the size and scale of the US TV-watching economy compared to anywhere else, it is quite easy for a US company, having made their profit in their domestic market to dump the rights (ideally as a leader for merchandising and other relatively scarce goods). This then puts local content at a disadvantage because they can't access the US market efficiently and they have to compete against cheap imports. The tax is one mechanism for trying to level the playing field slightly.

    Anyone want to bet this resolves itself with Netflix signing an agreement to produce Canadian-based content?

    reply to this | link to this | view in chronology ]

    • identicon
      JEDIDIAH, 23 Sep 2014 @ 7:44pm

      Re: "Culture Tax"

      That seems like an entirely separate issue apart from sticking their noses where it doesn't belong. If they want to go on a power trip, they should just levy the tax and be done with it.

      Canadians are already used to paying more for stuff than we do apparently.

      reply to this | link to this | view in chronology ]

    • icon
      nasch (profile), 23 Sep 2014 @ 9:57pm

      Re: "Culture Tax"

      While I am not generally in favour of the culture tax, it should be noted that, historically, it was there to respond to content dumping.

      I'm sure it was well-intentioned, but the problem is that no matter what the intent, the result will be content that's less desirable to Canadians than what they would have otherwise. This is because if Canadians wanted to watch a particular Canadian program, with or without the rule it would get produced and watched. With the rule, the program gets produced whether anyone wants to watch it or not. So the only content that's helped by this rule is content that Canadians don't want as much as other things (such as US reruns).

      Basically, the rule is trying to force Canadians to prefer Canadian culture, and that is never going to work. There have got to be better ways to encourage Canadian culture.

      reply to this | link to this | view in chronology ]

      • identicon
        Anonymous Coward, 24 Sep 2014 @ 6:14am

        Re: Re: "Culture Tax"

        I'm not sure I agree with you. Let's try a couple of made up numbers to illustrate the effect of dumping on competition. Let's say it costs $2184 to make a 30 minute TV show.

        US Show: Costing $2184, it has made $3000 in the US. Rights are sold to a Canadian broadcaster for $200. The Canadian broadcaster brings in $1000 in revenue on it.
        Profit for US producer: $1016
        Profit for Canadian broadcaster: $800.

        Canadian Show: Costing $2184 with no subsidies or government interference. The broadcaster brings in $2000 in revenue on it.
        Profit for US producer: N/A
        Profit for Canadian broadcaster: -$184.

        In this fictitious example, the Canadian people preferred it to the tune of being prepared to spend twice as much money on the show, but the broadcaster was almost $1000 worse off AND made a loss.

        reply to this | link to this | view in chronology ]

        • icon
          nasch (profile), 24 Sep 2014 @ 7:45am

          Re: Re: Re: "Culture Tax"

          Canadian Show: Costing $2184 with no subsidies or government interference.

          I didn't say there shouldn't be any subsidies or interference, I only said that a rule mandating a certain percentage of content be Canadian is a bad way to accomplish the goal. It strikes me that a tariff on foreign content would be better (I can't believe I'm suggesting a tariff as better than something already in place).

          reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 23 Sep 2014 @ 6:49pm

    Translation

    "Netflix's kind of late-1990s view of the internet as some unregulatable space was dragged into the 21st century and was put on notice,"

    In other words, "Haven't they heard we're eliminating the open internet?"

    reply to this | link to this | view in chronology ]

  • icon
    BS Simon (profile), 23 Sep 2014 @ 7:33pm

    I don't even think Netflix is in Canasa.

    My understanding is that Netflix doesn't have a Canadian office or employes. They also don't have servers in Canada.

    They do have a .ca website that contains the content they have Canadian licences for. However, claiming because they have a .ca website the CRTC has jurisdiction over them is like claiming Tuvalu has jurisdiction over Twitch.tv.

    reply to this | link to this | view in chronology ]

    • icon
      Whatever (profile), 24 Sep 2014 @ 12:57am

      Re: I don't even think Netflix is in Canasa.

      Generally, the view is that the CRTC may have some jurisdiction because it's distribution of programming to Canadians, which means there is a transaction occurring with a Canadian customer in Canada. It's the very same reasons why you cannot buy or own DirecTV or Dish Network stuff in Canada (though many have over the years).

      reply to this | link to this | view in chronology ]

  • identicon
    Dave, 23 Sep 2014 @ 7:48pm

    And this protectionist garbage is why we can't have Neon Alley in Canada, because Viz Media would have to start paying into the Canadian Content fund. I don't care about any of that—I just want my Sailor Moon back!

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 23 Sep 2014 @ 7:57pm

    "They might as well have asked the company to punch itself in the crotch..."


    Also American content.

    reply to this | link to this | view in chronology ]

  • icon
    Zinc Whiskers (profile), 23 Sep 2014 @ 8:31pm

    American Dollars?

    I'm with Netflix on this one...but you article claims "Canadian content is bought and paid for with American dollars"...??

    "Can Con" subsidies come from CDN consumers...out of our cable fees...not American dollars.

    reply to this | link to this | view in chronology ]

  • identicon
    known coward, 24 Sep 2014 @ 5:27am

    video content is video content

    the two issues need to be separated, Netflix as a content provider and as a content provider is no different than any other provider. They are subject to Canadian law and should pay their share.

    Whether Canadian law is inherently anti-competitive is another story.

    reply to this | link to this | view in chronology ]

  • identicon
    Anon, 24 Sep 2014 @ 7:31am

    History Repeats

    Yes, we were overwhelmed by US content in the "Good Old Days". This is simply because it's cheaper to buy American content than to create Canadian content. As an added bonus, the USA pays better so not just our stars over the years have moved there, but also talented behind-the-scenes people. When Canada began pushing for Canadian content, it became a byword for "awful". (Ever seen "The Starlost"?)

    In fact, Bob and Doug Mackenzie were created to satisfy the CRTC's need for "real Canadian" content. Second City deliberated created the most banal, stupid, boring Canadian content they could think of, and surprise, it resonated with Canadians as authentic.

    Canadian broadcasting is a very incestuous game. The original satellite broadcast license was held up so that the prime minister's son-in-law's company could also get a license. There are only a few players in the game - Bell, Rogers, Shaw, CTV, CBC... they gobble up any smaller fish. The CRTC just makes sure they play nice and share.

    The small guy gets the shaft in all this. Costs are through the roof for a captive audience, and providers are arrogant. When a new option comes along - big then small dish satellites, Netflix, etc. - it booms here because it can offer a wider content, usually for a lower price, than Canadian providers.

    I'm not sure what the CRTC's game is here. Video on demand by definition cannot meet Canadian Content percentage rules. The convoluted rights marketplace makes it difficult and expensive for Netflix to offer a wide range of Canadian choices, and when CanCon owners realize they have Netflix over a barrel, they'll gouge too. So, it's a shakedown for additional money for Canadian content. I guess the proof in the pudding will be if the fund can then be used for Canadian-produced projects similar to "House of Cards"?

    However, I suspect the majority of Netflix subscribers, the clever ones, are like me and use a proxy in the USA to get around the limitation for content. There is a much wider set of content available from a US address.

    So far the CRTC hasn't been able to stop this option. Like the RIAA/PMAA they haven't learned the simple lesson - give the people what they at a reasonable price and people won't select other options.

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 24 Sep 2014 @ 7:46am

      Re: History Repeats

      "I'm not sure what the CRTC's game is here. Video on demand by definition cannot meet Canadian Content percentage rules."

      sure it can... I can see it now,

      " Well play the episode of orange is the new black you requested in a second, but first this episode of Caillou brought to you by your tax dollars.... ok not really in a second more like 20 minutes. Sincerely netflix"

      reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 24 Sep 2014 @ 9:14am

    Funny how everyone's defending netfail. They want to broadcast TV shows in a country and bypass all its laws? Why do they feel they are special? Because they're online? They're still a broadcaster, it's still US content.

    Learn to deal with the laws where you try to push your business, not complain every step of the way.

    reply to this | link to this | view in chronology ]

    • icon
      John Fenderson (profile), 24 Sep 2014 @ 10:23am

      Re:

      "They want to broadcast TV shows in a country and bypass all its laws?"

      Umm, no, that's not what they're doing. From where I sit, it looks like they're working within the legal system of Canada -- so not bypassing any laws at all, but finding a way to work within the law.

      reply to this | link to this | view in chronology ]

  • icon
    John85851 (profile), 24 Sep 2014 @ 2:58pm

    Can we get back the culture tax when filming there?

    Can American companies get back the culture tax when they film in Canada? Canadian cities (such as Vancouver and Toronto) have been used as substitutes for American cities in movies and TV shows for at least a decade. I can think of Smallville and Battlestar Galactica as quick examples, but I'm sure there are plenty of others.

    So maybe the US should complain about how the Canadian cities are taking film revenue that should be spent in US cities and taking jobs away from Americans.

    reply to this | link to this | view in chronology ]

    • icon
      nasch (profile), 24 Sep 2014 @ 3:59pm

      Re: Can we get back the culture tax when filming there?

      I can think of Smallville and Battlestar Galactica as quick examples, but I'm sure there are plenty of others.

      A lot of planets they explored in Stargate: SG-1 looked strangely similar to the rainforest of British Colombia, and "Seattle" in The 4400 was actually Vancouver - just off the top of my head.

      reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 25 Sep 2014 @ 1:26am

    "First of all, if Canadian content is bought and paid for with American dollars, how Canadian is it, really?"
    "And that really makes no sense."

    If Italian Sports Cars are bought and paid for with American dollars, just how Italian are they?

    If Cuban cigars are bought and paid for with American dollars, just how Cuban are they?

    reply to this | link to this | view in chronology ]

    • identicon
      DogBreath, 25 Sep 2014 @ 1:51pm

      Re:

      If Italian Sports Cars are bought and paid for with American dollars, just how Italian are they?

      Depends on how many parts in/on the car are "Made In China".



      If Cuban cigars are bought and paid for with American dollars, just how Cuban are they?

      Depends on how much of the tobacco in the cigar is grown in Brazil, Cameroon, Cuba, the Dominican Republic, Honduras, Indonesia, Mexico, Nicaragua, the Philippines, Puerto Rico, Canary Islands (Spain), Italy and/or the Eastern United States.

      reply to this | link to this | view in chronology ]


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