Thank you, Mr. Chairman.
In the short time we have, I'd like to address three subjects this committee is considering.
First I'll address the implications of vertical integration in broadcasting, and second, the maintenance of a diversity of voices. Third, my colleague, Rita Cugini, will address the role of small and independent broadcasters.
In all of our activity as the broadcasting regulator, we are following a very clear principle: we interfere as little as possible in the marketplace. We establish regulations or guidelines only if they are shown to be necessary to serve the interests of the Canadian broadcasting system or fulfill the objectives of the Broadcasting Act.
With that in mind, l'd like to begin with vertical integration. The broadcasting industry is changing very quickly through the consolidation of ownership and the widespread adoption of new media platforms. Major transactions have produced vertical integration, that is, the ownership by one entity of both programming and distribution properties, or of both production and programming properties, or of all three--production, programming, and distribution properties together.
Does this present a risk of anti-competitive behaviour? The commission already has rules in place to discourage particular types of anti-competitive behaviour. For example, broadcasters have to acquire 75% of their prime-time programming from unaffiliated producers.
There is also the possibility that the distribution arm of an integrated company may give undue preference to services offered by its programming service arm, to the disadvantage of outside providers. We have established procedures to serve as a check against such undue preference in both traditional broadcasting and the new media. In the event that a preference has been demonstrated, a reverse onus is placed on the distributor to show that it is not an undue preference.
However, concerns have been raised that an integrated company could adopt other types of anti-competitive behaviour. Given the increasing consolidation of ownership and the rapid adoption of new platforms, we have announced a public proceeding to determine whether our existing safeguards are sufficient or not. A hearing will begin on May 9, 2011, on that very subject.
Through that hearing, we will examine the different situations under which undue preference and reverse onus provisions may be needed. We will also aim to develop norms that provide all players with a fair opportunity to negotiate for programming rights and carriage. This furthers competition and enhances consumer choice.
We do not intend to intrude into the commercial environment unless absolutely necessary to achieve the purposes of the Broadcasting Act. Intervenors in this proceeding must make a compelling case that any regulatory measures they propose are necessary in order to serve the best interests of the Canadian broadcasting system.
Let us move on to diversity of voices. Let me now turn to the second subject: how can we ensure a diversity of voices in a changing media landscape?
In January of 2008, following a wave of consolidation among broadcasters, we announced a policy to maintain a diversity of voices within the private element of the broadcasting system. This policy sets limits on the ownership of media outlets.
In a large market, an entity may control a maximum of two AM and two FM radio stations in the same language. In smaller markets, an entity may control as many as three radio stations operating in the same language, with a maximum of two stations in either frequency band.
For conventional television stations, the limit is one station per language in a given market.
We will not permit an entity to control all three main sources of local news serving the same market: a radio station, a television station and a newspaper. At most, an entity would only be able to control two out of the three.
We will generally not allow a single entity to have effective control of all TV distribution in a market.
Finally, the policy provides a limit to the share of the national audience that a single broadcasting entity may control as a result of a transaction. Any transaction that would result in an entity controlling more than 45% of the national audience will not be approved. Transactions that would result in an entity controlling between 35% and 45% of the national audience will be carefully scrutinized. They will only be allowed if the Commission is convinced that they do not diminish the diversity of voices. And transactions that would result in an entity controlling less than 35% of the national audience will be approved expeditiously if there are no other concerns.
Ownership consolidation is a fact of life, for both economic and technological reasons. Our media companies must be able to compete in the digital environment, where content can come from anywhere.
But in spite of all the consolidation, Canadians still enjoy a rich variety of broadcast programming from public, private and community sources. Our 2008 policy, which was built on previous policies to maintain diversity, has worked well. When we applied it to the Shaw/Canwest transaction that we approved last month, for example, we found that the consolidated company would lay claim to a national audience share of less than 35%.
But we cannot stand still. The rules for common ownership of radio stations are defined in terms of both FM and AM. But as you know, AM is losing market share, and it has been a long time since we had a single application for a new AM licence. The question arises: should we still be regulating the AM market? Is there a case to be made for letting it go by way of exemption?
I'd now like to turn to the small and independent television broadcasters. We are well aware of the challenges they face and we've taken a number of steps to deal with those issues.
We have just concluded a hearing on our direct-to-home satellite distribution policy. Among other things, we have been looking at the appropriate number of local stations they must offer to their subscribers. We've heard different views on these issues and we're taking them all into consideration.
In 2008, we established the local programming improvement fund, which supports local programming, especially news, in smaller markets. During the 2009-10 broadcast year, the fund distributed approximately $100 million to 78 local stations across the country.
The undue preference rules, which the chair discussed earlier, provide independent broadcasters with the means of defending themselves against discriminatory treatment in the distribution marketplace.
All broadcasters can use additional sources of revenue. Earlier this year, we outlined a possible regime of negotiation for the value of a local broadcaster's signal when it is carried by a distributor. As you know, speciality channels receive a fee from the cable and satellite companies that distribute their programming, but over-the-air broadcasters do not. We have submitted a reference to the Federal Court of Appeal to establish whether we have the legal right to institute such a regime. The court held a hearing in September, We expect its decision by the end of this year. If our proposed regime is instituted, it will benefit all broadcasters, including the small ones.
Before we conclude, I'd like to raise a practical point with the committee, which the CRTC has raised before. To deal with this fast-moving digital environment, we need to be able to address non-compliance in a timely, efficient, and effective way. At the moment, any significant violation of the rules can be penalized only by a very cumbersome, costly, and often ineffective method, and that is the shortening of a licence term. Unfortunately, our current tools for enforcing compliance are, to put it mildly, suboptimal.
In a recent decision, for example, we had to deal with non-compliance by two licensees with the broadcasting distribution regulations and other regulatory requirements. These violations were significant. They involved issues that included accessibility and funding obligations, but the only significant penalty we could impose was a shortening of the licence term when it came up for renewal.
We have found that this kind of discipline does not necessarily result in better behaviour. It is applied at a time when the offending conduct may have occurred years in the past. In the case of a licensee not complying with the accessibility criteria, a subscriber with a disability may not have access to closed-captioning or specialized programming until years in the future. This kind of action is costly, time consuming, and process laden.
We need the authority to impose administrative monetary penalties, otherwise known as AMPs. This would allow us to make the punishment fit the crime. It would provide a timely corrective deterrent for all players to see. We could acquire this power through an amendment to the Canadian Radio-television and Telecommunications Commission Act. We certainly hope that this committee can urge Parliament to act on this.
Thank you very much, Mr. Chair.
Welcome to the committee, Chair von Finckenstein, Mr. Hutton, and Ms. Cugini.
I'm actually very encouraged by your comments, Mr. Chairman. I think there's a recognition on your part that Canada is not an island and that we can't simply pretend that the global change that's occurring with respect to broadcasting.... You've correctly identified that this device I have here might pull up Canadian content, but it could also pull up content from anywhere in the world. That's the world we live in now. Broadcast is not limited to how far we can push an FM or AM signal, or indeed a television signal, from a tower. It's global.
I actually look at vertical integration as an opportunity. I think what's happening is very interesting. It's obviously happening very quickly. We've seen the purchase of Canwest by Shaw. Obviously, some time ago, Rogers bought the assets of Citytv. We see that Bell is purchasing the CTV assets. But this isn't just a Canadian phenomenon; this is occurring around the globe.
I actually see an opportunity here, because if we have these large, very powerful stages that will allow Canadian content to extend beyond simply our borders, then rather than broadcasting something five miles past Buffalo, we're actually broadcasting to the world.
Can you indicate to the committee the Canadian content rules we currently have in place? It is your intention that these Canadian content rules, regardless of vertical integration, will be steadfastly supported by the CRTC. Is that correct?
Mr. Chairman, members of the Committee, good afternoon.
First of all, we would like to thank you for your invitation to appear today.
We are here today as members of Le groupe de diffuseurs indépendants, le GDI, an association of independent Canadian broadcasters.
Let me introduce you to the member representatives who are here today.
My name is Suzanne Gouin and I am the President of TV5 Québec Canada.
I'm joined by Martha Fusca, president of Stornoway Communications. From ZoomerMedia television, I'm joined by Bill Roberts, president, and Monique Lafontaine, the vice-president of regulatory affairs. As well, I'm joined by IBG's legal counsel, Joel Fortune.
For efficiency's sake, we have joined forces and combined our presentation, although Stornoway is a separate company.
We would like to begin by saying a few words about independent broadcasting, and then move on to the substantive question you are examining.
Canada has a rich linguistic and cultural heritage, and that heritage is reflected by independent broadcasters, including IBG's members. Members of the Independent Broadcasters Group offer programming for Canadians from all conceivable backgrounds, in English, French, Aboriginal and many other languages, including Cantonese, Mandarin, Russian, Hindi and Punjabi, to name only a few, and for every age group and interest.
Independent broadcasters often have the mandate to provide programming that isn't found on mainstream commercial services. Independents provide content and editorial diversity and contribute directly to the free expression that we expect to find in their media and that makes our democracy function.
We also create and support jobs in the cultural industries in every region of Canada and, as small and medium enterprises, spur innovation—what Mr. von Fickenstein was referring to earlier—and growth in the economy.
Before going any further, let me explain what we mean by “independent” broadcasters. An “independent” broadcaster is a broadcaster that is not owned by a corporate group that also owns a cable, satellite or telephone network. Why is this distinction important? It is important because the cable, satellite and telephone companies are the gatekeepers to Canada's broadband networks that all broadcasters need to access in order to reach Canadian audiences.
Subject to only a few rules set by the CRTC, these carriers decide what channels Canadians get to watch on television and new media screens. Just as importantly, these carriers largely control the marketing of programming services—for example, how they are packaged, the retail price, channel placement and how aggressively they are marketed. Last, even while they have all this power, these carriers compete directly with independent broadcasters for viewers and programming, since they also operate a large number of their own TV services.
So, ownership of the distribution networks is critically important. If you own one of the large distribution networks, then the services you own get access, and they are marketed so that they reach a large number of Canadians and prosper. If you don't own the networks, if you are an independent broadcaster, then you are in a much different position.
Our message today is direct. Increased ownership concentration and cross-ownership between programming services and cable, satellite, and telephone companies will do great harm to independent broadcasters. Swift and proactive regulatory action is needed to mitigate this harm.
Canada is reaching a level of ownership concentration that has not been seen before. If BCE's acquisition of CTV is completed, then the owners of Canada's four largest cable companies and two largest telecom companies, Bell and Telus, will control the following: at least 90% of all Canadian cable and satellite subscribers; 97% of mobile phone customers; all four national conventional television networks, including TVA, distributed nationally under a CRTC requirement; 66% of Canada's analog and category 1 specialty channels, the channels that have benefited most from direct CRTC support and regulation; 83% of the total revenue generated by TV in Canada, including both distribution and broadcasting activities; and in excess of 90% of all residential Internet customers in their markets.
We know this committee is examining the move toward new viewing platforms together with changes in ownership in the TV industry. It is fair to say that probably all independent broadcasters are looking at viewing platforms to grow their businesses and to reach Canadians in all technologies, but television broadcasting remains by far the most important viewing platform, and it is also the generator of the same content that Canadians want to watch online.
Also, as you can see from the overlapping ownership of broadcasting networks, in emerging viewing platforms like mobile and the Internet, concentration of ownership is just as significant an issue for accessing the new networks as it is for accessing broadcast distribution. This concentration of ownership represents an enormous challenge to independent broadcasters, both for broadcasting and for new modes of distribution.
This is why adequate regulatory checks and balances need to be built into the system. But the CRTC has moved in the other direction. The commission has removed a number of important roles that were specifically intended to ensure that Canadians' specialty and pay television services get fair access to distribution networks.
The result of this deregulation is that BDUs will have the ability and every incentive to give pride of place to their own broadcasting services and to non-Canadian services. Independent broadcasters look at these coming challenges and are concerned about their ability to maintain a meaningful presence, or even to survive, within the system.
One way to ensure that Canadians continue to have access to important and diverse Canadian TV services is for the CRTC to use paragraph 9(1)(h) of the Broadcasting Act. Paragraph 9(1)(h) permits the CRTC to require cable and satellite BDUs to distribute certain services on basic or other terms and conditions. Some independent broadcasters have applied to the CRTC to become paragraph 9(1)(h) services as a response to concentration of ownership and deregulation. Paragraph 9(1)(h) services reach a large number of Canadian homes through Canada's largest BDUs. Consequently, they have to meet high Canadian content and other stringent obligations.
Regrettably, the CRTC announced at the end of this past summer that it was going to impose a moratorium on paragraph 9(1)(h) applications until after June 2012 at the earliest. It is important for the committee to appreciate that some paragraph 9(1)(h) applications were filed two and a half years ago, including those of the broadcasters on this panel. This means that it will be four and a half years from filing when they are finally heard by the CRTC.
This decision came as a complete shock and was directly contrary to what the CRTC had stated was its plan. IBG members and others have filed--or had planned to file--applications based on the understanding that they would be heard shortly after filing, but certainly before September of 2011, which is the digital transition date for the industry, and the date when the new regulated or deregulated regime will come into effect. Indeed, we have quite an extensive library of correspondence with the CRTC on this matter.
The moratorium is deeply unfair and potentially harmful to diversity of voices and ownership in the broadcasting system, which is CRTC policy.
First, we question how a moratorium can be in the public interest and consistent with the Canadian Broadcasting Act. To be approved, by definition, a 9(1)(h) service has made an exceptional contribution to the Canadian broadcasting system and has met strict criteria.
Second, the moratorium comes at a critical time and it is exactly the opposite of what is needed. We have already explained how the CRTC decided to remove many of the rules used to ensure diversity of ownership and voices in the system and how concentration of ownership has intensified across broadcasters and networks.
Indeed, Canada may now have the most concentrated media environment in the entire western world at exactly the time that the CRTC should use all of the tools available to rebalance, including the paragraph 9(1)(h) orders for exceptional services, and to counterbalance deregulation in certain areas and the negative public policy effects of industry consolidation.
Third, the moratorium is especially harmful to small niche and independent broadcasters who want to make excellent Canadian content. If independents are going to make meaningful contributions to Canadian broadcasting and diversity, they require regulated carriage terms to reach a wide enough audience.
Fourth, the moratorium requires us to put our business plans on hold, even while the CRTC continues to add new non-Canadian services for distribution in Canada and permits the cable and satellite companies to bring forward applications for more foreign channels and their own digital specialty pay and video-on-demand channels.
Fifth and last, more than anyone, small and independent broadcasters rely for survival on transparent, understandable, relevant, and timely regulation. This change of direction by the CRTC has been anything but and has left us and our business partners questioning the CRTC's priorities.
Even more troubling, when most 9(1)(h) applicants were being held back by the CRTC for the past two and a half to three years, the CRTC has moved some to the head of the line, given them a public hearing, and granted 9(1)(h) orders. Similarly, the CRTC decided to hear Quebecor's application for special distribution status for its cable news channel this past fall, even though it had already told the industry that applications similar to Quebecor's wouldn't be considered until 2011 at the earliest.
Finally, the CRTC has just announced another application it will consider, in which the applicant requests an extension of a 9(1)(h) order that, under its current term, isn't even set to end until 2015. The effect of this fast-tracking of some applicants and dismissal of others is that the CRTC is making decisions about what programming to license and not to license without holding public hearings. These are troubling precedents for a declared public policy goal of diversity of ownership and diversity of voices.
As members of Parliament, you are aware that the CRTC intends to look at some key issues related to vertical integration at the commission hearings scheduled for May, as Konrad announced. The outcome of these important hearings will be of utmost significance to the small and independent broadcasting sector. The IBG and others will encourage the CRTC to put in place relevant and proactive regulatory measures to offset the unprecedented power of huge, vertically integrated companies.
It is early days yet, but the CRTC seems to be most focused on refining its generic “undue preference” rule. In practical terms, what this means is that independent and small broadcasters will have to complain to the CRTC on a case-by-case basis and plead for fair and equitable treatment by giant cable and satellite networks every time the independents face discrimination.
As federal politicians, you wisely understand leverage and can appreciate why this approach will not work. It is very difficult for a small player to complain about a very large player in an industry where the small player fully depends on the larger player for its very existence.
What the industry needs instead is a clear and relevant set of rules, understood in advance, that will ensure independent broadcasters get fair and reasonable access and distribution by their large, vertically integrated competitors.
There are three things that we would like to ask this important committee to kindly consider. First, we request political and regulatory recognition that small and independent Canadian television broadcasters make a valued and unique contribution to the Canadian broadcasting system, especially as regards diversity of voices and ownership; second, that independent and small broadcasters with pending 9(1)(h) applications be heard before the August or September 2011 digital switchover, and that status quo carriage continue until those CRTC decisions are rendered; and lastly, that this committee explore and recommend how the Canada media fund can better service small, niche, and independent television licensees.
Good afternoon, Mr. Chair and members of the committee.
My name is Mike Keller. I am vice-president of industry affairs for Newfoundland Capital Corporation, or Newcap, as we're commonly known.
Thank you for this opportunity to speak to you today about the challenges facing small-market and independently owned television stations in Canada in this constantly changing communications environment.
While Newcap is probably best known as one of Canada's leading radio broadcasters, given that we operate some 80 radio stations across Canada, we're also a small-market television broadcaster. We own and operate two stations in Lloydminster, on the border of Alberta and Saskatchewan, where we provide the only local TV voice in that community.
One of our stations is a CBC affiliate, while the other is a CTV affiliate. They're known as a twin-stick operation because we operate both of them out of the same facilities and share the same transmitters and the same staff. Twin-stick and even triple-stick operations are quite common in smaller markets in Canada that can't support more than one TV operator.
l'm proud to say that our CBC affiliate, CKSA-TV, just celebrated 50 years on air. It is the only small-market TV station on the prairies to reach that important milestone. Its much younger sister station, CITL-TV, which is a CTV affiliate, is only 35. Still, that's pretty impressive, because unfortunately there are not many small-market and independently owned TV stations left in this country. It is for that reason that we often work together on policy and regulatory issues. That way, we can offer a unified voice that hopefully won't get lost when decision-makers consider the future of Canadian broadcasting.
Our stations make an important contribution to providing a diversity of ownership and programming in the system, and we want to continue to do that for a long time, so again, thank you for inviting me here as part of your study.
While I speak today on behalf of Newcap, I think it's fair to say that many of our issues, concerns, and hopes are shared by my colleagues operating small TV stations in parts of B.C., in places such as Thunder Bay and Peterborough here in Ontario, and in Val d'Or and Carleton in Quebec.
There has been much debate in the last few years about the future of conventional over-the-air television in this country. Indeed, this committee has been a leader in exploring that very issue. In fact, one of my small-market colleagues from Pattison Broadcasting in B.C. spoke to this committee last year when you were studying the evolution of the TV industry in Canada.
Much has changed in the Canadian broadcasting landscape even since then; hence these hearings now. But for small-market TV stations, much has also remained the same.
Competition for viewers in our communities still comes from everywhere: from big market stations available on cable; from time-shifted stations imported by satellite distributors; from foreign stations; and from the Internet.
As operators of small-market TV stations, we have been the canaries in the broadcasting coal mine. Because we are so close to our local audiences, we were the first to sense the trouble coming from new technologies and the changing economics. We were also the first to recognize that the key to our survival was to become intensely local. We recognized that we had to provide our viewers with more local news and information, public affairs, and public service programming than anyone else. We had to provide them with the programming they wanted and could not get from anywhere else.
That is exactly what we have done. We have focused on broadcasting from our communities, to our communities, and about our communities. We connect with our local audiences through our local programming and by building and nurturing our relationship with them. We reach out to our local viewers and we listen to them. We help them, too, through, for example, the many local charitable activities we initiate and support.
It is critical for us and for our viewers that we be the local TV voice in our small markets. But it is not cheap. It is very costly to staff and operate a local newsroom, to have reporters on the street, and to have talent and producers and crew in the studio, particularly when in our communities we have a limited commercial base from which to draw advertising revenues. That is why funding mechanisms like the CRTC's local programming improvement fund, the LPIF, are so important to us. Frankly, the LPIF has saved local television, at least for the time being.
Of course small-market stations have other challenges too. For example, we must be carried by satellite DTH distributors. In our own case, in Lloydminster, almost two-thirds of viewers get their TV service from a DTH provider. That means if we're not carried by DTH, we lose two-thirds of our potential audience. That would be the end of us.
It's pretty much the same for the other small-market, independently owned TV stations in this country. Fortunately, the CRTC has put rules in place that should ensure we have and maintain the DTH carriage we absolutely need.
Ensuring that we have the funds to produce local programming and that we have the DTH carriage have long been issues for small-market TV stations like ours. A much more recent concern for a number of us is whether we'll continue to have enough programming to fill our schedules.
As small broadcasters, we do not have the clout or the resources to negotiate with Canadian producers to license the top Canadian shows, or to go down to Hollywood each year to buy the popular U.S. programs. This is why we contract with the big Canadian networks to operate as their affiliates. So they act as our program suppliers, and we make their shows and brands available in our markets. But with increased consolidation and the vertical integration, we are worried that at some point our traditional program suppliers may decide they no longer want to maintain that role.
It is not an understatement to say that the large networks have the power of life or death over affiliate stations. This is especially true in smaller twin-stick or triple-stick markets, because if a network decides that it will not renew our affiliation agreement, we have no alternative source of programming. Of course, no programming means no local station. No local station means no local news or locally produced public affairs programming or locally focused public service announcements.
Bringing television to smaller communities was and still is a risky business. It is the small independent operators who took on those risks when the larger networks weren't willing to do so. That being said, the larger networks have since benefited from the exposure we have provided for their brands and their programming.
At the outset, I proudly told you that our station, CKSA, just celebrated 50 years in the TV business in Lloydminster. We have been a CBC affiliate throughout that entire time, meaning we have been the local source of CBC programming in our community and region for the last half-century. We are currently negotiating with CBC to continue that affiliation relationship, and we are hopeful that we can work something out, going forward.
Other small-market stations are also in the process of negotiating the renewal of their program deals. We will all continue to try to resolve our program supply issues through business negotiations. However, at some point we may need the CRTC to step in and help to ensure we actually have a program schedule to offer on our small-market stations.
To end on a positive note, however, I wanted to let committee members know that our small-market TV stations in Lloydminster are currently on track to meet next year's deadline for the digital transition. A year ago, we were somewhat overwhelmed by the costs we were facing to make that transition. Fortunately, though, many of those costs have come down substantially since then. As a result, and subject to resolving our programming supply issues, we are now confident that we, alongside other Canadian broadcasters, will be turning on the digital switch next August. I think the other small-market broadcasters mandated to make the switch can say the same.
Mr. Chair, committee members, thank you for this opportunity to appear before you. I would be pleased to respond to your questions.
Just touching on what Dean Del Mastro was speaking about in not having cable in five years, there are a lot of communities I know of in rural parts of Canada that don't even have access to the Internet yet. In five years they hope they will get access to the Internet and they're still going to be utilizing their cable.
Going back to ethnic communities, I know many of the people who have come, perhaps seniors in recent years, and my parents' generation as well--I mean, we're still trying to teach my mom how to figure out the whole concept of e-mail. They're watching their programs on television, so I think those licences and that programming are essential.
Bill, you have to be congratulated for your work with Vision TV. It's done a great deal of great work in bringing issues forward for ethnic communities across the country. For anyone who hasn't seen it on any Saturday, from morning to night, Vision is doing great programming. Congratulations.
I want to touch upon a topic you mentioned. I had asked the chairman previously in the panel with regard to the licences for some of the ethnic media programming. They spoke glowingly about the category B licences. You're telling me the question that wasn't asked was in regard to the launch. You said that in an approximation of about 400 licences issued, only about 90 had been launched. Can you please describe why some of these other 310 licences that perhaps have been granted haven't been launched? Perhaps the committee can learn from the reasons behind that to give proper recommendations moving forward to ensure there aren't those sorts of pending licences waiting. That's quite a high number.