October 30, 2008
OTTAWA-GATINEAU - The Canadian Radio-television and Telecommunications Commission (CRTC) today introduced new policies to prepare the Canadian broadcasting industry for the transition to a fully digital environment. In developing these policies, the Commission has simplified its regulation in order to foster a more coherent and well-calibrated broadcasting system.
"Following a comprehensive review, we have streamlined a number of rules and eliminated those that were no longer necessary," said Konrad von Finckenstein, Q.C., Chairman of the CRTC. "These measures will contribute to a more dynamic broadcasting system, which will be in a better position to respond to the opportunities and challenges presented by new media. They will also make it easier for viewers to choose the programs they want."
"The desire for better local programming in Canada's smaller markets was clearly made evident during this proceeding," added Mr. von Finckenstein. "We have taken concrete steps to make sure that viewers in these markets continue to benefit from a diversity of local programming."
The CRTC has developed forward-looking policies that will give the broadcasting system added flexibility while retaining the necessary regulations to achieve the objectives of the Broadcasting Act. The majority of the changes will come into effect on August 31, 2011. This date coincides with the end of analog over-the-air broadcasting in Canada and will give the industry time to adapt.
Broadcasting distribution companies, pay and specialty services, and conventional television broadcasters will be affected by the Commission's new policies. The principal changes are described below.
Broadcasting distribution companies
In reviewing the rules that affect broadcasting distribution companies, such as cable and satellite providers, the Commission has decided to:
- exempt from its licensing requirements broadcasting distribution companies with fewer than 20,000 subscribers
- harmonize as much as possible the rules between satellite and terrestrial distribution companies
- eliminate most rules governing how channels are packaged
- modify its approach to dispute resolution for complaints that involve allegations of undue preference or undue disadvantage
- require broadcasting distribution companies to continue offering a basic service package after the transition to digital, and
- initiate proceedings to explore how new forms of digital and interactive advertising could benefit the broadcasting system as a whole.
Pay and specialty services
In reviewing the rules that affect pay and specialty services, the Commission has decided to:
- allow direct competition between Canadian services in mainstream sports and national news
- maintain exclusivity across other genres while allowing for greater flexibility in the types of programming pay and specialty services may broadcast
- introduce a mechanism to introduce competition in other genres in the future, and
- maintain access rights for Canadian pay and specialty services in a digital environment.
Conventional television broadcasters
In reviewing the rules that affect conventional television broadcasters, the Commission has decided to:
- deny the request for a subscriber fee for the carriage of local conventional television stations, and
- allow conventional broadcasters to negotiate payments for the retransmission of their signals to other provinces (known as distant signals).
The CRTC will also support local programming by increasing to 6 per cent, up from 5 per cent, the contribution broadcasting distribution companies must make to Canadian programming. This increase will amount to approximately $60 million and will be allocated to a new Local Programming Improvement Fund.
The increased contribution represents a monthly average of $0.50 per subscriber. Given the health of the broadcasting distribution industry and the new revenue streams provided by the policies announced today, the CRTC does not expect companies to pass this cost along to their subscribers.
To view these files you will need Adobe Acrobat Reader.
- Broadcasting Public Notice 2008-100 (Regulatory frameworks for broadcasting distribution undertakings and discretionary programming services) [.htm] [.pdf]
- Broadcasting Public Notice 2008-101 (Call for comments on a proposed regulatory framework for video-on-demand undertakings) [.htm] [.pdf]
- Broadcasting Public Notice 2008-102 (Call for comments on a proposed framework for the sale of commercial advertising in the local availabilities of non-Canadian services) [.htm] [.pdf]
- Broadcasting Public Notice 2008-103 (Call for comments on proposed conditions of licence for competitive mainstream sports and national news specialty services) [.htm] [.pdf]
The CRTC is an independent public authority that regulates and supervises broadcasting and telecommunications in Canada.
Reference document: Broadcasting Notice of Public Hearing CRTC 2007-10 [.htm] [.pdf]
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Backgrounder on the new policies for the Canadian broadcasting system
1. Broadcasting distribution companies
Licensing requirements for broadcasting distribution companies
The Commission will streamline its licensing regime for terrestrial broadcasting distribution companies by adopting a single class of licence. Furthermore, companies with fewer than 20,000 subscribers will be exempted from its licensing requirements. As a result, more than 190 cable systems serving over 950,000 customers will be exempt. The CRTC will issue for comment its revised exemption order by April 1, 2009.
At the present time, terrestrial broadcasting distribution companies are divided into three licence classes, based primarily on the number of subscribers that are served. The Commission previously exempted, under two different exemption orders, companies with fewer than 6,000 subscribers.
Harmonization of regulations
The Commission first licensed direct-to-home satellite distribution companies in 1995 and 1996. To give them an opportunity to compete with the cable companies that were already well established, the requirements associated with their licences were relatively light. This approach helped satellite television companies grow into strong and mature competitors.
In order to achieve coherence within the broadcasting system, the Commission considers that its regulation should treat competitors who stand on an equal footing in a similar fashion. The CRTC has therefore adjusted the rules for both satellite and terrestrial distribution companies with the aim of harmonizing them as much as possible. In doing so, the Commission has taken into account the differences in technologies and distribution capacities, as well as the fact that satellite television companies operate nationally.
Packaging rules
As of August 31, 2011, the Commission will remove most of its existing rules governing how broadcasting distribution companies, such as cable and satellite providers, package channels. This will permit them to give their customers more choice in subscribing to pay and specialty services.
Currently, broadcasting distribution companies must offer within the same package one Canadian specialty service for every non-Canadian specialty service. In the future, companies will have the flexibility to adjust their packages according to their customers' wishes. They will simply need to ensure that their customers receive a majority of Canadian programming services (50 per cent plus one) as part of their overall subscription.
The CRTC has also simplified its packaging rules for third-language services by requiring that one Canadian third-language service be offered for every three non-Canadian services in the same language(s).
Similarly, the Commission will establish a simple rule to ensure the distribution of minority-official-language pay and specialty services. Broadcasting distribution companies will be required to offer one minority-language service for every 10 services offered in a market's majority official language.
Dispute resolution
Pay and specialty services negotiate with broadcasting distribution companies to establish the terms under which their services will be provided to viewers. Disagreements can arise between broadcasters and broadcasting distribution companies in the course of these negotiations. The Commission has reiterated its willingness to help resolve disputes in a timely manner through mediation, final-offer arbitration or an expedited hearing.
The Commission will modify its approach for complaints that involve allegations of undue preference or undue disadvantage by introducing a reverse onus provision. As in the past, a broadcaster will first need to demonstrate that a preference or disadvantage exists. However, the broadcasting distribution company will now be required to show why its actions were not undue.
New forms of advertising
A digital broadcasting environment holds opportunities that would allow viewers to watch ads that are more relevant and better suited to their interests (i.e., targeted advertising). Such advertising could benefit the broadcasting system as a whole by creating new sources of revenues and improving its ability to compete with the opportunities offered by the Internet.
The Commission has initiated a proceeding to consider whether broadcasting distribution companies should be permitted to insert targeted advertising in the local availabilities of programs broadcast by foreign pay and specialty services. Currently, the CRTC requires that this time, normally two minutes per hour, be used primarily to promote Canadian programming services.
In addition, the Commission today issued a proposed framework for video-on-demand services operated by the broadcasting distribution companies. Among other things, the CRTC proposes to allow these services to insert advertising in programming obtained from Canadian broadcasters or producers. Such advertising time could also be used for targeted advertising.
2. Pay and specialty services
Competition in mainstream sports and national news
The Commission will permit direct competition between Canadian services in mainstream sports and national news. Existing services in these genres have achieved maturity: they are strong, healthy, popular and highly competitive despite the differences in their programming. They have also established brands that are attractive to consumers and instantly recognizable.
Previously, pay and specialty services were granted guaranteed access to the broadcasting system and not allowed to compete directly with one another. This policy was designed to encourage a diversity of programming genres and to ensure that these services could contribute to the creation of Canadian programming. The Commission considers that the provisions of guaranteed access and genre protection are no longer necessary for mainstream sports and national news services to achieve these objectives.
In the future, the CRTC will consider opening other genres to competition by examining the following criteria:
- the economic health of existing services, based on profitability and revenues
- the popularity of existing services, based on brand recognition as well as audience and subscriber information
- the availability of programming
- the current diversity within a given genre, and
- the consequences that might result from the introduction of competition.
Increased programming flexibility
The Commission has simplified and streamlined the rules that apply to pay and specialty services. These services will now be able to draw programming from all program categories. However, the Commission has set limits on certain categories to prevent a service from transforming itself and competing directly with another service. During each broadcast month, no more than 10% of their programming may be drawn from the categories of theatrical feature films, professional sports and music, among others.
3. Conventional television broadcasters
Distant signals
Time-shifting is a popular feature that allows satellite and digital cable subscribers to watch local television stations that originate in other provinces. The Commission recognizes that conventional broadcasters should be compensated for the retransmission of these signals. Broadcasters will be permitted to negotiate payments in order to recover the value of their signals and the programming rights they have acquired.
Moreover, the CRTC will retain the existing fund that compensates independently owned broadcasters in small markets for the damages resulting from the distant signals carried by direct-to-home satellite companies.
Local Programming Improvement Fund
The Commission will establish a Local Programming Improvement Fund to support local programming in smaller markets. Over the last decade, stations in markets with a population of less than one million, and particularly in French-language markets, have invested fewer funds in this type of programming. However, public and private stations have an important role to play in enriching the diversity of information and editorial voices in Canada.
The Fund is designed to:
- ensure that viewers in smaller Canadian markets continue to receive a diversity of local programming, and particularly local news programming
- improve the quality and diversity of local programming broadcast in these markets, and
- ensure that viewers in French-language markets are not disadvantaged by the smaller size of these markets.
Individual public and private local stations will be eligible for funding. Stations must use these funds to increase their current expenditures on local programming, which should result in expanded news bureaus and more original local news stories.
The Canadian Association of Broadcasters has been asked to propose a plan for the administration of the Fund, in which it would suggest a third-party administrator. Following its third year of operation, the Commission will evaluate whether the Fund is fulfilling its objectives, and will decide whether it should be maintained, modified or discontinued.
The criteria the CRTC will use in its assessment could include:
- the number of original local news stories broadcast in each year of the Local Programming Improvement Fund's operation, compared to the number of original stories broadcast during the three years prior to the Fund's implementation
- evidence of increased resources allocated to local news gathering
- evidence of the increased diversity of local programming, and
- other quantifiable evidence of audience satisfaction, such as public-opinion polling.
Community broadcasting
The Commission has determined that broadcasting distribution companies must continue to offer community channels with their basic service packages. In addition, the CRTC will undertake a comprehensive review of its policies relating to community broadcasting in 2009-2010. At that time, it will consider whether community television broadcasters should have access to the Local Programming Improvement Fund, as well as other issues related to community broadcasting that were raised during this proceeding.
