Notes for an address
by Konrad von Finckenstein, Q.C.
Chairman, Canadian Radio-television and Telecommunications Commission
to the Banff World Television Festival
Banff, Alberta
June 8, 2009
(This speech may have been altered during delivery)
Thank you very much.
The Banff Festival is Canada’s premier meeting place for stakeholders in the television industry, and I’m delighted to be here with you.
Last week, we released the Commission's 2009 New Media Policy. The new media are going to have a greater and greater effect on the whole broadcasting industry. This raises major issues for us as the regulator, for the distributors and broadcasters, and for the production and creative sectors. So the New Media Policy will be my main subject today.
But I can't pass over the fact that we're living through hard times in the television industry, and hard times everywhere. The Commission has responded with some quick changes in our plan of action.
So before I get into the New Media Policy, I'd like to spend a few minutes on these recent difficulties.
Problems in conventional TV
We are right in the middle of one of the most challenging years in the history of Canadian broadcasting. The conventional television sector is in trouble. It has been the economic cornerstone of the industry ever since TV broadcasting began in Canada 57 years ago. It has attracted the large audiences and revenues that have supported Canadian programming. It has made possible our achievements in the key cultural genres like drama and documentary.
But today conventional TV is losing a lot of its audience to the pay and specialty channels. With these departed viewers goes advertising, along with revenues and profits.
So the conventional television business model can no longer meet the expectations that we have had for it in the past.
At the same time, the world financial crisis has hit the whole broadcasting industry very hard, in Canada and everywhere.
The situation is not only difficult but also unpredictable. It's hard to find a solid basis for making long-term plans.
Licence renewals
That's why we changed the focus of the recent hearings on licence renewals for the private conventional networks. Given the current volatile conditions, the usual seven-year renewal terms would have made no sense. Last month we granted renewals of one year for the major English networks, and two years for TVA. This will give these broadcasters some flexibility in this period of economic turmoil.
Third-language and other broadcasters who are not affected by the same issues were granted 6- or 7-year renewals.
Canadian programming
During those hearings, the issue of Canadian programming expenditures was on the table. That is of special interest to many of you here. It was pointed out that conventional broadcasters are spending increasing amounts on non-Canadian content.
We looked at the idea of requiring a one-to-one ratio between expenditure on Canadian and non-Canadian programming for English-language conventional broadcasters. But we found that it would not be feasible to impose that requirement for the upcoming broadcast year. Programming commitments had already been made.
However, we intend to make sure, through regulation, that an appropriate proportion of the financial resources of the English-language conventional broadcasters is devoted to Canadian programming in the years to come.
The summer process: Structural reform
That is one of the issues that we will address in the policy proceeding that we will launch this summer, leading up to a public hearing in October.
I went to the House of Commons on May 25 to appear before the Standing Committee on Canadian Heritage. I identified for the Committee the seven key areas that we will be looking at in our policy proceeding. These are the areas that will require structural reform.
- Group-based licensing. This will allow us to harmonize the rules and obligations governing all the conventional, pay and specialty services controlled by an ownership group. We will begin licence hearings on this new basis in April of next year.
- A meaningful commitment of energy and resources by conventional broadcasters to the core elements of their service—local news, local programming and programs of national interest.
- Harmonization of local programming obligations, which should be related to the size of the market.
- Clarified funding to enable the broadcasters to refocus on their core services. Rather than resorting to fee-for-carriage, we will seek to provide revenue support for conventional television stations in the following ways:
- investigating alternative support mechanisms for local programming
- protecting the integrity of Canadian broadcaster signals, and
- exploring mechanisms for negotiating the fair market value of these signals, backed up if necessary by CRTC arbitration.
- Firm commitments by broadcasters regarding local news, local programming and programs of national interest. This would be their side of the bargain in exchange for negotiated funding and harmonized obligations.
- Restraint on foreign programming and/or commitments to Canadian program spending in order to live up to the objectives of the Broadcasting Act.
- Finally, we must resolve the difficulties in the transition from analog to digital television. The answer would appear to be a hybrid solution, using over-the-air digital signals in major centres, and cable or satellite in non-metropolitan areas. However, certain details still need to be worked out, including access, cost and entitlement.
So those are the key issues for the proceeding that begins this summer.
A structural and systemic reform is necessary to ensure the survival of conventional television in this country. We're counting on the participation of all stakeholders to help us in this process.
2009 New Media Policy
I would now like to talk about the 2009 New Media Policy that we announced last week.
The arrival of the new media is a major force in transforming our world of broadcasting. In 2007, we launched our New Media Project Initiative to examine all the issues in cultural, economic and technological terms. It released its report in May of last year.
Since then, we have held hearings and received submissions on a number of regulatory issues concerning broadcasting in new media. Last week's policy announcement was the result.
Continuation of exemption order
Basically, we've decided to continue our hands-off policy. We are maintaining the exemption of new media broadcasting undertakings from the licensing requirement.
This exemption originated in our 1999 New Media Policy. The Commission determined at that time that the new media did provide broadcasting services. But they posed no threat to the ability of traditional broadcasters to carry out their obligations. They would not be able to lure away TV audiences until high-quality video could be delivered over the Internet.
The Commission also believed that freedom from regulation would encourage innovation in exploiting the new opportunities offered by Internet technology.
In the ten years since then, we have seen great advances. Residential broadband service is now available to 93% of households across the country, and has been adopted by 48%. Canadians are spending more time accessing broadcasting content over the Internet and on mobile devices. And higher-quality video is now available on these platforms.
Nevertheless, we do not see new media today as a threat to the audience numbers of licensed broadcasters. In fact, licensees are using new media to promote their services and offer their programming online. We believe they have little to fear and a lot to gain by incorporating new platforms and formats into their business models.
Many people have urged us to transpose traditional broadcasting-style regulation in the new media environment. But we have grave doubts that this could be done, and we have seen no evidence to justify such a move. We believe that any intervention at this point would only hinder innovation.
We have simplified things by combining our two exemption orders into one. It exempts from licensing all undertakings providing audio or video programming over the Internet or through mobile devices using point-to-point technology.
We expect to review our exemption order decision within five years, and the review would be subject to our normal public process.
We do regard new media as part of our Canadian broadcasting system: specifically, those elements of new media that deliver high-quality professionally produced content. However, let me make this clear: We have no interest as a regulator in online material created by individual Canadians in a personal capacity.
As far as professionally produced content is concerned, there are a number of issues that deserve our attention and the attention of stakeholders in the broadcasting industry. These include digital rights, measurement and funding.
Digital rights: Need for terms of trade agreements
If new media are to succeed as a broadcasting platform, agreements will have to be reached over the ownership of new-media broadcast rights—and how rights owners will be compensated for the broadcast of their material.
Disputes between producers and broadcasters over digital rights may be an obstacle to the distribution of Canadian content on multiple platforms.
As that distribution becomes more important, broadcasters want to exert greater control over the various rights. Independent producers may feel disadvantaged in negotiations. They are reluctant to give up digital rights to broadcasters for little or no additional compensation. And broadcasters with little or no investment in these rights will have little incentive to exploit them.
The Commission wants to see original Canadian content distributed across various digital platforms. We want a Canadian presence in the new media environment, and we want to see Canadians having access to it.
Therefore, the Commission expects broadcasters and producers to arrive at fair and equitable terms of trade agreements that will resolve these issues. This will bring stability and clarity to the industry, which will be good for all players and for the Canadian public.
Measurement
During our hearings, parties frequently raised the question of measurement. How shall we measure the availability of Canadian content on new media platforms? How shall we determine how many Canadians have been accessing it?
There are limitations to the tools currently available for measuring both the availability of content and consumers' use of it. However, the Commission believes that it's essential to get the best data we can in order to support new media broadcasting policy.
We will therefore introduce a requirement for new media broadcasting undertakings to report certain information. This may include measurement of their content offerings, usage by consumers, and the associated revenues and expenditures. The monitoring process will give us the material we'll need to examine when our exemption order comes up for review. We will be initiating a public proceeding on these proposed reporting requirements.
Funding
Funding, of course, is always an issue. Where will the money come from to support Canadian content in the new media?
We're encouraged by the creation of the Canada Media Fund, which has been established by the government as the successor to the Canadian Television Fund and the Canada New Media Fund. The CMF will fund Canadian content aimed at multiple platforms. We see this as recognition that the broadcasting environment is evolving past the traditional TV screen.
New media projects will also continue to be supported through funds such as the Bell Broadcast and New Media Fund and the Quebecor Fund. This too is encouraging.
Some parties on the creative and production side have argued that Internet service providers (ISPs), whether wireline or wireless, are distributors of broadcasting content, and should therefore be required to make contributions to a new fund for the creation and exhibition of Canadian new media programming.
The Commission notes that in general, the availability of Canadian content is increasing, stakeholders are actively participating and business models are being developed in this environment. We therefore see no justification for such a fund.
Reference: Status of ISPs
However, this debate raises an important question under the Broadcasting Act: Do the ISPs have the status of broadcasting undertakings when they provide access to broadcasting content?
The answer will help determine whether or not these service providers will be subject to our revised exemption order, including the reporting requirements.
More broadly, it will determine the role of the CRTC when contemplating a new media broadcasting policy in the future.
During our hearings we received representations prepared by two distinguished law firms. One of these briefs argued with great conviction that an Internet service provider should be considered a broadcasting undertaking. The other argued with equal conviction that it should be considered a telecommunications carrier.
We need clarity on this issue. It is a legal question involving provisions of both the Broadcasting Act and the Telecommunications Act. Therefore, we intend to find the answer through a reference to the Federal Court of Appeal—a procedure that will allow all stakeholders to participate. We will be initiating this reference in the near future.
National digital strategy
Our 2009 New Media Policy document ends with a call for a national digital strategy, and I would like to conclude today by repeating that call and its underlining importance.
The definitions, distinctions, boundaries and rules that we have relied on in the past are less and less useful to us in this digital century. All our major forms of communications are converging into a common stream of bits and bytes. This digital stream runs through any number of key areas: broadcasting, telecom, new media, copyright, privacy, taxation policy, spectrum management, culture and national identity, cybercrime, digital archiving of cultural works, and on and on.
Several parties who made submissions to us, including the National Film Board, suggested that the Government of Canada pursue a national digital strategy.
Other countries have already taken this approach:
- Digital Britain
- Digital France 2012
- New Zealand's Digital Strategy 2.0
- Germany's iD2010, and
- Australia's Digital Economy Future Directions Paper.
The National Film Board suggested that the impact of the digital revolution could be comparable to that of the Industrial Revolution 200 years ago—and I agree.
Canada urgently needs a holistic approach to meet the challenges that face us and take advantage of the opportunities. The Commission fully endorses the proposal for a comprehensive, government-wide examination, culminating in a national digital strategy.
Everybody understands that no advanced country today can survive and prosper without clear national strategies in key sectors such as the economy, health care and the environment. I firmly believe that a national digital strategy is also essential to the future of Canada. Other countries have acted already, and we must not fall behind.
I hope you will join me in becoming advocates for the development of such a strategy. I know that you in the Canadian television industry will have a lot to say.
Thank you very much.
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