Scott Hutton to the Standing Committee on Canadian Heritage

Speech

Ottawa, Ontario
May 2, 2019

Scott Hutton, Executive Director, Broadcasting
Canadian Radio-television and Telecommunications Commission

Check against delivery

Thank you, Madam Chair, for the invitation to discuss Harnessing Change: The Future of Programming Distribution in Canada. My name is Scott Hutton and I’m the Executive Director of Broadcasting for the Canadian Radio-television and Telecommunications Commission – the CRTC. Joining me today is my colleague Sheehan Carter, Director of Television Programming.

We are pleased to support the Committee’s important work on shaping the future of Canada’s media industries. As Committee members appreciate, the CRTC is an independent tribunal that monitors and oversees the communications industry in pursuit of the policy objectives set out in the Broadcasting Act and the Telecommunications Act, among others.

At the government’s request, the CRTC prepared the Harnessing Change report to examine to extent to which the future environment will support a vibrant domestic market for the creation and distribution of audiovisual programming. The report is intended to inform the government’s review of the communications legislation and the work of the Legislative Review Panel.

It describes the many benefits and opportunities generated by digital technologies. Canadians can now access more content from more places around the world than ever before. Innovative services succeed by catering to this demand. New digital tools make it easier to create high-quality audio and video content, and to make it available globally. The number of content buyers continues to increase, and data analytics make it possible to learn more than ever before about the relationships between content and audiences.

The report analyzes traditional and digital platforms in terms of their relative level of maturity and long-term sustainability. In the audio market, for instance, radio is mature and is adapting to shifts in consumer habits. Newer online services such as Spotify are experiencing rapid growth.

The market for video content is also fragmented. Conventional broadcast television is on the decline, while online services and user-uploaded content continue to attract growing numbers of subscribers. Mature distribution models such as cable, satellite and fibre services will face increased competition, but are making investments in new technology. As online markets and distribution models for both video and audio continue to change it will become increasingly difficult to divide them into clear-cut categories.

And while there are numerous opportunities for Canadians, the content they make and enjoy watching risks being lost among all the digital options at their fingertips. Moreover, as we watch less traditional television, there may be impacts on the underlying support systems used to create much of the video content we enjoy today, including news programming.

One of the report’s key findings is that video and audio streaming account for two-thirds of all online data traffic on North America’s fixed networks, and one-third of all data on mobile networks. We expect that these percentages will only continue to grow, as more Canadians have access to faster broadband service and larger mobile wireless data plans.

The preferences of people under the age of 35 give us a sense of what the future holds. This group is three times more likely than older Canadians to watch video online, for instance. And younger people are less likely to subscribe to traditional television services, such as cable and satellite. At the same time, streaming services such as Spotify and Netflix continue to draw greater numbers of subscribers both young and old.

Digital services are clearly on a growth trajectory and will play a more important role in the years ahead. It is important to keep in mind, however, that traditional services are mature businesses. Despite recent declines, they are popular with Canadians, and will continue to evolve and remain viable for the foreseeable future. The main area of concern are for services whose business models are declining. Conventional television, for instance, is facing considerable challenges and may not remain viable due to the erosion of advertising revenues.

These trends have serious implications – not only for Canada’s media industry, but on our regulatory and policy framework’s ability to meet its objectives. In essence, the current framework was designed for another time – a closed system of traditional broadcast services. It is not sufficiently adaptable to meet the challenges of an era marked by ready access to streamed content.

As the members of this Committee recognize, the CRTC and the report we’ve produced view these trends through a regulatory lens. Canada’s regulatory regime strives to achieve specific policy goals, such as to foster the production and accessibility of Canadian content, including news programming. Licensing is the principal mechanism used to achieve stated policy goals. Licences for most television service providers, for instance, require investments of prescribed percentages of revenues in the production of Canadian content.

Given these realities, the report considers four regulatory approaches: the status quo; deregulation; applying existing rules to digital players; and designing and implementing an entirely new approach. The report concludes that the first three are inadequate in light of current and emerging challenges. New tools and approaches are required to ensure a vibrant Canadian media-production industry – innovative tools and techniques that exploit the opportunities presented by current and emerging technologies and trends.

The process to design a more effective regulatory regime must begin by identifying clear policy goals. The Harnessing Change report proposes three:

  1. Foster both the production and promotion of Canadian content, including news programming. Moreover, in the digital age, discoverability is essential to success.
  2. Recognize that there are social and cultural responsibilities associated with operating in Canada. To ensure that Canadians benefit, and that all players can compete fairly and effectively, however, contributions should be equitable.
  3. Create a nimble and innovative regime that can readily adapt to change.

The last of these goals is particularly important over the long term. Just as those who designed Canada’s current regulatory regime could not have imagined today’s digitized world, we cannot foresee the changes that will arise in the future. We must have tools flexible enough to adapt to new realities.

The report concludes by describing a series of potential policy options – new mechanisms that could help achieve the stated goals. To be effective, the new policy requires legislative support, including the regulatory authorities needed to ensure compliance. This could include the authority to impose administrative monetary penalties in instances of non-compliance.

Ultimately, to ensure that the broadcasting industry continues to thrive, Canada must have a regulatory regime that encourages innovation and delivers the content that Canadians want.

While the Panel conducts its review, the CRTC continues to look forward and fulfill its mandate for the benefit of Canadians. Our current activities are focused on assisting the broadcasting system to adapt to the digital environment and develop new approaches and tools. These activities include a review of the policy for Indigenous broadcasting to ensure that Indigenous communities have access to content that reflects them as well as the tools to produce it.

As radio transforms itself in the digital environment, the CRTC will also review its commercial radio policy with the intention of developing renewed approaches that will more effectively support artists and content development, including news and information. Work is also underway to implement a digital monitoring system for radio and update the policy on Canadian programming expenditures in light of digital media. These are essential steps in improving the ways we monitor and understand how the digital environment is evolving so as to regulate as effectively as possible in the future.

In addition, we will soon initiate the process to renew the radio and television licences of the CBC and Radio-Canada. This will enable us to examine ways it can move forward in the digital environment while continuing to fulfill its mandate to Canadians.

We will do our best to answer the questions of Committee members. Thank you.

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