Canadian Heritage Committee on Oct. 30th, 2006

[The Chair, Conservative, Gary Schellenberger]

Seeing the clock at 3:30, I will open the meeting of the Standing Committee on Canadian Heritage, meeting number 19.

Today, pursuant to Standing Order 108(2), we are studying the Canadian Radio-television and Communications Commission, CRTC, mandate and priorities.

I will welcome today the witnesses here from CRTC. Chairman Dalfen, I would like you to introduce the people with you and please make your presentation. Thank you.

[Charles Dalfen, Chairman, Canadian Radio-television and Telecommunications Commission]

Thank you, and good afternoon, Mr. Chairman and committee members.

My name's Charles Dalfen and I am chairman of the Canadian Radio-television and Telecommunications Commission. With me today from the CRTC are Diane Rhéaume, secretary general, and Scott Hutton, acting associate executive director of broadcasting.

Good afternoon, Mr. Chairman and members of the Committee. I'm very pleased to be with you to respond to your request for an overview of the CRTC's mandate and priorities. I'll get right to that now, and when I've concluded, my colleagues and I would welcome any questions you may have.

With respect to the operation of the CRTC and its mandate, the basic aspects are the following. The CRTC is an independent public authority; it regulates and supervises Canadian broadcasting and telecommunications. It does so within the framework of authority granted by Parliament through the CRTC Act, the Broadcasting Act, and the Telecommunications Act. The commission reports to Parliament through the Minister of Canadian Heritage.

While the CRTC's mandate covers telecommunications as well as broadcasting, I will focus my remarks today on broadcasting, as it is that part of our work that is the primary focus of your committee.

Among the main tasks that the commission undertakes are the following: issuing, renewing, and amending licences for broadcasting undertakings; reviewing changes of ownership and control in the industry; developing and implementing regulations and policies to meet the objectives of the Broadcasting Act; resolving disputes and complaints that arise under our legislation and regulations; ensuring compliance with our legislation and regulations; and approving the distribution of foreign broadcasting services in Canada and issuing reports annually on the status of the different sectors of the industry.

The commission is a quasi-judicial tribunal and so in carrying out its responsibilities, it follows the rules of natural justice to ensure our decision-making is characterized by access, transparency, and openness to input from the public. Guiding all our work are the objectives of the broadcasting policy for Canada and the regulatory policy set out in sections 3 and 5 of the Broadcasting Act. We measure every decision and action the CRTC takes against the likelihood that it will serve these objectives as set out by Parliament.

The gist of these policy objectives is that our broadcasting system should be, and should remain, distinctively Canadian. That's easily said, but those few words describe a mandate that is as challenging as it is important. The act makes it clear that keeping the broadcasting system distinctly Canadian is about, among other things, reserving a special place on radio and television for Canadian content, programs produced by and about Canadians that showcase the talents of Canadian creators and performers and that tell stories and provide information to Canadians about our country and ourselves;

encouraging programming that reflects our Anglophone and Francophone roots, the place of Aboriginal people in our society, and the multicultural, multi-ethnic reality of 21st century Canada;

and encouraging programming that respects Canadian values with respect to matters such as equality and human rights.

In setting those objectives, Parliament recognized that protecting the uniquely Canadian nature of our broadcasting system will occur under constantly changing circumstances and that a regulatory approach must recognize this. For example, the act says that our broadcasting system should be adaptable to scientific and technological change and that the commission should regulate broadcasting in a way that does not inhibit the development of information technologies.

Often these cultural and technological objectives operate comfortably, side by side. But there are also times when they are, or may appear to be, in conflict. You can go right back to the beginning of broadcasting in Canada -- long before the current legislation was in place -- to find evidence of this. When radio came along, there were concerns, for example, that it would mean the death of live musical performances, and that its borderless nature would be a threat to Canadian culture.

Waves of succeeding technological innovation -- over-the-air television, cable TV, satellite broadcasting -- have all raised similar kinds of concerns. But the gloomy predictions have not materialized. In every case, we have been able to leverage technology to the advantage of Canada and Canadians.

We've adapted our regulations in a way that has allowed new technologies to flourish--giving Canadians one of the most advanced broadcasting systems in the world--while also remaining true to the core values written into the legislation and preserving the uniquely Canadian nature of our system.

I want to use this same thought as a way to move to the second area in which you have asked us to engage with you today, and that is the commission's current priorities.

Many of our current priorities in broadcasting are related to regulating in a way that embraces change without compromising fundamental principles that Parliament identified in our legislation. The change that we must embrace is not only technological but also demographic. Ethnic and racial minorities now account for at least one-third of the population of Vancouver and Montreal, and more than half of the population of Toronto. Cities such as Edmonton, Saskatoon, Regina, Winnipeg, and Ottawa are home to growing aboriginal populations.

The Broadcasting Act says that our broadcasting system should reflect Canadian reality back to Canadians; if so, then our regulatory approach must be sensitive to shifts in the composition of our population.

All of these technological and social factors are very much on our minds as we work currently on the first priority that I want to draw to your attention, which is our review of commercial radio policy that was announced in January.

A primary concern in the review is to ensure that regulation stays up to date with changing circumstances and continues to create conditions for a strong commercial radio sector, in both official languages, that is capable of contributing to the policy objectives set out in the act. We want to be sure that we are regulating in a way that gives Canadians a commercial radio sector that can meet its obligations related to, among other things, Canadian content, cultural diversity, local news and information, and technological sophistication. We expect to complete the commercial radio review by the end of this calendar year.

Six months after we announced the commercial radio review, we launched a similar exercise for over-the-air, or conventional, commercial television. Two important factors converged to affect the timing of this review. First was our recognition that the same technological and demographic factors that are affecting radio broadcasters are also having a significant impact on conventional TV broadcasters. The emergence of new viewing platforms for television--iPods and cellphones, for example--and the rapidly growing market share of pay and specialty TV services are forcing conventional broadcasters to rethink their business model and causing the commission to rethink some of its approaches to regulation.

So, too, are new forms of television advertising that are made possible by digital technology. As well, we know that demand from Canadian viewers for high-definition television is growing, but the supply of HD programming from conventional broadcasters is lagging.

And on top of these issues, you have the changing composition of Canadian society that is putting new demands on conventional, commercial television broadcasters in terms of satisfying viewer demand and meeting their obligations under the Act.

Amidst this flux in the market, the major conventional broadcasters have their licences coming up for renewal. Rather than deal with these issues, which affect all conventional broadcasters, through a series of one-off licence renewal hearings, we felt it would make more sense to clear the air prior to the renewals by reviewing our regulations on a selected set of crosscutting themes. Once the review is completed, the commission, the conventional broadcasters, and other interested parties could then, from a clear policy basis, approach the question of how licensees could best meet their obligations under the act.

We have received written comments for the conventional television review, and will hold public hearings at the end of November. The review has four objectives.

To ensure that conventional television broadcasters contribute in the most effective way to the production, acquisition and broadcast of high-quality Canadian programming that attracts increasing numbers of viewers.

to give conventional broadcasters greater clarity regarding the regulations that affect costs and revenues, so that they're in a position to propose maximum contributions to the production, acquisition, and broadcast of high-quality Canadian programming; to examine the most effective means of delivering high-definition television to Canadians; to examine the current and future economic status of small-market television, a sector that has felt a particularly strong impact from the changes in the broadcasting environment over the past decade and more.

We will also examine whether or not the quantity and quality of closed-caption programming is meeting the needs of the deaf and the hearing impaired.

We expect to complete this selective review of conventional broadcasting my mid-2007. Simultaneously, we are responding to a request from the Governor in Council, under section 15 of the Broadcasting Act, to prepare a report examining the future environment facing the entire Canadian broadcasting system. Section 15, as you are probably aware, provides for the Governor in Council to ask the commission to hold hearings or prepare reports on any matter within its jurisdiction under the act.

For this report, the government has indicated that it is especially interested in the likely impact of new audiovisual technologies on the Canadian broadcasting system. We've been asked to focus on how Canada can continue to be a world leader in the development and use of communications technology, while also having a broadcasting system that supports cultural choices and offers broad public access to a diverse range of programming.

This report, which must be provided to the government by December 14 of this year, obviously has issues in common with our selective review of conventional television, and I expect that each exercise will benefit from the other.

Another priority I want to mention has to do with pay and specialty services. The share of viewing for these services has grown rapidly, to the point at which it is now roughly equal to the share of viewing of conventional television. The increasing importance of pay and specialty suggests that we should examine whether our current regulatory approach remains well tuned to the objectives of the Broadcasting Act, so we plan to undertake a review of our policies with respect to these services in the upcoming fiscal year.

Finally, I would note that following the review of pay and specialty services, we are planning to undertake a review of our regulations concerning broadcast distribution undertakings.

I trust that this is giving a sense of the key tasks facing the commission, Mr. Chairman, of the broadcasting side of the house over the short to medium term. I haven't gone into any of these matters in great detail, but I would be happy to do so in response to any questions you might have.

Before closing, I want to note that it's all too easy to take our broadcasting system for granted, precisely because it works so well. We have the capacity to meet the challenge of Canada's vast land mass and dispersed population.

We have an immense variety of programming in both official languages and may other languages as well.

We have a regulatory framework that supports Canadian values and culture, and we have a level of technological sophistication to rival that of any other broadcasting system in the world. This kind of achievement doesn't happen on its own. It results from the strength of our broadcasting industry, along with decisions taken by Parliament and successive governments, and the work of the commission. Although there's no room for complacency, there's also no harm in stopping for a moment to recognize that there is much of which we can be proud.

My colleagues and I are ready and pleased now to address any matters you would like to raise. Thank you very much. Merci beaucoup.

[The Chair, Conservative, Gary Schellenberger]

Thank you.

Before we go to questions, I would let you know that our questioning will go to about quarter after five, because we do have another issue to deal with. This is to let everyone know we will start that meeting at 5:15 p.m.

Mr. Simms.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

Mr. Dalfen, it's good to see you again in this session, as it was in the last as well.

I have a very quick question off the top and I'm hoping you can pare it down for me, because time is of the essence. Do you feel that the CRTC is there for the industry stakeholders or for the consumer?

[Charles Dalfen]

The CRTC is there to give effect to the objects of the Broadcasting Act, which are to benefit Canadian consumers, ultimately. In doing so, a healthy sector is required. In effect, there are stakeholders in the system, and their interests need to be balanced under the objectives of the act. I hope that's responsive.

The answer is, ultimately, it has to be for the consumers. It has to be for Canadians, both as consumers and as citizens, because they have to be informed, and the act stipulates that they ought to be well informed.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

Technology seems to be speeding up at an impressive rate, exponentially, in the past five or six years. Now, in light of that study, at what point do you think you have gone too far and you're micromanaging?

[Charles Dalfen]

I suppose it's in the eye of the beholder.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

Let's say you're the beholder in this case.

[Charles Dalfen]

From my perspective, no. The answer to your question is an easy no. It's always a balancing act. We always have to calibrate the degree of involvement you maintain, but I think we maintain the appropriate balance. But you'd expect me to say that.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

Good point.

I want to bring up an example of one of the decisions made in the past little while with regard to satellite radio. I want to talk about Canadian content rules. I'll use an example so we can pare it down to that particular example, and that is satellite radio

. Let's say 30% is our Canadian content number. You have chosen to do it so certain channels are full Canadian content and certain channels are not, Correct? Why would you go that way instead of saying, like conventional radio, each individual station, each individual channel, has to have a 30% Canadian content? What I'm looking for is, why do we need this threshold of Canadian content?

[Charles Dalfen]

The quick answer is that it isn't conventional radio. It's true there is a 35% content level on a certain category of the most popular kinds of conventional radio, but even with unconventional radio, there are different levels: for ethnic services, 7%; for specialized formats, 10%; for popular formats, 35%. When you get into specialty services, content levels vary tremendously right across the map. In television, it's 50% in prime time, 60% over the day.

The commission tries to maximize the level of Canadian content consistent with the nature of the medium at the time, the nature of availability of product at the time, the nature of the circumstances of delivery at the time. In the case of satellite radio, where we were faced with propositions before us, not the ideal world versus what we chose, but rather the realities we were facing, we selected levels we thought maximized Canadian content--and French language content, for that matter--within the context of that medium, in those circumstances, at that time.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

Is it fair to say you're hands-off when it comes to Internet content?

[Charles Dalfen]

We have so far chosen to exempt broadcast media that are accessed and delivered via the Internet, that's correct.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

Why is that?

[Charles Dalfen]

Simply stated, it is too early in its growth and development. We didn't want to be sending wrong economic signals through premature regulations when it wasn't yet clear what we were regulating. The commission found there were manifestations of Canadian content on the Internet. We wanted that to be encouraged in as free an environment as possible, and that continues to be the case today. We do find Canadian content, both on the Internet and on mobile television.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

Don't you think by waiting for the economics to play out to a certain degree, you make a decision then puts you behind the curve when it comes to the peak of activity?

[Charles Dalfen]

I don't think so. The impact on conventional broadcasting of new media so far is modest enough that the policy remains correct. We will continue to monitor it, and we will be notified well in advance by conventional broadcasters if they begin to see impacts starting to affect their viewership, listenership, and revenues. At this point we're still comfortable letting it operate.

As you know, Parliament set two tools for us. It set the licensing tool and the exemption tool, and we can't exempt anything the way we exempt broadcasting under the Internet unless we believe that will contribute to the objectives of the Broadcasting Act. We have to do both within the objectives Parliament set, and we came to the view that so far we continue to be comfortable with exemption as the route for dealing with broadcasting via the Internet.

[The Chair, Conservative, Gary Schellenberger]

Scott, you're time is pretty well up. We've gone a little over time.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

Really? We were having fun.

[The Chair, Conservative, Gary Schellenberger]

We'll give you another opportunity later.

Mr. Kotto.

[Maka Kotto, Bloc, Saint-Lambert, QC]

Thank you, Mr. Chairman.

Good afternoon, ladies and gentlemen.

I would like to explore the question raised by my colleague from a different perspective.

Do you believe that the CRTC has adapted, and is adapting well to the introduction of new technologies? I am thinking, in particular, of satellite radio, that was discussed earlier, of Internet radio, IP telephony, cellular television, and many more.

Is the CRTC able to see these new technologies coming on stream before they actually are marketed, so as to provide advice to the government and allow it to develop the appropriate policies?

[Charles Dalfen]

I'm sure it won't surprise you to hear me say, once again, that the answer is yes. I believe we are prepared. Someone once said that the future is the most difficult thing to predict, and that is absolutely correct. We do not have a crystal ball; but the fact is that no one does. You always have to react as quickly as possible and make decisions by anticipating developments, be they technological or otherwise. And that is what we are trying to do. Are we successful at it? Well, that is not up to us to say. In any case, we are always aware of that obligation, because the Act clearly states that this is what we must do.

[Maka Kotto, Bloc, Saint-Lambert, QC]

I was saying to a friend recently that in the auto industry, for example, they plan future product generations in advance -- always with a view to supplying the market.

Nowadays, however, we are concerned with environmental issues. The vehicles to be marketed over the coming period will inevitably have to be adapted to reflect those environmental constraints. In a way, some people have [Inaudible--Editor] to examine these kinds of things.

At the CRTC, do you have the financial resources you need to take this kind of initiative?

[Charles Dalfen]

Well, the fact is that we have a great many things on the go. Any additional resources that could be made available to allow us to review these matters would be graciously accepted by the CRTC.

We have just reorganized the structure of the CRTC. In addition to a branch with responsibility for broadcasting, and another, for telecommunications, we now have a third which will allow the two others to access technological, economic and other types of expertise, and this branch will be able to serve what we call both sides of the store.

We have noted that in Canada, some companies integrate both areas -- telecommunications and broadcasting. That is an ever-growing phenomenon, and we want to be ready. We are currently hiring experienced staff to work in this third branch. Also, we will have to hire consultants from time to time, as we do normally.

We can also count on the contribution of broadcasters and intervenors to provide us with both technological and economic facts and data that allow us to prepare. It is in their interests to do so, so that we are in the vanguard as concerns these matters. Do we always succeed? Once again, we are not in a position to judge that.

[Maka Kotto, Bloc, Saint-Lambert, QC]

Does the Broadcasting Act, as it is currently worded, impose restrictions of any kind, be they positive, negative, or both at the same time?

I know you are anxious to preserve the cultural sovereignty of both Canada and Quebec. To what extent would an adjustment or review of the legislation help you to carry out your duties?