Evidence of meeting #30 for Canadian Heritage in the 40th Parliament, 3rd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was broadcasters.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Konrad W. von Finckenstein  Chairman, Canadian Radio-television and Telecommunications Commission
Rita Cugini  Acting Vice-Chair, Broadcasting, Canadian Radio-television and Telecommunications Commission
Scott Hutton  Executive Director, Broadcasting, Canadian Radio-television and Telecommunications Commission
Suzanne Gouin  President and Chief Executive Officer, TV5 Québec Canada, Independent Broadcasters Group
Martha Fusca  President, Stornoway Communications
Bill Roberts  President and Chief Executive Officer, ZoomerMedia Limited, Television Division, Independent Broadcasters Group
Mike Keller  Vice-President, Industry Affairs, Newcap Broadcasting (Jim Pattison Group), Newcap Inc.
Monique Lafontaine  Vice-President, Regulatory Affairs, ZoomerMedia Limited, Independent Broadcasters Group
Joel Fortune  Barrister and Solicitor, Joel R Fortune Professional Corporation, Independent Broadcasters Group

3:30 p.m.

Conservative

The Chair Conservative Michael Chong

Welcome to the 30th meeting of the Standing Committee on Canadian Heritage this Thursday, November 18, 2010.

We are meeting today pursuant to Standing Order 108(2) to resume our study of the impacts of private television ownership changes and the move towards new viewing platforms.

In front of us today we have representatives from the Canadian Radio-television and Telecommunications Commission. We have Mr. von Finckenstein, the chairman; Madam Cugini, the acting vice-chair of broadcasting; and Mr. Hutton, the executive director of broadcasting.

Welcome to you. We'll begin with an opening statement.

3:30 p.m.

Konrad W. von Finckenstein Chairman, Canadian Radio-television and Telecommunications Commission

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?

3:35 p.m.

Rita Cugini Acting Vice-Chair, Broadcasting, Canadian Radio-television and Telecommunications Commission

Thank you, Konrad.

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.

3:40 p.m.

Chairman, Canadian Radio-television and Telecommunications Commission

Konrad W. von Finckenstein

In conclusion, Mr. Chairman, our challenge as regulator is a fascinating one. We aim to interfere as little as possible in the marketplace. At the same time, we're challenged with a very important mandate: fostering the cultural and social objectives of the Broadcasting Act.

In a world that could hardly have been imagined the last time the act was amended nearly 20 years ago, the new digital world, of which broadcasting is only one part, is a world driven by the consumer. In such a world, the old top-down models are increasingly outdated. That includes the old models of regulation. To regulate by controlling access to the airwaves is yesterday's concept. Tomorrow's concept has yet to emerge.

Thank you for giving us the opportunity to express our views. We'd be pleased to answer any questions.

3:40 p.m.

Conservative

The Chair Conservative Michael Chong

Thank you, Mr. von Finckenstein.

Mr. Rodriguez.

3:40 p.m.

Liberal

Pablo Rodriguez Liberal Honoré-Mercier, QC

Thank you very much, Mr. Chairman.

Ladies and gentlemen, good afternoon and welcome.

The people who represent small independent broadcasters, and whom we will be hearing from after you, are telling us that they are going through very difficult times, in particular because of vertical integration and also because of CRTC policies. They find the current regulatory and legislative environment to be a difficult one, as far as they are concerned.

Do you think they are wrong about that?

3:40 p.m.

Chairman, Canadian Radio-television and Telecommunications Commission

Konrad W. von Finckenstein

Of course, it is difficult to be a small independent entity when there are giants operating in a market. As we pointed out, we have rules in place to protect these small entities and ensure that the giants don't take advantage of policies and programs to the detriment of small companies. In order to survive, they obviously have to be original and set themselves apart from the others. They have to convince the distributor to accept their programming and broadcast it over their airwaves. That was the problem, and it is probably even more of a problem now, with more market concentration.

3:40 p.m.

Liberal

Pablo Rodriguez Liberal Honoré-Mercier, QC

If they're having trouble surviving, in other words, it's because they are not original and creative enough, and not because of the current rules or integration. They say the ball is in your court but your response is to place the burden on their shoulders, saying that if they are creative and innovative, the current environment will be a favourable one for them and they will survive. Is that what you're saying?

3:40 p.m.

Chairman, Canadian Radio-television and Telecommunications Commission

Konrad W. von Finckenstein

No, I'm saying that it has always been that way. In order for small programmers to be competitive, they must set themselves apart from the others through their effectiveness and originality. Nowadays there are large fully integrated companies. Naturally, a small programmer wants to secure as much broadcast time as possible for his product. The competition is tougher now, but that is perfectly normal; it is just the way the competitive environment is evolving.

3:45 p.m.

Liberal

Pablo Rodriguez Liberal Honoré-Mercier, QC

So, you see no need to change the regulations.

3:45 p.m.

Chairman, Canadian Radio-television and Telecommunications Commission

Konrad W. von Finckenstein

Based on what I can see, no. But we are not absolutely certain of that. We want to see what the consequences of this consolidation are. For that reason, we have decided that we will be holding hearings in May on that very subject, to ensure that we have all the tools we need to combat anti-competitive behaviour, if need be.

3:45 p.m.

Liberal

Pablo Rodriguez Liberal Honoré-Mercier, QC

There is reason to be concerned. I understand the reasons behind the Canwest, Bell and CTV transactions. They may be good business, but there is nevertheless reason to be concerned, because there is less and less diversity and more and more integration. There are more and more giants out there. There seems to be no end in sight. Ultimately, I guess the end will come when there is no one left. A lot of people see that as a threat.

Do you feel reassured? You are asking a lot of questions to which the answers will only come with time. Don't you think there is reason to be concerned about this vertical integration? I'm not so sure that it really gives the consumer that much choice.

3:45 p.m.

Chairman, Canadian Radio-television and Telecommunications Commission

Konrad W. von Finckenstein

The integration that we are seeing reflects the logical development of this industry, according to the players. The platforms clearly demonstrate that programming is moving. In order to secure more power and not be left behind, companies are trying to acquire all different kinds of platforms and programming.

These companies are facing a challenge because we are talking about a creative industry. How do you go about maintaining the creativity of your programming? How do you create programs that appeal to the public? As a general rule, any large company wants to sponsor things—activities of all kinds. But that can act as a counter to creativity. They have a major challenge ahead and we'll see how they deal with it.

We want to be sure that they don't abuse their power.

3:45 p.m.

Liberal

Pablo Rodriguez Liberal Honoré-Mercier, QC

And if they do--

3:45 p.m.

Chairman, Canadian Radio-television and Telecommunications Commission

Konrad W. von Finckenstein

They had an opportunity to abuse that power. That's why we weren't sure.

3:45 p.m.

Conservative

The Chair Conservative Michael Chong

Thank you, Mr. Rodriguez and Mr. von Finckenstein.

Ms. Lavallée, please.

November 18th, 2010 / 3:45 p.m.

Bloc

Carole Lavallée Bloc Saint-Bruno—Saint-Hubert, QC

Thank you very much.

Good afternoon. I am very pleased to welcome you to the Standing Committee on Canadian Heritage.

There have been a number of recent agreements and ownership changes. Some of these were identified in our documentation. Bell acquired CTV in September of 2010. Shaw bought Canwest and acquired control of the Global Television Network. All of that happened in 2010. Another example would be Quebecor, which bought Vidéotron in 2001. I have the feeling that vertical integration or convergence is playing out differently in Canada and Quebec. Am I wrong about that?

3:45 p.m.

Chairman, Canadian Radio-television and Telecommunications Commission

Konrad W. von Finckenstein

No, I believe Quebec is further advanced. There you have one large company that is practically integrated—Quebecor—and which has been operating for a number of years already. In the English-speaking world, convergence and vertical integration began last year. It is a new phenomenon, whereas in Quebec, it has been around for several years now.

3:45 p.m.

Bloc

Carole Lavallée Bloc Saint-Bruno—Saint-Hubert, QC

In that case, is the Quebec example a good model? Given the challenges or issues facing Canadian broadcasters, should they be looking at what has been done in Quebec? It isn't a perfect model—quite the contrary. I know there are a lot of problems, but at the same time, there is a certain balance that has been achieved. I'm thinking of the consumer. Things are not perfect, and I'm well aware of that.

3:50 p.m.

Chairman, Canadian Radio-television and Telecommunications Commission

Konrad W. von Finckenstein

We'll see; that may be the case or it may not. As I said earlier, we are exercising caution. We will be holding our hearings in June. Everyone will have an opportunity to make a presentation so that we can really flesh out the issues.

This is the type of concentration we are seeing now. In Quebec, for example, Quebecor will be moving into the wireless phone market—the toughest market. What does that mean? Will that send a negative signal from the perspective of the Broadcasting Act? We don't know, but we are exercising caution for that very reason. So far we have not observed any negative impact, but that does not mean that there isn't any or that there never will be. For that reason, we will be looking at this before a major issue arises.

3:50 p.m.

Bloc

Carole Lavallée Bloc Saint-Bruno—Saint-Hubert, QC

So I guess we invited you to appear too early.

3:50 p.m.

Voices

Ha, ha!

3:50 p.m.

Chairman, Canadian Radio-television and Telecommunications Commission

3:50 p.m.

Bloc

Carole Lavallée Bloc Saint-Bruno—Saint-Hubert, QC

In order to get answers to our questions, we will have to wait until you have completed your study. We will have to be monitoring the situation at the same time as you are.

3:50 p.m.

Chairman, Canadian Radio-television and Telecommunications Commission

Konrad W. von Finckenstein

I'd like to take this opportunity to thank you for participating in our hearing on broadcasters and satellites. Your contribution was very much appreciated.