Canadian Heritage Committee on Dec. 7th, 2010

[Peter Murdoch, Vice-President, Media, Communications, Energy and Paperworkers Union of Canada]

Thank you, Mr. Chair.

My name is Peter Murdoch. I'm CEP's vice-president of media, and with me is Monica Auer, our legal counsel in this area.

CEP is Canada's largest media union. Thousands of CEP members work in broadcasting and telecommunications, and many hundreds of them cover and broadcast the news across Canada and are keenly interested in your work.

Our starting point is the fact that vertical integration is not new. As table 1 shows, the CRTC has allowed BDUs to control radio and TV stations for 30 years or more. Vertical integration matters, because it will affect news diversity and because Canadians and democracy rely on trustworthy and competitive news sources. The CRTC said that the benefits from these ownership structures were “significant and unequivocal”.

Have Canadians and news benefited from vertical integration? So far, programming employment, spending on local programs, and local broadcast hours have all dropped as ownership has concentrated. I refer you to the graphs in our submission. I think you'll find them interesting.

Could vertical integration strengthen our system? After all, BDUs now take in most of the revenues in broadcasting, while the TV programmers they own pay for most Canadian content. But since BDUs are accustomed to exceptional profits, they will fight any suggestion that they do more for Canadian programming. You have already heard Bell tell CTV that it must stand on its own two feet. The idea that more concentrated ownership would direct more resources to Canadian programming has been lost.

While vertical integration could benefit Canada, the CRTC has told you that its default position is to not regulate. It says that Canadians must prove the need for regulation. But since Parliament created the CRTC to regulate on Canadians' behalf, why should they now have to persuade the CRTC to serve their interests?

We have learned that the CRTC has spent $2.7 million on consultants and research since January 2007. Yet, as our table shows, it has not undertaken or commissioned any research on the impact of concentrated ownership, or on cross-media ownership, or on BDU ownership of programming services. It has not researched integration's impact on programming investment, and does not know how many broadcast news bureaus exist, or how many reporters work in broadcasting. It has not measured diversity in news or the impact of diversity of voices policy. So how can the CRTC or Canadians understand the impact of vertical integration? The CRTC won't even release the raw data needed to prove why or when regulation works. This is partly because it cannot. The CRTC recently destroyed most of its own data, from 1968 to 1990. Since 2007, it has opposed requests to access the data it still has.

As for other issues, such as foreign ownership, the CRTC does not track the percentage of voting shares or level of debt held by non-Canadians in Canadian broadcasting. Without research on the impact of increased foreign investment in broadcasting or telecommunications, what convinced the CRTC to recommend increased foreign ownership last spring? After telling Canadians to prove why regulation is needed, it turns out that the CRTC has never assessed the impact of its deregulation, or its own decision to stop regulating ads in over-the-air TV.

Why isn't the CRTC studying these questions? Perhaps it's because the current Broadcasting Act completely insulates the CRTC's policies and regulations from legal review. So instead of a professional, 21st century approach to communications policy, Canadians are getting regulation by guesswork. We know this is not what the government or you want. Its 2007 rules for regulating, that are attached here, emphasize requirements for empirical evidence when its agencies deregulate. We need evidence on deregulation, not only regulation.

This is why we strongly support your current study. It should direct the CRTC to adopt this evidence-based approach.Therefore, instead of asking that integration be dismantled or stopped, we recommend that Canada obtain research explaining the dynamics of ownership, and media content. We propose a creation of a national, independent policy research institute to undertake impartial, quantitative research on electronic media regulation and policy.

Our proposal would not cost taxpayers money. One-tenth of 1% of the billions coming from next year's spectrum auctions could fund this institute. Alternatively, ownership transactions could fund the research. You could recommend that the CRTC direct 1% of the benefits from the Bell-CTV deal to this institute.

This research should begin now. CEP would be very pleased to submit a formal proposal that would give communications regulations a solid, evidence-based foundation. Your committee could then turn to the study in two years to review Canada's communications laws and their possible merger. Mr. Del Mastro has raised this several times, and we support it.

To conclude, vertical integration has so far given Canadians a very poor return on their asset of broadcast spectrum. In our view, the regulatory balance has demonstrably tipped away from Canada's interests--without Parliament's informed consent and without your input.

The CRTC's role in assessing vertical integration must be to determine the facts, to weigh competing interests, but above all to put Canadians first. Restoring balance through effective, efficient, and evidence-based regulation will benefit Canadians, our national interest, and entrepreneurs.

I welcome your questions. Thank you.

[The Chair, Conservative, Michael Chong]

Thank you very much.

We'll have an opening statement now from the Canadian Media Guild.

[Marc-Philippe Laurin, President, CBC Branch, Canadian Media Guild]

Good afternoon, Mr. Chairman. Thank you for this invitation.

My name is Marc-Philippe Laurin. I am president of the CBC/Radio-Canada Branch of the Canadian Media Guild.

Our union represents 6,000 workers across Canada, including CBC/Radio-Canada's employees outside Quebec.

We also represent broadcast workers at TVOntario, TFO, the Aboriginal Peoples Television Network, Shaw Media, and ZoomerMedia.

Our members are committed to the future of public service broadcasting, and we're here today to urge the government and Parliament to be active partners in ensuring that Canadians have a healthy diversity of media voices as our industry continues to change.

The CMG would like to use the opportunity of this important study to make some proposals on what Parliament and the government can do to balance the various interests in our country's media system as the companies in the private element continue to consolidate.

With me is Karen Wirsig, communications coordinator of the Canadian Media Guild.

She is our director for advocacy, and she will continue this presentation and explain to you seven recommendations that we bring to you today.

[Karen Wirsig, Communications Coordinator, Canadian Media Guild]

Thank you.

I'll just go through our seven recommendations very quickly because we don't have a lot of time, but I thought it would be important to go over them.

They involve three areas. One is the regulation needed to deal with vertical integration. We don't have anything very detailed to offer you, but we do support measures that we've heard proposed to ensure that the new and growing companies aren't able to throttle Canadians' access to content, aren't able to push out smaller independent and public broadcasters from the airwaves and from the Internet. What we're suggesting is corporate separation be instituted to ensure that the pipes remain separate from content in these new big companies.

The second big area is CBC. We think more money needs to be given to CBC for local content on all platforms.

The third main area is that we believe a local content strategy needs to be included in Canada's digital strategy, and we're really concerned so far that content does not seem to feature big in the government's thinking about the digital strategy.

So just to go over the recommendations, the first, as I said, is to implement a rule requiring the separation of operations and management between content distribution and programming elements within a single company, and measures enabling the CRTC to act on infringements against this rule.

The second recommendation is to provide additional funding to CBC for new local programming on all platforms in underserved and unserved communities. Frankly, we don't think stable funding is enough.

Number three is make support for independent local programming on all platforms a priority in cultural and broadcast policy. Further to that, direct the CRTC to undertake a strategy for radio, television, and digital programming in smaller communities that builds on the success of the local program improvement fund and includes community media initiatives. At the moment, the LPIF is only available to public and private broadcasters. We think that the only way local media is going to grow in smaller communities is with the involvement and support of local communities themselves. It doesn't look at this point like major professional media organizations are going to be putting a lot of investment back in the smaller communities of this country. Every time we see consolidation—this is not new, the vertical integration is the newest element of it—we see larger media companies with less interest and less investment, especially in smaller communities, but frankly in local programming across the board. We need to try to reverse that. We need a strategy for that, and I think the heritage committee is a good place to start on a content strategy for our smaller communities.

We also urge the heritage committee to recommend reserving broadband in the coming spectrum auction, or auctions, for public and community broadcasts and other uses.

Number six is include a local media initiative strategy in Canada's digital strategy. Implementation of these initiatives could be funded in part with a small portion of the proceeds from these future spectrum auctions.

Finally, number seven is to establish a coordinated national education campaign on the transition to digital television that among other things will target local communities that stand to lose their over-the-air signals, letting those communities know what they could do to replace this service for their residents.

Thank you.

[The Chair, Conservative, Michael Chong]

Thank you very much.

Finally, we'll have a statement from the Writers Guild of Canada.

[Maureen Parker, Executive Director, Writers Guild of Canada]

Good afternoon, members of the heritage committee.

My name is Maureen Parker, and I'm the executive director of the Writers Guild of Canada. Also with me today is my colleague Kelly Lynne Ashton, WGC director of policy. Thank you for inviting us.

The Writers Guild of Canada is a national association representing more than 2,000 professional screenwriters working in English-language film, television, radio, and digital production in Canada. We are here to talk about the changing infrastructure of the Canadian broadcasting system and its impact on the creation of Canadian content.

The Canadian broadcasting system is rapidly changing. Broadcast mergers in the last few years have resulted in significant media concentration, and acquisitions have led to vertical integration as cable and satellite operators such as Shaw and Bell have purchased broadcasters. Most recently, we have seen the introduction of over-the-top services such as Netflix and Apple TV. Although they are directly competitive with elements of the Canadian broadcasting system, these services are outside the jurisdiction of the CRTC, because they are non-Canadian and because the legal definition of the Canadian broadcasting system is too narrow to include them.

The regulated players too—like Rogers, Shaw, and Bell—are playing in the unregulated space. Cable and satellite operators have set up their own online broadcasting services offering film and television programming free to subscribers. Moreover, most broadcasters such as CTV and Shaw Media have catalogues of their programming available for viewing online. However, because all of these services are unregulated, there is no obligation for them to carry or promote Canadian content, even though they are owned by regulated businesses.

Why are we concerned? It is because Canadians, through their viewing behaviour, have expanded their traditional concept of the Canadian broadcasting system to include these newer platforms. Canadians have not left the broadcasting television world, but they are increasingly choosing the convenience and portability of online viewing to supplement their broadcast television. According to the CRTC's latest “Communications Monitoring Report”, Canadians watch an average of 26 hours of television per week, and this figure is fairly stable. Anglophone Canadians are spending an average of 14.5 hours per week online, two hours of which are spent watching TV online. This is any where, any time television viewing. However, the regulatory framework created by the Broadcasting Act has not kept up with consumer behaviour.

The CRTC created expenditure and exhibition requirements to ensure that Canadian broadcasters support Canadian programming. Without the CRTC's regulatory framework, Canadian audiences would not have had the opportunity to enjoy Canadian successes such as Flashpoint, Murdoch Mysteries, and Heartland. We need a similar regulatory framework for the digital platforms, which are now part of our broadcasting system.

The CRTC is representing the public interest to the extent of its reach. At the group licence renewal in April 2011, a new TV policy will be implemented for the three private broadcasters with specific programming expenditure requirements for drama and documentaries, among other things. We are optimistic that a return to an expenditure requirement will mean more Canadian drama on broadcast television. However, there is no guarantee that this additional programming will also be available or easily accessible online.

Kelly Lynne.

[Kelly Lynne Ashton, Director, Policy, Writers Guild of Canada]

We also don't know that there will be sufficient money at the Canada Media Fund to adequately support the new programs funded under the new TV policy. Each one of the CMF's programs is oversubscribed.

You heard from the CMF that the revenues from the cable and satellite companies used to grow substantially each year, but have now slowed to an expected growth rate this year of only 2% over last year's revenues. They expect the stagnation to only worsen as more people unplug from cable or downgrade to basic packages and take advantage of the opportunities to view content online.

The CMF has been mandated to fund both digital and television content because this government has seen that Canadians are on both platforms and need to have the choice to see Canadian content on those platforms. Both broadcast and digital platforms should therefore be responsible for contributing to the financing of Canadian content.

Is it logical to treat a new media broadcaster such as Rogers on Demand Online, or RODO, differently from VOD? Both services offer Canadians the ability to watch film and television programming at the time of their choosing. The only difference is that one functions through the television set and the other through the computer.

VOD services are required to make Canadian programming available and to help finance its production. Rogers VOD, for example, is required to ensure that not less than 5% of English feature films available are Canadian and not less than 20% of television titles are Canadian. RODO has no such obligation. Rogers VOD has an obligation to pay 5% of its gross revenues to a Canadian program production fund such as the CMF, yet neither RODO nor Rogers, as an ISP, has to contribute to Canadian program production.

The situation is the same for all of the major cable and satellite providers who have both online and VOD services. And let's keep in mind that while Rogers, Bell, and Shaw express concerns about the competitive threat of an unregulated Netflix or Apple TV, as ISPs they are benefiting from consumers' increased bandwidth use due to these services as well as their own online services.

In fact, while Rogers, Shaw, and Bell promote their online services as free to subscribers, use of the services will cost subscribers more if they go over their bandwidth cap. If you watch a few TV shows a month, you will go over your cap. So Canadians are being enticed to use large amounts of bandwidth-streaming television shows, some of which are supported by the CMF. While the revenues to the ISP business units are increasing, they contribute nothing to the creation of the content.

[Maureen Parker]

In conclusion, we now have a Canadian broadcasting system that only partially supports the goals of the Broadcasting Act, because it has been broken into regulated and unregulated systems. We encourage the government and this committee to think of the Canadian broadcasting system as one integrated system that can offer Canadians a wide variety of Canadian programming on any platform that they choose. To do otherwise is to undermine the goals of the Broadcasting Act.

Regulation is not a dirty word. It protects Canadians while ensuring balance between competing interests. We would like this committee to include in your report a recommendation that all Canadian elements of the Canadian broadcasting system, including ISPs and new media broadcasters, should be subject to regulation under the Broadcasting Act so that they all fairly contribute to the creation and exhibition of Canadian programming.

We thank you for your time and we look forward to answering your questions.

[The Chair, Conservative, Michael Chong]

Thank you very much for all of your opening statements.

We'll have about 30 minutes of questions and comments from members. The chair is going to give each party about seven minutes. We'll just have one round of seven minutes each, because we have 5:30 bells and we'll be adjourning at 5:30.

We'll begin with Mr. Simms.

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

With that in mind, I'll be splitting my time with Ms. Crombie.

I think I'm starting to get a common message theme here, or at least a message thread.

When we talk about regulation, the chair of the CRTC alluded to the fact about jurisdiction, a court decision involved in there as well. Is this a final decision? Many of you have expressed your concerns about regulation, to say the least.

ACTRA, you talk about monetary fines, but sovereignty over cultural content. That's a valid point.

Electronic media regulation from the CEP when it comes to...and I think you even went a step further in your recommendation, talking about an independent panel in that regard.

There's also content, and digital strategy, indeed. Some of you talk about corporate separation as well in that one, and that theme tends to come up quite a bit.

The Writers Guild provided some examples of successes under the old framework, as it were.

So I'm just going to throw it to each and every one of you, if you would like to comment further, because you say that this regulation is needed, in this digital age...to the extent that it was before? Would you agree with that statement?

And do you think it's possible, given the proliferation of the technologies that are out there and how the next generation is able to acquire content?

[Ferne Downey]

In answer to your first question, yes, and it is possible. When you have as your ultimate goal the creation of good, high-quality Canadian content, you can make anything happen that you need to happen. That's my simplistic high-level overview.

[Peter Murdoch]

I would add, and I think our submission lays a foundation for this, that whatever regulation you come up with—and we think it's possible that there is regulation that doesn't hamper the entrepreneurial aspects of even these large corporations—it has to be fact-based. It can't be “let's guess it and we go along”. It has to be fact-based, which I think is outlined in the cabinet directive we gave you.

We would say you can regulate it, but let's have the facts. Let's make sure it's based on something. We think it should be based primarily on evidence and the values that Canadians have put in their legislation.

[Maureen Parker]

Yes, it's possible, and yes, it's required.

The ISPs are operating in an unregulated environment, yet they're giving us the same programming. You know what? The future is here. I'm sure we're all watching the commercials: Netflix is offering us content for $8.99.

We're here, folks, and we need to address it. We need to regulate this environment.

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

And they're required from your perspective.

[Maureen Parker]

First of all, you can't regulate Netflix because it's a foreign company. The CRTC only has jurisdiction over Canadians.

Our own Internet service providers are providing content online, but they're not regulated to support Canadian content, nor are they required to promote it or offer it to Canadians.

Look at what's available and how we consume our content. I think we included a statistic in our piece that in terms of English-language viewing right now, two hours a week are spent watching television online. We want to ensure that some of those eyeballs are going to Canadian content.

There is a fallacy that the Internet cannot be regulated, that it's borderless. It sure can be regulated, absolutely. We can't get Hulu up here. We can't get some American shows up here. Broadcasters are businesses and they need to recoup their costs. To make entertainment programming is very expensive, and you have to recoup that cost usually in your domestic market.

So there are borders. There are regulations. These are businesses. We can absolutely look at this in terms of creating distinct territories in order to recoup investments.

What we need the ISPs to do is invest in content--that's the CMF--and to ensure that they're offering some programming that is available and that they're promoting it.

[The Chair, Conservative, Michael Chong]

Thank you, Madame Parker.

Monsieur Laurin or Madame Wirsig.

[Karen Wirsig]

We agree that regulation is certainly possible. It won't ruin the industry. It won't dampen entrepreneurial spirit. It is possible and necessary.

There is one caveat, though. In our experience, regulation alone will not create or make sure that the kinds of local content we've lost will be created. That's why we're saying we need regulation and additional initiatives to ensure local content.

[The Chair, Conservative, Michael Chong]

Thank you very much.

Madam Crombie.

[Bonnie Crombie, Liberal, Mississauga—Streetsville, ON]

You're all overwhelmingly concerned with vertical integration in the market, and I think all of us over here sympathize with you.

Let me ask you, then, what do you think the future is for the small and independent broadcasters?

[Peter Murdoch]

I'm not sure there are that many small or independent broadcasters. I wish there were, but in fact there aren't. You've seen the recent purchases by Shaw and BCE.

For those that are around, I think they're finding their way, but they are very worried about access, and so they should be.

Our major concern is with the behaviour of the large corporations, because that's where the money is and that's where the viewers are.

[Bonnie Crombie, Liberal, Mississauga—Streetsville, ON]

Anybody else? Okay.

So how do we ensure more diversity, local and Canadian content?

[Monica Auer, Legal Counsel, Communications, Energy and Paperworkers Union of Canada]

CEP has been recommending for some time that the commission give consideration to new methods of licensing, including competitive licences. At this point licences are effectively being bought and sold. They're being sold to the highest bidders because it makes sense. From an economic perspective, you want to maximize the profits from your investment.

The question is whether that is consistent with Parliament's goals for broadcasting, and in particular, the notion that you want to have the best possible licensees. If our goal is diversity, we'll have to ensure that either caps be imposed on the CRTC's licensing practices by Parliament, or that some other mechanisms be taken--for example, a research institute, as Peter had mentioned, looking at what precisely are the empirical foundations or the links between ownership and content.

[The Chair, Conservative, Michael Chong]

Thank you--

[Monica Auer]

By the way, in 1970, of course, we were already on the verge of massive concentration of ownership under the former 1970 royal commission on broadcasting.

So we've come a long way, but at this point we are at the tipping point.

[The Chair, Conservative, Michael Chong]

Thank you very much.

Madame Lavallée.