Madam Chair, vice-chairs, members, clerk and committee staff, thanks for the opportunity to appear before you today as part of your study on remuneration models for artists in the creative industries in the context of copyright.
My name is Frank Schiller. I'm here as a Canadian adviser to Border Broadcasters, Inc., a not-for-profit copyright collective representing 26 local over-the-air American television stations, including ABC, CBS, NBC, and Fox affiliates located along the Canada-U.S border from coast to coast.
As part of your study, I hope to inform and seek your committee's support on three fronts.
First, I hope to share with you a better understanding on how the current Canadian retransmission and copyright regimes are fundamentally unfair, not only for U.S. border stations, but also for Canadian viewers and broadcasters alike.
Second, I urge your committee to support and recommend retransmission consent as a new Canadian remuneration model available for local over-the-air broadcasters, including U.S. border stations, as a means to provide badly needed new commercial revenues to create industries.
Finally, I encourage the committee to recommend the necessary legislative changes to the Copyright Act to facilitate the implementation of these new remuneration models and to ensure fairness and nondiscriminatory treatment moving forward.
Local and distant signals and programming from U.S. border stations form part of Canada's regulated pay-TV services. Signals from these stations are appropriated, packaged in channel bundles, and sold to Canadian cable and satellite TV subscribers in every market across Canada. It's the Government of Canada that enables these U.S. stations to be listed and licensed for authorized Canadian distribution. What's remarkable is that this happens without notice to, consultation with, or consent from the U.S. station owners in the process. These Canadian practices are discriminatory and fundamentally unfair against U.S. stations. Consequently, the owners of these stations retransmitted in Canada experience demonstrable economic injury and harm under copyright, advertising, and consent for remuneration opportunities.
Canada has been importing U.S. television signals and programming for over 50 years. Initially, these practices and policies were intended to provide a direct subsidy to the then fledgling Canadian cable and satellite industries. It was a simple business model: Take for free from U.S. television stations and sell to Canadian pay-TV subscribers.
As technology changed from cable to satellite and then digital, the number of U.S. stations listed for retransmission in Canada exponentially increased from an original set of three U.S. channels to now multiple sets of what are known as the U.S. “4+1s”, plus superstations and more. The average Canadian TV subscriber is likely now to receive between eight to 15 over-the-air U.S. stations in their channel packages.
It was not until the early 1990s that U.S. stations even became eligible to receive copyright remuneration for their programs on distant signals retransmitted in Canada. This followed from efforts under the Canada-United States Free Trade Agreement to provide compensation consistent with the 1976 U.S. Copyright Act.
After 30 years of administration, U.S. TV stations are still waiting for non-discriminatory treatment in Canada. Canada does not require reporting, auditing or notification provisions when Canadian distributors are licensed to package and sell listed American channels to Canadian TV subscribers. As a result, U.S. stations cannot reasonably determine where and when their digital broadcast signals and programming are sold to Canadians.
Canada accepts inaccurate and incomplete data for Canadian viewership of retransmitted American stations, and this also causes economic injury to U.S. station owners.
For example, in 2010, TV viewing measures changed in Canada with a significant under-representation of U.S. border stations. At the same time, Canada changed distant signal regulations. The immediate impact was the significant under-reporting of Canadian viewership of U.S. stations. Consequently, copyright allocations to U.S. border stations were retroactively reduced by 64%. Border Broadcasters, Inc. received an unfair liability of over $8 million moving forward.
It's in the public interest and supported by sound public policy for the immediate remission of these unfair copyright liabilities retroactively adjusted against Border Broadcasters, Inc. It's also notable that local stations receive no copyright remuneration on local signal retransmissions in Canada, and this can be easily addressed with a small change to the Copyright Act.
There are many other examples of unfairness for U.S. stations under Canada's regime, including over the introduction of HD services. The bottom line is that Canada's copyright system is not providing for non-discriminatory treatment of U.S. stations. There's something fundamentally wrong with the Canadian listing process that allows the Government of Canada to decide what broadcast signals can be carried, without input or consent, even in cases where the signals are not available off air in Canada.
The unfairness is only compounded given that Canadian cable and satellite operators willfully alter U.S. signals by covering commercials, stripping out materials such as closed captioning, or inserting advertisements overtop of the retransmissions. Canada does not require an international trade agreement to reform its procedures here and remedy an inherently flawed and unfair process.
In 1992, the U.S. Congress established a retransmission consent regime for U.S. stations. Local stations can negotiate compensation for the retransmission of their signals by cable and other pay-TV distributors. These retransmission consent fees are now vital sources of revenue for local stations, which rely on the income to invest in modern digital broadcasting infrastructure, to deliver expanded local news offerings and to have emergency alert systems.
New commercial revenues from consent rights in Canada's listing and licensing processes, in addition to non-discriminatory copyright remuneration, will also benefit local Canadian stations and TV viewers. Canadian broadcasting will benefit from new commercial revenues that will offset the growing losses year over year for Canada's private conventional broadcasters, which now stands at more than $700 million in losses over the last five years. In contrast, the U.S. experience confirms that local TV stations are profitable. Recent studies also highlight that in most small and medium-sized markets, it's the local television stations that are the primary creators and generators of local news online.
Now, with the digital transition complete, in addition to high-definition multicasting, U.S. stations are getting set for the interaction of a new digital broadcast standard, ATSC 3.0. This includes next-generation digital delivery services to both fixed and mobile receivers, seamlessly combining over-the-air and broadband delivery.
Under Canada's current unfair regime, Canadian TV subscribers are paying the price with higher TV fees, reduced local news offerings, diminished digital services and an inferior TV experience. Canadians pay for the price of costly duplicate American programming in their TV channel bundles whether they watch the duplicate programming or not. It is Canada's copyright and retransmission regimes that provide the economic incentive for the oversupply of U.S. services by Canadian distributors to Canadian subscribers. At the same time, Canada's local broadcasting infrastructure is not being converted from analogue to digital in all markets. Consequently, the availability of free HDTV off-air reception is being reduced for some Canadians.
Finally, the cost of these recommendations, including new remuneration models and fair copyright, on Canadian pay-TV subscribers is likely to be negligible to positive, with a reduction in pay-TV fees possible depending on channel bundling and implementation.
Local TV brings us together. Cross-border television reflects our common values, our shared communities of interest and our programming diversity. Local U.S. border stations have a distinguished legacy of strengthening and deepening the relationship between Canada and the United States. By addressing the fundamental unfairness that underlies Canada's retransmission and copyright regimes and embracing retransmission consent, your committee will deliver new remuneration opportunities for creative industries, including local news, and this will benefit local viewers, communities, creators and broadcasters on both sides of the border.
Thank you.