Ian Scott to Cable TV Summit of National Communications Commission

From: Canadian Radio-television and Telecommunications Commission

Taipei City, Taiwan

November 28, 2019

Ian Scott, Chairperson and CEO

Canadian Radio-television and Telecommunications Commission

Check against delivery

Good morning.

Thank you for the invitation to be with you today. I welcome the opportunity to speak with you about the CRTC’s vision for the future of broadcasting regulation, as well as some of the solutions we have enacted to deal with past challenges before our industry.

The CRTC is Canada’s independent broadcasting system regulator. It is an arms-length entity that has been empowered by the Canadian Parliament to, in part, protect, preserve and promote Canadian audiovisual content in the face of external cultural influences.

Over the course of my remarks today, I will explain some of the steps we took in the past to serve this mandate. I will also outline some of the new thinking we have brought forward in recent years to respond to the depth and breadth of change stemming from digital technologies.

The overarching message that I want to leave you with today is that paradigms have shifted. New thinking is needed. Regulators must adapt.

The evolution of broadcasting in Canada

Let me begin by describing a bit about the evolution of the cable TV industry in Canada. It is useful to start there to set the stage for the changes we as regulators have enacted in response.

Canada’s television system has always been open to foreign content. Although the CRTC’s mandate is to ensure that our domestic broadcasting and production industries are reflective of Canadian culture, our system has always welcomed content from beyond our borders.

Major American television networks have always been available in Canada-initially as over-the-air signals and later as part of the TV packages of cable and satellite providers.

As the cable industry evolved, Canadians enjoyed access to a wide range of domestic specialty channels as well as to hundreds of television channels from around the world. These sources provide a multiplicity of content in English, French and many other languages besides including several in Mandarin. A breadth of programming such as this allows for a diversity of ideas and opinions, including both domestic and foreign-based news and information programming.

It goes without saying, of course, that among these foreign services, those of one nation dominate.

One of our main responses to mitigate such outside influence and ensure we could sustain domestic content and services was to regulate. The approach worked. It helped to fund and promote Canadian productions, and to ensure a vibrant and productive domestic market, and gave virtually all Canadians access to this content.

A new challenge appeared in our broadcasting sector when major players in the cable business began to consolidate. Larger companies acquired smaller ones. This was largely in response to the competitive environment, with the introduction of satellite TV and later Internet Protocol television (IPTV), and to achieve more efficient operations.

Over time, television service providers became fewer and fewer in number, and larger and larger in size, although there are still a number of smaller independent players. Regulating in a way that takes into consideration their reality and that of the larger players is another challenge.

The market’s next step was to consolidate further in response to stagnating advertising revenues. Companies began making deals to gather production, programming and distribution services all under the same corporate umbrella. This trend toward vertical integration was not unique to Canada, but it did have specific impacts on us due, in part, to our relationship with the U.S.

We at the CRTC were concerned about the likely effects of such consolidation. We worried that it created the potential for programming and distribution services to become proprietary, for previously widely available content – both Canadian and non-Canadian – to be split along corporate lines, and, in extremis, for the broadcasting system to fail to meet its public-policy objectives as a result.

Around the same time, it became evident that the TV-watching behaviours of Canadians were beginning to change. They were starting to access more and more online video over the Internet and on their mobile devices. A new trend was emerging.

We now know some of the outcomes of this early shift. Where those digital media services were in their infancy ten years ago, and were complementary to conventional broadcasting models, they are anything but nascent players today. They are popular, successful and ubiquitous.

Data published in the 2019 edition of the CRTC’s Communications Monitoring Report provides a Canadian perspective on such trends. It shows an increase in total revenues for online television services of nearly 44% from 2017 to 2018; and an increase in estimated revenues for online audio services of nearly 17%. More is, I’m sure, to come. Disney and Apple recently launched new streaming services in Canada. Both will undoubtedly capture audience eyes and dollars.

All of this is not to say the market for conventional broadcast services is heading off a cliff. Such services-and particularly those that provide news and information, and which allow Canadians to tell their stories-remain of great cultural importance to Canadians. Again, I will point to data from our 2019 Communications Monitoring Report. In 2018, the average Canadian aged 18 or older watched a little more than 26 hours of traditional television per week, and about three hours of online content. Radio numbers are similar. Adult Canadians listened to about 15 hours of programming a week on conventional radio stations, and a little more than eight per week online.

How do we regulators respond to this trend? We change. We must. Because the frameworks we at the CRTC have implemented since our inception in 1968, based on our legislation, are not flexible enough to adapt to the current environment. Created more than a half century ago, our regulatory tools are not well-suited to respond to the change being wrought by digital media.

Our regulatory responses

As I indicated a moment ago, our initial response to regulating the flow of foreign content into our broadcasting sector was to regulate. Canada, as you know, shares a huge border with our neighbour to the south-a neighbour which also happens to be the world’s largest exporter of English-language cultural products.

And although we share many cultural, economic and social similarities with the United States, we are fiercely proud of the differences that set us apart from them. Canada is a nation that embraces two official languages-English and French-and cultures, that celebrates a young and vibrant population of Indigenous Peoples, and that prizes multiculturalism.

The mandate entrusted to the CRTC under Canada’s Broadcasting Act is to ensure that Canada’s broadcasting system protects this unique cultural identity in the face of foreign influences-not only those from the United States, but also from those dozens of international services I referenced previously.

How did we do so? Through regulation. To use an analogy, we created a wall around our broadcasting industry. We allowed only approved services to penetrate into the garden beyond that wall, and created conditions for our domestic broadcasting and production industries within to grow and thrive.

Let me explain four tools in particular that we used. The first: mandatory Canadian ownership and control over Canadian broadcasting entities. The second: the requirement that broadcasters obtain a licence from the CRTC. The third: quotas that mandated a certain percentage of content that is aired be Canadian. And the fourth: a requirement that traditional services invest money back into the production of Canadian content, including news and information programming.

This approach helped to bring high-quality Canadian information and entertainment programming to Canadians that reflected their reality. It enabled the launch of the first Indigenous TV channel in the world.

Our approach worked well. It sowed seeds. It nurtured growth. It allowed Canada’s content system to flourish for nearly 40 years. But it was not immune to change. The walls surrounding our garden could not stand unchanged forever.

One of the first new regulatory challenges we faced occurred when the trend toward vertical integration emerged in the broadcasting market. At the time, we judged that such a trend could have a negative impact on the sector’s ability to meet its public-policy objectives. We responded by issuing a new framework for such integrated companies that allowed them to respond to new market opportunities, while also establishing measures that prevented them from harming their competitors or restricting consumer choice.

For instance, we put in place rules and codes to ensure that:

  • programming services make their content available to their competitors on a fair and non-discriminatory basis
  • negotiations between distributors and programming services are conducted in good faith and Canadians do not lose access to their television services during such negotiations, and
  • independent distributors and broadcasters are treated fairly by the large integrated companies.

This framework has evolved over the years through a series of policies and decisions, for the benefit of all Canadian viewers.

Modernizing our approaches

We began to ask profound questions about the future of our broadcasting system-and the suitability of our regulatory tools-when digital media’s influence became undeniable. When evidence showed that more and more Canadians were turning to online video over the Internet and on their mobile devices versus conventional viewing.

We launched a comprehensive review of our television framework in 2013 as a result. In its form, this review was intended to be a study of our television framework in light of the inescapable presence and influence of digital services. It was much more than that, however. It was, I’m confident in saying, a watershed moment for the ways in which the CRTC conducted consultations with industry stakeholders and the public at large.

The CRTC is an administrative tribunal that acts in the public interest. The decisions we make are therefore based on the public record. The more that record contains a diversity of public input and a multiplicity of views, the better informed we are to make decisions that benefit the public interest.

As a result, and during our review, we provided Canadians and stakeholders with new ways to share their opinions with us: Internet discussion forums, real-time commentary during formal Commission proceedings, video submissions, and more. The result was a broader, deeper and more fulsome public record, which was fundamental to the decisions that flowed from it.

From a policy perspective, the decisions that stemmed from this review changed the way we regulated the broadcasting system.

We provided for greater flexibility on those broadcasting quotas I referred to earlier.

We mandated broadcasters offer more flexible television viewing packages to consumers. These included an entry-level service package of stations that was designed to not only be affordable, but also include local and regional television stations that provide news and information programming.

We also mandated broadcasters to allow consumers to build on that skinny basic package by selecting only those discrete channels they wanted to view.

Finally, we created a Television Service Provider Code that set out the rights of consumers in their interactions with the cable and satellite companies.

The review also created significant outcomes for industry. One of these was a wholesale code that established certain parameters around the commercial arrangements between programming and distribution undertakings-with a view to curbing those disputes that inevitably occur in an increasingly competitive marketplace.

We at the CRTC are often called upon to resolve disputes among programmers and distributors. It’s part of the work we perform. In all cases, we aim to resolve such disputes through informal means, and using the expertise of our experienced staff. In the event that this approach does not work, parties can ask for staff-assisted mediation process whereby we meet confidentially with all parties to see if they can agree to a mutually acceptable solution.

Should informal resolution or staff-assisted mediation be unsuccessful, parties can choose final-offer arbitration, through which a panel of our Commissioners will review both parties’ final offers and select one in a binding determination. This process is reserved exclusively for monetary disputes.

One important thing to note about our dispute-resolution process is that it enacts what we call a “stand-still rule.” This means that when a dispute arises over a service, for example, the disputing parties must continue to offer their services, and distributors must continue to distribute them, at the same rates and under the same conditions as prior to the dispute. This rule applies until such time as the Commission issues a decision.

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