In a decision issued on February 28, 2011, the Federal Court of Appeal has ruled that the CRTC has the power to order cable and satellite distributors to negotiate retransmission consent agreements with private local, over-the-air television broadcasters (also known as "value-for-signal" or "fee-for-carriage" negotiations).

The Federal Court of Appeal proceeding was the result of a reference from the CRTC last March. The key issue before the Federal Court of Appeal was whether or not retransmission consent is an issue of copyright policy, and therefore outside the jurisdiction of the CRTC.

Rogers, Shaw, Bell, Cogeco and TELUS, operators of cable and satellite distribution undertakings, argued before the Court in a hearing last September that the CRTC did not have the jurisdiction to order retransmission consent negotiations. Private broadcasters, including CTV and CanWest, argued that the CRTC does have the power to require retransmission consent.

By a 2-1 majority, the Federal Court of Appeal found no conflict between the CRTC's proposed value-for-signal regime and the Copyright Act. Justice Nadon dissented and said he would have found that the proposed value-for-signal regime does conflict with the Copyright Act and is therefore beyond the jurisdiction of the CRTC.

Rogers and TELUS have both publicly stated that they will seek leave to appeal the decision to the Supreme Court of Canada. One obvious ground for review is the fact that, in its decision, the Federal Court of Appeal ruled that the Copyright Act already grants broadcasters a cable retransmission right with respect to their signals when, in fact, the Act grants no such right.

The issue has been further complicated by the fact that, since the CRTC issued the reference to the Federal Court of Appeal, CanWest has been acquired by Shaw and CTV has been acquired by Bell.

The CRTC first turned its mind to retransmission consent in 2006. At that time, the Commission rejected the idea (Broadcasting Notice 2007-53), saying broadcasters did not need the assistance, and such a move might have harmed the growth of digital specialty services. The issue arose again in 2008 and the Commission rejected the idea once more (Broadcasting Notice 2008-100). In a sharply worded rebuke, the Commission told broadcasters to examine their own business plans before coming to the CRTC for new fees.

But, in May, 2009 (Broadcasting Decision 2009-279), the CRTC announced that a policy proceeding on, among other things, "revenue support for conventional broadcasters" would be held in the fall of 2009. The same month, the Standing Committee on Canadian Heritage held hearings on fee-for-carriage and recommended that it not be implemented.

The CRTC proceeded with its hearings and in November 2009 heard from both distributors and broadcasters their reasons against and in favour of value-for-signal (as the CRTC was by then calling it). Distributors continued to question the CRTC's jurisdiction to implement such a regime. In response to an Order-in-Council requiring the CRTC to report on the impact that retransmission negotiations might have on consumers, the Commission sought input from the public and industry stakeholders on the potential magnitude of the fees to be negotiated, and their impact on consumers.

This resulted in the cable and satellite distributors organizing a "Stop the TV Tax" campaign in opposition to the value-for-signal proposal, and local broadcasters organizing a "Local TV Matters" campaign in support of the proposal.

The CRTC issued a policy decision on March 22, 2010 (Broadcasting Order 2010-168) indicating that it favoured implementing a requirement for distributors to enter into negotiations with broadcasters to agree on the terms and conditions for cable and satellite retransmission of local broadcast signals. Broadcasters choosing to participate in this scheme would forego mandatory carriage, priority placement and other regulatory protections. The Commission stayed its decision and referred the jurisdictional question to the Federal Court of Appeal.

Writing for the majority of the Federal Court of Appeal in the February 28 decision, Madam Justice Sharlow agreed with distributors that they have a right under section 31(2) of the Copyright Act to retransmit local signals, but held that this right is subject to and limited by, among other things, the Broadcasting Act and the broadcasting policy objectives which it serves. Under the Broadcasting Act, the Commission is required to implement the broad policy goals described in section 3(1); and Justice Sharlow found that implementing a value-for-signal regime is within the Commission's broad jurisdiction.

Justice Nadon dissented on this point, finding that Parliament had expressed an intent in section 31(2)(d) of the Copyright Act that only the retransmission of distant signals would require a royalty to be paid by the distributor. Justice Nadon concluded that, by imposing a royalty regime for retransmission of local signals, the CRTC would be rewriting the Copyright Act, not simply implementing broadcasting policy.

The Majority, however, held that the Commission could go even further than giving broadcasters the option to negotiate a value-for-signal agreement and could impose a fee-for-carriage, as a condition of license. The Court held that fee-for-carriage would simply be another example of a benefit that distributors are required by regulation to provide to broadcasters along with mandatory carriage, preferential channel placement and financial contributions to the Local Programming Improvement Fund – it is a transfer of value from distributors to broadcasters which the Commission has the power to impose.

Applications for leave to appeal the Federal Court of Appeal decision must be filed with the Supreme Court by the end of April.