On October 22, 2010, the Canadian Radio-television and Telecommunications Commission (the "Commission") announced its decision (Broadcasting Decision CRTC 2010-782) to approve the acquisition by Shaw Communications Inc. ("Shaw") of the conventional television stations and specialty services controlled by Canwest Global Communications Corp. ("Canwest"). On the same day, the Commission also launched a public proceeding, in Broadcasting Notice of Consultation CRTC 2010-783, to review its approach to vertical integration.

The Shaw-Canwest Decision

The decision approving the Shaw-Canwest acquisition followed a public proceeding that included a public hearing held from September 21 to 23, 2010. The Commission indicated that it approved the application by Shaw to acquire Canwest because of the substantial benefits it would provide to the Canadian broadcasting system. It found that the Canwest television stations and specialty services would benefit from the "stable ownership" offered by Shaw, and that the broadcasting system as a whole would benefit from Shaw's support for local and independent programming and the transition to digital television.

As part of the application, Shaw committed to a tangible benefits package valued at $180.1 million, which will be spent over a seven year period on several initiatives designed to benefit the Canadian broadcasting system. Those initiatives include:

  • the conversion of analog transmitters to digital in 67 smaller markets;
  • the provision of a satellite receiver and free access to local or regional television stations for those viewers who will lose access to the over-the-air signals August 31, 2011;
  • the purchase of more drama, documentary and comedy programs from independent producers; and
  • the production of new two-hour morning newscasts in Regina, Saskatoon, Winnipeg, Toronto, Montreal and Halifax.

Vertical Integration in the Broadcasting Industry

In announcing a review of the regulatory framework relating to vertical integration, the Commission noted that a "growing trend" of consolidation has emerged over the past decade. Shaw's application to acquire Canwest and the announcement by BCE Inc. in September 2010 that it would acquire CTVglobemedia Inc. were cited as the two most recent examples of this trend.

The purpose of the new proceeding is to consider whether the Commission's existing safeguards, which include regulatory provisions relating to undue preference and disadvantage and guidelines on good commercial practices, remain appropriate in this new era of consolidation and vertical integration in the broadcasting industry.

Specifically, the Commission indicated that it will consider expanding the reverse onus provisions as they apply to undue preference or disadvantage allegations, so as to make them generally applicable to all programming undertakings as well as to all broadcasting distribution undertakings ("BDUs"). Currently, only BDUs, new media undertakings and Video-On-Demand undertakings are subject to a reverse onus when confronted with allegations of undue preference/disadvantage.

The Commission will also be reviewing its good commercial practices guidelines, which were put in place in Broadcasting Public Notice CRTC 2005-35. Among other things, those guidelines are designed to ensure that all players have a fair opportunity to negotiate for such key elements as programming rights and details of carriage. The Commission highlighted in particular its guideline that generally requires a BDU to suspend proposed changes in distribution pending dispute resolution, and indicated its preliminary view that a party to a dispute should generally be held harmless during the period in which the Commission is considering the dispute.

The Commission emphasized that its objective in initiating the proceeding on vertical integration is not to interpose itself into the wholesale commercial environment, but to regulate or, alternatively, establish guidelines only where measures appear warranted by the record of the proceeding.

The Commission is calling for written comments to be submitted by March 7, 2011 on its review of the regulatory framework relating to vertical integration, in advance of a public hearing set to start on May 9 of that year.