As a prelude to overhauling the regulatory framework for television, the Canadian Radio-television and Telecommunications Commission (CRTC) sought the public’s views on the state of Canadian television services through the first two phases of its “Let’s Talk TV: A Conversation with Canadians” consultation launched in October 2013.
On April 24, 2014, in Broadcasting Notice of Consultation CRTC 2014-190, the CRTC launched the third phase of Let’s Talk TV: A Conversation with Canadians. This phase features a public hearing on the future of the television system and the CRTC regulatory framework applicable to the television industry. Comments are due on June 25, 2014 and the hearing is set to begin on September 8, 2014 in the National Capital Region.
The CRTC will explore a number of proposed changes to its regulations and policies applicable to television services and their distribution. The goal of this review and any eventual changes to the regulations is to ensure that the Canadian broadcasting system:
- fosters choice and flexibility in selecting programming services;
- encourages the creation of compelling and diverse content made by Canadians; and
- empowers Canadians to make informed choices and provides recourse mechanisms in the case of disputes.
With these goals in mind, the CRTC is seeking comments on a wide variety of current regulations and policies applicable to the Canadian television industry.
Maximizing Choice and Flexibility
In November 2013, the Government of Canada requested that the CRTC provide a report on television channel choice, in particular, “pick-and-pay” television subscription options (Order in Council 2013-1167).
On April 24, 2014, the CRTC issued its report in response to Order in Council 2013-1167, titled Maximizing the ability of Canadian consumers to subscribe to discretionary services on a service by service basis. In it, the CRTC set out its preliminary view that the distribution and packaging of television services should be reviewed to maximize consumer choice and flexibility. It proposed the following new measures that would require broadcasting distribution undertakings (BDUs) to:
- offer subscribers a small, all-Canadian basic service that includes only local Canadian conventional television stations, 9(1)(h) services, provincial educational services, the community channel and the provincial legislature programming service;
- promote this small basic service to Canadians so that they are aware of its availability;
- allow subscribers to select all discretionary programming services on a stand-alone basis (pick-and-pay); and
- allow subscribers to build their own custom packages of discretionary programming services (build-your-own-package).
Under the proposed approach, BDUs would be permitted to continue offering discretionary programming services in pre-assembled packages in the same manner as they do now, provided that they also offer the services in the manner noted above.
The CRTC is also examining the current rule that requires each subscriber to receive a preponderance of Canadian programming services (the preponderance rule). Under a framework designed to maximize subscriber choice, the CRTC is considering whether there remains a need to maintain the preponderance rule or whether other measures might be more appropriate to promote viewership of Canadian programs.
Access to Non-Canadian Programming Services
The potential impact of allowing Canadians to have enhanced access to non-Canadian programming services will be examined in the proceeding. Under the current policy, only non-Canadian programming services that do not compete in whole or in part with Canadian pay or specialty services are authorized for distribution in Canada. In assessing competitiveness, the CRTC examines factors such as the genre and nature of service.
The CRTC is examining whether a new approach to authorizing non-Canadian services for distribution in Canada would be appropriate and it suggests that one approach might be to authorize all non-Canadian services for distribution in Canada, except where it can be demonstrated that distributing a particular service would have an undue negative impact on the Canadian broadcasting system.
Whether simultaneous substitution remains an appropriate mechanism to enable local Canadian television stations to maximize audiences and advertising revenues is another issue being considered by the CRTC. Simultaneous substitution is the temporary replacement of the signal of an out-of-market television station with that of a local television station that is broadcasting the same program at the same time. This substitution typically involves replacing the signal of a U.S. commercial television network signal with the signal of a Canadian television station. It allows Canadian broadcasters to earn a reasonable return on their investment in acquiring non-Canadian programming so they have the financial resources to meet the needs of viewers and to satisfy their regulatory obligations.
The CRTC highlighted a number of concerns about the current simultaneous substitution rules. These include: (i) the errors made in performing substitutions and the inability to of viewers to watch commercials for special events, such as the Super Bowl; (ii) the fact that broadcast schedules for Canadian television stations are tied to those of U.S. broadcasters because the Canadian broadcasters are trying to maximize their substitution opportunities; and (iii) the absence of up-to-date evidence that simultaneous substitution provides significant value to Canadian broadcasters.
Foster Local Programming
The CRTC emphasized that the business model for local television has been under long-term pressure due to audience fragmentation, decreases in advertising revenues and competition. In 2011 to 2012, the revenues of private local television stations in both the French- and English-language markets decreased by $100 million or 5%. In addition, television stations assume the costs of maintaining over-the-air transmitters and, in most markets, digital television (DTV) transmitters. Given the high BDU subscription rates in most markets, few Canadians receive television signals over the air. The CRTC is therefore examining the ongoing role of local television and local programming in the Canadian broadcasting system and considering whether there are new ways in which it may be offered in the future. The CRTC is also exploring ways to enhance the sustainability of local television stations.
Financing and Promoting Compelling Canadian Programming
The various support mechanisms for Canadian programming that have been established under the Broadcasting Act are being examined in this proceeding. The current mechanisms include: requiring certain programming services to devote a specific percentage of their revenues to Canadian programming expenditures (CPE); requiring programming services to achieve certain thresholds for the exhibition of Canadian programming; encouraging the production of certain types of programs (drama, long-form documentary, music/variety and award shows) through time credits and conditions of licence; and for larger BDUs, requiring a contribution of 5% of their gross revenues from broadcasting activities to Canadian programming (which includes contributions to the Canadian Media Fund (CMF), independent production funds and community channels). All financial contributions are calculated on revenues earned from broadcasting-related activities (advertising and subscriber revenue), which exclude revenues earned from telecommunications services.
To ensure the presence of Canadian programs on multiple platforms in the future, the CRTC will consider various incentives and other measures, such as:
- imposing CPE requirements on all television stations and specialty and pay services;
- including expenditures for online or on-demand only productions toward CPE requirements;
- reducing or eliminating exhibition requirements for Canadian programs; and
- changing its approach related to the allocation of BDU contributions between community channels, the CMF and independent production funds.
The CRTC will also consider whether the definition of “broadcasting revenues” should be expanded to take into account the changes in the broadcasting environment and to include programming that is offered by BDUs and programming services online and on other exempt platforms.
Making Television Services Available to Underserved Audiences
With respect to official language minority communities (OLMCs), the CRTC has, in the past, implemented several measures to improve the reflection of OLMCs on television. For example, the CRTC recently approved the mandatory distribution on the basic service of TV5-Unis, which will be dedicated to the reflection of French-language OLMCs. The CRTC also imposed OLMC-related requirements on the French- and English-language television services of the CBC. Further, all licensed terrestrial BDUs are required to distribute one minority-language Category A or Category B service, for every ten majority-language services they distribute. As well, DTH BDUs are required to distribute all Category A services. This proceeding will explore whether the current rules are still necessary to ensure that OLMCs continue to have access to services in the minority language.
The provision of programming to Aboriginal and third-language audiences is also a matter for consideration. Today, Aboriginal Peoples are primarily served by the Aboriginal Peoples Television Network (APTN). The CRTC will explore whether there are other mechanisms that can be employed to ensure that television adequately reflects Canada’s Aboriginal cultures. The availability of programming that reflects ethnic and third-language communities in Canada remains an issue for the CRTC. The cost of subscribing to packages of services through a BDU is highlighted as a concern, as is the ability of the current programming choices to reflect these communities or the cultural diversity within these various communities.
The challenges faced by Canadians with disabilities will also be addressed. A simple way for people with visual impairments to access programming has been an ongoing issue. The CRTC notes that remote controls provided by some BDUs require multiple button pushes to access described video, which can be challenging for some members of this segment of the population. In addition, many platforms, including personal video recorders and set-top boxes (STBs), mobile applications, and other platforms that require on-screen interaction are not accessible to members of this community.
Promoting access for non-vertically integrated programming sources
The CRTC noted that the scale and scope of vertically-integrated companies operating in the Canadian broadcasting system give rise to the possibility that they may use their market power to engage in anti-competitive behaviour. According to the CRTC, such behaviour would make it more difficult for other independent programming services, particularly new entrants, to operate, thereby decreasing the quality and diversity of programming that is available in the system.
The CRTC will examine whether there is a need to amend the Code of conduct for commercial arrangements and interactions (the VI Code) or to adopt measures in addition to the VI Code, such as distribution requirements or undue preference provisions to protect independent services.
Enhanced audience measurement using set-top boxes
The CRTC believes that data from STBs could be used to measure viewing levels of programs more accurately and suggested that this could be an effective tool that will enable the television services to effectively respond to changes in the industry and meet the needs of viewers. The CRTC also notes that access to STB data may provide VI companies with an advantage to the extent that they share STB data received from their BDUs with the television programming services that they also own. The privacy of individuals is an important issue and raises additional matters related to viewer consent that will have to be addressed before any new audience measurement system can be established.
Genre exclusivity and protections for Category A services
Today, Category A services are licensed by the CRTC on a one-per-genre basis. In other words, they receive “genre protection.” These genres are defined to ensure that these services do not compete head-to-head with one another. Category B services do not benefit from genre protection and they are not permitted to operate in a genre that would be directly competitive with an existing Category A service. Category C services operating in the genres of mainstream news and sports may compete with each other. BDUs are required to distribute Category A services. There are no general distribution requirements for Category B or C services.
The rationale for the genre protection policy is two-fold: to ensure a diversity of programming genres, and to provide a measure of support to pay and specialty Category A services to enable them to meet their Canadian content and other programming obligations, which are generally higher than other types of specialty and pay services.
Now that the pay and specialty television industry is mature, the CRTC will explore whether its genre protection policy should be eliminated. The CRTC suggested that such a policy change may benefit consumers by better responding to their desire for a diversity of programming, permitting new services to enter the market in currently restricted genres and allowing all services to innovate in providing programming to Canadians. By eliminating priority access rules for Category A services, all specialty and pay services would operate on a level playing field.
The CRTC’s proposal would allow pay and specialty services to operate within broad genres, which would enable them to communicate their brand and programming to Canadians and BDUs. All discretionary services could compete with each other and offer programming of any type, category or genre.
The CRTC is seeking to simplify its current licensing system and is proposing to consolidate all programming services into three types, based on the way in which these services are distributed to Canadians by BDUs:
- Basic services: the current television stations required to be distributed on basic and provincial educational services.
- Discretionary services: the current specialty and pay Category A, B and C services.
- On-demand services: the current video-on-demand (VOD) and pay-per-view services.
These three types of services would operate under standardized sets of obligations determined following a public process.
The CRTC is also proposing to exempt from licensing discretionary and on-demand programming services with a low number of subscribers. It is prepared to expand the existing exemption orders related to third-language programming services, Category B services serving fewer than 200,000 subscribers and VOD services operated by exempt BDUs.
In addition, the CRTC is reviewing the appropriateness of the licensing criteria for Category C national news specialty services and requests comments on those criteria.
Notifying subscribers of changes to programming services
The CRTC will explore strategies to ensure that consumers are properly informed of the programming offered to them by programming services and are able to understand how the services to which they subscribe are packaged and priced by BDUs. The goal would be to provide Canadians with a clear understanding of their subscription and the information they need to gain control and make informed choices as to the programming services for which they are paying.
Enhancing safeguards and controls relating to programming content
The CRTC will consider whether better information and tools would provide viewers with enhanced safeguards and controls relating to programming content and suggested that electronic program guides (EPGs) could become more user-friendly and informative, including accessibility-related information, so Canadians can make more informed choices.
Enabling a more dynamic market for BDUs
To facilitate the entry of new BDU services in the system by eliminating the long period to get a licence and encourage competition among BDUs, the CRTC is proposing to broaden the BDU exemption order to include BDUs with fewer than 20,000 subscribers that compete in markets with licensed BDUs.
Adopting guidelines for BDU-subscriber relationships
To ensure that Canadians are informed about the services they receive and that they have the flexibility to easily change BDU service providers, the CRTC is considering whether to adopt guidelines for BDU-subscriber relationships, including guidelines for contract clarity and termination of service. In addition, the CRTC may consider measures, such as the creation of an ombudsman and the introduction of a code of conduct for BDUs, as a means to ensure that Canadians have proper recourse mechanisms to resolve complaints.