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Broadcasting and Telecommunications Legislative Review Panel: “Time To Act”

The Broadcasting and Telecommunications Legislative Review Panel (BTLR) was tasked in 2018 by the Minister of Innovation, Science and Economic Development and the Minister of Canadian Heritage to review Canada’s outdated communications legislative framework. That framework includes the 1991 Broadcasting Act.

The BTLR’s long awaited report was released today.

As anticipated and intended, the Panel has gone well beyond a mere “legislative review”. It has considered decades-old policies, structures, institutions and practices, and made recommendations to change or replace many of these in fundamental ways.

The report speaks to a broad range of industry stakeholders. Chief among these are online media content providers, notably foreign services.

Among its calls for “Immediate Action” — even prior to developing and enacting new legislation — the Panel calls on government to:

Require media content curators now exempt to contribute to Canadian content: to achieve this, the federal government should require the CRTC to hold hearings and issue a new exemption order so that those media content curators that derive revenue from Canada and are now exempt from licensing, such as Netflix, are required to contribute to Canadian content through spending and discoverability requirements, consistent with our recommended legislative framework.

End the competitive disadvantage facing Canadian companies: apply GST/HST equitably to media communications services provided by foreign online providers.

More broadly, the Panel proposes to require all media content undertakings with “significant Canadian revenues”, and delivering media content via the Internet, to register with the Canadian Radio-television and Telecommunications Commission.

“This new model would bring all those providing media content services to Canadians – whether online or through conventional means, whether foreign or domestic, whether or not they have a place of business in Canada – within the scope of the Broadcasting Act [proposed to become the Media Communications Act] and under the jurisdiction of the CRTC.”

BTLR Panel Report, January 29, 2020

The Panel recommends that “for greater certainty”, the Act be amended so that it clearly applies to foreign Internet streaming services with revenues in Canada.

The CRTC would set obligations in various areas — content curation (streaming services); content aggregation (distribution services); and sharing (user / interactive services) — with a view to supporting Canadian content. For example, streaming companies would have spending requirements on Canadian content. The specifics –who contributes, for which activities, and how much — would be up to the CRTC. The Panel recommends ensuring that the CRTC is equipped to “regulate economic relationships between media content undertakings and content producers, including terms of trade”, and help Canadian producers to retain commercial rights over their content.

The CRTC would retain its power to exempt providers or classes of providers from regulation. If the Panel’s broad recommendations are adopted, much could ride on that discretionary power. In 1999, the CRTC relied on its discretion to exempt “new media” broadcasting from almost all regulation. That exemption has remained in place for more than 20 years. Today’s Panel report proposes a dramatic shift, from exempting and excluding online media content services from the regulatory framework, to bringing them under direct CRTC regulation.

This post addresses top-line issues of interest for online media content providers. For those picking up the report in the coming days, recommendations 51 through 85, and Chapter 3, address the “Creation, Production and Discoverability of Canadian Content”. We will provide additional highlights in upcoming posts.

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Broadcasting and Telecommunications Legislative Review Panel: “Time To Act”

Let’s Talk TV – Delayering 50 years of Regulation in “the Age of Abundance”

In an important policy decision issued today, “The way forward – Creating compelling and diverse Canadian programming”, the CRTC announced “significant changes to bring the CRTC’s regulations and Canadian television forward into the Age of Abundance”, where content is everywhere online and on TV.  Commission Chair Jean-Pierre Blais warned the audience for his speech today to the Canadian Club of Ottawa that the sheer length of the policy decision – 323 paragraphs – “illustrates how complex it is to delayer regulatory rules built over the past 50 years.”

Genre Exclusivity

The delayering includes eliminating the genre exclusivity that many Canadian services have relied on for years.  This was no surprise, as the CRTC had previously announced its intention to review the policy and asked for comment not only whether to eliminate it, but also the “earliest feasible timeframe” to do so.

By way of background, the Commission has in the past licensed must-carry “Category A” services – such as HGTV Canada, Bravo!, Sportsnet 360, and YTV – on a one-per-genre basis.  Genre exclusivity is intended to prevent “head-to-head” competition for Category A services with each other, or with any other linear service in Canada.  Category A services have been insulated at least in part from competition with other Canadian services (may-carry Category B services, and Category C news and sports services).  The rules to authorize non-Canadian services for distribution in Canada have also prohibited “direct competition” with Canadian services as a condition of authorization.  The “must carry” and the genre protection privileges for Category A services were designed in large part to ensure that the services achieved enough revenues to meet their Cancon and related programming obligations, and thereby maximize their contribution to the creation of Canadian programming.

In a 2013 Discussion Paper commissioned by the CRTC, Broadcast consultant Peter Miller concluded that

Genre exclusivity cannot be considered ‘smart regulation’.  It has elements that make it internally contradicting, ambiguous, difficult to understand, costly to enforce, and it may possibly be just plain wrong-headed for today’s Canadian broadcast system.  […] The CRTC is not required to ‘rely on market forces to the extent possible’ in its regulation and supervision of the Canadian broadcasting system. But in this instance there is much to be said for doing just that.

In today’s decision, the CRTC stated that in the “Age of Abundance”:

the genre exclusivity policy is no longer needed to ensure programming diversity between services and [the CRTC] is therefore eliminating this policy. […] By eliminating this policy, the Commission is removing regulatory barriers so as to allow entry by new programming services, programming flexibility and greater domestic competition.

Genre exclusivity will be retained only in the conditions of licence (COLs) for the so-called 9(1)(h) services that benefit from a CRTC mandatory distribution order.  Such services include CBC News, The Weather Network, and the Aboriginal Peoples Television Network (APTN).  Limited genre protections also remain for mainstream sports services.

For all other Category A services, it remains to be seen how market forces of supply and demand will impact what has been a regulated and “exclusive” space.

The Commission has significantly “delayered” or revised regulatory requirements in a number of other areas, summarized below.

A.  “Leveling the playing field” for SVOD (subscription video-on-demand) services

A new category of “hybrid” SVOD services will be exempt from licensing.  These hybrid services would be available both over the closed facilities of a broadcasting distribution undertaking (BDU), and also delivered and accessed over the Internet.  Such SVOD services would be able to offer exclusive content – just as exempt online-only services can do – as long as that content is available over the Internet to all Canadians without BDU subscriber authentication.

The CRTC has issued a call for comments on revisions to the VOD exemption order and standard conditions of licence for VOD services.  Comments are due April 27.

B.  Promotion and “discoverability” of Canadian programming

Promotional and marketing expenses for Canadian-made content

Independent broadcasters may use up to 10% of the amount they invest in programs for marketing and promotion, including payments to other broadcasters for paid promos.

Local Availabilities to Promote Canadian Programs

Local availabilities, or “local avails”, are the two minutes per hour of reserved advertising time in non-Canadian specialty channels.  Broadcast distributors in Canada contract with the non-Canadian channels to insert promotional materials in these avails.

Under the current regulatory regime, 75% of this time is made available to Canadian broadcasters to promote their services, to promote the community channel, and for unpaid Canadian PSAs.  25% has been available to broadcast distributors for information on and promotions for distributors’ services.

Going forward, at least 75% of local avails must be used to promote first-run, original Canadian programs.  The remaining 25% can be used to promote Canadian channels and broadcast distribution services.

C.  Funding models for Canadian-made programs

As exceptions to the CRTC’s standard Canadian program certification process – and subject to certain streamlined criteria – the CRTC is launching the following pilot projects:

Pilot project 1:  CRTC will recognize adaptations of best-selling novels by Canadian authors as Canadian live-action drama and comedy productions.

Pilot project 2:  CRTC will recognize Canadian live-action drama and comedy productions with a budget of at least $2 million per hour as Canadian productions.

D.  Terms of Trade

In a 2007 policy decision, the CRTC encouraged the development of terms of trade agreements between broadcasters and independent producers.  In the years following that decision, the CRTC imposed adherence to a terms of trade agreement with the Canadian Media Production Association (CMPA) as a condition of licence for large English-language TV groups, and for the CBC.  The CRTC has now – to the surprise of many in the industry – stated that it will eliminate those conditions of licence effective April 29, 2016, stating that “it is no longer necessary for the Commission to intervene in this relationship by requiring adherence to terms of trade agreements”.

E. Cancon quotas

In its policy shift from “quantity to quality”, the CRTC is eliminating the daytime quotas for Cancon for local TV stations; the quota for prime time remains at 50%.  For specialty channels, 35% of all programs broadcast overall must be made by Canadians.  This sweeps away varied levels from 15% to 85%, depending on the service, and does away with a specific quota for prime time.

F.  Viewer Information:  Set-top boxes

Industry stakeholders are to form a working group to develop an audience measurement system based on STB data.  The group is to report back to the CRTC by June 10 on its progress on technical standards, privacy protections, a governance structure, and cost-sharing.

Privacy protection issues have long been raised in this area as a key concern.  The collection and sharing of viewer data has also received recent media coverage in the context of user commands to Smart TVs.  STB data collection, use and disclosure proposals can be expected to be watched closely by the Office of the Privacy Commissioner of Canada.

G.  National news services

Existing and new Canadian news services will have to meet additional regulatory criteria.  Going forward, they must broadcast an annual average of 16 hours per day, 7 days per week, of original programming.  95% of their programming must be drawn from specific news-oriented categories. They must also operate a live broadcast facility, and have news bureaus in at least 3 other regions.

Next Steps

The Commission has called for comments on the proposed exemption order for hybrid VOD services, and will be amending regulations and conditions of licence in further proceedings, to implement today’s policy decisions.

The Commission will also be issuing decisions on pick-and-pay (a la carte) programming and related issues in the coming days.

 

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Let’s Talk TV – Delayering 50 years of Regulation in “the Age of Abundance”