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    Why Competition Holds the Key to a Broken Broadcast System

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    Tuesday July 05, 2011
    As the Canadian Radio-television and Telecommunications Commission concludes its hearing on the consolidation of the Canadian communications market into a handful of corporate giants (so-called vertical integration) and embarks on a "fact-finding exercise" on the impact of online video services (today is the submission deadline), my weekly technology law column (Toronto Star version, homepage version) notes the only obvious conclusion from the hundreds of submissions and hours of debate is that Canada’s broadcast law framework is broken.

    The Commission’s struggle to make sense of the changing corporate and technological landscape - alongside lobbying for new industry codes of practice and Internet regulations - is rooted in a regulatory framework premised on scarcity rather than abundance. When the law was crafted, broadcasters occupied a privileged position, since the creation of video was expensive and the spectrum needed to distribute it scarce. As a result, the government established a licensing system complete with content requirements and cultural contributions designed to further a myriad of policy goals.

    Yet among the more than 40 policy goals found in the current Broadcasting Act, the word "competition" does not appear once. The absence of competition may have made sense when there was little of it, but in today’s world of abundance featuring a seemingly unlimited array of content and distribution possibilities, fostering competition among broadcasters and broadcast distributors such as cable and satellite companies might hold the key to reforming the system.

    What might a competition-focused broadcast policy look like?  


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    Why Competition Holds the Key to a Broken Broadcast System

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    Tuesday July 05, 2011
    Appeared in the Toronto Star on July 3, 2011 as Why Competition Holds the Key to a Broken Broadcast System

    As the Canadian Radio-television and Telecommunications Commission concludes its hearing on the consolidation of the Canadian communications market into a handful of corporate giants (so-called vertical integration) and embarks on a "fact-finding exercise" on the impact of online video services, the only obvious conclusion from the hundreds of submissions and hours of debate is that Canada’s broadcast law framework is broken.

    The Commission’s struggle to make sense of the changing corporate and technological landscape - alongside lobbying for new industry codes of practice and Internet regulations - is rooted in a regulatory framework premised on scarcity rather than abundance. When the law was crafted, broadcasters occupied a privileged position, since the creation of video was expensive and the spectrum needed to distribute it scarce. As a result, the government established a licensing system complete with content requirements and cultural contributions designed to further a myriad of policy goals.

    Yet among the more than 40 policy goals found in the current Broadcasting Act, the word "competition" does not appear once. The absence of competition may have made sense when there was little of it, but in today’s world of abundance featuring a seemingly unlimited array of content and distribution possibilities, fostering competition among broadcasters and broadcast distributors such as cable and satellite companies might hold the key to reforming the system.

    What might a competition-focused broadcast policy look like?  

    First, rather than erecting barriers to new entrants with proposed fees, regulations, or investment restrictions, Canadian law would seek to create a level playing field that encourages more competition. This would mean recognizing that video can be distributed across many platforms from broadcast television to the Internet to software games, but that broadcast regulation is not needed where there is no scarcity.

    While some argue for the regulation of services like Netflix, the reality is that there is nothing to stop any Canadian company from establishing a competing service. The best way to beat Netflix is in the marketplace, not a CRTC hearing room. Conventional broadcast may still require some regulation (spectrum is still relatively scarce), but new online competitors do not.

    Moreover, encouraging greater competition means inviting new competitors into the marketplace. Canada maintains some of the most restrictive rules for foreign investment in the communications sector and this would change under a competition-focused broadcast policy.

    Second, broadcasters and broadcast distributors should be forced to compete more aggressively for viewers and original Canadian content. In the current environment, cable and satellite companies package hundreds of channels together in a confusing manner that leaves consumers frustrated with ever-increasing bills, while broadcaster competition is largely limited to outbidding one another for Hollywood hits.

    Injecting competition into this environment would include establishing a pick-and-pay option for consumers that would allow them to pay only for those channels they actually want and removing the simultaneous substitution policy that grants Canadian broadcasters the lucrative ability to substitute their feed (commercials included) over the same U.S. feed. Dropping simultaneous substitution, which has turned some Canadian private broadcasters into little more than U.S. affiliates, would force the broadcasters to compete with their own original content and help to ensure that Canadian content is made to be watched, not just made to comply with regulatory requirements.

    Third, a competition-focused approach would ensure that the vertically integrated giants do not leverage their controls across multiple platforms to stymie new entrants or independently created content. That would require guidelines on the implementation of Internet data caps (since ISPs can use the caps to hamper online video competitors), enforcement of net neutrality rules to foster different modes of video distribution, and restrictions on the use of exclusivity by ensuring competitor access to content on reasonable terms.

    The result would be a sea-change in the Canadian broadcast landscape – broadcasters competing on the quality of their original programming, broadcast distributors on the basis of the value they provide to consumers, and creators on their ability to find an audience in a world of abundance.

    Michael Geist holds the Canada Research Chair in Internet and E-commerce Law at the University of Ottawa, Faculty of Law. He can reached at mgeist@uottawa.ca or online at www.michaelgeist.ca.


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    CRTC Chair Calls on Broadcasters to Lobby For Legislative Reform

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    Friday May 06, 2011
    CRTC Chair Konrad von Finckenstein gave a speech to the Canadian broadcasting community yesterday in which he urged broadcasters and broadcast distributors to speak with one voice for legislative reform. Von Finckenstein presented his vision of a single communications statute (rather than separate Telecom Act and Broadcasting Act) that could include:
    • A statement of the economic, social and cultural objectives of the communications system.
    • A structure for the optimum regulation of the transport of bits, whether by wireline or wireless, and whether the content is voice or data. This would be the heart of the Act. The goal has to be a competitive, flexible system that encourages innovation.
    • A clear delineation of the broad policy choices that are to be left to the government, and the powers to be assigned to an independent regulator.
    • Specific provisions on timelines and on regulatory powers, such as AMPs [Administrative Monetary Penalties], mandatory adoption of codes, and the explicit power to impose arbitration.
    • A coherent scheme for the support of Canadian content, be it by way of exemption, exception or subsidies—or a combination of all three.
    • The obligations, responsibilities and governance of the public broadcaster, defining its special role in reflecting Canada’s unique culture and values. This could be set out in a separate part of the Act—or, as I would recommend, in a separate statute.
    He concluded by stating that Canada needs modern, forward-looking legislation and that the industry needs to step up to the plate to lobby for change.
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    Do We Still Need Foreign Ownership Restrictions in Canadian Broadcasting?

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    Thursday March 10, 2011
    Appeared in the Toronto Star on March 6, 2011 as Content Rules, Not Canadian Ownership, Protect Our Culture

    In recent weeks, a political consensus has begun to emerge on the benefits of removing restrictions on foreign ownership in the telecommunications sector. Implementing such reforms faces at least one major political stumbling block that is only tangentially related - the spillover effect onto the broadcasting sector.

    As Canadian telecom operators, broadcasters, and broadcast distributors become single entities - Rogers combined with City-TV, Quebecor’s ownership of Videotron, Sun Media, and Groupe TVA, Shaw having purchased Canwest Global, as well as Bell in the process of merging with CTVglobemedia - the biggest hurdle may well be fears about the cultural impact of opening up telecom companies to foreign buyers.

    While the link between broadcasting and Canadian culture is obvious, the connection between Canadian broadcasting ownership and Canadian culture is tenuous at best.

    Canadian law currently features both foreign ownership restrictions and content requirements. The foreign ownership rules generally limit licensees to 20 percent foreign ownership (up to 33 percent for a holding company). This covers all types of broadcasters including television, radio, and broadcast distributors.

    The Canadian content requirements apply to television, radio, and specialty television stations. Television stations must carry a certain percentage of Canadian content, with additional requirements for “priority programming” that includes Canadian dramas, documentaries, music, and variety shows.  At least 35 percent of music played on radio stations must be Canadian in order to meet Cancon requirements.

    Many observers appear to assume that Canadian ownership and content requirements go hand-in-hand, fearing that a foreign owned broadcaster would be less likely to comply with Canadian content requirements. Yet there is little reason to believe this to be so.  

    The Canadian Radio-television and Telecommunications Commission’s active involvement in setting Canadian content requirements is a direct result of Canadian-owned broadcasters regularly seeking to limit the amount of Canadian content they are required to broadcast. Producing original Canadian content is simply more expensive than licensing foreign (largely U.S.) content.  These fiscal realities - and the regulations that have arisen as a response - remain true regardless of the nationality of the broadcaster.

    Foreign owned businesses face Canadian-specific regulations all the time - provincial regulations, tax laws, environmental rules, or financial reporting - and there is little evidence that Canadian businesses are more likely to comply with the law than foreign operators.  
    Cultural businesses may raise particular sensitivities, but broadcasters that are dependent upon licensing from a national regulator can ill-afford to put that licence at risk by violating its terms or national law.

    In fact, a review of other developed countries reveals that many have eliminated foreign ownership restrictions in their broadcasting sector but retain local content requirements.  For example, Australia has no foreign ownership restrictions on broadcasters (Canwest was once the majority owner of one of its television networks), yet employs a wide range of local content requirements.

    The same is true in many European countries - Germany has eliminated foreign ownership restrictions but retains daily regional programming requirements, Ireland has no foreign ownership restrictions but establishes programming requirements for each broadcast licensee, and the Czech Republic has dropped its foreign ownership restrictions but relies on broadcasting licences to mandate local programming.

    In the absence of content requirements on private broadcasters, some countries rely more heavily on their public broadcasters to be a key source of domestic programming.  For example, Norway does not have foreign ownership restrictions but has established regional programming requirements for its public broadcaster (in addition to local programming expectations in the licensing process).

    Although few are calling for Canadian broadcasting to be opened to foreign ownership, the reality is that the cultural concerns associated with greater foreign ownership are vastly overblown. As a growing number of viewers venture outside the traditional broadcasting system for their news and entertainment, the cultural community must find better tools than foreign ownership restrictions to help support the creation and broadcast of Canadian content.

    Michael Geist holds the Canada Research Chair in Internet and E-commerce Law at the University of Ottawa, Faculty of Law. He can reached at mgeist@uottawa.ca or online at www.michaelgeist.ca.


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