Speech by Konrad von Finckenstein, Q.C., Chairman, Canadian Radio-television and Telecommunications Commission


To the Banff World Media Festival

Banff, Alberta
June 13, 2011

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The content of this text was delivered in an interview format, which covered all the issues included in the speech.

 

Thank you very much. I’m glad to be back in these beautiful surroundings—and I’m glad to have the chance to meet once again with the major players in the industry.

Today, I’d like to review some of the regulatory measures we have been taking to help our broadcasting system adapt to the new digital environment. 

Digital transition

When I was here last year, I spoke to you with some sense of urgency about the deadline for the switch from analog to digital television.

At that point, there was just over a year to go. I was concerned that the preparations weren't going fast enough. The cut-off date was non-negotiable, and it was essential that it be met. The reasons were, and are, compelling:

  • We have to ensure that Canadians have access to the high-definition programming that they want to see.
  • We are committed by our agreement with the United States to vacate channels 52 to 69, some of which will be used for public safety services.
  • And we have to free up spectrum for a vast expansion of advanced wireless services.

I'm very pleased that the industry is well on its way to getting the job done. I’m confident that you will complete all the remaining work in time for August 31.

You have been overcoming significant difficulties—technical, logistical and financial. It's been a special challenge for the CBC—which operates two national networks and is responsible for Canada's largest group of over-the-air transmitters.

We knew that the digital changeover would not be easy. That's why we set a realistic objective. Conversion would be required by the cut-off date only in certain markets:

  • all provincial capital cities
  • the National Capital Region
  • markets served by multiple originating stations, including CBC stations, and
  • markets with populations greater than 300,000.

We're pleased to see that Shaw Communications has come forward with a solution to one of the inevitable problems. There are thousands of Canadian viewers who have been receiving the signals of their local or regional TV stations through rabbit ear or rooftop antennas. After the transition to digital, some of these viewers would have lost access to those stations.

Therefore, to ensure continuing service, they will be eligible to receive from Shaw, free of charge, a satellite dish, including installation. Shaw will also provide them with free satellite access to those local or regional stations.

This is a creative solution, and we would urge Shaw to advertise their offer so that eligible viewers may take advantage of it.

Informing the public

The Commission would like to draw to your attention one of the jobs that must be completed in order to ensure the success of the transition. Canadians must be informed about what this change will mean to their viewing experience. We have required all broadcasters to air public service announcements to explain it. These have been on the air since May 1.

The great majority of Canadians are served by cable or satellite; it's important for them to know that they won't see any change. However, for those 7% who get their TV service over the air, there will be changes. They must be told what to expect, and what they can do to maintain access to their local stations.

These messages must be crystal clear. Some cable distributors may see the changeover as a marketing opportunity. They may want to propose to their customers that they should now upgrade their subscriptions from analog to digital distribution. Cable packages, however, have nothing to do with the transition to digital over-the-air broadcasting.

We have written to the distributors, strongly urging them not to suggest to their customers that the switchover of August 31 provides a reason for upgrading their cable service. That would only create confusion when what we need is clarity.

Spectrum

The future of the digital world is increasingly shifting towards mobile devices communicating through wireless connections. As I mentioned a moment ago, the transition to digital television is critical for Canada since it will free up the 700 megahertz (MHz) band.

The government has launched a consultation on the 700 MHz band, with an auction planned for late 2012.  An auction is also expected in the near future for the 2500 MHz band.

Spectrum is a limited and valuable public resource. As mobile data and video traffic grows rapidly over the next few years, it’s only a matter of time before more spectrum will be needed. Experience has shown that those who occupy the spectrum are in a position to have a say in determining its future utilization. Broadcasters would be well advised to start thinking about this eventuality.

Terms of trade

The revolution in digital technology has led to a wave of vertical integration and corporate consolidation. The industry is now dominated by a handful of very large broadcasting groups. As a result, independent producers, including many of you in this room, have felt they are at a disadvantage in negotiations over broadcasting rights. For example, you are concerned about getting paid fairly for the use of your programs across the multiple platforms that have sprung up in the digital world.

This is why the Commission has been urging the industry to develop terms of trade: a framework for fair and equitable dealings between independent producers and the broadcasters who buy rights to their productions.

We believe that terms-of-trade agreements would be helpful to our broadcasting system and to the development and distribution of Canadian content. We therefore gave broadcasters and independent producers a deadline: If they failed to reach an agreement before the start of our group-based licence-renewal hearings, we would impose one.

I'm pleased that they have responded so well to this gentle persuasion. The Canadian Media Production Association (CMPA) and the major private broadcasting groups undertook intensive negotiations. There was give and take on both sides, and they finally reached an agreement. It will apply to the full life cycle of a show, including pitching, development, production and broadcast on all platforms.

In addition, the Association des producteurs de films et de télévision du Québec (APFTQ) has reached an agreement with Astral for its French-language networks.

Terms of trade will bring clarity and certainty to broadcasters and producers. They will also help to bring Canadians a steady supply of high-quality Canadian programming available on a variety of platforms. We congratulate all the parties involved on their good will and hard work.

Negotiations have also been taking place between the CMPA and the CBC, and between the APFTQ and the Société Radio-Canada and Quebecor. We expect that agreements will be reached before the licence-renewal hearings; if not, terms will be imposed by the Commission.

Community broadcasting

Last summer, the CRTC issued a new community television policy to help ensure that the objectives of the Broadcasting Act could be met effectively in the new digital environment.

A key element of community broadcasting is access programming. We define it as programming under the creative control of members of the local community. To have that control they must originate the idea and participate significantly in the production team.

We established new requirements for the amount of access programming to be included in a community channel's schedule, and also for the amount of money to be spent on it.

During the process that led up to our new policy, some people raised concerns about access programming opportunities. We therefore asked the industry to develop a proposed code of best practices to guide the cable distributors in their decision-making.

The cable distributors established a working group to draw up a code of best practices for access programming. They submitted it to us earlier this year and we have published it for comments, which are due by September 6.

The Commission strongly supports the concept of self-regulating codes drawn up by the industry itself. We will approve such codes once we are satisfied that they meet the objectives of the governing legislation.

Fact-finding exercise on over-the-top programming services

The digital revolution has generated a flood of programming over the Internet. At the beginning of April, a working group representing a cross-section of the Canadian communications industry wrote me a letter. They asked that we look into the new over-the-top (OTT) programming services and their impact on the Canadian communications system. The Standing Committee on Canadian Heritage had also recommended such a study.

The OTT programming services offer foreign or domestic programming over the Internet independent of any traditional delivery system like cable or satellite. The programming is available on a variety of platforms for free or at a minimal cost. These services are not required to contribute to the creation and promotion of Canadian content, although they may choose to do so.

We do not know what impact OTT may have. Is it an extension of our broadcasting system, complementing the traditional methods of delivery? Or is this the beginning of a paradigm shift that will eventually replace traditional methods?

What we do know is that OTT is happening now, and it's growing fast. According to a recent report by Sandvine, Netflix alone is now delivering nearly 30% of peak downstream Internet traffic in North America. In Canada, Netflix was launched only last September, but by March it was already accounting for 13.5% of downstream traffic during the peak evening hours.

OTT programming services are here to stay, and consumers are quickly adopting them. We'd like to know how these developments can enhance our broadcasting system.

We are therefore gathering facts to help us understand the situation. You in the industry have access to the facts. We would like to hear from you about the impact of OTT programming services. For example:

  • What trends do you see in Canadians' consumption of programming, both domestic and foreign?
  • What technological developments in consumer devices and network capabilities will influence OTT programming?
  • Will the OTT offerings lead consumers to downgrade or cancel their cable or satellite subscriptions?
  • What opportunities and challenges will OTT present to Canada's creative industries?

On these and any other questions, we'd like you to provide the most specific and detailed data that you can.

We will be receiving submissions until July 5. Once we have the facts we'll be able to determine what action, if any, needs to be taken, and by whom.

Fundamental change is needed

Now that I've reviewed some of the key items on our current agenda, I'd like to close with some ideas directed towards the longer term.

As you know, I am a strong advocate of fundamental change in the regulatory system for communications in Canada. The industry is going through fundamental change in technology, in business models and in corporate structures. It has become a single industry, thoroughly converged and integrated. Yet it continues to be regulated under three separate Acts, which date from 20 years ago. Authority continues to be divided among different departments and agencies.

A conceptual rethink

We are in a new digital world now, a world in which consumers are in control. They have access to a wide range of digital platforms and applications. These new media bypass the traditional pathways of regulated broadcasting: over-the-air, cable and satellite. Therefore the Commission's ability to regulate through control of access is very much reduced.

I believe we need a conceptual rethink of the whole regulatory system. The results of that rethink should preferably be embodied in a single comprehensive Act to govern all communications.

The aim of the new legislation would be to create a structure for optimal regulation of the transportation of bits, whether by wireline or wireless technology, and whether they are carrying voice, video or data. This structure would support the development of a flexible, competitive and innovative system providing access for all Canadians to their choice of fast and efficient digital resources.

Here are some of the key points that might be included:

  • A statement of objectives for the system—economic, social and cultural.
  • A clear distinction between the broad policy choices to be made by the government and the powers to be assigned to an independent regulator in all areas of communication, including broadcasting, telecom and spectrum management.
  • Specific provisions on timelines and on regulatory tools, such as AMPs (Administrative Monetary Penalties), mandatory adoption of codes, and the power to impose arbitration.
  • A coherent scheme for the support of Canadian content. This could include subsidies, or incentives in the form of regulatory exemptions and exceptions, or a mix of all of these methods.
  • The responsibilities and governance of the public broadcaster, defining its special role in reflecting Canada's unique culture and values.

The institutions

We should also consider a rationalization of our institutional framework. Should we consolidate all communications policy in a single government department, as others have done? The European Union, the United Kingdom, France and Australia have all designated a Minister with special responsibility for the digital economy.

What about the regulator? Is our present CRTC model the best for us? Should there be fewer Commissioners? Should the powers of ex ante regulation be curtailed, while ex post powers of enforcement are increased? The aim should be to favour competition, with intervention limited to cases of market failure.

Should the relationship between the CRTC and the Competition Bureau be more clearly defined? What about the CRTC and the Copyright Board?

The industry must act

These are some of the questions that need to be answered as part of the conceptual rethink of our regulatory setup. The government and the Commission have introduced a number of improvements in recent years. However, there is a limit to what we can do without fundamental reform of the legislation and the institutions.

The kind of fundamental reform I'm talking about can only be realized through action by the government. The government, however, is unlikely to take action unless the industry itself is pushing for it. It is therefore up to you to organize yourselves and make sure the message gets out loud and clear.

At one time the industry could speak through The Canadian Cable Television Association, the Specialty and Premium Television Association, and the Canadian Association of Broadcasters. Today, these bodies are either gone or playing a diminished role. In my opinion, it is now time for the large vertically-integrated players to establish a new organization to speak for them, and to propose plans for change.

Regulatory change is necessary in our new digital world. We need new legislation and a new institutional framework. We cannot make the most of new opportunities when we are limited by the practices and the structures of the past.

Thank you very much.

 

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