Update to CRTC Communications Monitoring Report - 1 September 2008

Section 4.5 New Media: 

1)       Figure 4.5.10 source replaced with the following:

MTM 2007 (Respondents: All)

2)         In the Audio usage and New Media subsection, replace the paragraph just before Figure 4.5.11 with the following:

Traditional radio broadcasters are also evolving to include new media offerings as part of their business, such as making traditional radio broadcasts available online as either streaming services, or downloadable podcasts. Anglophones have displayed increased interest in utilizing podcasts, showing a growth rate of 63% over the past year. AM/FM broadcasting remains an important source for audio material, even for consumers which are Internet-centric in their media consumption. The following charts illustrate the popularity of AM/FM broadcasters as a source for audio content when streaming audio and downloading podcasts.

3)         Table 4.5.6 source replaced with the following:

MTM 2007 (Respondents: Past Month Internet Users (First four lines of table) and Those Using the Listed Technologies (Last 2 lines of table))

4)         Figure 4.5 13 title replaced with the following:

Average hours Canadians spend listening to radio - comparing average Canadian listening hours to those using the Internet to stream radio or listen to radio podcasts

5)         Figure 4.5 13 legend label Streaming or Podcasting replaced with the following:

Streaming or Podcasting Radio

6)         In the Audio usage and New Media subsection, replace last paragraph just after Figure 4.5.12 with the following:

The following chart indicates that users of alternative platforms for audio content delivery tend to consume more, not less, content from traditional providers. For example, Francophones who listen to streaming radio online reported average weekly hours of radio listening at over 21 hours, compared to all Francophones who reported only 14 hours of radio listening on average per week.

The following version of the Communications Monitoring Report 2008 reflects the corrections mentioned above.

Communications Monitoring Report

2008

This publication is only available electronically: http://www.crtc.gc.ca

This publication can be made available in alternative format upon request.

Ce document est également disponible en français.

Acknowledgements

The Commission wishes to thank all the entities that completed the CRTC Data Collection forms, without which this report would not have been possible. The Commission would also like to acknowledge the assistance provided by (1) Industry Canada in the analysis of broadband deployment as it related to the rural communities in Canada; (2) Statistics Canada for the various supplementary data used in this report; (3) BBM Canada and BBM Nielsen Media Research for audience measures; (4) BBM Analytics for 2007 Media Technology Monitor (MTM) syndicated reports; (5) comScore, for assistance with the MyMetrix data; and (6) Mediastats.

Interested parties are welcome to provide comments for improvements or additions to future editions of the report. You can send your comments to the attention of the Secretary General, CRTC, Ottawa, K1A 0N2 or by using our On-Line Services located on our website at www.crtc.gc.ca.

Executive Summary

Communications companies are crossing what have been traditional boundaries between broadcasting and telecommunications. The CRTC Communications Monitoring Report combines the previous broadcasting and telecommunications monitoring reports into one report to address these developments by providing a more holistic view of the industries and their markets than in past reports specific to each industry.

Broadcasting is an important element in the cultural, social, political and economic lives of Canadians while telecommunications are an important element in their social and economic lives. Radio and television broadcasting, whether over-the-air (OTA) or over broadcasting distribution undertaking (BDU) networks, such as cable and satellite, is available to virtually all Canadians. As well, over 98% of Canadians subscribe to telecommunications services.

Cable BDUs have benefited from technological developments as they have transformed their networks from one-way broadcasting networks to two-way broadband communications networks. They have expanded their services and are now providers of telecommunications and broadband services. In 2007 their landline telecommunications service revenues represented approximately 30% of their revenues. Similar technological developments have enabled telephone companies to transform their landline networks from analog to digital to broadband networks. With these developments telephone companies have expanded their services to include broadband and broadcasting services. In 2007 their Internet protocol television (IPTV) service revenues represented less than 2% of their revenues.

Canadians have benefited from these developments as they now have more choice of suppliers for broadcasting and telephony services. Approximately 93% of Canadian households can access broadband services using landline facilities. Satellite facilities can extend this reach to virtually all Canadian households which is only limited by capacity constraints. Approximately 64% of households subscribe to high-speed Internet access service. Of these 75% subscribe to broadband service with speeds of 1.5 mbps or higher and 59% subscribe to service with speeds of 5 mbps or higher.

With respect to wireless services, approximately 98% of Canadians live within the wireless footprint. Wireless service providers have also benefited from technology and enhanced their networks to provide 3G or 3G-equivalent wireless service that is now available to 78% of Canadians. These Canadians now have access to a wireless network capable of providing them with broadband equivalent services.

These developments position Canada well to take advantage of the services, opportunities and benefits that broadband has to offer.

Industry Revenue Growth

Total broadcasting and telecommunications revenues increased 5.7% from $48 billion in 2006 to $51 billion in 2007. Broadcasting revenues increased 6.7% from $12 billion in 2006 to $13 billion in 2007; whereas telecommunications revenues increased 5.3%, from $36 billion to $38 billion.

Broadcasting

In 2007, BDU broadcasting revenues increased 1.4 and 2.0 times faster than radio and television respectively: BDU broadcasting revenues increased 8.8% from $5.8 billion in 2006 to $6.3 billion in 2007; whereas private commercial radio revenues increased 6.2% from $1.4 billion to $1.5 billion and television revenues increased 4.3% from $5.0 billion to $5.3 billion.

Radio

There were 1,222 radio and audio services in Canada in 2007, of which 8.5% were operated by the national broadcaster. These services were broadcast to English-language Canadians (75%), French-language Canadians (22%) and third-language Canadians (3%). There were 59 digital radio and audio services in 2007.

Nationally, average weekly hours tuned per capita have declined by 2% annually from 19.5 hours in 2003 to 18.3 hours in 2007. On a per listener basis, average weekly hours tuned also declined but at a slower rate, declining 1% annually from 21.0 hours in 2003 to 20.2 hours in 2007.

Private commercial broadcasters representing 60% of radio and audio services, generated $1.5 billion in 2007, a 6% or $87 million increase over the previous year. Although 47 AM stations have been converted to FM since 2003, the average revenues and profit before interest and taxes (PBIT) per FM station has remained relatively unchanged at $2.5 million and $0.6 million per station respectively; whereas the average revenues per AM station have increased from $1.5 million in 2003 to $1.9 million in 2007 and the PBIT has increased from almost nil to $0.1 million.

Television

There were 685 television services in 2007. The number of third language television stations increased 12% from 113 stations in 2006 to 126 stations in 2007. Pay, pay per view (PPV), video-on-demand (VOD) and specialty services had the highest revenue growth in 2007, increasing from $2.5 billion in 2006 to $2.7 billion in 2007, a $226 million or 9% increase. Pay, PPV, VOD and specialty service revenues were 52% of total television revenues.

Industry PBIT margins have generally increased for English- and French-language private conventional OTA television and pay, PPV, VOD and speciality services.

Overall viewing of Canadian programs on Canadian English-language services decreased from 52% in 2006 to 48% in 2007, whereas viewing of Canadian programs on French-language services remained relatively unchanged at 65% in 2007. While drama & comedy continues to be the most popular type of programming, it is predominantly of non-Canadian programs. In 2007, 79% of viewing of English-language drama/comedy was of non-Canadian programs and 63% of viewing of French-language services was of non-Canadian programs.

BDU

The cable BDU footprint encompasses over 12.4 million Canadian households.¹ In 2007 approximately 10.7 million or 90% of Canadian households subscribed to a BDU for television service, an increase of 0.2 million or 1.7% over the previous year. Of those subscribing to a BDU, 25% subscribed either to a direct-to-home (DTH) or multipoint distribution system (MDS) BDU. The top 4 cable BDUs and the two DTH providers captured 91% of all BDU subscribers in 2007.

BDU programming revenues per subscriber per month² increased $3.26 or 7% from $46.56 in 2006 to $49.82 in 2007.

Combined with their telephony services, over the 2002 to 2007 period the cable BDU earnings before interest, taxes, depreciation and amortization (EBITDA) margin remained within the 40.2% to 43.9% range whereas the DTH and MDS EBITDA margin steadily increased from a negative 9.2% in 2002 to 16.9% in 2007.

New Media broadcasting

Canadians are increasingly benefiting from the wide spread availability of broadband services. A growing numbers of Canadians report using the Internet for things such as watching video (36% in 2007), as well as using other technologies such as MP3 players (31% in 2007). Canadians are also spending more time using new media technologies as part of their everyday lives. Average hours of Internet usage has grown to over 10 hours per week, and it increases for those with high-speed broadband Internet access.

Telecommunications

The vast majority of the $1.9 billion increase in telecommunications revenues is directly attributable to the 14% and 17% revenue growth of mobile phone and residential high-speed Internet services, respectively. The number of mobile phone subscribers increased 8.2% in 2007. Canadians continued to embrace technologies including broadband access to the Internet as the number of residential subscribers to high-speed Internet services increased by 12%.

To a lesser extent, overall industry revenues continued to benefit from the revenue growth of the newer data services that meet business customer requirements for increased speed, functionality and cost efficiency. These services now represent over 70% of the data protocol revenues, with data services such as Ethernet and Internet Protocol (IP) based virtual private networks (VPNs) having a combined revenue growth of 20%.

Over the 2003 to 2007 period, the incumbent TSPs' EBITDA declined from $7.2 billion to $6.7 billion or 7%. In contrast, the wireless EBITDA steadily increased from $3.1 billion in 2003 to $6.5 billion in 2007 or 110%. Although wireless revenues accounted for 38% of the telecommunications revenues in 2007, the wireless EBITDA accounted for an estimated 50% of industry EBITDA. Capital expenditures increased from $6.9 billion in 2006 to $8.2 billion in 2007, a $1.3 billion or 18.7% increase.

Competition

The alternative TSPs' share of total wireline telecommunications revenues continued to increase and reached 32% or $7.5 billion in 2007. The alternative TSPs' market share included the incumbent telephone companies' activities when operating outside of their traditional territories (8%), other facilities-based TSPs such as cable companies and hydro utility companies with telecommunications activities (18%) and resellers (6%).

The large cable companies are major providers of high-speed Internet service, as they have approximately 55% of high-speed residential Internet subscribers in 2007. In 2005, they started to provide local telephone service generally over a managed network and by end 2007 they captured almost 12% of local residential lines to become major competitors of the incumbent telephone companies in residential markets.

The competitors of the incumbent telephone companies which include incumbent telephone companies when operating outside of their traditional territories, continued to gain market share primarily due to the dramatic growth in local competition. Competitors had strong growth in their number of local lines; both in the residential market, essentially from cable BDUs, where competitor lines increased 38% and, to a lesser extent, in the business market, where competitor lines increased 7%.

Regulation

The Commission has forborne from economic regulation approximately 73% of residential local exchange lines and 65% of business local exchange lines or 80% of local revenues. With respect to the remaining telecommunications services, the Commission has forborne from economic regulation 95% of long distance, 94% of data, 47% of private line, 98% of Internet, and 100% of wireless service revenues. Overall, approximately 90% of total telecommunications revenues were from forborne services. The remaining 10% consists of revenues from the remaining non-forborne retail (75%) and wholesale (25%) revenues.

International

In terms of pricing, Canadian rates for wireline telecommunications service compare favourably with other foreign jurisdictions. For wireless service, at a low usage level Canadian rates are below those in the United States, but tend to be higher than in other countries surveyed. At a high usage level, Canadian wireless rates are comparable to the United States and France, but significantly higher than in the United Kingdom and Australia. For Internet service, Canada appears to be mid-range in terms of international pricing.

Canada has the highest proportion of households taking up broadband connections among all of the G7 countries. Broadband to the home in Europe is primarily supplied via DSL technology over fixed telephone lines, whereas in Canada (as in the United States) consumers have more choice as broadband delivery is widely available over both cable and DSL.

Table of Contents

1.0 Introduction

1.1 Purpose of the report
1.2 Data collection and outline of the report

2.0 The CRTC, policies and regulation

2.1 The CRTC
2.2 Regulatory oversight of broadcasting and telecommunications
2.3 Diversity and social issues
2.4 Regulatory frameworks
2.5 Contribution and spending regimes
2.6 Simplifying regulation and dispute resolution
2.7 Current major CRTC initiatives

3.0 The Communications Service Industry

3.1 Financial Overview

4.0 Broadcasting

4.1 Broadcasting - Financial review
4.2 Radio
4.3 Television
4.4 Broadcast Distribution
4.5 New Media

5.0 Telecommunications

5.1 Telecommunications - Financial review
5.2 Local & access and long distance
5.3 Internet and broadband availability
5.4 Data and private line
5.5 Wireless

6.0 International Perspective

6.1 Current regulatory practices
6.2 How Canada compares internationally

Appendices

Appendix 1 Data collection methodology and analysis
Appendix 2 Summary of Canadian telecommunications markets subject to Commission forbearance rulings
Appendix 3 Classification of telecommunications service providers
Appendix 4 Status of local forbearance - residential and business exchanges
Appendix 5 International pricing assumptions

List of Diagrams

Diagram 4.1.1 Program Distribution

List of Tables

Table 2.3.1 Broadcasting complaints by sector, by issue
Table 2.3.2 Number of contacts by public
Table 2.3.3 Complaints handled by the CBSC
Table 2.3.4 Complaints handled by the ASC
Table 2.3.5 Canadian penetration rates - Wireline and wireless subscribers (per 100 households)

Table 2.6.1 Number of dispute files received in 2007/08
Table 2.6.2 Fiscal year comparisons of the average number of days to resolve disputes

Table 3.1.1 Telecommunications and broadcasting revenues
Table 3.1.2 Industry revenues by type of provider

Table 4.1.1 Broadcasting revenues

Table 4.2.1 Number and type of radio and audio services authorized to broadcast in Canada
Table 4.2.2 Markets with transitional digital radio stations in Canada
Table 4.2.3 Number of new over-the-air radio stations approved from 1January 2003 to 31 December 2007
Table 4.2.4 Average weekly hours tuned per capita by age group
Table 4.2.5 Radio tuning share in an average week and average weekly hours tuned by listener for English and French AM and FM bands
Table 4.2.6 Fall tuning achieved by the largest private commercial radio operators in Canada

Table 4.2.7 Fall tuning achieved by largest English and French - language private commercial radio operators in Canada
Table 4.2.8 Revenues and number of undertakings reporting financial results for private commercial radio stations - English, French and Ethnic
Table 4.2.9 English-language, and French-language radio revenues and number of undertakings reporting for the largest radio operators in Canada
Table 4.2.10 Revenues for Type B Native, Community, and Campus radio stations
Table 4.2.11 Value of radio transactions and corresponding transfer benefits for the period 1 May 1998 to 31 December 2007
Table 4.2.12 Summary of annual CCD contributions reported by radio licensees

Table 4.3.1 Number and type of television services authorized to broadcast in Canada
Table 4.3.2 Over-the-air transitional digital television
Table 4.3.3 National average weekly viewing hours by age group (All persons 2+, Monday to Sunday, 6 a.m. to 6 a.m.)
Table 4.3.4 Viewing share of Canadian and non-Canadian services by language and type of service - All Canada , excluding Quebec Franco market 2004/2005 - 2006/2007 television seasons
Table 4.3.5 Viewing share of Canadian and non-Canadian services by language and type of service in the Quebec Franco market 2004/2005 - 2006/2007 television seasons
Table 4.3.6 Viewing of Canadian and non-Canadian programs distributed by Canadian English-language television services by program origin and genre - All Canada, excluding Quebec Franco market All persons 2+, 6 a.m. to 6 a.m.
Table 4.3.7 Viewing of Canadian and non-Canadian programs distributed by Canadian English-language private conventional services by program origin and genre - All Canada, excluding Quebec Franco market All persons 2+, 6 a.m. to 6 a.m.
Table 4.3.8 Viewing of Canadian and non-Canadian programs distributed by English-language CBC conventional services by program origin and genre- All Canada, excluding Quebec Franco market All persons 2+, 6 a.m. to 6 a.m.
Table 4.3.9 Viewing of Canadian and non-Canadian programs distributed by Canadian English-language pay and specialty services by program origin and genre - All Canada, excluding Quebec Franco market All persons 2+, 6 a.m. to 6 a.m.
Table 4.3.10 Viewing of Canadian and non-Canadian programs distributed by Canadian French-language television services by program origin and genre - Quebec Franco market , All persons 2+, 6 a.m. to 6 a.m.
Table 4.3.11 Viewing of Canadian and non-Canadian programs distributed by Canadian French-language private conventional television services by program origin and genre - Quebec Franco market , All persons 2+, 6 a.m. to 6 a.m.
Table 4.3.12 Viewing of Canadian and non-Canadian programs distributed by French-language SRC conventional services by program origin and genre - Quebec Franco market , All persons 2+, 6 a.m. to 6 a.m.
Table 4.3.13 Viewing of Canadian and non-Canadian programs distributed by Canadian French-Language pay and specialty services by program origin and genre - Quebec Franco market, all persons 2+, 6 a.m. to 6 a.m.
Table 4.3.14 Advertising and other revenues: CBC conventional OTA television stations (owned and operated)
Table 4.3.15 Advertising and other revenues: Private conventional OTA television stations
Table 4.3.16 Revenues: Pay, PPV, VOD and specialty analog and digital services
Table 4.3.17 Companies with significant ownership interest in specialty, pay, PPV and VOD services as of 31 December 2007
Table 4.3.18 Canadian Programming Expenditure (CPE) - CBC English- and French-language conventional OTA television
Table 4.3.19 Canadian Programming Expenditure (CPE) - Private conventional OTA television
Table 4.3.20 Expenditures on non-Canadian programming - Private conventional OTA television
Table 4.3.21 Expenditures on Canadian and non-Canadian programming by genre reported by pay and specialty services
Table 4.3.22 Canadian programming expenditures (CPE) reported by the PPV and VOD services
Table 4.3.23 Number of hours of Canadian priority programming broadcasted annually - 7 p.m. to 11 p.m.
Table 4.3.24 Value of television transactions and corresponding transfer benefits for the period 11 June 1999 to 31 December 2007

Table 4.4.1 Broadcast distribution - basic and non-basic revenues, subscribers, monthly revenues per subscriber, and percent of households subscribing to BDUs
Table 4.4.2 Top Canadian distributors and number of subscribers
Table 4.4.3 Number of subscribers receiving digital services
Table 4.4.4 Number of cable undertakings contributing to community channels
Table 4.4.5 Affiliation payments made to pay, PPV, VOD (pay)and specialty services

Table 4.5.1 Canadian Internet usage by demographic
Table 4.5.2 Website category visits by Canadian unique visitors
Table 4.5.3 Average weekly hours spent online by Canadians
Table 4.5.4 Adoption and growth / decline rate of various video technologies in Canada
Table 4.5.5 Adoption and growth / decline rate of various audio technologies in Canada
Table 4.5.6 Time spent by Canadian adopters using various technologies
Table 4.5.7 Various Canadian New Media Development Funds

Table 5.1.1 Retail and wholesale telecommunications revenues
Table 5.1.2 Telecommunications revenues by market segment
Table 5.1.3 Total telecommunications revenues by type of service provider
Table 5.1.4 Wireline telecommunications revenue market share by type of service provider
Table 5.1.5 Capital expenditures by type of TSP

Table 5.2.1 Local & access and long distance revenues, local lines and long distance minutes
Table 5.2.2 Local & access and long distance revenues by market segment
Table 5.2.3 Local & access revenues by type of TSP
Table 5.2.4 Local lines by type of TSP
Table 5.2.5 Incumbent TSP provincial retail local market share by line
Table 5.2.6 Incumbent TSP residence and business local market share by line for major centres
Table 5.2.7 Local wholesale revenues by major component
Table 5.2.8 Long distance revenues by type of TSP
Table 5.2.9 Long distance minutes by type of TSP
Table 5.2.10 Large incumbent TSPs' retail long distance revenue market share by region

Table 5.3.1 Internet Revenues
Table 5.3.2 Residential Internet subscribers by type of TSP
Table 5.3.3 Internet plans and pricing
Table 5.3.4 Key telecommunications availability indicators

Table 5.4.1 Data and private line revenues
Table 5.4.2 Data protocol revenues by service category
Table 5.4.3 Revenue market share by data legacy and new protocol service category
Table 5.4.4 Private line revenues by service category
Table 5.4.5 Private line - Short-haul and long-haul revenue market share

Table 5.5.1 Wireless and paging revenues and number of subscribers
Table 5.5.2 Wireless and paging revenues components
Table 5.5.3 Post-paid and Pre-paid Wireless Revenues (basic voice and long distance)
Table 5.5.4 Wireless subscriber market share by province
Table 5.5.5 Average revenue per user (ARPU) by province (excluding paging)
Table 5.5.6 Average monthly churn rates

Table 6.2.1 International pricing ($/month) - medium usage
Table 6.2.2 International pricing ($/month) - high usage
Table 6.2.3 International pricing ($/month) - low usage
Table 6.2.4 Main broadband connection types in 2007
Table 6.2.5 Mobile wireless statistics

List of Figures

Figure 2.3.1 Price Indices (TPI, BDU (Cable and Satellite (including pay television)), Internet access services and CPI)

Figure 2.5.1 2007 Contributions to CCD reported by commercial radio & audio services
Figure 2.5.2 2007 Television CPE
Figure 2.5.3 2007 BDU contributions to Canadian programming and local expression
Figure 2.5.4 Subsidy paid to LECs and the revenue percent charge 54

Figure 3.1.1 Broadcasting and telecommunications annual revenue growth rates
Figure 3.1.2 Broadcasting and telecommunications revenues by type of provider
Figure 3.1.3 Commercial broadcasting and telecommunications revenues (Excluding non-programming and exempt services)
Figure 3.1.4 BDU revenues by service type
Figure 3.1.5 BDU - EBITDA margins achieved from all services (programming, exempted and non-programming services)
Figure 3.1.6 Broadcasting and telecommunications operating platforms
Figure 3.1.7 Select Canadian communications companies revenue composition
Figure 3.1.8 Regulatory considerations in a converging industry

Figure 4.1.1 Commercial radio revenues by broadcaster
Figure 4.1.2 Commercial television revenues by broadcaster
Figure 4.1.3 BDU revenues by operator
Figure 4.1.3 Total broadcasting revenues and PBIT/EBITDA margins

Figure 4.2.1 Type of radio and audio services authorized to broadcast in Canada
Figure 4.2.2 Radio tuning share in an average week
Figure 4.2.3 English-language station formats - BBM Canada Fall 2007, 5 a.m. to 1 a.m., all persons 12+ Monday to Sunday
Figure 4.2.4 French-language station formats - BBM Canada Fall 2007, 5.a.m. to 1 a.m., all persons 12+, Monday to Sunday
Figure 4.2.5 Revenues - private commercial radio stations
Figure 4.2.6 Average annual revenues and PBIT per station - private commercial radio stations
Figure 4.2.7 PBIT and PBIT Margin - private commercial radio stations
Figure 4.2.8 Revenues - English-language private commercial radio stations
Figure 4.2.9 Average annual revenues and PBIT per station - English-language private commercial radio stations
Figure 4.2.10 PBIT and PBIT Margin - English private commercial radio stations
Figure 4.2.11 Revenues - French-language private commercial radio stations
Figure 4.2.12 Average annual revenues and PBIT per station - French-language private commercial radio stations
Figure 4.2.13 PBIT and PBIT Margin - French-language private commercial radio stations
Figure 4.2.14 Revenues - Ethnic private commercial radio stations
Figure 4.2.15 Average annual revenues and PBIT per station - Ethnic private commercial radio stations
Figure 4.2.16 PBIT and PBIT Margin - Ethnic private commercial radio stations

Figure 4.3.1: National average weekly viewing hours by age group (All persons 2+, Monday to Sunday, 6 a.m. to 6 a.m.)
Figure 4.3.2 Television revenues: CBC and private conventional OTA television, pay, PPV, VOD and specialty services
Figure 4.3.3 Source of Revenues for Conventional Television
Figure 4.3.4 Aggregrate PBIT margins for Private commerical OTA conventional television, pay, PPV & VOD services, analog, digital category 1 and category 2 specialty services
Figure 4.3.5 Aggregate PBIT margins private conventional OTA television, pay, PPV, VOD and specialty services
Figure 4.3.6 Revenues of English-language private conventional OTA television, specialty pay, PPV, VOD services
Figure 4.3.7 Aggregate PBIT margins English-language private conventional OTA television, pay, PPV, VOD and specialty services
Figure 4.3.8 Revenues of French-language private conventional OTA television, specialty, pay, and PPV services
Figure 4.3.9 Aggregate PBIT of French-language private conventional OTA television, pay, PPV and specialty services
Figure 4.3.10 Revenues of ethnic and third-language specialty, and digital category 2 pay services
Figure 4.3.11 PBIT Margins of ethnic and third-language specialty, and digital category 2 pay services
Figure 4.3.12 Revenues of large English-language private conventional OTA television ownership groups
Figure 4.3.13 Revenues of large French-language private conventional OTA television ownership groups
Figure 4.3.14 Advertising revenues: CBC/SRC conventional OTA television stations (owned & operated)
Figure 4.3.15: Canadian programming Expenditures (CPE) - distribution by genre for private conventional OTA television

Figure 4.4.1 EBITDA margins achieved from basic and non-basic programming services
Figure 4.4.2 Contributions to the CTF, other independent industry funds and expenditures on local expression (community channels) reported by broadcasting distribution undertakings

Figure 4.5.1 Cycle of consumer adoption / product Life Cycle
Figure 4.5.2 Internet applications - bandwidth requirements
Figure 4.5.3 Popular Internet activities of Canadians related to New Media
Figure 4.5.4 Video technology penetration in Canada
Figure 4.5.5 Internet video viewing by Canadians
Figure 4.5.6 Internet video viewing of Canadians by type
Figure 4.5.7 Penetration of Internet TV viewers by selected demographic groups
Figure 4.5.8 Gaming console statistics for Canada
Figure 4.5.9 Audio Technology Penetration in Canada
Figure 4.5.10 Podcast usage in Canada
Figure 4.5.11 AM/FM broadcasters as a source of audio material in streaming audio and downloaded podcasts
Figure 4.5.12 Average hours Canadians spend watching TV - comparing average Canadian viewing hours to those reporting watching Internet TV
Figure 4.5.13 Average hours Canadians spend listening to audio - comparing average Canadian listening hours to those using the Internet to stream audio or listen to podcasts
Figure 4.5.14 Canadian online advertising expenditures

Figure 5.1.1 Telecommunications revenues and percent annual growth
Figure 5.1.2 Annual revenue growth by market segment
Figure 5.1.3 Distribution of telecommunications revenues by market segment
Figure 5.1.4 Total telecommunications revenue market share by type of service provider
Figure 5.1.5 Total telecommunications revenue market share by type of service
Figure 5.1.6 Total business market wireline revenue distribution by customer size and type of provider
Figure 5.1.7 Telecommunications revenues and EBITDA margins
Figure 5.1.8 Capital expenditures as a percentage of revenues by type of TSP
Figure 5.1.9 Wireline inter-carrier expenses as a percentage of revenues by type of TSP

Figure 5.2.1 Alternative TSP local retail lines by type of facility
Figure 5.2.2 Alternative TSP local residential and business lines by type of facility
Figure 5.2.3 Incumbent TSP pay telephone quantities and revenue per payphone
Figure 5.2.4 Local service revenue distribution incumbent TSPs, alternative TSPs (out-of-territory) and alternative TSPs
Figure 5.2.5 Long distance service revenue distribution incumbent TSPs, alternative TSPs (out-of-territory) and alternative TSPs

Figure 5.3.1 Internet access revenue share by type of entity
Figure 5.3.2 Business Internet access revenues by access technology
Figure 5.3.3 Residential Internet access technology mix (2003 v. 2007)
Figure 5.3.4 Distribution of the number of non-dialup Internet subscribers and average revenue per user by Internet speed categories
Figure 5.3.5 Broadband (greater than 1.5 Mbps) subscriptions
Figure 5.3.6 Broadband availability (percent of households
Figure 5.3.7 Broadband availability -Urban v. rural (Percent of households)
Figure 5.3.8 Broadband availability v. subscriptions
Figure 5.3.9 OECD Broadband subscribers per 100 inhabitants, December 2007

Figure 5.4.1 Data and private line revenue market share by type of TSP
Figure 5.4.2 Data revenue market share by type of TSP
Figure 5.4.3 Private line revenue market share by type of TSP
Figure 5.4.4 Alternative TSPs' private line revenue share (Short-haul and long-haul)
Figure 5.4.5 Data and Private Line Service Revenue Distribution - Incumbent TSPs, Alternative TSPs (Out-of-Territory) and Alternative TSPs

Figure 5.5.1 Wireless revenues, subscribers and revenues per subscriber (excluding paging)
Figure 5.5.2 Wireless revenue and subscriber growth rates (excluding paging)
Figure 5.5.3 Revenues by major component (excluding basic voice)
Figure 5.5.4 Percent of pre-paid and post-paid subscribers
Figure 5.5.5 Capital expenditures (CAPEX) and average capital expenditure per user (ACEPU)
Figure 5.5.6 Retail and Wholesale Revenue Split
Figure 5.5.7 Wireless TSPs' subscriber market share
Figure 5.5.8 Wireless TSPs' revenue market share

Figure 6.2.1 International penetration rates, 2006
Figure 6.2.2 Change in fixed voice and mobile connections, 2001-2006
Figure 6.2.3 Telecommunications services revenue, 2006
Figure 6.2.4 Telecommunications services revenues, 2001 - 2006
Figure 6.2.5 Digital TV switchover completion
Figure 6.2.6 Mobile revenue as % of total telecom revenue
Figure 6.2.7 Mobile ARPU - international comparison

Map

Map 5.5.1 Presence of wireless facilities-based service providers
Map 5.5.2 Presence of 3G or 3G equivalent wireless facilities-based service providers

1.0 Introduction

1.1 Purpose of the report

This report provides a window on the broadcasting and telecommunications industries and is intended to foster an open and better-informed public discussion of broadcasting and telecommunications policies and issues.

The report contains disaggregated data on the Canadian broadcasting and telecommunications industries and markets. It provides a means to assess the impact of market and technological developments on, but not limited to, the cultural, social and economic objectives of the Broadcasting Act and the Telecommunications Act (the Acts), and the effectiveness of the Commission's regulatory frameworks and determinations in achieving the objectives.

Domestic and global competition as well as consumer demands for greater control over the communications experience has spurred rapid corporate and technological convergence in the communications landscape in Canada and abroad. The evolving borderless world of communications is a source of innovation and opportunities for carving out a special place within the broadcasting system for Canadian voices. The Commission invites parties to use this report to enrich their participation in the regulatory process.

What's new in this report?

The broadcasting and telecommunications industries are increasingly interwoven. As an example, dial-up Internet access service has given way to high-speed Internet service. This has contributed to and, with the introduction of higher access speeds, will continue to contribute to the development and evolution of New Media broadcasting. This offers a significant opportunity to further contribute to the broadcasting policy objectives of the Broadcasting Act. Communications companies are crossing what have been traditional boundaries between broadcasting and telecommunications. The CRTC Communications Monitoring Report combines the previous broadcasting and telecommunications monitoring reports into one report to address these developments by providing a more holistic view of the industries and their markets than in past reports specific to one industry or the other. The report updates and expands on the performance indicators and trends presented in previous broadcasting and telecommunications monitoring reports. The report has been expanded to include:

1. An overview of the broadcasting and telecommunications service providers and markets;

2. International price and availability comparisons with which to benchmark communications services;

3. Broadband availability by speed for both wireline and wireless platforms;

4. An expanded New Media section; and

5. An assessment of the impact of competition on communications service providers and consumers.

1.2 Data collection and outline of the report

Data collection and reduced regulatory reporting

This report is based on the responses from the industry to the Commission's annual broadcasting returns and telecommunications data collection forms (referenced collectively as 'CRTC data collection'), data collected from other sources, including Statistics Canada, Industry Canada, company-specific financial reports, BBM Canada, BBM Nielsen Media Research, BBM Analytics' Media Technology Monitor (MTM) reports and information previously filed with the Commission. All broadcasting data in this report, unless otherwise noted, is for the twelve month period ending August 31 whereas telecommunications data, including Internet service, is for the twelve month period ending December 31.

In order to minimize response burden on the industry, make more efficient use of resources and promote coherence of the Canadian statistical system, Statistics Canada and the Commission have been working together to eliminate overlap in their respective data collection activities and, where possible, to use common concepts and definitions. In that spirit the two organizations have jointly issued the Annual Returns for broadcasting licensees for many years. In 2008 a similar arrangement was introduced for the collection of telecommunications data from telecommunications service providers. Statistics Canada's Annual Survey of Telecommunications and Annual Survey of Internet Services Providers have been merged with the CRTC's annual telecommunications data collection. Thus, the CRTC annual data collection process was enhanced to include the compilation of information essential for the production of national and provincial economic accounts. As well, Statistics Canada streamlined and redesigned its quarterly survey of telecommunications in order to improve the coherence between annual and quarterly statistics for this sector.

International comparisons or analyses are made based on data obtained from reports published by international organizations such as the Organisation for Economic Co-operation and Development (OECD) as well as reports or data published by national regulatory agencies (NRAs) in other countries.

Specific elements of the monitoring exercise change over time to take into account regulatory or market developments, such as new technologies; changes in the market structure or in domestic or international regulations or agreements; or the introduction of new or evolving services. These changes serve to ensure that the monitoring reports continue to be useful tools for all stakeholders, including regulators, customers and industry players. Certain figures published in prior years' monitoring reports may be restated to be consistent with data displayed in this report. Other figures may change as a result of broadcasters or service providers resubmitting prior years' data. All revised numbers are identified by means of a number sign (#).

Outline of Report

This report is divided into a number of sections and appendices. An overview of the Commission's regulatory frameworks, streamlining initiatives and recent regulatory and industry developments is provided in Section 2. This section also compares and contrasts the key objectives of the broadcasting and telecommunications legislation. Section 3 examines the key financial indicators of the communications industry. It addresses the financial landscape of the broadcasting and telecommunications industries by examining key financial indicators including revenue, capital expenditures and other operational data. As well, it provides an overview of the broadcasters and telecommunications service providers. The performance of the Canadian broadcasting system is presented in Section 4, encompassing traditional radio, television and distribution undertaking broadcasting results and non-traditional New Media broadcasting results. Section 5 discusses the major telecommunications market segments: local and access; long distance; Internet; data and private line; and wireless. The section also reviews the availability of broadband service. Section 6 presents current regulatory developments in other countries and compares Canada's performance in broadcasting and telecommunications to that of those countries.

A description of the data collection methodology and analysis is provided in Appendix 1. A summary of the Canadian telecommunications markets subject to economic forbearance rulings is provided in Appendix 2. Appendix 3 discusses the classification of the telecommunications service providers. The status of local forbearance applications in residential and business exchanges is provided in Appendix 4. Appendix 5 lists the pricing assumptions used in the development of the price comparison of telecommunications services in Canada to that in other countries.

2.0 The CRTC, policies and regulation

2.1 The CRTC

The CRTC is an independent public authority in charge of regulating and supervising Canadian broadcasting and telecommunications. It serves the public interest and its power and jurisdiction are set out in the Acts. The CRTC reports to Parliament through the Minister of Canadian Heritage. The Governor in Council may issue directions of general application to the Commission on matters with respect to the objectives of the telecommunications, broadcasting or regulatory policy objectives set out in the Acts.

The components of broadcasting policy set out at section 3 of the Broadcasting Act are directly or indirectly tied to the cultural, social, political and economic fabric of Canada while those of the Telecommunications Act, as set out in section 7 of that Act, are tied to the social and economic fabric of the country.

Access to Canadian content, in particular its creativity and availability to Canadians, is the underlying principle of the broadcasting objectives. Canadian content must not only exist, it should also be available to all Canadians both as participants in the industry and as members of the audience. To achieve the objectives of the Broadcasting Act, the Commission is guided by the regulatory policy objectives set out in subsection 5(2) of that Act which requires the Commission to regulate and supervise the broadcasting system in a flexible manner that, among other things, takes into account regional concerns, is adaptable to technological developments and facilitates provisioning of broadcasting Canadian programmes to Canadians.

With respect to telecommunications, pursuant to the Telecommunications Act, the Commission strives to ensure the provision of reliable and affordable telecommunications services of high quality accessible to both urban and rural area customers, to foster facilities-based competition, to provide incumbents with incentives to increase efficiencies and be more innovative, and to adopt regulatory approaches, where necessary, that impose the minimum regulatory burden possible.

Since its coming into force in December 2006, the Commission has applied the Policy Direction³ in the exercise of its powers and performance of its duties under the Telecommunications Act. The Policy Direction mandates the CRTC to rely on market forces to the maximum extent feasible and regulate where there is still a need to do so, in a manner that interferes with market forces to the minimum extent necessary. The Policy Direction specifies criteria to encourage effective regulation which must be met by any new regulatory measure. The Policy Direction further directs the CRTC to adopt operational practices that promote more efficient, informed and timely regulation where it is required.

In addition to implementing the policy objectives in its governing legislation and the Policy Direction, the Commission also seeks to ensure that its regulatory frameworks for the Canadian broadcasting and telecommunications industries are keeping pace with emerging technologies. In all its activities, the Commission is guided by four basic working principles: transparency; fairness; predictability and timeliness. Consequently, it endeavours to make and publish its decisions promptly with a clear rationale and to regulate only where necessary, and then in the least intrusive manner possible. To further the transparency of Commission processes, the CRTC prepares each year (a) a summary of its activities related to the Canadian broadcasting and telecommunications industries and (b) its three-year work plan in consultation with industry stakeholders. These documents are available to the public on the CRTC's website.⁴

2.2 Regulatory oversight of broadcasting and telecommunications

Overview

The Commission uses a variety of means to exercise its regulatory powers. Under section 6 of the Broadcasting Act, the Commission has the power to establish policy guidelines and statements. These policy guidelines and statements are periodically reviewed to ensure that they are current. When reviewing the guidelines and statements, the Commission consults with the industry and the public by holding hearings. The Commission also has the power, pursuant to the Broadcasting Act, to establish regulations⁵ applicable to the broadcasting industry. Under subsection 9(1) the Commission has the authority to establish classes of licence and impose conditions of licence. The Commission imposes conditions of licence when issuing a licence and modifies these conditions as necessary when renewing the licence, to achieve the Canadian broadcasting policy objectives as set out in the Broadcasting Act.

Pursuant to section 47 of the Telecommunications Act, the Commission must exercise its powers and perform its duties with a view to implementing the telecommunications policy objectives set out in section 7 of the Telecommunications Act, ensuring that the rates charged by Canadian telecommunications carriers are just and reasonable, that, in relation to the provision of telecommunications services, Canadian carriers do not discriminate unjustly or accord any undue or unreasonable preference⁶ and in accordance with any order made by the Governor in Council or any standards prescribed by the Minister of Industry.⁷ In addition to regulating the rates, terms and conditions under which telecommunications services are provided, the Commission has the power to forbear from regulating telecommunications services or classes of service where it finds, among other things, that there is sufficient competition to protect the interests of users.⁸

The Commission fulfils its broadcasting and telecommunications regulatory and supervisory responsibilities by means of a number of inter-related activities, which include:

1. establishing, monitoring, assessing and reviewing, where appropriate, regulatory frameworks to meet its policy objectives;

2. implementing procedures for the efficient and effective resolution of competitive disputes; and

3. making determinations on industry mergers, acquisitions and changes of ownership in the industry.

The Commission also monitors the programming and financial obligations of broadcasting undertakings to ensure compliance with regulations and conditions of licence.

Regulatory framework within a competitive environment

In exercising its statutory powers under the Acts and predecessor legislation, the Commission has, where feasible gradually and in an orderly manner, opened up monopoly-based markets to competition to allow consumers multiple means of receiving programming services that include not only traditional cable companies but also satellite, wireless and telephone companies. In Broadcasting Public Notice CRTC 1997-25,⁹ the Commission established the conditions under which it would forbear from the regulation of Class 1 undertakings.¹⁰ In the process of opening the broadcast distribution undertaking (BDU) market to competition, the Commission has implemented self-regulatory mechanisms in the broadcasting industry where appropriate. The Commission has encouraged industry associations, such as the Canadian Association of Broadcasters (CAB), to develop self-regulating codes of conduct and standards pertaining to their industries.

Similarly since the early nineties, the Commission has moved toward greater deregulation of the telecommunications market. In Telecom Decision 94-19,¹¹ the Commission established a three-step process by which it could determine whether a telecommunication market is, or is likely to become competitive for the purpose of considering forbearance applications.¹²

As outlined in Appendix 2, since 1994 the Commission has forborne from regulating a number of telecommunications services including mobile services, retail Internet services, long distance and international services, various data and private line services, terminal equipment and inside wiring, satellite services and services provided by non-dominant carriers. More recently, frameworks have been established for the forbearance from regulating retail local exchange services. The Forbearance Order¹³ modified the Commission's framework established in Telecom Decision 2006-15¹⁴ for forbearing from regulating retail local exchange services. In the HSDS Decision¹⁵ the Commission established a framework for forbearing from regulating high-speed intra-exchange digital network access (high-speed DNA) services and metropolitan wavelength services (MWS). In this decision, the Commission also forbore from regulating Bell Canada's high-speed DNA services in a number of wire centres and from regulating the company's MWS in the Toronto, Montreal and Ottawa census metropolitan areas.

2.3 Diversity and social issues

Part 1 - Broadcasting

For the purposes of this report, the Commission's key social policy objectives can be described under four general headings: (i) diversity, (ii) official languages, (iii) accessibility and (iv) programming standards.

(i) Diversity

The Commission's objective with regard to diversity is to ensure all broadcasters contribute to a system that accurately reflects the presence in Canada of ethnocultural minorities, Aboriginal peoples and persons with disabilities. Consistent with subsection 3(1)(d)(iii) of the Broadcasting Act, the Canadian broadcasting system should:

through its programming and the employment opportunities arising out of its operations, serve the needs and interests, and reflect the circumstances and aspirations of Canadian men, women and children, including equal rights, the linguistic duality and multicultural and multiracial nature of Canadian society and the special place of Aboriginal peoples within that society.

The Commission's diversity objectives, as they pertain to the Canadian broadcasting system require:

1. that the broadcasting system should be a mirror in which all Canadians can see themselves; and

2. that the broadcasting system should be one in which producers, writers, technicians and artists from different cultural and social perspectives have the opportunity to create a variety of programming and to develop their skills.¹⁶

The Commission's objectives are to ensure:

1. the accurate reflection of the presence (i.e., "who we see" and "who we hear") of ethnocultural minorities, Aboriginal peoples and persons with disabilities; and

2. the accurate, fair and non-stereotypical portrayal (i.e., "how we see" and "how we hear") of such groups.

The Commission is achieving its objectives by licensing services that target specific communities and through expectations with regard to private broadcasters and the national broadcaster, the Canadian Broadcasting Corporation (CBC).

Broadcasting services and community needs

The Commission continues to license services dedicated to serving specific communities such as:

1. over-the-air ethnic radio and television services;

2. ethnic specialty and pay services;

3. native radio and television undertakings; and

4. The Aboriginal Peoples Television Network.

The Commission authorizes non-Canadian third-language services for distribution in Canada, subject to certain criteria. In December 2004, the Commission issued Broadcasting Public Notice 2004-96,¹⁷ which announced a revised approach to the assessment of requests to add non-Canadian third-language television services to the lists of eligible satellite services for distribution on a digital basis. The revised policy, which established a more open-entry approach to the authorization of non-Canadian third-language general interest services, puts a greater emphasis on expanding the diversity and choice in television services available to underserved third-language ethnic communities in Canada.

Subsequently, Broadcasting Public Notice 2005-104¹⁸ established an open-entry approach for general interest third-language ethnic Category 2 pay and specialty services. In order to expand the diversity and range of services available to underserved communities, the Commission issued Public Notice 2007-33,¹⁹ an exemption order that exempts from regulation certain third-language television undertakings, provided they meet the terms of the exemption order.

Persons with Disabilities

In response to Broadcasting Public Notice 2004-2,²⁰ wherein the Commission called upon the CAB to examine issues surrounding the presence, portrayal and participation of persons with disabilities in television programming, the CAB submitted, in September 2005, its final report. Entitled The Presence, Portrayal and Participation of Persons with Disabilities in Television Programming, the report included the results of a three-part qualitative research project on the state of the presence, portrayal and participation of persons with disabilities on Canada's privately-owned television services, as well as proposed initiatives, tools and recommendations for both the CAB, its members and its industry partners. On 19 June 2006, the Commission issued its response to the CAB's final report in Broadcasting Public Notice 2006-77.²¹ The Commission concluded that it expects progress to be made by both the CAB and broadcasters in addressing the key gaps identified in the research. The Commission indicated its expectation to see progress, in licensees' annual reports on cultural diversity described above, in the following areas:

1. increasing knowledge of the needs and abilities of persons with disabilities at all corporate levels;

2. implementing measures to increase the presence and participation of persons with disabilities, both on-air and behind the camera in terms of access and accommodation; and

3. community outreach initiatives involving persons with disabilities and disability organizations.²²

Cultural Diversity Corporate Plans & Annual Reports

The Commission requires broadcasters to describe their plans and activities with respect to the equitable employment and on-air representation of the four designated groups: visible minorities, Aboriginal persons, women and persons with disabilities.

In July 2004, the Task Force for Cultural Diversity on Television (the Task Force), which was formed by the CAB in 2001, published an extensive report.²³ The report includes the results of a landmark quantitative and qualitative study of the state of representation on private Canadian television as well as a recommended set of best practices and industry initiatives.

The Commission issued its response to the report in Broadcasting Public Notice 2005-24.²⁴ The Commission stated that, in addition to overall improvements in the representation and reflection of ethnocultural diversity on television, it expected progress to be made by broadcasters in addressing the key gaps identified by the research, namely:

1. the virtual absence of Aboriginal peoples in all genres of programming;

2. the significant under-representation of Asian Canadians in all genres of programming; and,

3. the lack of visible minorities and Aboriginal peoples in French-language news, in lead roles in English-language news programming, and in primary roles in English-language drama.

The Commission stated that it expected the CAB to report annually on its progress in implementing the industry initiatives recommended by the Task Force. The CAB filed its third annual report on diversity on 30 April 2008.

Television broadcasters

Since August 2001, the Commission has required television licensees to develop and file detailed corporate plans that include specific commitments to corporate accountability, the reflection of diversity in programming, and the solicitation of effective feedback from viewers.²⁵ As a key tool for monitoring progress in this respect, the Commission also requires television licensees to file annual reports outlining progress made to achieve the stated goals and any new initiatives undertaken. These reports are available on the Commission's website.

Radio broadcasters

In November 2007 the Commission followed up on the new Commercial Radio Policy 2006 by establishing reporting requirements on cultural diversity for commercial radio operators²⁶ and approving the CAB's best practices for diversity in radio. Like television licensees, large radio operators (with revenues above $50 million) are required to report annually to the Commission, starting 31 January 2009. Medium-sized radio operators (with revenues between $20 and $50 million) are required to report every five years from the date of the publication of the public notice (i.e., starting 2 November 2012). Small radio operators (with revenues below $20 million) are exempt from reporting but should be prepared to describe their efforts in implementing the CAB's best practices at licence renewal.

Diversity of Voices

The Commission considers that the concept of "diversity" in the Canadian broadcasting system should be approached at three distinct levels: diversity of elements, plurality of editorial voices within the private element, and diversity of programming.²⁷ In its Diversity of voices determination, the Commission established an approach that will preserve the plurality of editorial voices and the diversity of programming available to Canadians, both locally and nationally, while allowing for a strong and competitive industry. The Commission introduced new policies with regard to cross-media ownership; the common ownership of television services, including pay and specialty services; and the common ownership of broadcasting distribution undertakings. The Commission's existing policies with respect to the common ownership of over-the-air television and radio undertakings remain in effect.

In addition, in Broadcasting Public Notice CRTC 2008-5,²⁸ the Commission conditionally approved the Journalistic Independence Code proposed by the Canadian Broadcast Standards Council (CBSC). The Commission directed the CBSC to include a minimum number of journalists on the panels that study complaints and to formalize the process used to select panel members. The principles set out in the Code will ensure a diversity of professional editorial voices and will eventually apply to all broadcasters who own a newspaper in the same market.

The National Broadcaster - Canadian Broadcasting Corporation (CBC)

As the national broadcaster, the CBC, pursuant to paragraph 3(1)(l) of the Broadcasting Act, is required to provide radio and television services incorporating a wide range of programming that informs, enlightens and entertains. Paragraph 3(1)(m) of the Broadcasting Act states that CBC's programming should:

1. be predominantly and distinctively Canadian,

2. reflect Canada and its regions to national and regional audiences, while serving the special needs of those regions,

3. actively contribute to the flow and exchange of cultural expression,

4. be in English and in French, reflecting the different needs and circumstances of each official language community, including the particular needs and circumstances of English and French linguistic minorities,

5. strive to be of equivalent quality in English and French,

6. contribute to shared national consciousness and identity,

7. be made available throughout Canada by the most appropriate and efficient means and as resources become available for the purpose, and

8. reflect the multicultural and multiracial nature of Canada.

The Commission requires that the CBC include in its annual reports a description of how it is fulfilling its commitment to more adequately reflect the multicultural and multiracial nature of Canada and the special place of Aboriginal Peoples and to balance on-air representation of racial and cultural minority groups and Aboriginal Peoples in a manner that realistically reflects their participation in Canadian society and that help to counteract negative stereotypes.²⁹

(ii) Official languages

The Broadcasting Act recognizes that "English and French language broadcasting, while sharing common aspects, operate under different conditions and may have different requirements." The Broadcasting Act requires that "a range of broadcasting services in English and in French shall be extended to all Canadians as resources become available" and also requires that CBC programming "reflect the different needs and circumstances of each official language community, including the particular needs and circumstances of English and French linguistic minorities" so as "to be of equivalent quality in English and in French."

As a designated agency under the Official Languages Act (OLA), the Commission has the responsibility to take positive measures to enhance the vitality of the English and French linguistic minority communities in Canada and support and assist their development as well as foster the full recognition and use of both English and French in Canadian society. The Commission intends to continue its efforts, within the limits of its mandate, in promoting linguistic duality, and in strengthening the vitality and fostering the development of the English and French language minority communities in Canada.

To this end, the CRTC has created a discussion group with representatives of official language minority communities (OLMCs) associations and organisations. The group's mandate is to provide a forum in which the CRTC and OLMCs can identify ways to maximize OLMCs' participation in CRTC public proceedings and ensure that their realities are taken into account in Commission's decisions. More specifically, these meetings provide opportunities to discuss trends in the area of broadcasting and telecommunications, inform communities about the Commission's public proceedings of interest to them, and discuss tools and methods for improving their interventions at public hearings.³⁰

The CRTC Action Plan 2008-2011 also anticipates awareness and training activities, as well as communication, liaison and coordination, and reporting activities.

(iii) Accessibility

Paragraph 3(1)(p) of the Broadcasting Act states that "programming accessible by disabled persons should be provided within the Canadian broadcasting system as resources become available for the purpose." The Commission considers that improved accessibility to television service is clearly a key tool for social integration. Television is an essential source of information for Canadians, enabling them to involve themselves knowledgeably and effectively, in Canadian society. As a vehicle for entertainment, television also allows Canadians to participate in a shared culture and shared social values.

Access for persons who are deaf or hard of hearing is provided through closed captioning.³¹ In Broadcasting Public Notice 2007-54³² the Commission established a new policy with respect to closed captioning, which requires television broadcasters to caption 100% of their programs over the broadcast day. Recognizing that 100% error-free captioning requirement is impossible, largely due to technical and/or human error, the 100% requirement is subject to exceptions that take into account instances of equipment/technical malfunctions and human errors that are beyond the broadcaster's control, or exceptional circumstances beyond the broadcaster's control where captioning may not be available but not patterns of such malfunctions and errors.

As noted in Broadcasting Public Notice 2007-54, the underlying rationale of the new policy applies to all broadcasters, including educational broadcasters and specialty, pay, pay-per-view and video-on-demand services. Accordingly, the Commission will discuss the application of this policy to such undertakings at the time of their license renewals.

Recognizing that the quality of captioning is a growing concern, in Broadcasting Public Notice 2007-54 the Commission also stated its expectation that broadcasters focus on improving the quality, reliability and accuracy of closed captioning, and work with representatives of the deaf and hard of hearing communities to develop and implement measures to improve the quality of closed captioning, including the development of universal standards in English and French. The Commission also called upon the industry to establish working groups in each of the English- and French-language markets to develop and implement universal standards and to propose and implement concrete solutions with respect to other aspects of captioning quality, including mechanisms aimed at reducing errors and technical malfunctions.

On 7 December 2007, the CAB submitted its Action Plan for Closed Captioning which included the proposed membership of the English- and French-language working groups. The Commission approved the plan on 28 February 2008 and noted in its approval letter that it expects to receive the results of the working groups in November 2008.

Access for blind or visually impaired persons is provided through audio description³³ and video description³⁴ (described video programming). The Commission expects licensees to provide audio description, wherever appropriate.

Broadcasters

Broadcasters are generally expected to broadcast described versions of their programming, wherever available. In addition, the Commission imposes conditions of licence on individual broadcasters at licence renewal or upon initial licensing.

Distributors

In Broadcasting Public Notice 2005-18,³⁵ the Commission reminded Class 1 cable operators and direct-to-home (DTH) providers of their obligation to pass through all described video programming being provided to them by programming services. In Broadcasting Public Notice 2006-6,³⁶ the Commission stated that, while Class 2, Class 3 and exempt BDUs are required to pass through video description of all programming services on a digital basis, it would be prepared to relieve exempt BDUs and certain Class 2 and Class 3 BDUs of the requirement to pass through video description on an analog basis. The Commission also stated that it finds it appropriate to relieve multipoint distribution system (MDS) BDUs of the pass through requirements due to difficulties experienced in the existing competitive environment. The Commission is monitoring the activities of Class 1 and DTH BDUs to assess the extent to which these distribution undertakings are passing description through to their subscribers.

National reading services

VoicePrint and La Magnétothèque are national reading services which were licensed in 1990 to provide programming of benefit to persons who are blind, whose vision is impaired, or who are print-restricted. These services provide full-text reading of stories, information, news and features published by a variety of newspapers, magazines and periodicals. VoicePrint has mandatory carriage in English-language markets pursuant to an order issued under paragraph 9(1)(h) of the Broadcasting Act.³⁷ Cable companies distributing VoicePrint on an analog basis distribute it on CBC Newsworld's SAP channel. MDS licensees, DTH satellite distributors and cable companies distributing Voiceprint on a digital basis distribute it on an audio channel located near a CBC channel.

La Magnétothèque is provided by cable undertakings as background audio on alphanumeric channels or as audio services on audio channels of their undertakings. It is also offered to FM radio station licensees for broadcast on Subsidiary Communications Multiplex Operation Channels (SCMO).

In July 2007 Broadcasting Decision 2007-246,³⁸ the Commission approved the licensing and mandatory distribution of The Accessible Channel, a national, English-language digital specialty described video television service that will provide 100% of its programming in open format described video.

(iv) Programming standards

The Commission is required, pursuant to section 5(1) of the Broadcasting Act, to regulate and supervise the Canadian broadcasting system with a view to implementing the broadcasting policy set out in subsection 3(1) of the Broadcasting Act. Subsection 3(1) sets out an extensive declaration of the broadcasting policy for Canada and lists a number of policy objectives that address programming standards. Subparagraph 3(1)(d)(i) declares that the Canadian broadcasting system should "serve to safeguard, enrich and strengthen the cultural, political, social and economic fabric of Canada." Subparagraph 3(1)(d)(ii) states that the Canadian broadcasting system should "encourage the development of Canadian expression by providing a wide range of programming that reflects Canadian attitudes, opinions, ideas, values and artistic creativity." Subparagraph 3(1)(d)(iii) states that the Canadian broadcasting system should, through its programming and employment opportunities arising out of its operations, "serve the needs and interests, and reflect the circumstances and aspirations, of Canadian men, women and children, including equal rights." Paragraph 3(1)(g) states that "the programming originated by broadcasting undertakings should be of high standard."

a) Policy achievement

The Commission balances the achievement of the broadcasting policy against the requirement to apply the Broadcasting Act in a manner consistent with freedom of expression and the journalistic, creative and programming independence enjoyed by broadcasting undertakings, as set out in Subsection 2(3). Paragraph 3(1)(h) of the Broadcasting Act states that the broadcasters themselves "have a responsibility for the programs they broadcast."

b) Standards

A key mechanism for achieving these objectives is through self-regulation. The industry must abide by the following industry codes,³⁹ some of which apply as a result of the Commission's regulations, some by condition of licence, and some as a result of membership in the Canadian Broadcast Standards Council (CBSC) or the Advertising Standards Canada⁴⁰ (ASC):

• ASC Canadian Code of Advertising Standards

• Broadcast Code for Advertising to Children

• Cable Television Community Channel Standards

• Cable Television Customer Service Standards

• CAB Code of Ethics

• CAB Equitable Portrayal Code⁴¹

• CAB Voluntary Code Regarding Violence in Television Programming

• CBC Guidelines on Sex-Role Portrayal

• Code for Broadcast Advertising of Alcoholic Beverages

• Industry Code of Programming Standards and Practices Governing Pay, Pay-Per-View and Video-On-Demand Services

• Pay Television and Pay-Per-View Programming Code Regarding Violence

• Radio-Television News Directors Association of Canada (RTNDA Canada) Code of Ethics

• Journalistic Independence Code

The Commission has indicated its expectation that any discretionary service broadcasting adult programming adhere to the adult programming provisions contained in Industry Code of Programming Standards and Practices Governing Pay, Pay-Per-View and Video-on-Demand Services.⁴² The code includes a comprehensive section specifically addressing adult programming that provides clear guidance for broadcasters regarding the classification and scheduling of adult films. Furthermore, the Commission expects all licensees that distribute adult programming to develop internal policies for the broadcast of adult programming to be submitted at the time of licensing, licence renewal or in the event of a complaint.

In Broadcasting Public Notice 2005-24, the Commission directed the CAB to review its broadcasting industry codes to determine whether they address concerns identified in the research findings regarding reflection and portrayal. The CAB did so in 2005 and concluded that a new code would be developed to establish industry standards for the portrayal of ethnocultural groups, Aboriginal Peoples and persons with disabilities. The CAB submitted its revised Equitable Portrayal Code on 12 March 2007. This code expands and effectively replaces the CAB Sex-Role Portrayal Code for Radio and Television Programming. The Commission approved the CAB's Equitable Portrayal Code in Broadcasting Public Notice 2008-23.⁴³ It is a condition of licence for all broadcasters.

c) Complaints and inquiries

Between April 2007 and 31 March 2008, the Commission received 1,118 broadcasting complaints. Most (57%) of the complaints were related to conventional television, followed by those related to radio (28%).

The CBSC⁴⁴ administers specific codes of broadcast conduct and provides a means of recourse for members of the public regarding the application of the standards set out in the following codes:

• CAB Code of Ethics

• CAB Voluntary Code Regarding Violence in Television Programming

• CAB Equitable Portrayal Code

• RTNDA of Canada Code of Ethics.

The Commission deals primarily with complaints that are related to non-member broadcasters who are not CBSC members and with issues that do not fall within the parameters of the codes administered by the CBSC. Of the complaints received by the Commission, approximately 27% were referred to the CBSC.

The ASC responds to complaints by consumers and special interest groups regarding advertising with respect to all media subject to the Canadian Code of Advertising Standards, the principal instrument of advertising self-regulation. In addition, ASC undertakes pre-clearance functions in five industry categories based on applicable legislation, regulations, and/or industry codes and guidelines.

Viewers and listeners may request that the Commission consider their complaints at first instance, or where they are not satisfied with the results of the self-regulatory process.

Statistical information - Diversity and social issues (Broadcasting)

Table 2.3.1 Broadcasting complaints by sector, by issue

Notes:
a) Where a complaint alleges that hatred or contempt was incited on-air against one of the groups identified in the Television, Radio, and Specialty Regulations
b) Where a complaint alleges offensive humour or other comments that do not fall under the "abusive comment" provision
c) Where a complaint alleges offensive language in song lyrics or in spoken word
Source: CRTC Correspondence Tracking System. (The Rapids tracking system counts multiple contacts from the same client on the same complaint as separate units, therefore the actual number of complaints received should be slightly lower.)

Table 2.3.2 Number of contacts by public

Source: CRTC Correspondence Tracking System (The Rapids tracking system counts multiple contacts from the same client on the same complaint as separate units, therefore the actual number of complaints received should be slightly lower.)

Table 2.3.3 Complaints handled by the CBSC

Source: CBSC annual reports

Table 2.3.4 Complaints handled by the ASC

Source: Ad complaints reports

Part 2 - Telecommunications

The Telecommunications Act affirms that telecommunications perform an essential role in the maintenance of Canada's identity and sovereignty. With respect to social issues Canadian telecommunications policy has as its objectives:

• to facilitate the orderly development throughout Canada of a telecommunications system that serves to safeguard, enrich and strengthen the social and economic fabric of Canada and its regions (subsection 7(a) of the Act);

• to render reliable and affordable telecommunications services of high quality accessible to Canadians in both urban and rural areas in all regions of Canada (subsection 7(b) of the Act);

• to respond to the economic and social requirements of users of telecommunications services (subsection 7(h) of the Act); and

• to contribute to the protection of the privacy of persons (subsection 7(i) of the Act).

(i) Connections

The telecommunications network has evolved from a landline twisted-pair based communications network to an interconnected multiplatform network that provides Canadians with both voice and data communications when and where they want it. These connections consist of the traditional wired local exchange service, wireless or mobile service, IP based connections utilizing the underlying Internet and Internet subscriptions. In 2007 there were approximately 19.2 million residential and business local exchange lines (including VoIP), 20.3 million residential and business wireless subscribers and 9.3 million residential Internet subscribers for a total of 48.8 million connections, an increase of approximately 5% over the previous year.

Internet connections allow Canadians to essentially merge their voice and data communications activities. For example, there is the rapid growth of social networking sites and similar services, such as instant messaging, which allows users to communicate with one another in new ways. These media combine elements of both audio-visual content as well as telecommunications (online conversations) in order to allow Canadians to share common experiences and to connect with others who share common interests, languages and/or cultural values. Over the past year, the changes have been seen through a rise in the use of social networking sites, combined with a decline in instant messaging application usage. Of particular interest is the growth of social networking sites such as Facebook.com, not just in Canada, but globally as well.

Although how Canadians communicate is changing, penetration rates still provide a useful indicator of consumer access to the public switched telephone network (PSTN). Penetration rates are measured by identifying the percent of households that subscribe to various local services that utilize or access the PSTN such as wireline local telephone service and wireless telephone service.

The penetration rate of wireline and/or wireless services, including VoIP based local service remained relatively constant⁴⁵ over the 2001 to 2007 period, at approximately 98.8% of households. Wireline penetration gradually declined over this period from 97.4% to 92.5% of households. In contrast, over the same period, wireless penetration increased from 47.6% to 71.9% of households in 2007 and wireless-only households increased more than five-fold from 1.2% in 2001 to 6.3%.

In Telecom Decision 2008-1,⁴⁶ the Commission approved the use of deferral account funds⁴⁷ by incumbent local exchange carriers for certain initiatives including improvements to access to telecommunications services for persons with disabilities. The Commission also directed⁴⁸ that any balance remaining in the deferral accounts be rebated to residential subscribers in non-high-cost serving areas.⁴⁹

(ii) Price indices and the consumer price index

Price indices provide a useful means to assess the movement of the price for a basket of goods or services. For the Canadian communications industry, Statistics Canada provides three indices: the telephone price index (TPI),⁵⁰ the cablevision and satellite services (including pay television) index and the Internet access services.⁵¹

Throughout the 2002 to 2007 period, the TPI and the Internet access services index remained below the consumer price index (CPI). Over this 5-year period telephone prices, on average increased 1.6% whereas the price of Internet access services declined 2.6%. Video distribution services as captured by the cablevision and satellite services (including pay television) index increased 22.7% over the 5-year period compared to an 11.4% increase in the CPI.

During this period, residential local service was forborne in many residential local exchange markets. A review of the rates for residential local exchange service in the major cities where local residential telephone service had been forborne indicates that, on average, local rates had increased slightly over the last two years by less than 3%, consistent with the increase in the TPI and below that of the CPI. Most of the increase was attributable to increases in local feature rates such as call display and voice mail, that had risen by approximately 6% over that period. Company-specific price changes vary considerably. For instance, rates declined in Regina and Calgary, whereas increases of close to 6% overall occurred in the Atlantic Provinces (due largely to feature price increases).

It should be noted, however, that bundled access and feature packages were increasingly available from the incumbent local exchange carriers (ILECs). For instance, Bell Canada offered a Home Phone Basic Package which included call display and voice mail. This represented a significant reduction in rates compared to its existing standalone rates. However this rate applied to new or returning customers rather than existing customers.

(iii) The Consumer

Statement of consumer rights

The statement of consumer rights provides a guide to help consumers understand their rights with respect to local home phone services.⁵² The Commission determined in Telecom Decision 2006-52 that the statement of consumer rights should be limited to telecommunications services as defined under the Telecommunications Act and the rights that apply to regulated retail tariff services.

In its earlier decisions on local forbearance the Commission had established a list of obligations common to all local exchange carriers (LECs).⁵³ The obligations on the list include issues of customer confidentiality, emergency service obligations, customer notification and disconnection of local service for non-payment of long distance service.

Accessibility

Subsection 27(2) of the Telecommunications Act prohibits a Canadian carrier from unjustly discriminating against or giving an unreasonable preference toward anyone or subjecting anyone to an unreasonable disadvantage in relation to providing a telecommunications service.

Some services for people with disabilities are mandated by the CRTC. These include: Message Relay Service, which allows callers unable to use a regular phone to place telephone calls to people who use a regular phone and vice-versa; a 50% discount off Basic Toll Rates for telecommunications device for the deaf (TDD) users; alternative billing formats (e.g., Braille, large print); free directory assistance; automatic directory assistance call completion and a teletypewriter upgrade program for pay telephones.

In January 2008, the Commission approved the use of deferral account funds by ILECs for certain initiatives to improve access to telecommunications services for persons with disabilities. These initiatives included the following: establishing a single point of contact for persons with disabilities to receive customer service tailored to the specific needs of the customer; conducting research into the needs of persons with disabilities during the development process of new products and services; establishing accessibility committees; incorporating inclusive design considerations in service development; developing specific inclusiveness guidelines; and working with wireless device manufacturers to procure accessible wireless handsets.

Commissioner for Complaints for Telecommunications Services

Following a public proceeding,⁵⁴ the CRTC approved the structure and mandate of the Commissioner for Complaints for Telecommunications Services Inc. (CCTS or agency) subject to certain conditions being met. The CCTS, which began operating on 23 July 2007, provides residential and small business customers with an effective, accessible and consumer-friendly recourse when they are unable to resolve a disagreement with their telecommunications service provider. It aims to resolve complaints from residential and small-business subscribers about deregulated services.

TSPs with annual service revenues exceeding $10 million are required to be members of the Agency. Some TSPs, however, have yet to join the CCTS and some TSPs that did join made an application to review and vary the decision, questioning the CRTC's authority to determine the CCTS's membership requirements. The Commission released its decision⁵⁵ on the application on 30 May 2008.

The Commission requested that the CCTS report back to it on issues related to the CCTS' operating procedures and public awareness campaign. In March 2008, the CCTS provided some preliminary comments on the progress that it had accomplished to date. The CCTS received 3,731 contacts from consumers and small businesses between 23 July 2007 and 29 February 2008. These contacts included 1,351 complaints that fell within the CCTS' mandate and related to one of its members.

(iv) Privacy

The Commission has established a number of privacy safeguards and obligations to protect consumers of telecommunications services. These include, for example, confidentiality of consumer information which says that all information regarding the customer, other than the customer's name, address and listed telephone number is confidential and may not be disclosed to anyone except under certain circumstances. With respect to the distribution of listing information by telephone companies, certain safeguards exist for protecting the privacy of consumers. Consumers with non-published telephone numbers are not included in listings that are provided by ILECs to third parties. Consumers with published telephone numbers can request that their names and numbers be removed from listings sold or rented to third parties. Consumers can also access other services to help them control and protect privacy, such as call blocking.

The Commission has a framework for unsolicited telemarketing calls and other unsolicited telecommunications received by consumers.⁵⁶ This framework includes rules for a National Do Not Call List (DNCL) which is expected to be in operation by September 2008, as well as rules regarding telemarketing and automatic dialling-answering devices (the Unsolicited Telecommunications Rules).

The National DNCL will be a nationwide registry that will allow consumers to reduce the number of unsolicited telemarketing calls they receive. Currently, each telemarketer is required to maintain its own "do not call list", which consumers must register on separately to reduce or avoid calls. With the National DNCL, they will only have to register their telephone number on one list.⁵⁷

(v) Emergency services

In Telecom Decision 2005-21 the Commission mandated that all service providers offering local VoIP service must notify their customers, and potential customers, of any service limitations with respect to their 9-1-1 or Enhanced 9-1-1 (E9-1-1) service. The Commission requested the CRTC Interconnection Steering Committee (CISC) to develop standard notifications for the implementation of that requirement.

On 12 August 2005, CISC submitted its report⁵⁸ for Commission approval. The Report recommended the minimum requirements for customer notification regarding the availability, characteristics, and limitations of the local VoIP service provider's 9-1-1/E9-1-1-1 service, as compared to wireline E9-1-1 service.

In Telecom Decision 2005-61⁵⁹ the Commission approved the Report and directed all Canadian carriers offering local VoIP service to abide by the customer notification requirements set out in the Report.

With respect to emergency 9-1-1 services, the Commission notes that it is inappropriate for VoIP service providers to deliver 9-1-1 calls from their fixed/non-native and nomadic VoIP customers to public safety answering points (PSAPs) using low-priority telephone lines or restricted numbers. The Commission considers that zero-dialed emergency call routing service (0-ECRS) is the only available 9-1-1 call routing method on the record that is functionally comparable to basic 9-1-1 service.⁶⁰

The Commission requires all Canadian carriers offering local VoIP service to use 0-ECRS as the interim solution to route fixed/non-native or nomadic VoIP 9-1-1 calls to the PSAPs, pending the development and implementation of a long-term fixed/non-native and nomadic VoIP enhanced E9-1-1 solution.

The Commission has a framework for emergency community notification which allows ILECs to provide enhanced E9-1-1 information for a telephone-based community notification service, subject to limitations to its circumstances of use, with appropriate safeguards, notification requirements and other constraints.⁶¹

Statistical information - Diversity and social issues (Telecommunications)

Table 2.3.5 Canadian penetration rates - Wireline and wireless subscribers (per 100 households)

Source: Statistics Canada
n/a: not available

Figure 2.3.1 Price Indices (TPI, BDU (Cable and Satellite (including pay television)), Internet access services and CPI)

2.4 Regulatory frameworks

A) Broadcasting

To achieve the cultural, social, political and economic objectives of the Broadcasting Act, the Commission established a set of policies and regulations that address the unique characteristics of the Canadian broadcasting environment.

i) Regulatory framework - Radio

The Commission has established policies and regulations with respect to radio that encompass:

• Conventional over-the-air radio
  1. Commercial radio⁶²
  2. Public radio⁶³
  3. Campus radio⁶⁴
  4. Community radio⁶⁵
  5. Aboriginal/Native radio⁶⁶
  6. Digital radio⁶⁷
  7. Ethnic radio⁶⁸
  8. Religious radio⁶⁹
• Multi-channel subscription radio services⁷⁰
  1. Satellite subscription radio services
  2. Terrestrial subscription radio services
• Audio services delivered by BDUs⁷¹
  1. Speciality audio
  2. Pay audio

These regulations address radio programming, levels of Canadian content and other matters. Content regulations include the levels of Canadian music and French-language vocal music that must be broadcast by licensed radio undertakings.

• Commercial, campus and community radio stations are required to devote at least 35% of their musical selections drawn from content category 2 (popular music) to Canadian selections each week.⁷² This minimum level also applies to the 6 a.m. - 6 p.m. period from Monday to Friday on commercial stations only.
• French-language stations are required to devote at least 65% of musical selections from category 2 to musical selections in the French language each week. Commercial French-language radio stations are also required to broadcast at least 55% of their category 2 vocal selections between the 6 a.m. to 6 p.m. period from Monday to Friday in the French-language.
• Stations that broadcast ethnic programming have the flexibility to choose to program either a minimum of 35% Canadian music over the entire broadcast week or to provide at least 7% Canadian music during ethnic programming periods and at least 35% during the non-ethnic programming.
• In the 2006 Commercial Radio Policy, the Commission increased the minimum requirements for Canadian concert music (subcategory 31) to 25% and jazz and blues music (subcategory 34) to 20%. The revised Canadian content levels of concert music and jazz and blues is expected to come into effect by way of amendments to the Radio Regulations later in 2008. The Radio Regulations require that stations airing music from other category 3 special interest subcategories broadcast at least 10% Canadian selections in those subcategories each week.
• In the 2006 Commercial Radio Policy, the Commission also indicated that applicants for new licences, licence renewals and transfers of ownership or control of radio stations would be asked to make specific commitments to provide airplay and promotion for emerging Canadian artists and their music.

Licensing of new radio stations

When issuing licences for new radio stations, the Commission follows a competitive licensing process that allows for the evaluation of competitive licence applications.⁷³ In Broadcasting Decision 99-480, the Commission outlined the factors that will generally be among those relevant to the evaluation of competitive applications. The factors were: (i) quality of the application; (ii) diversity of news voices in the market; (iii) market impact; and (iv) competitive state of the market. The Commission noted that the relative weight and significance of the factors would vary depending on the specific circumstances of the market concerned. The Commission also considers the extent to which approval of the application would further the objectives of the Broadcasting Act, particularly with respect to the production of local and regional programming.

Applications for new radio stations in smaller markets are subject to the revised market evaluation process outlined in Broadcasting Public Notice 2006-159.⁷⁴ If the Commission's final determination is that the market is incapable of supporting a new radio station, the application will be either returned to the applicant or a public notice will be issued detailing the Commission's conclusions for not proceeding with a call for applications. Where the Commission decides not to issue a call based on unfavourable market conditions or after the issuance of a decision following a call for applications, the Commission will not generally be disposed to accepting applications for this market for a period of two years from the date of the public notice announcing the Commission decision.

Commercial Radio

The Commission stated in its Commercial Radio Policy 2006 that although the radio industry is currently healthy, it was entering a period of uncertainty as it comes to grips with the challenges and opportunities that will be provided by new technologies for the distribution of audio programming. The Commission therefore continues to monitor how new distribution technologies for audio programming are affecting the radio industry.

The Commission also noted that many radio broadcasters are exploring ways of using new distribution platforms to complement the service provided by their conventional radio stations. The Commission therefore indicated its intention to question radio licensees, at licence renewal and in new licensing and ownership transfer proceedings, about their plans to employ new distribution platforms to the benefit of the Canadian broadcasting system.

Digital Radio

In Broadcasting Public Notice 2006-160,⁷⁵ the Commission set out its revised policy for digital radio broadcasting. Under this revised policy, the replacement model for L-band digital radio broadcasting (DRB) was replaced with a flexible model allowing for new innovative services. The Commission will now accept applications to obtain permanent digital licences from applicants wishing to develop whatever broadcast services they believe will be of greatest interest to the listening public. These new digital radio licence holders will fall under the same regulatory framework as existing FM analog services. The revised policy eliminated transitional digital licences.

For in-band-on-channel (IBOC) technologies, the CRTC stated that, if the Department of Industry authorized IBOC technology (or another technology such as Digital Radio Mondiale (DRM)) for the AM and/or FM bands, it would be prepared to authorize services using the technology under the Broadcasting Act. The CRTC also agreed that Digital Multimedia Broadcasting (DMB), Digital Video Broadcasting-Handheld (DVB-H) and other multimedia technologies could deliver innovative programming provided that the spectrum capacity issues are addressed.

ii) Regulatory framework - Television

The Commission has established policies and regulations with respect to television that encompass:

• Conventional over-the-air television⁷⁶
• Public television⁷⁷
• Digital Pay and Speciality Services⁷⁸

In the 1999 Television Policy, the Commission indicated that one of its goals in developing the policy was to "ensure quality Canadian programs at times when Canadians are watching." The policy also stated that the Commission wished to ensure the availability of a sufficient number of hours of diverse Canadian programming in order to attract audiences during peak viewing periods (i.e. 7 p.m. to 11 p.m.).

In the 1999 Television Policy, "under-represented" Canadian drama, music and dance, and variety programs were redefined as "priority programming" and expanded to include long-form documentaries, regionally-produced programs and entertainment magazine programs.

The 1999 Television Policy also requires that the largest multi-station ownership groups offer as a minimum, in each broadcast year, an average of eight hours per week of Canadian priority programming during the 7 p.m. to 11 p.m. peak viewing period. This requirement is in addition to any benefit commitments made by these broadcasters in connection with transfers of ownership or control.

Over the Air (OTA) Digital television services

In Broadcasting Public Notice 2002-31,⁷⁹ the Commission set out a policy framework for the licensing of over-the-air (OTA) digital television (DTV) services. The Commission's DTV television services policies are based on the principle that digital technology will replace analog technology and are intended to encourage the transition of the Canadian broadcasting system from analog to digital and high definition (HD) technology.

Recognizing the need to provide regulatory certainty and encouragement during the transition period, the Commission instituted the regulatory frameworks for the licensing and distribution of digital OTA services in Broadcasting Public Notice 2003-61.⁸⁰ In Broadcasting Public Notice 2006-74 it established the regulatory framework relating to the licensing and carriage of high definition pay and specialty services. The distribution of HD and discretionary programming services by cable distribution undertakings, and DTH undertakings, are also among the issues being addressed in current BDU Proceeding.⁸¹ In the meantime, the Commission has, as of 31 December 2007, authorized 21 originating and seven rebroadcast over-the-air transitional digital television licences to help support the transition from analog to digital.

Transitional DTV licensees are allowed to broadcast a maximum of 14 hours per week of high definition programming that is not duplicated on the analog version of the service. A minimum of 50% of this unduplicated high-definition programming must be Canadian and all of the unduplicated programming must be in high definition television (HDTV) format. This OTA policy was subsequently updated in Broadcasting Public Notice 2007-63.⁸²

In the 2007 OTA television policy, the Commission announced that analog licences would not be renewed beyond August 2011. The adoption of a shut down date is expected to provide the television industry with the necessary regulatory certainty to expedite the transition from analog to digital. The Commission further noted that it would also help advance the production of Canadian HD programming.

To ensure that Canadians are not deprived of OTA television service, the Commission indicated that it was willing to consider, on an exceptional basis, the continuation of analog OTA service in northern and remote communities where spectrum is not in short supply and where there would be no interference with the transmission of other signals.

In Broadcasting Public Notice 2007-62⁸³ the Commission issued a call for applications from parties wishing to obtain OTA digital/HD broadcasting licences in markets across Canada.

Digital pay and specialty services

In Broadcasting Public Notice 2000-6⁸⁴ and in Broadcasting Public Notice 2004-8⁸⁵ the Commission set out a framework for licensing digital Canadian pay and specialty programming services. This framework established two categories of digital services that are designed to enhance diversity and choice for Canadian viewers:

In 2005 to expand the diversity and the range of Canadian television services available to underserved third-language ethnic communities, the Commission adopted a more open entry approach to applications proposing new third-language ethnic Category 2 pay and specialty services.⁸⁶ In March 2007, the Commission issued a new exemption order respecting certain third-language services.⁸⁷

Migration of pay and specialty services from analog to digital distribution

In Broadcasting Public Notice 2006-23⁸⁸ the Commission set out the framework that will guide the migration to a digital distribution environment for those pay and specialty services that were approved under the analog licensing framework. The Commission's goal was to develop a framework that would ensure an orderly transition from the current highly structured technological and regulatory environment to an environment characterized by a more market-driven approach. In designing this framework, the Commission also sought to achieve the following objectives:

• encourage the transition to digital and eventually high definition distribution;
• permit BDUs to take advantage of the flexibility of digital distribution, to the benefit of consumers;
• help ensure that, during the transition, analog programmers can reasonably expect to operate within their business plans, in order to continue to meet their programming obligations and the objectives of the Broadcasting Act, including objectives related to linguistic duality;
• design an approach that recognizes the unique challenges and characteristics of the French-language market and services;
• introduce a more simplified regulatory regime, where appropriate; and
• harmonize the obligations of different types of BDUs.

The Commission foresees the transition as taking place over the following three stages, of which the cable BDUs are currently in the first stage:

1. The distribution of analog as well as digital services.
2. No analog services will be distributed. Instead, BDUs will offer a mix of predominantly low definition digital services with some HD services.
3. HD digital services will predominate.

The latter two stages will occur at different times for different BDUs, and each stage will have its own regulatory obligations.

Canadian pay and specialty services in HD format

As part of the migration of analog to digital services, in Broadcasting Public Notice CRTC 2006-74 , the Commission announced its HD licensing and distribution policy framework for Canadian pay and specialty service.⁸⁹

The framework takes a hybrid approach under which existing pay and specialty services licensees who wish to launch a HD service could choose between a licence amendment and a new licence. HD authorities granted by licence amendment would be subject to certain restrictions. For example, carriage arrangements would have to be negotiated with distributors, the term of the authority would be limited to three years and the programming of the analog and HD replacement services would have to be comparable, that is, at least 95% of the video and audio components would have to be the same. New HD-transitional licences would be issued to services that offer the benchmark amounts of HD programming. These licences would confer carriage rights and the current genre protections. A limited amount of separate HD programming would also be allowed.

In general, the licensing and distribution policy is intended to encourage the transition of the Canadian broadcasting system to HD technology. It does so by providing a mechanism for the licensing of transitional HD pay and specialty services that will permit easy entry for the new technology. The policy also encourages BDUs to carry HD services by permitting flexibility in the packaging of such services. At the same time it provides regulatory certainty by setting out the details of the distribution framework for the new HD services, including the distribution and linkage rules, the carriage of non-Canadian HD signals, and provisions governing technical quality and simultaneous substitution.

iii) Regulatory framework - BDUs

The essentials of the regulatory framework currently applicable to BDUs were announced in Broadcasting Public Notice 1997-150.⁹⁰ This framework establishes the authorizations and obligations applicable to BDUs, and generally governs the relationship between these undertakings and the various types of programming services that they distribute.

The new regulations announced in Broadcasting Public Notice 1997-150 came into effect in January 1998. Consistent with the policy announced in Broadcasting Public Notice 1997-150, they were intended to promote competition among BDUs. In the decade since these regulations were adopted, the BDU sector has experienced a fundamental shift towards increased competition.

Reflecting that increased competition, the vast majority of cable BDUs are no longer subject to retail rate regulation by the Commission. Further, a large number of smaller BDUs have been exempted from detailed regulation in general and indeed from the requirement to be licensed by the Commission, as discussed in section 2.6 of this report. In support of its policies in favour of competition among BDUs, the Commission also established processes for the orderly transfer of customers from one BDU to a competitor.

With competition among BDUs increasingly established in the industry landscape, the Commission has now undertaken a review of the applicable regulatory framework to establish an approach to permit the industry to meet the increasing challenges of providing service in a digital and fully converged environment, as discussed in section 2.7 of this report.

Non-Canadian satellite services authorized in Canada⁹¹

In addition to Canadian programming services, the Commission also authorizes BDUs to provide a number of non-Canadian programming services. It does so by adding such services to a list of services eligible for distribution in Canada.

In Broadcasting Public Notice CRTC 2004-96⁹² the Commission adopted a more open approach to the entry of non-Canadian third-language general interest television services which previously precluded the addition of English- or French-language non-Canadian services to the lists if they were found to be either partially or totally competitive with Canadian specialty or pay television services. This was changed in order to expand the diversity of and choice in television services available to underserved third-language communities in Canada. In so doing, the Commission established conditions for the distribution of non-Canadian third-language services, in order to ensure that the viability of Canadian third-language services and their ability to meet their obligations under the Broadcasting Act was not adversely affected.

As set out in Broadcasting Public Notice 2006-55⁹³ the Commission will periodically issue public notices setting out revised lists of satellite services that include references to all amendments that have been made since the previous public notice setting out the lists was issued. These public notices provide a link to an up-to-date version of the lists on the Commission's website.

iv) Regulatory framework - New Media Broadcasting

Since the inception of New Media, the Commission has relied on market forces for the regulation of New Media Broadcasting.

In Telecom Public Notice 99-14 / Broadcasting Public Notice 1999-84⁹⁴ (the New Media Policy) the Commission clarified that services consisting predominantly of alphanumeric text and those with the potential for significant user customization do not "involve the transmission of programs for reception by the public and are, therefore, not broadcasting."

The Commission concluded that those elements of New Media that do not consist predominantly of alphanumeric text or have potential for significant user customization fall within the definition of "broadcasting".⁹⁵

In the accompanying 1999 New Media Exemption Order, the Commission determined that with respect to the remaining services that do fall within the scope of the regulations of the Broadcasting Act, compliance with Part II of the Act and applicable regulations made thereunder by new media broadcasting undertakings providing broadcasting services delivered and accessed over the Internet would not contribute in a material manner to the implementation of the broadcasting policy set out in subsection 3(1) of the Broadcasting Act. The 1999 New Media Exemption Order has since been clarified in Broadcasting Public Notice 2003-2 and expanded in Broadcasting Public Notice 2006-47 and Broadcasting Public Notice 2007-13 (collectively, the New Media Exemption Orders).^{96 97}

In Broadcasting Public Notice 2006-47, which called for comments on a proposed exemption order for mobile television broadcasting services, the Commission again confirmed its exemption of new media as the new undertakings in question had yet to have an impact on the achievement of the Broadcasting Act's objective.

In Broadcasting Public Notice 2007-13, the Commission exempted undertakings that "provide television broadcasting services that are received by way of mobile devices, including cellular telephones and personal digital assistants." It was further clarified that only point-to-point technology was included within the exemption order. The Commission determined, at that time, that the potential impact of point-to-multipoint broadcast technologies was still uncertain, and thus decided not to include them in the exemption order.

In Broadcasting Public Notice 2008-4,⁹⁸ the Commission noted that, with regard to professional editorial voices, new media platforms largely offer content that was originally produced for licensed radio or television stations or for newspapers. As a consequence, the Commission's approach to ensuring a plurality of editorial voices on traditional media would also benefit the plurality of voices available on new media undertakings. In addition, the Commission recognized the availability on New Media platforms of an enormous range of user-generated editorial content from Canadian and foreign sources.

B) Telecommunications

As the Commission, pursuant to section 34 of the Telecommunications Act, forbears from regulating a growing number of telecommunications services, the Commission is regulating an increasingly smaller percentage of telecommunications service revenues and only regulates where competition is not sufficient to protect the interests of consumers. The percentage of revenues that were subject to regulation in 2007 was approximately 10%. Of these, approximately 25% was related to wholesale services that are generally provided by the incumbent TSPs to other TSPs.

In Telecom Decision 2008-17,⁹⁹ the Commission restructured its regulatory framework for regulated wholesale services provided by the major incumbent carriers to competitors (formerly referred to as competitor services). Existing wholesale services were assigned to one of six new service categories: i) Essential; ii) Conditional essential; iii) Conditional mandated non-essential; iv) Public good; v) Interconnection; and vi) Non-essential subject to phase-out. The Commission also, among other things, determined the pricing principles for each category and the length and terms of phase-out periods for services classified as non-essential subject to phase-out. Further, the Commission approved, on a prospective basis, forbearance with respect to services classified as Non-essential subject to phase-out at the end of the phase-out period, and determined that it will review the assignment of all remaining mandated wholesale services six years from the date of that decision. Certain determinations in Telecom Decision 2008-17 are currently under appeal.

Local and access

Local telephone service in the territories of all incumbent TSPs is open to competition. In the case of the large incumbent TSPs local competition in their territories is open to facilities-based competition and resale of local service; whereas in the territories of the remaining incumbent TSPs, facilities-based competition is on a case by case basis, except for the operating territory of Northwestel where only the resale of local service is permitted. As of 30 June 2008, the Commission has forborne from regulation over 73% of the residential lines and 65% of the business lines and approximately 80% of local and access revenues were from forborne local services.

In the case of large incumbent TSPs,¹⁰⁰ local services that are still subject to economic regulation include a limited number of local exchange residential and business single and multi-line services and associated services such as local calling features and options, pay telephone, digital network access, local channels, and competitor services. These services are subject to price cap regulation.¹⁰¹

In the case of Northwestel, the Commission established a simplified, four-year price cap regime.¹⁰² This framework was intended to provide the company with certainty over the price cap period and significantly reduce Northwestel's regulatory burden.

In the case of the small incumbent TSPs, in Telecom Decision 2001-756,¹⁰³ the Commission established a simplified price regulation regime which it extended, with minor modifications, in Telecom Decision 2006-14.¹⁰⁴

Long distance

Competition in the long distance market exists in all of the operating territories of the incumbent TSPs. The Commission has forborne from regulating the long distance market through a series of decisions and orders that addressed various service providers and market segments.¹⁰⁵ Pursuant to Telecom Decision 97-19, the Commission forbore from regulating the incumbents' long distance service rates, with the exception of Northwestel, and imposed certain regulatory constraints on the incumbents' provisioning of long distance services, most notably price ceilings applying to each basic long distance rate schedule. With respect to Northwestel, in Decision 2007-5,¹⁰⁶ the Commission forbore from regulating all toll services except for toll-free services.

In Telecom Decision 2007-56,¹⁰⁷ the Commission removed the constraints applied to the basic toll schedules in Telecom Decision 97-19 except in relation to registered or certified hearing- or speech-impaired teletypewriter users. In 2007 approximately 95% of long distance revenues were from forborne long distance services.

While the Commission has generally forborne from regulating long distance services, it continues to regulate wholesale services such as access tandem and direct connect. Access tandem and direct connect rates were updated in 2006, resulting in modifications to the rates paid by long distance service providers to the incumbent TSPs for originating and terminating long distance traffic.¹⁰⁸

Internet

While retail Internet access services are forborne from regulation, the Commission continues to regulate the provision of wholesale Internet access services. In the case of the incumbent TSPs, wholesale Internet access services are subject to price regulation and generally fall within the Competitor Services basket of services under the current price cap regime. Cable BDUs are also required to provide wholesale Internet access services. In 2007 approximately 98% of Internet revenues were from forborne Internet services.

In 1999, in its consideration of an appropriate framework for new media,¹⁰⁹ the Commission found that while some Internet applications fell under the definition of "program" and "broadcasting" under the Broadcasting Act, regulation was not necessary to achieve the objectives under that Act.

In Telecom Decision 2008-1,¹¹⁰ the Commission approved several initiatives to utilise deferral account funds¹¹¹ for the deployment of broadband in rural and remote communities, among other initiatives. Bell Canada has applied to the Supreme Court of Canada for leave to appeal the Federal Court of Appeal's judgement in the appeal of Telecom Decision 2006-9 regarding the disposition of funds in the deferral account. Portions of Telecom Decision 2008-1 including those regarding the disposition of broadband are currently stayed.

Data and private line

Competition was first permitted in the data and interexchange (IX) private line market in 1979. The Commission has since forborne from regulating many of the incumbent TSPs' data services as well as their private line services on thousands of IX routes. Telecom Order 99-434¹¹² directed alternative TSPs to file with the Commission on 1 April and 1 October of every year, the list of IX private line routes on which they offer or provide service at the equivalent of DS-3 (44.736 mbps) or greater, using their own terrestrial facilities, or terrestrial facilities leased from a company other than an incumbent TSP or an affiliate of an incumbent TSP. The order also had provisions for the Commission to expedite the forbearance if certain criteria were met. Incumbent TSPs are also free to apply for forbearance at any time.

In 2007 approximately 75% of data and private line revenues were from forborne services. By the end of 2007, the Commission has forborne from regulating approximately 2,900 private line routes.

X.25 and frame relay services were forborne from regulation under Telecom Order 96-130¹¹³ in February 1996. Under Telecom Order 2000-553,¹¹⁴ in June 2000, WAN services were also forborne from regulation. The access components of ATM and Ethernet services provided by incumbent TSPs continue to be regulated.

Wireless

Industry Canada has responsibility for the licensing regime governing wireless communications, including the awarding of spectrum licences to companies, and for the terms and conditions for these licences.

In Telecom Decisions 94-15,¹¹⁵ 96-14,¹¹⁶ and 98-18,¹¹⁷ the Commission forbore from regulating mobile wireless services on the basis that such services were sufficiently competitive. In public notices released in early 2006, the Commission ruled that mobile television services which offer television programming accessible through a wireless handset, such as a cell phone, are exempt from regulation.¹¹⁸ However, the Commission will continue to monitor the developments in this area closely. One hundred percent of wireless revenues were from forborne wireless services.

2.5 Contribution and spending regimes

The Commission uses a number of approaches to achieve the cultural, social and economic objectives set out in the Acts. One such method has been the establishment of contribution and spending regimes.

In 2007, broadcasting and telecommunications providers contributed over $2.7 billion towards the achievement of these objectives. Approximately 92% of these funds were for cultural and programming initiatives under the Broadcasting Act and the remaining 8% were for the achievement of the social and economic objectives under the Telecommunications Act.

A - Broadcasting

In addition to Canadian exhibition and carriage requirements, broadcasters are also generally expected to make contributions towards the promotion, development, creation and broadcast of Canadian talent and content. These spending and funding activities are intended to ensure the availability of Canadian content within the Canadian broadcasting system.

The Commission sets out its general expectations and policies relating to spending and contribution initiatives for radio, television and BDUs in various regulatory and policy frameworks which are reviewed every few years. The Commission also reviews contribution requirements and commitments of individual broadcasters and BDUs in the context of:

1. commitments made during the renewal of existing licences,
2. commitments relating to the licensing of new broadcasting and distribution undertakings, and
3. additional benefits resulting from the transfer of ownership or control

In 2007, broadcasters contributed over $2.5 billion towards the development, creation, and exhibition of Canadian programming and talent.

a) Radio and audio services - contributions towards Canadian content development¹¹⁹

Under the Canadian content development (CCD) contribution regime, radio stations operating under the Commercial Radio Policy are expected to make a basic annual contribution towards various CCD funds and initiatives. The regime places an emphasis on the creation and promotion of audio content for broadcast through the development of Canadian musical and spoken word talent, including journalists. This approach is expected to help increase the amount of high-quality Canadian music and spoken word material, and promote emerging Canadian talent.

Radio broadcasters contributed $23.5 million to CCD initiatives in 2006/07.

i) Commitments made during the renewal of existing radio and audio undertakings

Each radio station holding a commercial radio licence must make basic annual contributions to CCD initiatives. Beginning 1 September 2008, the amount of these contributions will be based on the station's previous year's revenues.¹²⁰

Pay audio services are required to contribute a minimum of 4% of their previous year's annual gross revenues to CCD. Multichannel subscription radio services are required to contribute at least 5% of their gross annual revenues to CCD. The percentage rate increases to 6%, if the number of subscribers exceeds a certain level.¹²¹ Half of the contributions are directed to the development of Canadian French-language talent and the other half is directed to the development of Canadian English-language talent.

ii) Commitments related to the licensing of new radio undertakings

Applicants for new commercial radio stations, especially those made in the context of a competitive process, often make contribution commitments that exceed the required basic annual CCD contributions. Effective 1 September 2008, no less than 20% of this amount will be allocated to FACTOR¹²² or MUSICACTION.¹²³ The balance may be directed to any eligible CCD initiative, at the discretion of the applicant.

Between 1 January 2003 and 31 December 2007, the Commission licensed 76 new radio stations through competitive processes in markets across Canada. The successful applicants committed more than $55.4 million to CCD initiatives over their initial licence terms. In addition, during that period, there were 212 new radio licences or AM to FM conversions granted without a competitive process. These licensees committed a combined $7.1 million towards CCD initiatives.

iii) Benefits resulting from the transfer of ownership or control

In addition to the basic annual contributions required under the CCD contribution regime, applicants for the transfer of ownership or control of profitable commercial radio stations are also required to make commitments that represent a minimum direct financial contribution to CCD of 6% of the value of the transaction. Three percent is to be allocated to the Radio StarMaker Fund/Fonds RADIOStar¹²⁴ music marketing and promotion fund, two percent to either FACTOR or MUSICACTION and one percent at the discretion of the purchaser to other eligible¹²⁵ CCD initiatives. These contributions are usually made over a seven year period.

Between 1 April 1998 and 31 December 2007, the Commission approved 126 changes in ownership or control involving 503 radio stations. CCD commitments (benefits) from these transactions have totalled $200 million. There were two significant transfers in ownership approved by the Commission in 2007 resulting in $95.3 million in tangible benefits for radio.¹²⁶

b) Television - contributions to Canadian programming

The Canadian television sector plays an essential role in ensuring a strong Canadian presence in the Canadian broadcasting system by providing distinct and diverse Canadian programming. Canadian programming expenditures (CPE) reported by the Canadian television sector in 2006-07 totalled $2.14 billion.

i) Conventional over-the-air television

Conventional over-the-air (OTA) television plays a vital role in the broadcasting system by providing local television programming that reflects Canadian interests and the needs of the communities that they are licensed to serve. It is because of its ability to reach mass audiences that it remains a dominant force in the provision and production of Canadian programming.

In the 1999 Television Policy, the Commission eliminated CPE requirements for the private OTA television sector.¹²⁷ Any concerns relating to expenditure and exhibition contributions towards the production and acquisition of Canadian programming, including local programming, are now reviewed with each licensee at the time of licensing and subsequent licence renewals.

In the 2007 OTA Television Policy,¹²⁸ the Commission noted that, although the English-language OTA television sector has maintained CPE as a percentage of revenues, the continued decline in proportion to total programming expenditures was a cause for concern. In order to ensure that an appropriate proportion of financial resources are allocated towards the production and acquisition of Canadian programming, the Commission indicated that it would review this matter during the licence renewal process for the major broadcast groups that is currently scheduled to take place in 2009. In 2006/07, OTA television stations reported $1.2 billion in CPE. Private OTA television stations accounted for 52% of this amount.

ii) Specialty, pay, pay-per-view and video on demand television services

In contrast to OTA television, most Canadian specialty, pay, pay-per-view (PPV) and video on demand (VOD) services are required, by condition of licence, to expend on the acquisition of and/or investment in Canadian programs, a minimum percentage of their gross revenues derived from the operation of the service during the previous broadcast year. The amount, imposed at the time of licensing or at licence renewal, is determined on a case-by-case basis. The requirements are based on considerations such as the genre of the services proposed, the availability of Canadian programming falling within that genre, and the applicant's other plans and commitments. The Commission also takes into account the applicant's proposed wholesale fee and the type of distribution by BDUs that the services will receive. In the 2004 licence renewal hearing for specialty services, the Commission required increases in CPE based on historical PBIT¹²⁹ levels. In 2006/07, specialty, pay, PPV and VOD reported CPE of $941.6 million.

iii) Benefits resulting from the transfer of ownership or control¹³⁰

Since competing applications are not solicited in the case of transfer of ownership or control, the Commission generally expects applicants to make commitments to clear and unequivocal benefits representing a financial contribution of 10% of the value of the transactions, as accepted by the Commission, for television. The onus is on the applicant to demonstrate that the application filed is the best possible proposal under the circumstances and that the benefits proposed in the application are commensurate with the size and nature of the transaction. Television stations that earn less than $10 million in annual revenues and are eligible to receive support from the Small Market Programming Fund are exempted from the application of the benefits test.¹³¹

The policy was re-examined in 2007 in the context of the Diversity of Voices public proceeding¹³² and the Commission determined that it would retain its current policy.

From 11 June 1999 to 31 December 2007, the Commission approved 48 changes in ownership or control providing $836.6 million in tangible benefits.¹³³ In 2007, the Commission approved three significant transfers in ownership resulting in $286 million in tangible benefits for the English-language television sector.¹³⁴

c) BDU - Contributions to Canadian programming and local expression

Class 1 and 2 cable, DTH and MDS distribution undertakings contribute a minimum of 5% of their gross annual revenues derived from broadcasting activities to support Canadian programming. Contributions to Canadian programming are made through the Canadian Television Fund (CTF) and other independent production funds, as well as through contributions to local expression.

i) Contributions to Canadian production funds

At least 80% of the contributions that are directed to production funds must be made to the CTF. The remaining 20% may be directed to one or more independently administered production funds.¹³⁵ In 2006/07, BDUs reported contributions of $194 million to programming funds.

CRTC Report on the CTF

In June 2008, following an extensive review process, the Commission issued a report to the Minister of Canadian Heritage on the CTF.¹³⁶ In this report, the Commission reaffirmed the important role that the CTF and the independent production sector play in producing quality Canadian television programming. Nevertheless, given the increasingly competitive environment facing the Canadian broadcasting system, the Commission also recommended that several changes be made to the fund.

The Commission recommended the creation of separate public and private sector funding streams, each managed by its own board of directors, with the day to day administration remaining with the CTF. The public sector funding stream would rely on public funding and be made available to the CBC/SRC, educational and other not-for-profit broadcasters. This funding stream would concentrate on the production of programming that contributes to the fulfillment of the cultural objectives set out in the Broadcasting Act. The private sector funding stream would be market-oriented, concentrating on the production of programming with broad popular appeal to Canadian audiences. It would rely on contributions from the BDUs and be made available to private commercial broadcasters.

The Commission also made several recommendations relating to how audience success should be measured, as well as the extent to which other criteria should be used in determining the level of CTF funding that broadcasters receive.

Other recommendations included the establishment of a new media funding stream, based on incremental funding, to support Canadian programming designed for new media platforms.

The Commission also indicated that it would launch two public processes in July 2008. One, to amend its benefits policy so that tangible benefits can be used to support CTF and, the other, to review its Certified Independent Production Funds Policy with a view to providing greater support for new media projects.

ii) Local expression

Although the Commission is of the view that community programming, and the broader goal of local expression, are important components of the broadcasting system, it removed the requirement to provide an outlet for local expression in Broadcasting Public Notice 1997-25.¹³⁷ However, while no longer obliged to do so, class 1 and 2 BDU licensees with fewer than 20,000 subscribers¹³⁸ are permitted under the BDU Regulations¹³⁹ to allocate all of their Canadian programming contributions to local expression. Class 1 licensees with more than 20,000 subscribers may allocate up to 2% of their contributions to local expression.

The number of licensees that have reported community channel expenses has remained relatively unchanged since 2004 at approximately 131. Total expenditures relating to community channel programming in 2007 were $103 million.

iii) Benefits resulting from the transfer of ownership or control

The benefits test does not apply in the case of changes in effective control of BDUs.¹⁴⁰

Statistical Information Contribution and spending regimes - Broadcasting¹⁴¹

Figure 2.5.1 2007 Contributions to CCD reported by commercial radio & audio services CCD $23.5M

Minor variances are due to rounding.
Includes contributions made under both the CTD and CCD regimes.
Source: CRTC data collection

Figure 2.5.2 2007 Television CPE $2,137 M

Minor variances are due to rounding.
CPE: Includes expenditures on Canadian programs telecast, write-down of Canadian inventory, script and concepts and loss on equity Canadian programs. Includes expenditures relating to ownership transfer benefits and to commitments made at the time of licensing. Excludes CTF "top-up" reported by private OTA, specialty, Pay, PPV and VOD television services.
CBC OTA excludes indirect and facility cost allocations.
* Estimate based on 2006 results.
Source: CRTC data collection

Figure 2.5.3 2007 BDU contributions to Canadian programming and local expression $296.7M

Minor variances are due to rounding.
Source: CRTC data collection

B - Telecommunications

The Commission implemented a national revenue-based contribution collection mechanism in 2001 to collect the moneys required to subsidize the cost of residential telephone service in high-cost serving areas.

Under this contribution mechanism, all TSPs, or groups of related TSPs, with Canadian telecommunications service revenues equal to or greater than $10 million are required to contribute towards the subsidization of residential telephone service in high-cost serving areas. Contribution is collected based upon a TSP's contribution-eligible revenues and the Commission approved revenue-percent charge. Contribution-eligible revenues are calculated based upon a TSP's Canadian telecommunications service revenues less certain specific deductions including retail Internet and retail paging revenues. The revenue-percent charge is calculated using the ratio of the national subsidy requirement to the total estimated contribution-eligible revenues of all TSPs who are required to contribute.

In 2007, LECs received approximately $219 million in subsidy and the final revenue-percent charge was 0.94% of contribution-eligible revenues.

The revenue-percent charge has gradually decreased since 2003. The increase in the subsidy paid to the LECs in 2005 was the result of the approval of the costs used to calculate the subsidy rates for two of the smaller incumbent LECs.¹⁴²

Statistical Information Contribution and spending regimes - Telecommunications

Figure 2.5.4 Subsidy paid to LECs and the revenue percent charge

Sources: CRTC data collection and decisions

2.6 Simplifying regulation and dispute resolution

The Commission has put in place a wide range of mechanisms to ensure effective and efficient regulation. These mechanisms include both streamlining initiatives and dispute resolution mechanisms.

Simplifying regulation

i) BDU Exemptions

In 2001, the Commission began the process to exempt from licensing requirements and associated regulations, those cable systems with less than 6,000 subscribers that serve small and rural communities. As of 2007, approximately 74% and 91% of the Class 2 and Class 3 cable BDUs respectively had exemption status.

ii) Streamlining initiatives

Broadcasting

The Commission has put in place a number of mechanisms to ensure effective and efficient regulation of broadcasting in Canada. These include:

• an expedited process whereby the Commission would inform applicants of the status of their licence amendment applications within 15 business days of receiving an application.
• Reduction of the average time it takes to deal with amendment applications by 50 percent compared to the 2005-06 fiscal year.¹⁴³
• the exemption of certain network operations from licensing requirements; reviewing broadcasting application forms; and reviewing the policy concerning the issuance of radio calls for applications in the processing of requests to add foreign third-language services to the Lists of Eligible Satellite Services. The Commission has also set out measures to streamline certain reporting requirements for Class 1 cable distribution undertakings having 20,000 or more subscribers and for television licensees, and has issued an exemption order for certain third-language television undertakings from licensing requirements.
• new service standards for applications for licence amendments and licence renewals currently processed by public notice, as well as applications processed using an administrative approach that does not entail a public process.¹⁴⁴ The quarterly and annual statistics for the period 1 April 2006 to 31 March 2007¹⁴⁵ show that the Commission has either met or surpassed these standards.

Telecommunications

With respect to telecommunications the Commission has also put in place a range of mechanisms to ensure effective and efficient regulation of telecommunications. These include:

• expedited processes for retail tariff filings. The Commission recognizes the need for timely disposition of tariff applications by incumbent TSPs for new or amended services. Since 2005, the Commission has streamlined and expedited the processing of retail tariff filings¹⁴⁶ and the processing of applications concerning the withdrawal of services for which new technologies are employed and for which there are replacement services.¹⁴⁷
• approval of price ranges within which incumbent TSPs can offer certain services such as local exchange and related services¹⁴⁸ as well as VoIP related services. This permits the incumbent TSPs to respond to market forces by providing pricing flexibility and eliminating the need for regulatory approval of price changes within the range.
• deemed approval of certain inter-carrier agreements filed pursuant to section 29 of the Telecommunications Act upon filing with the Commission.¹⁴⁹

In Telecom Decision 2006-15,¹⁵⁰ among other things, the Commission set out the details of the framework for forbearance from the regulation of local exchange services including the local forbearance criteria such as a 25% market share loss threshold. The Commission determined that residential local exchange services and business local exchange services are in different relevant markets for the purpose of the local forbearance framework. The Commission also outlined the scope of forbearance to be granted under the local forbearance framework. The Commission determined it to be appropriate to retain only those powers and duties that are strictly necessary to protect the interests of customers, particularly uncontested and vulnerable customers, and to further competition. The Commission also determined that those powers and duties that relate strictly to economic regulation should be removed in a forborne environment. The Commission adopted certain transitional measures to aid in the development of sustainable local competition.

In the Forbearance Order,¹⁵¹ the Governor in Council, among other things, replaced the Commission's market share loss criterion with one that emphasizes the presence of facilities-based competitive TSPs and replaced the geographic regions by incumbent TSP exchange boundaries. The Forbearance Order also modified the competitor quality of service indicators for forbearance purposes and eliminated the winback rules which determined when an incumbent telephone company could contact customers that were switching to their competitors and removed the competitive safeguards for promotions which addressed issues such as the availability, timing, duration and limitations of the promotion as well as the price of the service promoted.

In an effort to deal with local forbearance applications as expeditiously and fairly as possible, the Commission issued Telecom Circular 2007-13,¹⁵² to set out the timelines for submissions regarding local forbearance applications. In addition, the Commission also issued letters to the incumbent and alternative TSPs to notify them of the type of data and level of detail to be provided in local forbearance applications or proceedings.

The Policy Direction requires the CRTC to act in a more efficient, informed and timely manner to achieve the telecommunications policy objectives set out in section 7 of the Telecommunications Act. With greater reliance on market forces, monitoring of the industry will continue to be a valuable tool to assess the extent to which these objectives are being met.

iii) Dispute resolution

The Commission has established the following dispute resolution mechanisms for broadcasting and telecommunications:

• the CRTC Interconnection Steering Committee (CISC) process provides a forum for interested parties, with the assistance of Commission staff, to resolve telecommunications related competition issues of a technological, operational or administrative nature;
• third-party mediation or staff-assisted dispute resolution to encourage and promote bilateral negotiations;
• expedited procedures for resolving competitive broadcasting¹⁵³ and telecommunications¹⁵⁴ issues. The issues must be factual in nature, and generally relate to the application of existing rules, and not to the creation of new ones. This process is an efficient and effective way of dealing with disputes. The expedited hearings generally result in decisions being issued within 10 calendar days after the hearing.

Broadcasting

The Broadcasting ADR group was created in 2000 to process and resolve competitive and access disputes involving broadcasting matters. The process and procedures used by the Commission are outlined in Broadcasting Public Notice 2000-65.¹⁵⁵

The kinds of disputes handled by this group generally fall into three categories: (1) disputes between broadcasting distributors and programming services relating to the terms of distribution, including wholesale rates; (2) disputes between competing broadcasting distributors over access to buildings and the end-user; and (3) disputes between programmers regarding programming rights and markets served.

Wherever possible, ADR techniques, such as fact-finding meetings, mediation and staff-opinions are used to attempt to break deadlocks, identify core issues, and assist disputing parties to directly resolve their disputes. When these techniques are insufficient, the Commission may, where appropriate, render determinations on disputes, generally by way of "final-offer" selection (e.g., under sections 12 to 15 of the BDU Regulations) or by way of decisions involving allegations of undue preference or disadvantage (e.g., under section 9 of the BDU Regulations).

Final offer selection processes are typically conducted on a confidential basis both to permit candour on the part of the parties and to take into account that the matters in dispute often involve commercially sensitive information, the disclosure of which could cause harm that would outweigh any public interest benefit.

In certain disputes that come before the Commission as allegations of undue preference or disadvantage, the complainant seeks a ruling by the Commission that the preference or disadvantage has material and serious consequences for the complainant and/or the Canadian broadcasting system, and that are contrary to the public interest. Cases involving such public issues are usually immediately placed on a public file.

a) Review of existing broadcasting practices and procedures

In the context of the BDU and discretionary programming review of the regulatory frameworks proceedings,¹⁵⁶ the Commission invited comments on its existing practices with regard to competitive disputes and undue preference. The Commission also sought specific comments on whether parties felt a reversal of onus on undue preference matters would be appropriate.

Many parties took the opportunity to provide comments on the need for continued dispute resolution by the Commission, particularly in an environment of reduced regulatory protections. The notion of a reversal of onus was widely supported. The Commission's determinations are expected to be released in the fall 2008.

b) Number, type,trends and time to closure of broadcasting disputes

Between 1 April 2007 and 31 March 2008, the Commission dealt with three outstanding dispute files from the previous period and opened six new files. There were three dispute files outstanding at the end of the period - one of these files has been suspended at the request of the parties for quite some time, and the remaining two were received from December 2007 to March 2008.

During the same period, the Commission also resolved four of the six informal dispute interventions received.

A trend of note in the report period is the shift back to more formal interventions. These formal files involved major players and, all but one, featured disputes between programmers and BDUs. The number of informal files has also decreased. This may have been due to parties focussing their efforts on a particularly heavy regulatory agenda in 2007/08.

Telecommunications

The Commission has strongly encouraged parties to pursue independent negotiations to resolve any competitive dispute. In instances where the parties can not settle a dispute by mutual agreement, the CRTC has successfully used a number of resolution mechanisms to settle a number of competitive disputes. In 2007 17 disputes were resolved using various dispute resolution mechanisms.

The kinds of telecommunications competitive disputes handled through alternative dispute resolution generally fall into the following categories: (1) access to support structures, (2) billing and collection service, (3) access to Multi-dwelling unit buildings, (4) access to municipal rights-of-way, and (5) interconnection issues.

Statistical Information - Simplifying regulation and dispute resolution

Table 2.6.1 Number of dispute files received in 2007/08

(1) 1 April 2007 to 31 March 2008
(2) Section 9 of the Broadcasting Distribution Regulations
(3) Sections 12 to 15 of the Broadcasting Distribution Regulations

Table 2.6.2 Fiscal year comparisons of the average number of days to resolve disputes

Notes: Excludes informal interventions. Files commenced in one year but concluded in another are included in the calculation for the year of closure. Files can be suspended for various periods of time in order to permit the parties to negotiate. Suspension times are not included in these calculations.

2.7 Current major CRTC initiatives

The following is a brief summary of some of the major initiatives currently underway by the Commission.

Accessibility proceeding

In June the Commission launched a review of unresolved accessibility issues.¹⁵⁷ The review will cover accessibility issues in telecommunications, broadcasting and New Media broadcasting. The proceeding will include a public consultation component to allow interested parties and organizations to make all stakeholders more aware of the issues and barriers faced by people with disabilities.

Ownership

In the fall of 2008 the Commission will implement a broadcasting ownership reporting mechanism with the objective of starting the collection and review of broadcasting ownership data in the Winter of 2009. The initiative is primarily designed to provide greater flexibility in the furnishing of ownership information and documents, and to ease related general administrative burden.¹⁵⁸

In June of this year, the Commission considered the applications filed by TQS Inc. for authority to change its effective control and to renew its conventional television stations licences.¹⁵⁹

BDU-Discretionary Review

In Notice of Public Hearing 2007-10,¹⁶⁰ the Commission announced that it would conduct a review of the regulatory frameworks for BDUs and discretionary programming services and invited written comments and proposals from the industry and interested parties.

In Notice of Public Hearing 2007-10, the Commission indicated that BDUs and programmers must be able to respond to the evolving expectations, tastes and demographics of Canadian viewers. In order to meet the challenges of the years ahead, licensees will need to have the flexibility to react quickly and creatively to the opportunities and challenges they encounter, and not be burdened by detailed or unnecessary regulations.

To this end, the Commission indicated that it would consider a revitalized regulatory approach to both distribution and discretionary programming undertakings that would aim to reduce regulation to the minimum necessary to achieve the objectives of the Broadcasting Act, relying instead on market forces wherever possible. In particular, the Commission is sought to:

• develop forward-looking regulatory frameworks that are strategic, straightforward, flexible, and equitable;
• ensure a strong Canadian presence in the broadcasting system in the form of distinct and diverse Canadian programming and services; and
• recognize the increasing autonomy of audiences and consumers, providing them with the greatest possible choice of services at affordable prices.

New Media Broadcasting Proceeding

In 2007, to investigate the cultural, economic, and technological issues associated with new media broadcasting, the Commission launched the New Media Project Initiative (the Initiative). In May 2008, the Commission released a document¹⁶¹ which reflected stakeholder views relating to Canadian broadcasting in new media (the new media document). Concurrent with the release of this document, Broadcasting Public Notice 2008-44¹⁶² was released, with the purpose of gathering additional comments and input from the industry and the public. This will ultimately lead to a Public Hearing at a future date to examine the new media broadcasting environment and the continued appropriateness of the existing new media exemption orders.

The Commission launched Broadcasting Public Notice 2008-44 to examine the new media broadcasting environment to determine whether the new media broadcasting environment is contributing sufficiently to the achievement of the broadcasting policy objectives of the Broadcasting Act and will continue to do so or whether the New Media Exemption Order and the Mobile Broadcasting Exemption Order need to be revised. Fundamentally, it is necessary to determine if public consultations regarding Canadian new media broadcasting content and access to such content are necessary to explore the contribution by new media broadcasting undertakings to the achievement of the broadcasting policy objectives of the Broadcasting Act.

Upon receipt of comments pursuant to the public notice, the Commission will make a determination as to the matters to be dealt with in the future public hearing and will issue a Notice of Public Hearing in the late summer of 2008 outlining the details of the new media broadcasting public hearing to be held in 2009.

Included in the information discussed in the new media document was the stated desire by some stakeholders for data and knowledge sharing to further understand this evolving Canadian industry. Accordingly, this report contains an expanded new media section which captures additional facts and information about the new media industry in Canada, as well as consumer trends having an impact on new media. Details may be found in section 4.5 of this document.

National Do Not Call List (National DNCL)

In June 2006, Bill C-37 came into force. It amended the Telecommunications Act to grant the CRTC the powers required to establish a National DNCL. In July 2007 the Commission established the rules of the National DNCL.¹⁶³ The rules are part the unsolicated Telemarketing Rules that cover all aspects of telemarketing calls. These rules are meant to balance the privacy of individuals with the legitimate uses of telemarketing.

There are exemptions set out in the Telecommunications Act that will permit certain types of unsolicited calls even though the phone number is on the National DNCL. For example, calls from registered charities and political parties will be exempted, as well as calls from organizations with which the consumer already has a business relationship.

Organizations that are exempt from the National DNCL are nonetheless required to establish their own internal do not call list, and add to it the phone number of any consumer who does not want to be called by that organization.

The Commission will not manage the National DNCL itself. After issuing a Request for Proposal, the Commission awarded a five-year contract to Bell Canada for the development, implementation and operation of the National DNCL. The National DNCL will be funded by fees paid by the telemarketers and is expected to be launched by the end of September 2008.

The Commission is in the process of establishing a framework for investigating possible violations of the telemarketing rules, including those of the National DNCL. Companies who are found in violation will be subject to administrative monetary penalties.

Policy Direction

The Commission is required to apply the Policy Direction when exercising its powers and performing its duties under the Telecommunications Act.

The Policy Direction requires that the Commission rely on market forces to the maximum extent feasible and when relying on regulation should use measures that satisfy the following criteria:

• specify the telecommunications policy objective that is advanced by those measures and demonstrate their compliance with this Order;
• if they are of an economic nature, they should neither deter economically efficient competitive entry into the market nor promote economically inefficient entry;
• if they are not of an economic nature, to the greatest extent possible, they are implemented in a symmetrical and competitively neutral manner; and
• if they relate to network interconnection arrangements or regimes for access to networks, buildings, in-building wiring or support structures, they should ensure the technological and competitive neutrality of those arrangements or regimes, to the greatest extent possible, to enable competition from new technologies and not to artificially favour either Canadian carriers or resellers.

To enable the Commission to act in a more efficient, informed and timely manner, the Policy Direction also requires the Commission, among other things, to use only tariff approval mechanisms that are as minimally intrusive and as minimally onerous as possible, and, to continue to explore and implement new approaches for streamlining its processes.

Accordingly in Telecom Decisions 2007-51¹⁶⁴ and 2008-34,¹⁶⁵ the Commission established action plans to review the existing economic, non-economic and social regulatory measures, with a view to ensuring that such measures are implemented in a manner consistent with the Policy Direction.

The Commission has already completed its review of some of the measures. These include:

• general tariff bundling rules and requirement for market trials,¹⁶⁶ and
• mandatory customer contract renewal notification and requirement for service destandardization/withdrawal.¹⁶⁷

More information about the Commission's action plans may be obtained from the CRTC's website.¹⁶⁸

Net neutrality

On 3 April, the Canadian Association of Internet Providers (CAIP) filed an application requesting that the Commission issue an order directing Bell Canada to cease and desist from "throttling"¹⁶⁹ its wholesale Asymmetric Digital Subscriber Line (ADSL) services and in particular, the wholesale service known as Gateway Access Service (GAS). The Commission has sought additional information from the parties and expects to deliver a decision on CAIP's application this fall.

The Commission is addressing the traffic-shaping issue in the context of Bell Canada's wholesale broadband access tariff; however the question of "net neutrality" raises a whole range of questions affecting consumers and service providers. Fundamental issues of technology, economics, competition, access and freedom of speech are all involved. Examples include:

1. access to content or services - blocking of services or websites, preferential treatment for certain content providers, and modification of content;
2. carriage-related issues - which devices can be connected to the networks of different providers and disclosure by ISPs to ensure transparency in their service agreements with consumers regarding, for example, network management and speed; and
3. privacy concerns.

The Commission expects to continue to study the issues surrounding net neutrality in the coming year. This process could evolve into a major public consultation in order to obtain the views of interested parties.

3.0 The Communications Service Industry

3.1 Financial Overview

This section provides a broad overview of the financial performance of the broadcasting and telecommunications industries (the Canadian communications industry) and briefly examines how convergence is enabling industry participants to offer communications services outside of their traditional core services. The financial performance of individual sectors within broadcasting and telecommunications is found in sections 4 and 5.

Revenue Trends

In 2007, total broadcasting and telecommunications revenues increased by 5.7% to $51.1 billion, contributing nearly 4.2% towards Canada's annual GDP,¹⁷⁰ an increase of 0.1% over 2006. During the same period, telecommunications industry revenue accounted for 74% of Canadian communications industry revenue as total broadcasting industry revenue increased by 6.7% to $13.1 billion and total telecommunications industry revenue rose by 5.3% to $38.0 billion.

Total revenue for both the broadcasting and telecommunications industries has exhibited growth each year since 2003, with broadcasting industry revenue experiencing compounded growth of 6.5% over this period, as compared to 4.4% for the telecommunications industry.

A Converging Industry

Figure 3.1.6 illustrates the various types of players in the Canadian communications industry and how they deliver their service offerings to consumers. The deployment of high-capacity digital networks and the emergence of IP as the standard for data transmission and delivery have facilitated the carriage of multiple types of data on a single network; and has been a major enabler of network convergence. Today's unified data networks are capable of delivering all forms of information, be it voice, data, text or video.

The capability and capacity of these underlying technologies and the regulatory response of allowing and encouraging competition in formerly non-competitive sectors has encouraged convergence. The blurring of the traditional distinction between a telecommunications company and a cable company is manifested by traditional telephony companies offering broadcasting services and cable companies adding telecommunications services, such as Internet and telephony, to their service offerings. Further, content providers are increasingly utilizing the Internet to distribute various forms of media and entertainment.

The rationalization of networks and services within the broadcasting industry is demonstrated by the increase of non-programming¹⁷¹ service revenues as a share of total revenues (excluding mobile telephone and DTH) reported by the largest cable companies. In 2003, non-programming service revenues represented approximately 24% of total cable company revenues, primarily due to increasing take-up of Internet access services. In 2007, non-programming service revenues increased to 39% of total cable company revenues. This increased as a result of further adoption of broadband Internet and, most recently, the inroads made by their residential telephone service. During the period from 2003 to 2007, cable company revenues increased by 60% or $2.6 billion to $7.1 billion, of which non-programming services represented 64% or $1.7 billion of this increase. Clearly, the cable companies have been successful in "up-selling" telecommunications services to their customer base.

A similar magnitude of broadcasting revenue to total revenue (excluding mobile telephone and DTH) was not exhibited by the incumbent telephone companies. During 2007, their broadcasting revenue, although experiencing growth of approximately 40%, represented just 3.1% of incumbent telephone company wireline revenues. Wireline based broadcasting services are not uniformly available across Canada. Within certain geographic regions, however, the telephone companies successfully increased their market-share for broadcasting services.

Figure 3.1.7 represents revenue makeup and relative revenue magnitude of eight selected companies. Each company is displayed by a bubble which represents the magnitude of the respective company's revenues. The position of the bubble determines the extent of each company's telephony versus broadcasting revenues; the closer the bubble is to the x-axis indicates that the company generates revenues mainly through broadcasting activities and vice versa for telecommunications revenues.

Given that the telecommunications and broadcasting industries are converging, the business of communication services may focus less on the distribution, and more on the services themselves being delivered to Canadians. Referring to Figure 3.1.8, from a regulatory perspective, the Commission will need to track the impact of convergence as it applies to corporate structure, technology and customers. Within this framework it will need to consider a number of complex issues including, among others, concentration of ownership, net neutrality, service quality and affordability, open access, and consumer protection and privacy.

Competition

Service convergence has led to increased competition and encouraged innovation through offering multiple service bundles to consumers. TSPs providing local service are bundling long distance service with their local service offering. Others, such as the wireless service providers, offer friend and family plans.

In 2007, over 25% of residential accounts included service bundles that consisted of two or more of the following services: local, Internet, video, and wireless.¹⁷² This is up from 15% in 2006. The extent to which residential customer accounts contained service bundles varied by TSP, ranging from a low of 15% of residential accounts to a high in excess of 55%. The financial impacts to TSPs and Cable companies, due to convergence, can be seen in the tables and charts of this section.

Statistical information - Financial overview

Table 3.1.1 Telecommunications and broadcasting revenues ($ billions)

Source: CRTC data collection

Figure 3.1.1 Broadcasting and telecommunications annual revenue growth rates

Source: CRTC data collection

Table 3.1.2 Industry revenues by type of provider ($ thousands)

Source: CRTC data collection

Figure 3.1.2 Broadcasting and telecommunications revenues by type of provider (Percent)

Source: CRTC data collection

Figure 3.1.3 Commercial broadcasting and telecommunications revenues
(excluding non-programming and exempt services)

Source: CRTC data collection

Figure 3.1.4 BDU revenues by service type

Source: CRTC data collection

Figure 3.1.5 BDU - EBITDA margins achieved from all services (programming, exempted and non-programming services)

Source: CRTC data collection

Figure 3.1.6 Broadcasting and telecommunications operating platforms

Figure 3.1.7 Select Canadian communications companies revenue composition

Note:
(1) Bubble size represents estimated total telecommunications and broadcasting revenues
Source: Company websites and other public annual reports

Figure 3.1.8 Regulatory considerations in a converging industry

4.0 Broadcasting

4.1 Broadcasting - Financial review

Overview

Broadcasting of radio and television programming can be made by utilizing one of three delivery platforms: (i) over the air (OTA) transmission where the licensed broadcasters transmit either radio or television programs to the general public free of charge over assigned frequencies or channels in the appropriate spectrum (AM, FM, VHF, UHF or L-Band); (ii) over dedicated landline (cable or DSL) or wireless (satellite, DTH, MDS), facilities of licensed broadcasting distribution undertakings (BDUs) who transmit radio and television programming over their network to subscribers of their service for a monthly subscription fee; and, more recently, (iii) via the Internet utilizing web-based facilities or sites to subscribers of high-speed or broadband Internet service. Various models have been developed by the providers to recover the costs of the content that users access via the Internet. These models range from free, as the costs are recovered through advertisements (Joost and Hulu), to subscription based (Jump TV), to pay-per-view (Apple TV).

Broadcasters who produce their own content can broadcast their content over their own facilities, use their web-based facilities or use the services of a BDU.

Diagram 4.1.1 Program distribution

Financial discussion and analysis¹⁷³

Broadcasting revenues include revenues from radio, television, and BDUs. Radio revenues include AM and FM commercial radio stations. Television revenues include CBC conventional OTA television, private conventional OTA television, and pay, pay-per-view (PPV), video-on-demand (VOD) and specialty services. BDU revenues include DTH/MDS as well as IPTV service, but exclude Internet and telephony service revenues.¹⁷⁴ All revenues from these three markets, radio, television and BDU are analysed in greater detail in subsections 4.2, 4.3, and 4.4 respectively.

A) The Industry

In 2007, there were several large consolidations in the broadcasting industry that are worth noting as they reflect the trend of converging services and ownership.

First, CTVglobemedia expanded its broadcasting interest by acquiring effective control of CHUM's radio stations, television specialty services and the A-Channel OTA conventional television stations.¹⁷⁵ Second, Astral Media acquired Standard Radio's¹⁷⁶ radio and television stations to become the largest radio operator in Canada. Third, Canwest acquired effective control of Alliance Atlantis Broadcasting's¹⁷⁷ specialty television services, further increasing its presence as a national television broadcaster in Canada. Fourth, Rogers Media acquired effective control of CHUM's five CityTV¹⁷⁸ OTA conventional television stations. Combined, these four transactions will generate $383 million in tangible benefits to the Canadian broadcasting system.

a. Radio

The radio industry had six large companies that collectively had 72% of the commercial radio revenues in 2007. Four of these companies had between 10% and 22% of the radio revenues and the remaining two had less than 10%. The remaining 28% of commercial radio revenues was captured by a large number of smaller companies.

b. Television

By the end of 2007, the television industry had 13 large companies that collectively controlled directly or indirectly over 89% of the television revenues in 2007 which can be seen in Figure 4.1.2

c. Broadcast Distribution

The broadcast distribution industry had 5 large companies that captured approximately 93% of the broadcast distribution revenues.

B) Revenues

Total revenues from broadcasting services were approximately $13.1 billion in 2007, an increase of 6.7%. Radio revenues increased from $1.4 billion in 2006 to $1.5 billion in 2007 an increase of $0.1 billion or 6.2%, while television revenues increased from $5.0 billion in 2006 to $5.3 billion in 2007 an increase of $0.3 billion or 4.3% and BDU revenues increased from $5.8 billion in 2006 to $6.3 billion in 2007. Revenue growth in broadcasting came predominantly from the pay, PPV, VOD and speciality services and BDUs.

Revenues reported by the pay, PPV, VOD and specialty services continue to increase annually and since 2005 they have been the largest revenue component of total television revenues. The revenues reported by these services increased 9.1% or $226 million from 2006 to 2007. Since 2003, these services have increased by an average of 9.7% per year which represents the largest growth component of the television market. The number of services reporting financial results over this same period has increased from 117 in 2003 to 176 in 2007. This was largely due to the proliferation of digital services.

Revenues reported by the CBC and private conventional OTA television sector decreased by $8 million or 0.3% from 2006 to 2007. Since 2003, these revenues have grown by an average of 1.3% per year. During this same period, CBC and the private conventional OTA television sector garnered 56% of total television revenues reported, but in 2007, this percentage decreased to 48%.

The sector that experienced the most revenue growth in 2007 was the BDUs. As seen in Table 4.1.1, cable and DTH and MDS revenues grew by $0.3 billion or 7.7% and $0.2 billion or 11.8% in 2007 respectively.

i) Radio - Revenues

Revenues generated by radio operators were derived mainly through advertising. In 2007, advertising revenues increased $79.6 million, an increase of 5.7% over the previous year, consistent with the 6.0% annual growth rate over the 2003 to 2007 period.

ii) Television - Revenues

Pay, PPV and VOD services rely entirely on subscription revenues while specialty services, have both advertising and subscription revenue streams. In 2007, 44% of specialty service revenues were derived from advertising and the remaining 56% was generated through subscription fees. Total television advertising revenues experienced a slight increase in growth of 1.8% from 2006 to 2007 while subscription revenues increased 9.6% for the same period.

iii) BDU - Revenues

BDU revenues from basic and non-basic programming services increased 8.8% from $5.8 billion in 2006 to $6.3 billion in 2007. BDU revenues represent approximately 48% of total broadcasting revenues in 2007.

C) EBITDA and PBIT margins

i) Radio PBIT

• AM radio reported a $1.4 million or 8.0% decrease in profit before interest and taxes (PBIT)) from 2006 to 2007. The PBIT margin for AM radio in 2007 was 4.96%.
• FM radio reported a $17.1 million or 6.4% increase in PBIT from 2006 to 2007. The PBIT margin for FM radio in 2007 was 24.21%.

ii) Television PBIT

PBIT and PBIT margins for the private conventional OTA television and pay, PPV, VOD and specialty services, excluding CBC conventional OTA television, gradually increased from $0.6 billion in 2003 to $0.8 billion in 2005. Since 2005, it has declined by $0.04 billion, resulting in a 5.0 % decline.

• The PBIT reported by the private conventional television sector increased from $90.9 million in 2006 to $112.9 million in 2007. The number of private conventional television services reporting financial results stayed unchanged at 97 in 2007.
• The PBIT reported by the Pay, PPV and VOD television services increased $74.3 million (13%) to $647 million from 2006 to 2007. The number of Pay, PPV and VOD services reporting financial results also increased from 166 in 2006 to 176 in 2007.
• Overall television PBIT grew by $96.3 million or 14.5% from 2006 to 2007.

iii) BDU

• The EBITDA margin for cable undertakings from basic and non-basic programming activities continues to decrease from 27.8% in 2006 to 23.3% in 2007. In contrast, the EBITDA margin from basic and non-basic programming activities reported by DTH and MDS undertakings continues to increase to 17.1% in 2007.
• The combined EBITDA margin for cable, DTH and MDS undertakings from basic and non-basic programming activities has been steadily declining since 2004.¹⁷⁹

Statistical Information - Broadcasting revenues

Table 4.1.1 Broadcasting revenues ($ millions)

nm = not meaningful
* CBC revenues include advertising and other commercial revenues. Parliamentary appropriations are not included.
Source: CRTC data collection

Figure 4.1.1 2007 Commercial radio revenues by broadcaster

Source: CRTC data collection

* In December 2007, the Commission approved an application by Astral Media to acquire Standard's radio assets.
Percentage of total revenue calculation is based on total revenues reported for each service where the broadcaster had greater than 50% direct and indirect voting interest as of 31 August 2007.

Figure 4.1.2 2007 Commercial television revenues by broadcaster

Source: CRTC data collection
Notes:
* In December 2007, the Commission approved an application by Canwest for authority to transfer effective control of Alliance Atlantis's television specialty services.
** In September 2007, the Commission approved an application by Rogers for authority to transfer effective control of the five OTA CityTV stations previously owned and operated by CHUM Limited.
*** Based on advertising, subscriber and other commercial revenues only. Therefore does not include parliamentary appropriations.
**** Includes OTA TQS stations. In June 2008, the Commission approved, subject to certain conditions, the acquisition by Remstar Diffusion Inc. of TQS's network and television stations in Montreal, Quebec, Trois-Rivières, Sherbrooke and Saguenay. The Commission also approved the acquisition by CBC of the assets of the French-language television programming undertakings CKSH-TV Sherbrooke, CKTM-TV Trois-Rivières and CKTV-TV Saguenay and its transmitter CKTV-TV-1 Saint-Fulgence, Quebec, from TQS inc.

Percentage of total revenue calculation is based on total revenues reported for each service where the broadcaster had greater than 50% direct and indirect voting interest as at 31 August 2007.

Figure 4.1.3 2007 BDU revenues by operator

Source: CRTC data collection

Figure 4.1.4 Total broadcasting revenues and PBIT/EBITDA margins ($ billions)

Source: CRTC data collection
* BDU revenues include non-reporting BDU revenues, but exclude exempt and non-programming services. BDU EBITDA represents only basic and non-basic services.

4.2 Radio

Overview

As of 31 December 2007, there were 1,222 radio and audio services in Canada. Ninety-nine percent of radio and audio services were over-the-air while the remaining 1% was delivered by BDUs. Canada's national broadcaster, the CBC, accounted for approximately 8.5% of radio and audio services while the private commercial broadcasters accounted for 59.7%. The remaining 31.8% consisted of religious, community, campus, Aboriginal and other radio and audio services. There were approximately 619 private commercial undertakings operating in 2007 with revenues of approximately $1.5 billion.

Highlights

• As of 31 December 2007, there were 23 private commercial over-the-air ethnic radio stations, 71 radio stations licensed to broadcast religious music, 50 Type B Native radio stations, and 53 campus stations licensed across Canada.
• The private commercial broadcasters, representing 60% of audio and radio services, generated revenues of $1.5 billion in 2007, a 6% increase or $88 million over the previous year.
• Average weekly hours tuned per capita have declined by 2% annually since 2003 from 19.5 hours per week to 18.3 hours in 2007. The age groups with the largest declines were the 18 to 24 age group with a 5% annual decrease and teens in the 12 to 17 age group with a 4% annual decrease.
• Weekly hours per listener have declined 1% annually since 2003 from 21.0 hours per week in 2003 to 20.2 hours in 2007.
• FM revenues increased 7% from $1,093 million in 2006 to $1,173 million in 2007. AM revenues increased 2% from $322 million in 2006 to $329 million in 2007.

Industry

Five operators accounted for 71% of the revenues in the English -language market:¹⁸⁰

• Rogers Communications Inc. (19%),
• Corus Entertainment (17%),
• Astral Media Inc. (16%),¹⁸¹
• CTVglobemedia Inc.(12%), and
• Newcap Inc. (7%).

The three largest operators in the French-language market accounted for 83% of the revenues in the French-language market:¹⁸²

• Astral Media Inc. (48%),
• Corus Entertainment Inc. (21%), and
• Cogeco Inc. (13%).

Analysis

Revenue and PBIT analysis

Revenues from private commercial radio stations have increased 6% annually from $1.2 billion in 2003 to $1.5 billion in 2007. As displayed in Figure 4.2.5 and Table 4.2.8, over the 2003 to 2007 period, revenues from AM private commercial radio increased 2% annually from $306 million to $329 million in 2007. Revenues from FM private commercial radio stations increased 7% annually from $884 million to $1,173 million. During this period, there was also a steady conversion of AM stations to FM stations. The impact of this conversion on the radio industry is displayed in Figure 4.2.6. Over the 2003 to 2007 period on a per station basis, AM station revenues increased from $1.5 million per AM station to $1.9 million and FM station revenues remained relatively unchanged at $2.6 million per FM station. In addition, over this period the PBIT increased 10-fold from $0.01 million per AM station in 2003 to $0.1 million in 2007, whereas the PBIT remained relatively unchanged at $0.6 million per FM station.

Tuning trends

In 2007 there was a 2% decrease in the weekly radio listening levels per capita of approximately 18 minutes, mostly due to those in the 12 to 17 and 18 to 24 age groups. This was partially offset by the increases in radio listening among adults aged 50-54 and 65 and over, who increased their radio listening by approximately 1% or 12 minutes.

Fall weekly tuning trends per listener decreased 1% from 20.4 hours to 20.2 hours. Private commercial radio captured 80.5% of total tuning. In 2007, the six largest private commercial radio operators represented over 54% of the tuning, down from 55% in 2006. The remaining 46% was shared among the other private operators and public broadcasters.

Similar trends were evident in both English and French language tuning. With respect to English-language tuning, the five largest private commercial operators maintained their tuning share at 59% of the English language radio listening hours. Their revenues represented 71% of the total private English radio revenues. These revenues increased 9% from $815 million in 2006 to $885 million in 2007. The top three private operators in the French-language market captured 63% of the listening hours. These operators captured 83% of the total private French-language radio revenues in 2007. These revenues increased 4% from $179 million in 2006 to $187 million in 2007.

Transfer Benefits

As of 31 December, 2007, transfer benefits increased more than 100% compared to the accumulated transfer benefits from 1 May 1998 to 31 December 2006. The total amount for the period ending 31 December 2007 was $100.8 million whereas from 1 May 1998 to 31 December 2006, the total was $99.3 million for a total of $200.0 million. This increase can be attributed to two major ownership changes in 2007:

1. the CTVglobemedia Inc. acquisition of 34 radio stations from CHUM Limited (CHUM)¹⁸³
2. the Astral Media Inc. acquisition of 55 radio stations from Standard Broadcasting Corporation Limited.¹⁸⁴

Digital radio

As of 31 December 2007, the Commission renewed 59 transitional digital radio licences, of which 41 were to private commercial radio programming undertakings and 18 were to existing CBC stations. All 59 licences will expire on 31 August 2009.

Cultural Diversity:

As of 31 December 2007, the Commission had authorized 23 private commercial over-the-air ethnic radio stations in the major cities such as Vancouver, Edmonton, Calgary, Winnipeg, Toronto, Montréal, and Ottawa. The Commission directed these stations to provide programming to a number of cultural and linguistic groups.

As of 31 December 2007, there were 71 radio stations licensed to broadcast primarily religious music and/or spoken word; 27 were French-language, 43 were English-language and one was third-language.

In 2007, there were 50 Type B Native radio stations and six Native network radio licences and 30 undertakings that together reported revenues of $18.2 million.

As of 31 December 2007, there were 44 Type A, 55 Type B and ten Developmental community stations. Of the Type A community stations, 34 were French-language, 9 were English-language and one was bilingual. Of the Type B community stations, 28 were French-language, 26 were English-language and one was multicultural. There were nine English-language and one bilingual developmental community stations. There were 84 undertakings with reported revenues of $21.6 million.

At the end of 2007, there were 53 campus stations licensed across Canada: 41 Community-based of which 34 were English-language stations, five French-language stations, two bilingual stations, 11 English-language instructional stations and one English-language developmental station. There were 42 undertakings with reported revenues of $8.1 million.

As of 31 December 2007, the Commission approved seven specialty audio services of which three were targeted at ethnic communities.

Multi-channel subscription services

In Broadcasting Public Notice CRTC 2005-61,¹⁸⁵ the Commission set out the licensing framework for satellite subscription radio services and announced approval of three national subscription radio undertakings that provide a package of radio channels to subscribers for a monthly fee: the programming of one of the authorized services¹⁸⁶ to be delivered by terrestrial transmitters and all channels to be Canadian-produced, two other authorized programming services¹⁸⁷ to deliver primarily by satellite with terrestrial transmitters, as required to fill the gaps in coverage. Each of these North American satellite-based services provide a mix of Canadian and non-Canadian channels.

The National public broadcaster

The CBC/SRC operates four national radio network services: Radio One and Radio 2 in English, and La Première Chaîne and Espace musique in French. Additionally, the CBC provides a unique radio service serving Canada's northern communities, broadcasting in English, French and eight Aboriginal languages. The CBC also operates Radio-Canada International, an international radio service broadcasting in nine languages. The CBC radio services broadcastes commercial-free and is funded by the federal government.

The CBC/SRC owned and operated the national pay audio service Galaxie, offering 45 channels of continuous music, without talk, to nearly six million subscribers.¹⁸⁸ Revenues for this bilingual service were derived entirely from subscriber revenues.

The CBC/SRC was also a partner in the satellite radio service SIRIUS Canada, which was launched in December 2005.

Statistical Information - Radio

Table 4.2.1 Number and type of radio and audio services authorized to broadcast in Canada