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CRTC Communications Monitoring Report

2011

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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 powers 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 related to the telecommunications, broadcasting, or regulatory policy objectives set out in the Acts.

The components of broadcasting policy set out in 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 policy set out in section 7 of the Telecommunications Act are tied to the country’s social and economic fabric.

Access to Canadian content, particularly its creation 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 the provision of broadcasting and Canadian programs to Canadians.

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, that foster increased reliance on market forces and ensure that regulation, when required, is efficient and effective.

Since December 2006, the Commission has applied the Policy Direction 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, when regulating to do so in a manner that is efficient, proportionate to the purpose of regulation, and interferes with market forces to the minimum extent necessary. The Policy Direction specifies criteria that 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 required.

In addition to implementing the policy objectives in its governing legislation, 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 of its activities, the Commission is guided by four basic principles: transparency, fairness, predictability, and timeliness. Consequently, it endeavours to make and publish its decisions promptly and with a clear rationale. To further the transparency of its 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: http://www.crtc.gc.ca/eng/publications.htm

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 public proceedings, which can include calls for comments. The Commission also has the power, pursuant to the Broadcasting Act, to make regulations³ respecting the Canadian broadcasting industry. Under subsection 9(1) of that Act, the Commission has the authority to establish classes of licence and to impose conditions of licence. To achieve the Canadian broadcasting policy objectives set out in the Broadcasting Act, the Commission imposes conditions of licence when it issues a licence and amends these conditions as necessary when renewing the licence.

Pursuant to section 47 of the Telecommunications Act, the Commission must exercise its powers and perform its duties under that Act with a view to implementing the telecommunications policy objectives set out in section 7 and ensuring that Canadian carriers provide telecommunications services at rates that do not discriminate unjustly or accord any undue preference⁴, as well as, in accordance with any order made by the Governor in Council or any standards prescribed by the Minister of Industry⁵. 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 users⁶.

The Commission fulfils its broadcasting and telecommunications regulatory and supervisory responsibilities by means of a number of interrelated 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 Public Notice 1997-25, the Commission established the conditions of Class 1 undertaking fees⁷. In the process of opening the 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 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, the Commission established a three-step process by which it could determine whether a telecommunications market is or is likely to become competitive for the purpose of considering forbearance applications⁸.

Since 1994, the Commission has forborne, in large part, 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. In 2006, the frameworks for the forbearance from regulating retail local exchange services were established. The Forbearance Order amended the Commission’s framework established in Telecom Decision 2006-15 for forbearing from regulating retail local exchange services. In the HSDS Decision, the Commission established a framework for forbearing from regulating high-speed DNA services and 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, Montréal and Ottawa census metropolitan areas.

The Commission will review the regulatory framework relating to vertical integration (Broadcasting Notice of Consultation CRTC 2010-783) by way of a public hearing to consider whether it is appropriate that it expand upon existing safeguards so as to better take into account systemic changes in the broadcasting industry. In this process, among other things, the Commission will review and, where appropriate, update the issues examined in Broadcasting Public Notice 2005-35 (Good Commercial Practices) including, in particular, “Possible suspension of proposed changes in distribution pending dispute resolution,” identified in paragraphs 29 to 33 of the Notice.

Dispute resolution

For the twelve-month fiscal period ending 31 March 2011, the Commission’s Broadcasting ADR group commenced with one outstanding formal dispute resolution file from the previous fiscal period and opened four new files. All were undue preference files dealing with significant matters raised by the changing dynamics of services and platforms as the broadcasting industry transitions to a digital environment. There remained four dispute files outstanding at the end of the period, of which two were received in June 2010; one was received in December 2010 and one in January 2011.

During the same period, the ADR group assisted parties to fully resolve (i.e. the parties settled on all issues between them) two of the 15 requests for informal interventions that were received, 6 more were concluded and disposed with staff assistance, and seven are still on-going. It is noteworthy that, similar to the comments provided above for formal disputes, the majority of matters dealt with informally concerned subject matters related to changing platforms or packaging arrangements, disputes born in an environment of changing commercial and regulatory realities. Anecdotal evidence suggests that the submission of matters to the Commission for both formal and informal assistance declined substantially in the last several years as parties waited for the commercial and regulatory environments to become somewhat more clarified.

Statistical information - Regulatory oversight of broadcasting and telecommunications

Table 2.2.1 Broadcasting complaints by sector, by issue

	2007-08		2008-09		2009-10		2010-11
	Complaints received	Referrals to CBSC	Complaints received	Referrals to CBSC	Complaints received	Referrals to CBSC	Complaints received	Referrals to CBSC
Radio
Abusive comment1	11	-	26	10	22	2	35	5
Adult content	8	3	19	11	10	9	13	5
Alcohol advertising	-	-	6	-	-	-	-	-
Gender portrayal	-	-	1	1	1	1	-	-
Offensive comment2	89	30	397	308	224	140	220	100
Offensive language3	24	8	40	23	39	16	296	266
Conventional television
Abusive comment	5	1	39	5	27	5	26	-
Adult content	84	34	111	47	87	25	52	8
Alcohol advertising	4	-	17	1	5	1	4	-
Gender portrayal	-	-	5	2	9	2	2	-
Offensive comment	107	6	455	61	260	133	135	22
Offensive language	34	14	51	20	47	19	41	19
Television violence	40	9	85	24	56	20	84	14
Specialty channels
Abusive comment	2	-	10	-	2	-	-	-
Adult content	32	14	82	39	41	10	31	10
Alcohol advertising	1	-	1	-	2	-	-	-
Gender portrayal	-	-	-	-	-	-	-	-
Offensive comment	12	2	212	202	22	12	19	5
Offensive language	7	2	32	23	25	8	13	6
Television violence	14	5	20	14	19	9	21	5
Pay television and pay-per-view services
Abusive comment	-	-	-	-	-	-	-	-
Adult content	4	-	402	1	24	3	32	-
Alcohol advertising	-	-	-	-	-	-	-	-
Gender portrayal	-	-	-	-	-	-	-	-
Offensive comment	-	-	2	-	-	-	-	-
Offensive language	-	-	-	-	-	-	-	-
Television violence	-	-	-	-	-	-	-	-
Subscription radio (Satellite)
Abusive comment	-	-	-	-	-	-	-	-

• For the 12 month period: 1 April to 31 March

1. Where a complaint alleges that hatred or contempt was incited on-air against one of the groups identified in the television, radio, or specialty regulations.
2. Where a complaint alleges offensive humour or other comments that do not fall under the “abusive comment” provision.
3. 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. The actual number of complaints received should be therefore slightly lower.)

Table 2.2.2 Number of contacts by public

	2007-08	2008-09	2009-10	2010-11
Broadcasting related enquiries	14,594	7,131	5,747	6,261
Broadcasting complaints	5,581	11,851	12,740	10,813

• For the 12 month period: 1 April to 31 March

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 2.2.3 Complaints handled by the CBSC

	2007-08	2008-09	2009-10
Files handled by the CBSC	1,498	1,781	2,035
Referred by the CRTC	979	1,045	761

Source: CBSC annual reports

Table 2.2.4 Complaints handled by the ASC

	2006	2007	2008	2009	2010
Complaints received by the ASC	1,040	1,445	1,119	1,228	1,200
Complaints about television ads	527	857	528	546	526
Percent of total complaints received	51%	59%	47%	44%	44%
Complaints about radio ads	73	52	56	64	67
Percent of total complaints received	7%	4%	5%	5%	5%

Source: Ad complaints reports

Statistical Information - Dispute resolution

Table 2.2.5 Number of dispute files received in 2010/2011

	Disputes/mediation	Final Offer Arbitration/Expedite
Broadcasting	20	2
Telecommunications	5	2
Total	25	4

• For the period 1 April 2010 to 31 March 2011

Source: CRTC internal tracking

Table 2.2.6 Number of broadcasting dispute files received in 2010/2011

	Formal dispute files	Informal interventions
Building access	0	0
Distribution/programming	5	15
Total	5	15

• For the period 1 April 2010 to 31 March 2011

Source: CRTC internal tracking

2.3 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 2010, broadcasting and telecommunications providers contributed $3.1 billion towards the achievement of these objectives. Approximately 95% of these funds were for cultural and programming initiatives under the Broadcasting Act and the remaining 5% were for the achievement of the social and economic objectives under the Telecommunications Act.

Contribution and spending regimes at a glance

			% Growth
($ millions)	2009	2010
CCD reported by commercial radio and audio services	51	46	-9.6
Television CPE	2,429	2,431	0.1
BDU contribution to Canadian programming	352	368	4.6
LPIF	-	101	-
Subsidization of residential telephone in high-cost serving areas	182	165	-9.3

Source: CRTC Data Collection

Statistical information: Contribution and spending regimes - Broadcasting

The following contribution and spending regimes are based on the 1 September 2009 to 31 August 2010 broadcast year. Refer to the broadcasting section of this report for additional statistical information. These charts do not reflect additional funding, incentives or contributions made by private institutions or government bodies towards the development and production of Canadian audio and visual content that are outside of the CRTC’s administrative scope and mandate.

Figure 2.3.1 2010 Contributions to CCD reported by commercial radio & audio services, $46.1 million

• Minor variances are due to rounding.
• Includes contributions made under both the CTD and CCD regimes.

Source: CRTC data collection

Figure 2.3.2 2010 Television CPE, $2.4 billion

• 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 CMF “top-up” reported by private conventional, specialty, Pay, PPV and VOD television services.
• CBC conventional television excludes indirect and facility cost allocations. Certain programming related expenses are included as programming costs beginning in 2008 consistent with CRTC guidelines.

* Estimate

Source: CRTC data collection

Figure 2.3.3 2010 BDU contributions to Canadian programming and local expression, $368 million

• Minor variances are due to rounding.

Source: CRTC data collection

Table 2.3.1 LPIF – Contributions and number of recipients

Year	Contributions ($ millions)	Number of recipients		LPIF funding as a percentage of total recipients’ revenues (excluding the CBC)
		Licensees	Stations
2009-2010	100.7	16	79	10.8%

• Based on the 1 September 2009 to 31 August 2010 broadcast year

Source: CRTC data collection

Figure 2.3.4 LPIF distribution by region and owner group

Source: CRTC data collection

Statistical Information: Contribution and spending regimes – Telecommunications

Figure 2.3.5 Subsidy paid to LECs and the revenue-percent charge

Sources: CRTC data collection and decisions

 

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Notes:

[3] Radio Regulations, 1986; Television Broadcasting Regulations, 1987; Broadcasting Information Regulations, 1993; Broadcasting Licence Fee Regulations, 1997; CRTC Rules of Procedure; Broadcasting Distribution Regulations; Pay Television Regulations, 1990; Specialty Services Regulations, 1990. and in accordance with any order made by the Governor in Council or any standards prescribed by the Minister of Industry

[4] Subsections 27(1) and 27(2) of the Telecommunications Act

[5] Sections 8, 15 and 47 of the Telecommunications Act

[6] Section 34 of the Telecommunications Act

[7] BDUs are classified based on the number of subscribers as follows: Class 1 refers to BDUs with more than 6,000 subscribers, Class 2 includes BDUs that have between 2,000 and 6,000 subscribers and Class 3 encompasses BDUs with fewer than 2,000 subscribers.

[8] The three steps consisted of (a) identifying the relevant market; (b) determining whether the applicant has market power with respect to the relevant market; and (c) determining whether, and to what extent, forbearance should be granted.