THE FUTURE ENVIRONMENT FACING THE CANADIAN BROADCASTING SYSTEM
a report prepared pursuant to
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| Table of content |
Paragraph |
|
| Introduction | 1 | |
| Section I: Evolution of technologies | 11 | |
| A. Broadcasting services' current state and predicted evolution | 11 | |
|
1. Audio |
12 | |
|
a) Licensed radio services |
12 | |
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b) Financial data |
16 | |
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i. Advertising revenue by media ($ million) |
16 | |
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ii. Revenues of private commercial radio - 2000 to 2005 |
17 | |
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c) Transition to digital radio |
23 | |
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d) Other than over-the-air |
26 | |
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i. Specialty audio services |
26 | |
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ii. Pay audio programming services |
26 | |
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iii. Satellite subscription radio programming undertakings |
28 | |
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2. Video |
29 | |
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a) Licensed television services |
29 | |
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b. Financial data |
31 | |
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c) Transition to digital over-the-air television |
33 | |
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d) High Definition Television |
38 | |
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e) Distribution technologies |
43 | |
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i. Over-the-air (OTA) |
46 | |
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ii. Cable distribution |
49 | |
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iii. Direct-to-home distribution (DTH) |
55 | |
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iv. Internet Protocol Television (IPTV) |
59 | |
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f) On-demand technologies |
60 | |
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i. Video-on-demand (VOD) |
60 | |
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ii. Personal video recorders (PVRs) |
64 | |
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g) Other Technologies |
67 | |
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i. Broadband Internet |
67 | |
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ii. Audio over the Internet |
69 | |
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iii. Enabling technology |
70 | |
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iv. Mobile wireless |
73 | |
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v. Mobile television |
75 | |
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3. Audio-visual technologies' predicted evolution over the coming years |
77 | |
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Section II: Usage of audio-visual technologies by Canadians |
81 | |
|
A. Changes in the usage of audio-visual technologies by Canadians since 1 January 2000 |
81 | |
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1. Changes to audience tuning to radio and television |
93 | |
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a) Audience tuning data - radio |
93 | |
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i. Decline for the 12-34-year-old demographic |
94 | |
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ii. AM to FM |
96 | |
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b) Audience tuning date - television |
102 | |
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2. Change in usage of other audio-visual technologies |
106 | |
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a) Personal computers and Internet |
106 | |
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b) Personal digital devices |
116 | |
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B. Changes in the demand for various types of programming and programming services since 1 January 2000 |
123 | |
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1. Radio |
123 | |
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2. Television |
127 | |
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C. How Canadians of different generations use various audio-visual technologies, and the impact that these different uses will have on the broadcasting system |
139 | |
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1. Audio |
139 | |
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a) Radio |
139 | |
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b) Music players |
145 | |
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c) Music downloads |
146 | |
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d) Music buying |
147 | |
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e) Podcasts |
148 | |
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2. Video |
149 | |
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a) Television |
149 | |
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b) Other television-related technologies |
155 | |
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3. Other audio-visual technologies |
158 | |
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a) Personal computers and the Internet |
158 | |
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b) Laptop computers (laptops) |
166 | |
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c) Cellular telephones (cell phones) |
168 | |
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d) Video (television) downloads |
171 | |
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e) Adaptation to technology |
173 | |
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D. A comparison between Canada and other countries of adoption rates for technologies |
186 | |
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1. Digital Audio Broadcasting (DAB) |
186 | |
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2. Broadband/Internet |
212 | |
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3. Digital TV (DTV) |
218 | |
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4. Television viewing |
225 | |
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5. Internet Protocol Television (IPTV) |
226 | |
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6. Online music |
227 | |
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7. Satellite Radio |
228 | |
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8. Wireless/Cellular telephone |
229 | |
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9. Personal Video Recorders (PVRs) |
232 | |
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10. Digital consumer technologies |
233 | |
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E. Demand for various types of programming and programming services by the Canadian population, taking into account the full diversity of Canadian society |
234 | |
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F. How future generations will consume or access content, programming, and programming services |
247 | |
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G. Impact of the evolution of audio-visual technologies on content and programming choices available to Canadians |
253 | |
| Section III: Impact on the broadcasting system | 260 | |
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A. Adoption of technologies by broadcasting undertakings since 1 January 2000 |
260 | |
|
B. The economic and regulatory impact of new technologies on the broadcasting system |
267 | |
|
1. Fragmentation and the erosion of borders |
269 | |
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2. Copyright challenges |
272 | |
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3. Downward pressure on unit costs in fragmented markets |
273 | |
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4. Changes in audience measurement and media buying |
274 | |
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5. Pressure on traditional concepts of scheduling and bundling |
276 | |
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C. The types of content delivered through the regulated and non-regulated systems, and how they are delivered |
281 | |
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D. Methods by which local, regional and national programming can continue to be provided |
293 | |
|
1. Community channels |
296 | |
|
E. The predicted economic impact of new technologies on broadcasting undertakings |
303 | |
|
F. Adoption of new technologies by the independent production sector and the impact of them |
319 | |
| Section IV - Concluding observations | 328 | |
| A. Introduction | 328 | |
| B. Appropriateness of current legislation | 332 | |
|
C. The impact of new audio-visual technologies on the objectives of the Broadcasting Act |
338 | |
| D. The evolution and impact of new audio-visual technologies | 358 | |
|
E. Monitoring the impact and contribution of audio-visual technologies |
369 | |
|
F. Addressing the impact of new audio-visual technologies on existing broadcasting undertakings |
376 | |
| G. Regulatory oversight of new audio-visual technologies | 385 | |
| H. The need for non-regulatory public policy action | 400 | |
| I. Timing and choices | 404 | |
|
J. The Commission's perspective on the policy issues raised by parties to this process |
408 | |
|
i. The Broadcasting Act and its objectives |
410 | |
|
ii. Regulatory symmetry |
417 | |
|
iii. Choosing between conflicting policy objectives |
421 | |
|
iv. Monitoring |
429 | |
|
v. When to act |
432 | |
|
vi. Approaches and/or legislative reform outside the Broadcasting Act |
435 | |
| K. The Commission's approach | 437 | |
| Appendix 1 - An overview of the various technologies used for the transmission and distribution of broadcast services | ||
| Appendix 2 - Order in Council by the Governor in Council | ||
| Appendix 3 - List of parties that responded to the call for comments - Broadcasting Public Notice CRTC 2006-72, 12 June 2006 |
|
|
Introduction |
|
1. |
On 8 June 2006, the Governor in Council issued Order in Council P.C. 2006-519 (the OIC), pursuant to section 15 of the Broadcasting Act (the Act). The OIC, a copy of which is appended in Appendix II of this report, requested that the Commission provide a factual report on the future environment facing the whole broadcasting system. |
|
2. |
In the OIC, the Governor in Council: |
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3. |
For these reasons, the Governor in Council requested that the Commission provide a factual report on the future environment facing the Canadian broadcasting system. |
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4. |
To fulfil the request set out in the OIC, the Commission issued Call for comments on a request by the Governor in Council pursuant to section 15 of the Broadcasting Act to prepare a report examining the future environment facing the Canadian broadcasting system, Broadcasting Public Notice CRTC 2006-72, 12 June 2006 (Public Notice 2006-72). The purpose of the call for comments was to gather information from the public addressing the points set out in the OIC. This information would then be used to inform the Government of Canada's policy determinations with respect to the future of broadcasting in Canada, as well as the Commission's review of certain aspects of its regulatory framework for over-the-air television. |
|
5. |
The Commission received 52 submissions from individuals, consumer groups, broadcasters, distributors and industry associations, all of which form part of this proceeding's public record. The Commission reviewed the submissions in detail and considers them an integral part of this report. The Commission thanks all of the parties of record for their valuable contribution to this process. |
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6. |
To assist in the process, the Commission also commissioned the following three independent research studies: |
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|
7. |
All three reports form part of this proceeding's public record. The Commission also used in-house information that it acquires in the normal course of its regulatory mandate including its Broadcasting Policy Monitoring Reports and the Statistics Canada financial and operational annual returns that licensees file with the Commission. |
|
8. |
All of the submissions by the parties of record and the three studies commissioned by the Commission for this proceeding may be found at the following Internet site: www.crtc.gc.ca. |
|
9. |
In structuring the report, the Commission followed the order of the points as set out in the OIC. |
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| Section IV contains the Concluding Observations. | |
|
10. |
In preparing the report, the Commission focused on the information in the submissions that specifically addressed the points set out in the OIC and attempted to include as many different positions of parties as possible. However, given the volume of material received, the Commission, in the interest of brevity, consolidated common points-of-view amongst the various interested parties. |
Section I: Evolution of technologies |
|
A. Broadcasting services' current state and predicted evolution |
|
|
11. |
This section examines the current state of the audio, video and distribution broadcasting services available to Canadians, including the number of services, advertising revenues and profitability, technical features and the predicted evolution of those broadcasting technologies in the coming years. |
1. Audio |
|
a) Licensed radio services |
|
|
12. |
The number of each type of licensed Canadian radio and audio service, as of 21 November 2006, is set out in the following table. The numbers in brackets indicate the number of each corresponding undertaking in the 2002 broadcast year. |
| Table 1 Canadian radio and audio services | ||||
|
English language (1) |
French language (2) |
Third language |
Total |
|
| Over-the-air radio services | ||||
| National public broadcaster | ||||
| CBC: Radio One / Première chaîne |
36 (36) |
20 (20) |
- - |
56 (56) |
| CBC: Radio Two / Espace musique |
14 (14) |
12 (10) |
- - |
26 (24) |
| CBC network licences |
2 (2) |
2 (2) |
- - |
4 (4) |
| CBC digital: Radio One / Première chaîne |
5 (4) |
4 (3) |
- - |
9 (7) |
| CBC digital: Radio Two / Espace musique |
5 (4) |
4 (3) |
- - |
9 (7) |
| Private commercial | ||||
| AM stations |
158 (189) |
19 (17) |
12 (9) |
189 (215) |
| FM stations |
380 (216) |
88 (65) |
9 (6) |
477 (287) |
| AM and FM network licences |
27 (n/a) |
9 (n/a) |
- - |
36 (n/a) |
| Digital radio (stand-alone and transitional) |
42 (35) |
9 (4) |
7 (3) |
58 (42) |
| Community | ||||
| Type A stations (3) |
11 (9) |
34 (27) |
- - |
45 (36) |
| Type B stations |
22 (13) |
26 (19) |
1 - |
49 (32) |
| Developmental |
8 (n/a) |
- (n/a) |
- - |
8 (n/a) |
| Campus | ||||
| Community-based |
36 (33) |
5 (5) |
- - |
41 (38) |
| Instructional |
9 (8) |
- (1) |
- - |
9 (9) |
| Developmental |
1 (n/a) |
1 (n/a) |
- - |
2 (n/a) |
| Aboriginal - Type B stations (3) |
41 (32) |
12 (5) |
- - |
53 (37) |
| Religious (spoken word and/or music) |
41 (4) |
25 (20) |
1 - |
67 (24) |
| Other (tourist/traffic; Environment Canada. special event, etc.) |
96 (n/a) |
13 (n/a) |
1 - |
110 (n/a) |
| Total number of over-the-air Canadian radio services |
934 |
283 |
31 |
1,248 |
| Multi-channel subscription radio services | ||||
| Satellite |
2 - |
- - |
- - |
2 - |
| Terrestrial (4) |
1 - |
- - |
- - |
1 - |
| Audio services delivered by BDUs | ||||
| Specialty audio (commercial / Non-profit, regional / national) |
5 - |
- - |
4 - |
9 - |
| Pay audio (English and French national services) |
2 - |
- - |
- - |
2 - |
| Total number of Canadian radio and audio services |
944 |
283 |
35 |
1,262 |
|
(1) Includes bilingual (English and French) and native services. (2) Includes French-native services. (3) Includes network licences. (4) Authorised not yet licensed. Excludes rebroadcasters and exempt radio services. Sources: CRTC APP 1205 report (21 November 2006), CRTC Decisions |
||||
|
13. |
Between 1 September 2002 and 21 November 2006, the number of English-language commercial FM radio stations increased to 380 while the number of AM stations declined to 158. The number of French-language FM stations increased to 88 while the number of AM stations declined to 19. |
|
14. |
The following table sets out, by language and type of station, the number of radio applications approved by the Commission from 1 January 2003 to 31 December 2005. |
| Table 2 Number of new over-the-air radio stations approved from 1 January 2003 to 31 December 2005 | ||||
|
2003 |
2004 |
2005 |
Total |
|
| Total number of new AM & FM stations approved: |
68 |
49 |
44 |
161 |
| English-language stations |
51 |
43 |
38 |
132 |
| French-language stations |
12 |
5 |
4 |
21 |
| Ethnic-language stations |
5 |
1 |
2 |
8 |
| Type of radio stations approved: | ||||
| Commercial |
32 |
25 |
33 |
90 |
| Community |
11 |
10 |
8 |
29 |
| Campus |
4 |
2 |
- |
6 |
| Native |
7 |
2 |
- |
9 |
| Other |
14 |
10 |
3 |
27 |
|
Notes: Includes AM to FM conversions (often referred to as flips). Excludes digital transitional radio. "Other" includes not for profit, CBC/SRC, tourist, Environment Canada, etc., radio stations Sources: CRTC APP 1100 report and CRTC Decisions issued from 1 January 2003 to 31 December 2005 |
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|
15. |
Of the 90 commercial radio stations approved, approximately 50% were conversions of AM stations to the FM band. The majority of approvals were for undertakings in Ontario, followed by Alberta. Most of the conversions occurred in Ontario, followed by Quebec. |
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i. Advertising revenue by media ($ million) |
|
|
16. |
As set out in the table below, radio is doing well in comparison to other media. Between 2000 and 2005, radio's share of media advertising rose from 13.9% to 14.7%. Although in their infancy, Internet revenues garnered 1.5% in 2000, increasing to 5.8% in 2005. |
| Table 3 Advertising revenue by media ($ millions) | ||||||
| Media |
2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
| Television |
2,454 |
2,547 |
2,595 |
2,821 |
2,939 |
3,013 |
| Daily Newspaper |
1,731 |
1,678 |
1,684 |
1,696 |
1,751 |
1,784 |
| Radio |
1,001 |
1,048 |
1,080 |
1,171 |
1,209 |
1,310 |
| Magazine |
805 |
845 |
900 |
950 |
994 |
1,028 |
| Weekly Newspaper |
820 |
836 |
849 |
862 |
875 |
883 |
| Billboard |
293 |
310 |
321 |
338 |
356 |
404 |
| Internet |
110 |
97 |
117 |
237 |
364 |
519 |
| Total |
7,214 |
7,361 |
7,546 |
8,075 |
8,488 |
8,941 |
| % Radio |
13.9% |
14.2% |
14.3% |
14.5% |
14.2% |
14.7% |
Note: Daily newspaper revenues exclude classified ads
Source: Carat Expert, May 2006
|
ii. Revenues of private commercial radio - 2000 to 2005 |
|
|
17. |
As shown in Table 4, the revenues of conventional AM and FM stations, including those of ethnic stations, grew by 30% between 2000 and 2005. Of this, combined English- and French-language AM revenues dropped by 5.0%. Individually, English-language AM dropped by 2.2% and French-language AM dropped by 33.4%, the latter to a five-year low of $17.8 million. |
| Table 4 Revenues - Private commercial radio ($ 000) - Broadcast year ending 31 August | ||||||
|
Radio type |
2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
|
English AM |
270,599 |
263,608 |
253,029 |
259,804 |
259,506 |
264,730 |
|
English FM |
563,274 |
607,066 |
641,676 |
701,416 |
740,698 |
825,222 |
|
Total - English |
873,872 |
870,674 |
894,705 |
961,220 |
1,000,204 |
1,089,952 |
|
French AM |
26,721 |
24,899 |
24,996 |
26,067 |
22,668 |
17,784 |
|
French FM |
137,691 |
146,123 |
155,042 |
172,882 |
172,577 |
191,219 |
|
Total - French |
164,412 |
171,022 |
180,038 |
198,949 |
195,245 |
209,003 |
|
Ethnic AM |
17,798 |
18,280 |
18,705 |
19,602 |
20,321 |
21,326 |
|
Ethnic FM |
9,418 |
9,629 |
9,284 |
9,834 |
10,551 |
13,085 |
|
Total - Ethnic |
27,216 |
27,909 |
27,989 |
29,436 |
30,872 |
34,411 |
|
Total AM |
315,118 |
306,787 |
296,730 |
305,473 |
302,495 |
303,840 |
|
Total FM |
710,383 |
762,818 |
806,002 |
884,132 |
923,826 |
1,029,526 |
|
Total Canada |
1,025,501 |
1,069,605 |
1,102,732 |
1,189,605 |
1,226,321 |
1,333,366 |
Note: Includes network results
Source: CRTC Financial database
|
18. |
The combined revenues of English- and French-language FM stations increased by 45% between 2002 and 2005. Individually, English-language FM revenues increased by 46.5% while French-language FM revenues increased by 38.9%. This growth in the FM segment more than offset the contraction in the AM industry segment during this same period. Revenues for both AM and FM ethnic radio stations rose by 19.8% and 38.9%, respectively, over the same period. Currently, there are 21 private commercial, over-the-air ethnic radio stations authorised to serve the following markets: Vancouver (5), Edmonton, Calgary and Winnipeg (1 each), Toronto (8), Montreal (4) and Ottawa (1). |
|
19. |
In considering these statistics, it should be noted that, as shown in Table 2, between 2002 and May 2006, the number of AM stations declined by 29 to 186 as some licensees converted their AM stations to FM. However, as over 80% of these conversions involved English-language stations, this would suggest that French-language AM radio is experiencing some difficulty. English-language AM stations are faring slightly better; while their revenues fell by 5% over the period, they showed a modest gain of 2.0% in 2005. |
|
20. |
Table 5 below, illustrates that, overall, English-language AM stations reported negative to marginally positive profit before interest and taxes (PBIT) margins between 2000 and 2004. While reporting a PBIT increase to 6.5% in 2005, this figure represents only one year and cannot be considered an indication of a turn-around as yet. French-language AM stations have reported negative PBIT's in all years, culminating in a low of -37.4% in 2005. |
| Table 5 Profit before interest and taxes (PBIT) margins - Private commercial radio | ||||||
| Radio type |
2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
|
English AM |
-4.8 % |
-6.1 % |
-7.7 % |
1.08% |
1.9 % |
6.5 % |
|
English FM |
27.3 % |
26.7 % |
25.9 % |
27.6 % |
25.9 % |
28.2 % |
|
Total - English |
16.9 % |
16.80 % |
16.4 % |
20.4 % |
19.7 % |
22.9 % |
|
French AM |
-12.6 % |
-8.2 % |
-7.5 % |
-9.9 % |
-20.9 % |
-37.4 % |
|
French FM |
20.1 % |
17.6 % |
18.9 % |
19.5 % |
16.2 % |
15.7 % |
|
Total - French |
14.7 % |
13.8 % |
15.3 % |
15.6 % |
11.8 % |
11.14 % |
|
Ethnic AM |
7.8 % |
5.9 % |
7.6 % |
9.5 % |
15.6 % |
12.8 % |
|
Ethnic FM |
4.1 % |
2.08 % |
-3.1 % |
3.4 % |
4.3 % |
7.0 % |
|
Total - Ethnic |
6.5 % |
4.6 % |
4.0 % |
7.4 % |
11.7 % |
10.6 % |
|
Total AM |
-4.8 % |
-5.5 % |
-6.7 % |
0.7 % |
1.1 % |
4.4 % |
|
Total FM |
25.6 % |
24.7 % |
24.2 % |
25.7 % |
23.9 % |
25.6 % |
|
Total - Canada |
16.3 % |
16.0 % |
15.9 % |
19.3 % |
18.3 % |
20.8 % |
Source: CRTC Financial database
|
21. |
In comparison, both English- and French-language FM stations are doing considerably better than AM, although the PBIT margins for French-language FM declined annually from a high of 20.1% in 2000 to a low of 15.7% in 2005. English-language FM PBIT margins basically remained steady, fluctuating within the 26% to 28% range and closing at a high of 28.2% in 2005. |
|
22. |
Contrary to English- and French-language AM/FM performance, ethnic AM radio is doing noticeably better than ethnic FM radio. The PBIT margins for AM and FM ethnic stations are up by 5 and 2.9 percentage points, respectively. |
c) Transition to digital radio |
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23. |
As of 1 October 2006, the Commission has authorised 76 transitional digital radio programming undertakings. Of these, 57 are authorised to operate in association with existing commercial radio stations, 18 are authorised to operate in association with existing Canadian Broadcasting Corporation (CBC) radio stations, and one is authorised to operate as a stand-alone ethnic radio station. The table below sets out, by location, the number of transitional digital radio stations that have been approved by the Commission. |
| Table 6 Markets in Canada(1) with transitional digital radio stations (2) | ||||||||
| Market/Province |
Commercial |
CBC English |
CBC French |
Total | ||||
| English | Franch | Ethnic |
Radio One |
Radio Two |
Première chaîne | Espace musique | ||
| Montréal |
2 |
6 |
- |
1 |
1 |
1 |
1 |
12 |
| Ottawa/Gatineau |
8 |
3 |
- |
1 |
1 |
1 |
1 |
15 |
| Toronto |
17 |
- |
7 |
1 |
1 |
1 |
1 |
28 |
| Vancouver |
9 |
- |
- |
1 |
1 |
1 |
1 |
13 |
| Victoria |
2 |
- |
- |
- |
- |
- |
- |
2 |
| Windsor |
4 |
- |
- |
1 |
1 |
- |
- |
6 |
|
All Canada |
42 | 9 | 7 | 5 | 5 | 4 | 4 | 76 |
| 58 | 18 | 76 | ||||||
Based on BBM Radio Markets
Number of stations approved but not necessarily on-air
Source: CRTC Decisions
|
24. |
Digital radio's roll-out has apparently stalled. According to the CBC, consumers do not want to buy receivers until they are convinced that there is unique new content available to justify the purchase while, broadcasters have been unwilling to create the required content until there are adequate audiences to justify the programming expenditures. |
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25. |
Moreover, because digital radio has as yet to take hold while other services such as Internet audio streaming, downloading of music and subscription-based satellite radio have since come to the market, some parties in the industry are of the opinion that, it is doubtful whether digital radio, as originally conceived and planned, will become an integral part of the Canadian radio broadcasting system in the foreseeable future. Instead, the industry is considering different uses of the existing digital radio spectrum, technology and infrastructure for new and innovative multimedia mobile wireless services. |
d) Other than over-the-air |
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26. |
Over the last five to ten years, consumers have been able to choose new platforms to access audio content including satellite radio, specialty audio services and pay audio, as well as unlicensed platforms such as Internet radio, podcasting and downloading of music files from the Internet. These new technologies give consumers access to a much greater variety of music, more choice in the medium they choose to access that music from, and flexibility and control over when they listen to it. The unlicensed platforms are discussed later in this report while the licensed technologies are discussed below. |
i. Specialty audio services |
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ii. Pay audio programming services |
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| Table 7 Usage of Pay Audio Services in Canada | ||||
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Anglophones 18+ |
Francophones 18+ |
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2004 |
2005 |
2004 |
2005 |
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|
Past Month Usage |
19% |
21% |
16% |
21% |
Source: MTM (CBC / Radio-Canada, page 14)
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27. |
Because they rely on BDU distribution for delivery of their programming, the pay audio services lack the portability and convenience of wireless services and would face significant challenges in the future if satellite subscription radio (SSR) programming services sought to expand their reach through new channels, such as mobile wireless services. In addition, if the SSR programming services were successful in obtaining carriage on BDUs, they would certainly provide direct competition to pay audio for its target audience. |
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28. |
The CBC predicts that the pay audio service providers may need to partner with wireless operators in the future in order to provide their niche-type programming over the latter's wireless networks and retain their subscribers in a "mobile" world. |
iii. Satellite subscription radio programming undertakings |
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2. Video |
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a) Licensed television services |
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29. |
The number of each type of licensed Canadian television service, as of 21 November 2006, is set out in the following table. The numbers in brackets indicate the number of each corresponding undertaking in the 2002 broadcast year. |
| Table 8 Diversity of television services available in Canada | ||||
|
English |
French language |
Third language |
Total |
|
| Canadian conventional (over-the-air) (2) | ||||
|
National public broadcaster (CBC) - Owned and operated |
15 (15) |
8 (8) |
- |
23 (23) |
| - Transitional digital (3) |
4 (-) |
4 (-) |
- |
8 (-) |
| Private commercial (4) |
77 (60) |
23 (18) |
4 (3) |
104 (81) |
| Religious |
5 (5) |
- (-) |
- |
5 (5) |
| Educational |
4 (4) |
3 (3) |
- |
7 (7) |
| Aboriginal |
9 (10) |
- (-) |
- |
9 (10) |
| Transitional digital (3) |
10 (-) |
3 (-) |
2 (-) |
15 (14) |
| Canadian specialty, pay, pay-per-view (PPV) and video-on-demand (VOD) | ||||
| Analog specialty services |
30 (30) |
14 (16) |
5 (5) |
49 (51) |
| Category 1 digital specialty services (5) |
15 (16) |
3 (-) |
- |
18 (19) |
| Category 2 digital specialty services (5) |
49 (31) |
3 (-) |
26 (10) |
78 (41) |
| Pay television services (6) |
5 (6) |
2 (1) |
5 (-) |
12 (7) |
| PPV services (direct-to-home (DTH) and terrestrial) (6) |
9 (10) |
2 (2) |
- (1) |
11 (13) |
| VOD services (6) |
14 (3) |
- (1) |
- |
14 (4) |
| Other Canadian services | ||||
| Community channels (7) |
133 (197) |
33 (47) |
- |
166 (244) |
| Community programming services |
11 (-) |
1 (-) |
- |
12 (12) |
|
House of Commons - Cable Public Affairs Channel (CPAC) |
1 (1) |
1 (1) |
- |
2 (2) |
| Non-Canadian services (8) | ||||
|
Non-Canadian satellite services authorised for distribution in Canada |
83 (77) |
6 (8) |
45 (8) |
134 (93) |
| Total number of television services |
474 (484) |
106 (109) |
87 (27) |
667 (603) |
|
Excludes rebroadcasters and exempt television services. Also excludes some network licences. (1) Includes bilingual (English and French) and native services.
(2) Includes satellite to cable services. |
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30. |
Currently: |
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b. Financial data |
| Table 9 Revenues of English-language and French-language private conventional television and pay, pay-per-view & specialty services, by language ($ 000,000) | ||||||
|
2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
|
| English-language | ||||||
| Private Conventional |
1,519 |
1,538 |
1,515 |
1,684 |
1,693 |
1,764 |
| Pay, PPV and Specialty - Analog |
1,006 |
1,183 |
1,312 |
1,399 |
1,521 |
1,618 |
| Pay, PPV and Specialty - Digital |
48 |
100 |
116 |
143 |
||
| Pay, PPV and Specialty - Total |
1,006 |
1,183 |
1,360 |
1,499 |
1,637 |
1,761 |
| French-language | ||||||
| Private Conventional |
361 |
366 |
378 |
409 |
422 |
434 |
| Pay, PPV and Specialty - Total |
230 |
272 |
301 |
338 |
363 |
366 |
| Ethnic & Third-language | ||||||
| Pay, PPV and Specialty - Analog |
34 |
36 |
40 |
42 |
48 |
50 |
| Pay, PPV and Specialty - Digital |
1 |
2 |
3 |
7 |
||
| Pay, PPV and Specialty - Total |
34 |
36 |
41 |
44 |
51 |
57 |
Note: English-language private conventional television includes revenues from ethnic conventional television stations as a significant portion of their revenues are derived from English-language programs.
Note: Bilingual services are combined with English-language pay, PPV and specialty services.
Source: Charts 3.12, 3.15 and 3.18 from the 2006 Broadcasting Policy Monitoring Report
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31. |
From the Statistic Canada financial and operational annual returns (the annual returns) that licensees file with the Commission, and the Commission's financial database: |
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| Table 10 Aggregate PBIT(1) margins of English-language and French-language private conventional television & pay, pay-per-view and analog specialty services | ||||||
|
2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
|
| English-language | ||||||
| Private Conventional |
14% |
13% |
9% |
14% |
11% |
11% |
| Pay, PPV and Specialty - Analog |
18% |
19% |
21% |
21% |
25% |
31% |
| French-language | ||||||
| Private Conventional |
12% |
10% |
11% |
14% |
12% |
11% |
| Pay, PPV and Specialty - Analog |
17% |
16% |
17% |
21% |
21% |
25% |
| Ethnic & Third-language | ||||||
| Pay, PPV and Specialty - Analog |
16% |
14% |
17% |
17% |
26% |
24% |
Note: English-language private conventional television includes ethnic conventional television stations, as a significant portion of their revenues are derived from English-language programming.
Note: Bilingual services are combined with English-language pay, PPV and specialty services.
Source: Charts 3.14, 3.17 and 3.19 from the 2006 Broadcasting Policy Monitoring Report
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32. |
From the annual returns that licensees file with the Commission, and the Commission's database: |
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c) Transition to digital over-the-air television |
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33. |
In A licensing policy to oversee the transition from analog to digital, over-the-air television broadcasting, Broadcasting Public Notice CRTC 2002-31, 12 June 2002 (Public Notice 2002-31), the Commission set out a policy framework to oversee the transition of analog over-the-air television services to digital television (DTV) services. The policy framework is based on a voluntary, market-driven transition model, without mandated deadlines. |
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34. |
Transitional DTV licensees are allowed to broadcast a maximum of 14 hours per week of high definition (HD) programming that is not duplicated on the analog version of the service. A minimum of 50% of this unduplicated HD programming must be Canadian and all of the unduplicated programming must be in HD television (HDTV) format. In Public Notice 2002-31, the Commission encouraged transitional DTV licensees to ensure that two-thirds of their schedules would be available in HDTV format by 31 December 2007. |
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35. |
In The regulatory framework for the distribution of digital television signals, Broadcasting Public Notice CRTC 2003-61, 11 November 2003 (Public Notice 2003-61), the Commission determined that a cable BDU may apply to be relieved of the obligation to distribute analog signals, once 85% of its subscribers have the ability to receive digital services by means of DTV receivers or set-top boxes. |
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36. |
Currently, 22 originating television stations and four rebroadcasters are authorised to operate transitional DTV undertakings. The following table lists the transitional DTV undertakings that have been approved, although not all are implemented. |
| Table 11 Over-the-air transitional digital television(1) | |||||
| Market |
Language |
Source station |
Actual or planned |
||
| Montréal |
F |
CFJP | TQS |
- |
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F |
CBFT | SRC |
March 2005 |
||
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F |
CIVM | Télé-Québec (educational and cultural service) |
September 2007 |
||
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F |
CFTM | TVA |
- |
||
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E |
CBMT | CBC |
March 2005 |
||
| Québec |
F |
CBVT | SRC |
January 2006 |
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| Ottawa |
F |
CBOFT | SRC |
September 2006 |
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E |
CBOT | CBC |
September 2006 |
||
| R |
O/E |
OMNI 1 | Rogers (ethnic station) |
July 2007 |
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| R |
O/E |
OMNI 2 | Rogers (ethnic station) |
July 2007 |
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| Toronto |
F |
CBLFT | SRC |
March 2005 |
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| R |
F |
CBOFT | SRC (Ottawa station) |
September 2006 |
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E |
CBLT | CBC |
March 2005 |
||
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E |
CFTO | CTV |
July 2005 |
||
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E |
CIII | Global |
November 2004 |
||
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E |
CITS | Crossroads (religious programming) |
- |
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E |
CITY | CHUM |
January 2003 |
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E |
CKXT | Quebecor |
February 2004 |
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O/E |
OMNI 1 | Rogers (ethnic station) |
October 2006 |
||
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O/E |
OMNI 2 | Rogers (ethnic station) |
October 2006 |
||
| Hamilton |
E |
CHCH | Global |
- |
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| R |
E |
CKXT | Quebecor |
February 2004 |
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| Vancouver |
E |
CBUT | CBC |
January 2006 |
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E |
CHAN | Global |
- |
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E |
CIVT | CTV |
July 2005 |
||
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O/E |
CHNM | Multivan (ethnic station) |
- |
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(1) Number of stations approved but not necessarily in operation
E: English; F: French; O/E: Multi/English; R: Rebroadcaster
Source: CRTC APP 1205 (3 May 2006) and licensees
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37. |
As part of this proceeding, Michael McEwen, Broadcast Consultant, was commissioned to provide a report on the digital transition strategies in a number of different countries (the "McEwen Report"). In relation to Canada's transition, Mr. McEwen concludes that: |
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d) High Definition Television |
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38. |
In Regulatory framework for the licensing and distribution of high definition pay and specialty services, Broadcasting Public Notice CRTC 2006-74, 15 June 2006 (Public Notice 2006-74), the Commission announced its regulatory framework for the licensing and distribution of HD pay and specialty services. As of May 2006, the Commission has approved licence amendments for four analog specialty, two pay and ten Category 2 specialty services, authorizing their distribution in the HD format. It is estimated that, as of Spring 2006, there were at least 321,393 subscribers to discretionary HD services(2) in Canada. |
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39. |
The following tables indicate the number of HD services currently available from Canadian BDUs and the average hours of Canadian HD programming they offer in each week. |
| Table 12 Number of high definition services offered by BDUs | |||
|
Canadian services |
Foreign services |
Total |
|
| Cogeco |
10 |
9 |
19 |
| Rogers |
16 |
10 |
26 |
| Shaw |
5 |
5 |
10 |
| Videotron |
8 |
5 |
13 |
| Bell ExpressVu |
16 |
11 |
27 |
| Star Choice |
6 |
8 |
14 |
Source: Table 3.12 from the 2006 Broadcasting Policy Monitoring Report
| Table 13 High definition offering of Canadian programming | ||
|
Weekly average of HD hours |
Original |
|
| Conventional television | ||
| CBC |
8.25 |
100% |
| CHUM |
11.5 |
17% |
| CTV |
2.3 |
57% |
| Global |
10 |
55% |
| SRC |
6 |
100% |
| Pay and specialty services | ||
| Discovery HD |
75 |
0% |
| Movie Central |
42 |
7% |
| Movie Pix |
11 |
9% |
| Raptors |
25 |
100% |
| TMN |
53 |
4% |
| TSN |
10 |
60% |
Source: Table 3.13 from the 2006 Broadcasting Policy Monitoring Report
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40. |
As noted in the Introduction, the Commission commissioned Solutions Research to Group (SRG) to provide a trend analysis on the topics raised by the OIC. With respect of HDTV services, SRG canvassed Canadians' interest in HDTV. The findings in the SRG report are set out below. |
Chart 1 - Interest in HDTV |
Source: Page 21, Fast Forward TM Trend Analysis prepared by Solutions Research Group for CRTC - August 2006
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41. |
High Fidelity HDTV Inc. (High Fidelity), an independent Canadian broadcaster and content producer, concurred that HD penetration in Canada has stalled between television ownership (17%) and HD distribution (3%). In High Fidelity's view, however, the mandate of the US Federal Communications Commission (FCC) will drive the HDTV shift in Canada. Accordingly, HDTV unit sales for Canada are forecast to increase in the coming years. High Fidelity projected that the number of Canadian households with HDTV sets will rise to 22.6% in 2006, 31% in 2007, 40.6% in 2008, 51.7% in 2009 and 63.5% in 2010. |
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42. |
The Canadian Association of Broadcasters' (CAB) research indicated that while HDTV television ownership has reached 15% of Anglophones and 9% of Francophones overall, a minority of these televisions are actually connected to a source of HDTV programming such as a digital set-top box. As a result, only about 6% of Anglophones and just over 2% of Francophones are capable of receiving and viewing HDTV programming. |
e) Distribution technologies |
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43. |
There are four broadcast distribution technologies available for television programming: conventional over-the-air (OTA) transmission, cable distribution, DTH satellite distribution and Internet Protocol Television (IPTV). |
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44. |
All DTH subscribers receive digital signals whereas cable subscribers may receive either analog or digital signals, or a combination of the two. While a significant portion of cable subscribers continue to rely on analog service, the shift to digital cable has accelerated significantly in recent years and is expected to continue to grow rapidly as analog cable subscribers recognize the benefits of digital service. The CBC predicts almost four of five Canadian households will subscribe to some form of DTV distribution service by 2010. |
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45. |
From the annual returns that licensees file with the Commission: |
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i. Over-the-air (OTA) |
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46. |
SRG estimated that, of the just over 12 million households in Canada in 2006: |
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47. |
SRG's figure of 13% of higher than the figure contained in the report entitled A Review of research data on the Canadian television industry, prepared by the Canadian Media Research Inc. (CMRI) and included in the submission by Bell Canada (Bell), MTS Allstream Inc. (Allstream), Saskatchewan Telecommunications (SaskTel) and TELUS Communications Inc. (TELUS). The CMRI report indicated that the combined penetration of cable and DTH was 89.8% in 2005, meaning that only 10.2% of Canadians depend on OTA reception for their television programming. In 2000, the number that depended on OTA reception was 16.4%. In comparison, according to the annual returns filed with the Commission by BDUs, two million of the 12 million Canadians (16%) receive their television signals OTA (see table 14 below) while Nielsen Media Research (Nielsen) reports that approximately 13% receive their signals OTA. Given these differences in estimates, it would appear that anywhere between 10% and 16% of Canadians receive their television signals OTA. What is key however is that the percentage is declining. |
|
48. |
As part of its ongoing initiative to implement more efficient network technologies, the Aboriginal Peoples Television Network (APTN) engaged Environics Research Groups to canvas participants in APTN's annual North of 60° study regarding their preferred method for receiving their broadcast services. The results of the 2006 survey, which was conducted in May and June of that year, showed that 48% of respondents preferred satellite, 25% preferred analog cable and 13% preferred digital cable. Only 6% of respondents with televisions indicated OTA as their preferred method for receiving television programming. |
ii. Cable distribution |
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49. |
According to the annual returns filed with the Commission by BDUs, over 10 million of the approximately 12 million Canadian households receive their television signals from a licensed BDU, either a cable undertaking or a satellite DTH undertaking. The two million or so remaining households receive their television signals either from OTA television undertakings or from non-Canadian black and grey market satellite services. |
Table 14 Number of basic subscribers (000)
|
Cable, class 1 (1) |
DTH |
MDS & STV |
Total |
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| 2001 |
6,857 |
81.0% |
1,520 |
18.0% |
87 |
1.0% |
8,465 |
100% |
| 2005 |
6,617 |
72.4% |
2,486 |
27.2% |
32 |
0.4% |
9,135 |
100% |
(1) Class 1 cable BDUs include Digital Subscriber Line (DSL) results. As part of the Commission's streamlining process, a few Class 1 cable systems have been exempted from reporting requirements. Total results also exclude the approximately one million cable subscribers of systems, other than Class 1s, that are not required to report their results to the Commission ie. exempt cable systems.
Source: CRTC financial database
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50. |
According to Rogers Cable Communications Inc. (Rogers), the shift from analog to digital technology has been one of the most significant changes for distribution networks. Most cable operators have launched digital services and are near completing their transition to an all-digital platform. DTH providers have always offered all-digital services as have telephone companies. Also according to Rogers: |
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Chart 2 - Digital subscribers in Canada |
Source: p. 19 of Rogers' submission
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51. |
In its submission, the Ontario Media Development Corporation (OMDC) stated that Pricewaterhouse Coopers (PWC) predicts there will be 9.3 million digital households by 2010, representing nearly three-quarters of all Canadian households that have televisions. |
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52. |
Quebecor stated that, in 2006, nearly one-half of Videotron Ltd.'s (Videotron) subscribers will be served by digital and nearly 70% will have a digital terminal in their home within three years. Televisions will incorporate a digital terminal and a cable modem will permit the Internet to be provided by the distributor's private network, resulting in the convergence of television and computer screens. |
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53. |
SRG's research suggested that most of the consumers who have the greatest interest in digital television have already switched. Accordingly, SRG is projecting that the combined penetration rate of Canadian households by digital cable and DTH will reach a ceiling of 58% to 60% by 2011. |
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54. |
The CAB's research indicated that, while 90% of Anglophones and 83% of Francophones subscribe to a licensed BDU, those who subscribe to a digital BDU service are still in the minority. Specifically, 44% of Anglophones and 42% of Francophones subscribe to digital cable or DTH, while the other digital service providers (telecommunications distributors and "wireless" cable) serve less than 1% each. Thus a majority of Canadian consumers continue to rely on analog BDU and OTA reception. |
iii. Direct-to-home distribution (DTH) |
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55. |
There are two licensed DTH service providers: Bell ExpressVu Limited Partnership (ExpressVu) and Star Choice. |
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56. |
With HDTV's increasing popularity, ExpressVu has been testing and investing in a new transport modulation scheme to accommodate the need for more new, true HD signals. According to ExpressVu, however, this testings' results show that, even with the limited deployment of these techniques on satellite transponders used only for HD, there will still be a need for more satellite capacity to accommodate Canadian broadcasters' transition to HD. |
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57. |
ExpressVu also noted that, in June 2006, the Department of Industry (the Department) issued a call for applications for new satellites to employ as-yet unused frequencies at the orbital locations used by both ExpressVu and Star Choice and by Canadian Satellite Communications Inc.'s satellite relay distribution undertaking. One new satellite has an estimated capacity for as many as 150 true HD channels. According to ExpressVu, however, the business risk associated with satellites is high given the significant operating and capital costs of deploying this technology. ExpressVu also submitted that it is unclear when satellite capacity will be required, and whether the HD services will generate sufficient incremental revenue to provide an appropriate financial return. ExpressVu added that the $300 million cost of each new single-frequency-band satellite must be amortized over its life of about 12 years. |
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58. |
The Communications Research Centre (CRC) also referred to the Department's call for applications for 29 satellite licences, of which ten would be for new broadcasting satellite services. The CRC submitted that these satellite licences would provide an impressive increase in Canadian capacity, which could respond to the need for more local television and HDTV programming. The CRC further noted the trend to offer mobile, fixed and broadcast satellite services by satellite in various frequency bands as the technology evolves. The CRC maintained that any review or development of regulatory regimes and policies should take this trend into account. |
iv. Internet Protocol Television (IPTV) |
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59. |
In their respective submissions, Bell and Rogers addressed the current state of IP / Digital subscriber line (DSL) technology for broadcasting distribution: |
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more flexibility and more applications are sure to come, from more suppliers. But a day is coming when the capabilities we call IPTV today become a feature-set of something bigger and hopefully, able to fulfill the broader needs of subscribers and service providers alike.(8) |
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Whether it is channel programming, language selection, presentation customization, automating content selection for "my-channel" delivery, mixing personal content for delivery in a close community, or gaming or sharing within groups, these services illustrate the key benefits of IPTV: interactivity and communications capabilities available through the NGN (Next Generation Network) application plane. IPTV would benefit from open application-level standards for content management, application creation, and user control of their IPTV experience.(9) |
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f) On-demand technologies |
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i. Video-on-demand (VOD) |
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60. |
VOD is similar to PPV but differs in that subscribers choose their selections from a content library as opposed to a broadcasting schedule. The selection is played at the time of the subscriber's choosing rather than being broadcast according to a predetermined schedule. |
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61. |
According to the OMDC, digital cable's increased penetration has also led to an increase in VOD's popularity. OMDC stated that the percentage of digital cable subscribers that use VOD has grown from less than 10% in 2002 to nearly 36% in 2005, and that these subscribers spent $83 million on VOD services. Based on these take-up rates and the experience of video cassete recorder (VCR) and DVD penetration, PWC predicts that total VOD spending will reach $356 million by 2010, representing 61% of digital cable households. |
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62. |
Rogers reported that approximately 50% of its digital cable subscribers use VOD at some time each month. |
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63. |
In its research, SRG noted that: |
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ii. Personal video recorders (PVRs) |
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64. |
Personal video recorders (PVRs), or digital video recorders as they are also known, record video content in a digitized format to a hard disk storage medium such as a PC's hard disk. PVRs perform many of the same functions as a VCR but have a number of advantages over them, including the following: |
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65. |
In its research, SRG found the following with regard to PVRs' penetration rate and consumer attitudes toward these devices: |
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66. |
Submissions to this proceeding provided the following additional comments: |
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g) Other Technologies |
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i. Broadband Internet |
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67. |
As activities such as streaming video over the Internet or downloading audio files require more bandwidth, consumer demand for high speed broadband Internet continues to increase in Canada. The following chart compares the growth in high-speed Internet access to the decline in dial-up access over the last five years. As of 2006, 81% of homes with Internet access employed high-speed while only 19% used dial-up. |
| Table 15 Dial-up vs. high-speed Internet access at home | ||||
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CyberTRENDS |
SRG |
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High-speed |
Dial-up |
High-speed |
Dial-up |
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2001 |
30% |
70% |
- |
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2002 |
40% |
60% |
- |
- |
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2003 |
50% |
50% | ||