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2.0 The CRTC, policies, and regulation

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
  a. Commercial radio⁶⁷
  b. Public radio⁶⁸
  c. Campus radio⁶⁹
  d. Community radio⁷⁰
  e. Aboriginal/Native radio⁷¹
  f. Digital radio⁷²
  g. Ethnic radio⁷³
  h. Religious radio⁷⁴
  

• Multi-channel subscription radio services⁷⁵
  a. Satellite subscription radio services
  b. Terrestrial subscription radio services

• Audio services delivered by BDUs⁷⁶
  a. Specialty audio
  b. Pay audio⁷⁷

These policies and 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.⁷⁸ This minimum level also applies to the 6 a.m. - 6 p.m. period from Monday to Friday on commercial radio 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 6 a.m. and 6 p.m., 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 periods.
• Commercial radio stations are required to devote at least 25% of their musical selections drawn from subcategory 31 (concert music) and 20% of their musical selections drawn from subcategory 34 (jazz and blues) to Canadian selections each week. The Radio Regulations, 1986 require that stations airing music from other category 3 special interest subcategories broadcast at least 10% Canadian selections in those subcategories each week.
• In Commercial Radio Policy 1986, the Commission also indicated that applicants for new licences, licence renewals, and changes in 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.
• In Broadcasting Regulatory Policy 2009-61,⁷⁹ the Commission eliminated restrictions on the broadcast of hits by English-language commercial FM radio stations in English-language markets.

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 commercial licence applications.⁸⁰ 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 2006-159.⁸¹ 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 where it decides not to issue a new commercial licence following a call for applications, the Commission will not generally be disposed to accept applications for this market for a period of two years from the date of the decision announcing the Commission's determination.

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 changes in ownership and/or control proceedings about their plans to employ new distribution platforms to the benefit of the Canadian broadcasting system.

Digital radio

In Broadcasting Public Notice 2006-160,⁸² the Commission set out its revised policy for digital radio broadcasting. Under this revised policy, the transitional 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 analogue services.

For in-band-on-channel (IBOC) technologies, the Commission 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, the Commission would be prepared to authorize such services given its s powers under the Broadcasting Act. The Commission 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 television⁸³
• Public television⁸⁴
• Digital pay and specialty services⁸⁵

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 2002-31,⁸⁶ the Commission set out a policy framework for over-the-air (OTA) digital television (DTV) services. The Commission's DTV services policies are based on the principle that digital technology will replace analogue technology and are intended to encourage the transition of the Canadian broadcasting system from analogue 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 framework for the distribution of digital OTA services in Broadcasting Public Notice 2003-61.⁸⁷ In the meantime, as of 31 December 2008, the Commission has authorized 22 originating and eight rebroadcast OTA transitional digital television licences to help support the transition from analogue 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 analogue 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 May 2007 in Broadcasting Public Notice 2007-53⁸⁸

In May 2007, the Commission announced that analogue licences would not be renewed beyond August 2011.⁸⁹ The adoption of a shut-down date is expected to provide the television industry with the necessary regulatory certainty to expedite the transition from analogue 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 analogue 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.

Digital pay and specialty services

In Broadcasting Public Notice 2000-6⁹⁰ and in Broadcasting Public Notice 2004-8,⁹¹ 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

Category 1 services: These services have digital carriage privileges and genre protection to support them during the uncertain early digital rollout period. Only a limited number of specialty services have been licensed as Category 1 services.

Category 2 services: These services are not assured digital carriage and do not have genre protection. Applicants that meet the basic licensing criteria and that are not directly competitive with any analogue pay or specialty or Category 1 services are licensed as Category 2 services.

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.⁹² In March 2007, the Commission issued a new exemption order respecting certain third-language services.⁹³

In Broadcasting Public Notice 2008-100,⁹⁴ the Commission announced a new regulatory framework for digital discretionary programming services to replace the framework that was established in 2000 and 2004. This new framework establishes the authorizations and obligations applicable to digital discretionary programming services and generally governs the relationship between these services and the various types of undertakings that distribute them.

In reviewing the rules that affect the obligations and distribution of digital discretionary programming services, the Commission decided to

• retain access rights in the digital environment for existing Canadian analogue and Category 1 pay and specialty services. Services with access rights will be referred to as Category A services. Existing Category 2 services and any new services that the Commission may choose to license without access rights will be referred to as Category B services;
• introduce competition between Canadian services that operate in the genres of mainstream sports and mainstream national news;
• consider competitive applications in other genres, should an applicant demonstrate that the genre met the criteria set out by the Commission;
• simplify and streamline the rules that define a non-competitive service's nature of service and provide greater flexibility with regard to the program categories from which it is permitted to draw programming; and
• maintain the current restrictions on advertising limits (maximum of 12 minutes per hour) for specialty services.

The new policies are applicable to digital services and will take effect on 31 August 2011 to be consistent with the date conventional OTA television in Canada will switch from analogue to digital transmission and to give the industry time to adapt.

iii) Regulatory framework - BDUs

In Broadcasting Public Notice 2008-100, the Commission also announced a new regulatory framework for BDUs, to replace the framework established in 1997.⁹⁵ This new 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 Commission developed forward-looking policies that will give the broadcasting system added flexibility while retaining the necessary regulations to achieve the objectives of the Broadcasting Act.

In reviewing the rules that affect broadcasting distribution companies, such as terrestrial and satellite providers, the Commission decided to

• exempt from its licensing requirements broadcasting distribution companies with fewer than 20,000 subscribers;
• harmonize as much as possible the rules between satellite and terrestrial distribution companies;
• eliminate most rules governing how channels are packaged;
• modify its approach to dispute resolution for complaints that involve allegations of undue preference or undue disadvantage;
• require broadcasting distribution companies to continue offering a basic service package after the transition to digital; and
• initiate proceedings to explore how new forms of digital and interactive advertising could benefit the broadcasting system as a whole.

As noted above, the majority of the new policies are applicable to digital services and are scheduled to take effect on 31 August 2011 to coincide with the date OTA television in Canada will switch from analogue to digital transmission and give the industry time to adapt. Many of the new policies will require changes to the relevant Commission regulations. Others will be implemented through appropriate conditions of licence or amendments to exemption orders issued pursuant section 9(4) of the Broadcasting Act.

Non-Canadian satellite services authorized for distribution in Canada⁹⁶

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 2004-96,⁹⁷ the Commission adopted a more open approach to the entry of non-Canadian, third-language general interest television services, which had previously been subject to a competitiveness test that precluded their addition to the list if they were found to be either partially or totally competitive with Canadian specialty or pay television services. This requirement was changed in order to expand the diversity of 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 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.

In Broadcasting Public Notice 2008-100, the Commission announced that, effective 31 August 2011, it would harmonize its approach for general interest and niche non-Canadian, third-language services, and simplify the rules for packaging non-Canadian with Canadian third-language services. In this public notice, the Commission generally retained its competitiveness test for the authorization of English- and French-language services. That is, such services are generally not added to the lists if they would compete with a Canadian specialty or pay television service. However, as an exception to this approach, the Commission stated that, effective the date of the public notice (30 October 2008), it would be predisposed to authorize non-Canadian English- or French-language news services, absent clear evidence that the service would violate Canadian regulations, such as those regarding abusive comment. This approach was adopted in light of the importance the Commission places on the availability of a diversity of editorial points of view.

Up-to-date lists of services eligible for distribution in Canada are available on the Commission's website. As set out in Broadcasting Public Notice 2006-55,⁹⁸ the Commission periodically issues 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 the up-to-date version of the lists on the Commission's website.

iv) Regulatory framework - New media broadcasting

Since the Commission first reviewed the new media environment in 1999, and subsequently in 2009, the Commission has exempted from regulation undertakings that provide broadcasting services delivered and accessed over the Internet.

In Telecom Public Notice 99-14/Broadcasting Public Notice 1999-84,⁹⁹ 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."¹⁰⁰

In the accompanying 1999 New Media Exemption Order,¹⁰¹ 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 Broadcasting 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 with respect to Internet retransmission of broadcasting services in Broadcasting Public Notice 2003-2; interpreted to include mobile Internet broadcasting undertakings in Broadcasting Public Notice 2006-47; and supplemented by an exemption order for undertakings that provide television broadcasting services that are received by way of mobile devices in Broadcasting Public Notice 2007-13.¹⁰²

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-multi-point broadcast technologies was still uncertain and thus decided not to include them in the exemption order.

In Broadcasting Public Notice 2008-4,¹⁰³ 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.

In Broadcasting Public Notice 2008-44,¹⁰⁴ the Commission issued a call for comments on the scope of a future proceeding to examine issues pertaining to Canadian broadcasting in new media. Based on the submissions received, the Commission, on 15 October 2008, initiated a public proceeding to review Canadian broadcasting in the new media environment.¹⁰⁵

In Broadcasting Regulatory Policy 2009-329, the Commission maintained the exempt status of new media broadcasting undertakings and proposed an amendment to the definition of new media broadcasting undertakings to include mobile broadcasting services that provide broadcasting service received by way of mobile devices via point-to-point technology.¹⁰⁶ Further, in Broadcasting Notice of Consultation 2009-330,¹⁰⁷ the Commission proposed amendments to the exemption order for new media broadcasting undertakings for the introduction of reporting requirements and undue preference provisions for new media broadcasting undertakings.

B) Telecommunications

As the Commission, pursuant to section 34 of the Telecommunications Act, forbears from regulating a growing number of telecommunications services, it 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 2008 was approximately 10%. Of this amount, approximately 25% was related to wholesale services that are generally provided by the incumbent TSPs to other TSPs.

In Telecom Decision 2008-17,¹⁰⁸ 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 & 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. 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 Inc, where only the resale of local service is permitted. As of 30 June 2009, the Commission has forborne from the regulation of over 77% of the residential lines and 68% of the business lines. In 2008, approximately 75% of local and access revenues were from forborne local services.

In the case of large incumbent TSPs¹⁰⁹, local services that are still subject to economic regulation include a limited number of local exchange residential and business single-line 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.¹¹⁰

In the case of Northwestel, the Commission established a simplified, four-year price cap regime.¹¹¹ 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 Decision 2001-756,¹¹² the Commission established a simplified price regulation regime which it extended, with minor modifications, in Telecom Decision 2006-14.¹¹³

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.¹¹⁴ 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 Telecom Decision 2007 5, the Commission forbore from regulating all toll services except for toll-free services.

In Telecom Decision 2007-56,¹¹⁵ 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 2008, approximately 94% 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.¹¹⁶

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 2008, approximately 98% of Internet revenues were from forborne Internet services.

In 1999, in its consideration of an appropriate framework for new media,¹¹⁷ 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 2008-1,¹¹⁸ the Commission approved several initiatives to utilize deferral account funds¹¹⁹ 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 judgment in the appeal of Telecom Decision 2006-9 regarding the disposition of funds in the deferral accounts. 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 99-434¹²⁰ 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. This 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 2008, approximately 80% of data and private line revenues were from forborne services. By the end of 30 June 2009, the Commission had forborne from regulating approximately 3,400 private line routes.

X.25 and frame relay services were forborne from regulation under Telecom Order 96-130¹²¹ in February 1996. Wide Area Network (WAN) services were also forborne from regulation in Telecom Order 2000-553¹²² in June 2000. The access components of asynchronous transfer mode (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 94-15,¹²³ 96-14,¹²⁴ and 98-18,¹²⁵ 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.¹²⁶ However, the Commission will continue to monitor the developments in this area closely. One hundred percent of wireless revenues were from forborne wireless services.