Speech by Raj Shoan, Regional Commissioner for Ontario, Canadian Radio-television and Telecommunications Commission

To the annual conference of the Ontario Association of Broadcasters

Toronto, Ontario
November 7, 2013

Check against delivery

 

Thank you very much.

I'm delighted to be here. I feel very much at home among you, since I spent quite a few years on the broadcasting side myself. I was Director of Regulatory Affairs for the CBC and, before that, I had the same job at Astral Media.

I served on the staff of the Commission a few years ago but I have only been a Commissioner since July. This is my first opportunity as the Commissioner for Ontario to meet most of the Ontario broadcasters in one venue. In the interest of ensuring open lines of communication, I hope we can do this frequently.

I've been developing a plan to reach out to stakeholders across the province— both broadcasters and telecom service providers. I've already met with a lot of you, and I hope to reach out to others in the coming weeks.

I'm happy to say that the people I've been meeting seem pleased to be making the connection. If you haven't met me yet, please feel free to get in touch with my office. Communication is more important than ever in this period of rapid change and transformation.

Ontario is a big place and it includes a number of different regions. I consider it part of my responsibility to be aware of all parts of Ontario. That includes all broadcasting markets, large and small, in whatever part of the province they may be.

So I want to get to know all of you well. I want to know how you're doing, and what you're concerned about.

Although I've only been back at the CRTC for a short time, I am excited to be part of an organization that is putting Canadians at the centre of their communication system.

Let's Talk TV

It's in the spirit of this objective that we have launched our conversation with Canadians about the future of television. The television—once a passive but colourful screen in the living room—can now connect to a universe of apps, networks and devices. Increased functionality and access to new sources of programming means new opportunities and challenges—but, most importantly, unprecedented consumer choice.

Today, the Internet enables anyone with an account and a digital device to access pretty much any information or entertainment they want—most of it free. And that's great. Who would not want all this great programming to be available to everyone?

So the CRTC's role will have to change. Our traditional role as a protector of Canadian expression will have to evolve into a new one of enabler and promoter. More than that, our regulatory framework for television has to be dynamic and address the needs of Canadians—today and into the future.

We will need all of the help that we can get to figure out how to make this transition—and how to understand all of the other issues that have changed the communication landscape so radically.

That's why we've launched our conversation with Canadians. Television is still the medium that Canadians turn to for most of their programming content, so that's at the centre of our conversation. In the first phase, which began a couple of weeks ago, we're listening to the views of Canadians across the country.

This is not one of those cases where we draft some policy ideas and put them out for comments. This time, we are starting by gathering input from people who normally don't take part in our proceedings. Their needs and wants will help frame the issues that will be considered during our formal public proceeding, which we plan to launch in the spring.

The initial phase runs until November 22, so there is still plenty of time for people to join the conversation and tell us what they think. You can find more information at www.crtc.gc.ca/talktv. Canadians can also submit their comments through a 1-800 number, by mail, fax or email.

We are also trying something completely different. We have developed a conversation kit to enable community groups, educational institutions and any other public interest group to host their own “Flash!” conference. We are asking organizers to tell us about the outcome of their discussions by January 10, which can be in the form of a written report, a video, a podcast or any other format.

As for the people here today, we're looking forward to hearing from you later on, when we open up the conversation to the broadcasters and other stakeholders in the industry.

In the meantime, there are ways you can help us bring Canadians into our conversation. Radio stations can air public service announcements. Local TV stations can host panel discussions. Cable companies can engage viewers through their community channels. We would welcome these contributions to the process.

I have heard that Cable 14 in Hamilton has aired our short YouTube video on the future of TV. This is just one example of how you, the industry, can help us engage Canadians.

Tangible benefits

Meanwhile, we're continuing with our work on a number of broadcasting issues.

Last month, we published a Notice of Consultation on the tangible benefits policy that applies to television and radio services.

Transactions that change the ownership or effective control of a broadcasting service play a significant role in the evolution of Canada's broadcasting system. There have been some major takeovers in recent years.

The party proposing the deal must apply to the CRTC for permission to complete it. It's our job to determine whether the proposal before us is in the public interest.

A key factor in our assessment is the tangible benefits package proposed by the applicant. That is a set of financial commitments which must provide measurable benefits to the communities served by the applicant broadcaster, and to the Canadian broadcasting system as a whole. These dollars are generally directed towards the production of Canadian programming and the promotion of Canadian artists.

The amount to be invested depends on the value of the transaction. But determining the value is rarely a straightforward process. Furthermore, the requirements for tangible benefits vary according to the type of broadcasting operation involved. Specific values must be allocated to the various assets which are the ingredients of these transactions.

It's a complicated process which can be burdensome to both the applicants and the Commission. We are therefore inviting suggestions as to how the approach used to determine the value of transactions and allocate them amongst the component assets can be clarified, codified and simplified.

We would also like to ensure that the public interest is being served as well as it should be. In the past, we have given applicants the freedom to propose a wide variety of initiatives as part of the benefits package. But sometimes it's hard to see whether these initiatives are really incremental—that is, do they provide benefits that go beyond what might have been done anyway? Are they self-serving, helping the applicants rather than the public? And it is sometimes difficult to document the results of these initiatives to find out if their promise has been fulfilled.

The CRTC is proposing more rigorous criteria for benefits in television: Specifically, that they should flow primarily to established third-party funds including the Canadian Media Fund and various certified independent production funds.

In radio, we are asking whether the current formula for allocating benefits to various funds and initiatives should be reviewed.

To summarize, then, our consultation is looking for input on how we can streamline the whole tangible benefits process and ensure that those benefits are really paying off for the broadcasting system and for Canadians.

Radio sector

And now to radio: You've made it a great success story.

In the midst of enormous upheavals across the whole communication industry, radio has held its own and maintained a firm connection with its audience. Radio is a mature and stable sector based on a business model that has worked for many years.

But. As you know very well, there is always a "but." Radio does not automatically get to hold its position in the audio marketplace. Other contenders are coming to town.

Your listeners have many new digital ways to get music into their ears, on demand and without ads. Sixty percent of Canadians own a portable music player, almost half own a smartphone and just under a quarter own a tablet.

Streaming has not yet made a dramatic impact in Canada. Only 13% of Canadians reported streaming a personalized music service last year.

But Rdio is here. Slacker is here. It's expected that Apple will bring iTunes Radio to Canada next year.

Will these new entrants further fragment the marketplace? What will be their effect on traditional radio broadcasters?

Well, let's look at what traditional radio has to offer.

It is a very well established brand.

It is trusted by its listeners.

It offers lots and lots of music for a wide variety of tastes. Nielsen reports that 61% of Canadians tune in to terrestrial radio to discover music that is new to them. And 42% of the new music they encounter is on these stations. This is the highest share among all sources, including YouTube, the iTunes store and social media.

Radio adds to music a stream of up-to-date information that people count on in their daily lives: weather, traffic, local news. And it's delivered by high-profile local personalities who support their station's brand in the marketplace.

Radio is wired into the local community. It knows its audience and earns its loyalty day after day.

No service that offers only streaming music can replicate this very special radio mix. And you broadcasters have an advantage in the marketplace: You ask for no subscription fees. You're offering all of this absolutely free.

It all adds up to a robust business model.

In September, we published our annual Communications Monitoring Report. It shows that there are now 1,156 radio stations licensed to broadcast in Canada. Not all have launched or are currently in operation, but the number is impressive.

In 2012, radio revenues held steady. Profits before interest and taxes rose to $323-million from $311-million in the previous year.

However, there are signs Canadians may be spending less time listening to radio. Overall numbers are hard to judge at the moment, because the five major metropolitan markets are surveyed by PPM — the Personal People Meter technology — while other markets continue to be surveyed by the self-reported diary system.

Despite these different measurement tools, a trend is emerging: radio listening is much less popular among the younger demographics. In the PPM markets, the 18 to 24 age group are tuning in about 30% less than the general 12-plus population, while the 12 to 17 group tune in about 50% less.

So it's clear that you can't stand still if you want to hold on to your audiences, much less grow them.

Television broadcasters and distributors have been struggling to adapt to the new digital reality. Is the same thing going to happen to conventional radio?

What can you do to take the loyalty you've earned from your communities and invite your listeners to follow you online or on their mobile devices? How can you get them to connect with you interactively instead of just passively?

How can you use your libraries of Canadian music to build more loyalty from Canadian listeners?

If you want to be successful in the future, you will have to find ways to innovate, both as station owners and as a sector as a whole. It is difficult to know which way to go when the shape of the digital future is not yet defined. But if you do not take some steps to define the shape of the future in ways that are good for you, you will inevitably be left behind.

I'm confident that you will find ways to do it. We as the regulator will do all we can to help create a favourable environment for the radio sector as it moves ahead.

Radio regulation

I'd now like to move on to some of our recent and current activities in radio regulation.

The Commission is aware of the special challenges that face smaller radio stations. As in television, consolidation is creating a handful of large players, and the smaller players are understandably concerned.

All stations are required to make basic contributions to the development of Canadian content, in amounts based on their revenues. However, we decided in September to amend the Radio Regulations and remove this obligation from commercial and ethnic stations with revenues of under $1.25-million. This will provide them with more financial flexibility, reduce their regulatory burden and simplify administration of our policy.

The overall level of support for Canadian content development will be maintained through contributions from other sources, including the tangible benefits derived from ownership transfers.

The Canadian radio sector is holding its own and is in generally good shape. There seems to be no need at this point for any major overhaul of our current commercial radio policy. However, that policy was last reviewed in 2006, and there are some areas that may need to be updated.

Last week, we issued a Notice of Consultation. We have asked for comments on a number of issues:

Hybrid Digital Radio is the system developed by iBiquity which has become the standard for digital radio in the States. It offers extra channels in addition to the primary, and this may be part of the answer to the overcrowding of the FM spectrum.

We look forward to your thoughts on these issues.

And, of course, I personally would like to hear what you have to say on any issues.

I hope you'll let me know what you think about what we're doing, what you think we should be doing ... and even what you think we shouldn't be doing. My door is always open to you.

Thank you for inviting me here to speak to you today.

 

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