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Public Notice
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Ottawa, 5 August 1988
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Public Notice CRTC 1988-131
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POLICY CONCERNING LOCAL TELEVISION ADVERTISING
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RELATED DOCUMENTS: Public Notices CRTC 1985-61 dated 22 March 1985 and 1988-59 dated 13 April 1988; and Decisions CRTC 75-522 dated 28 October 1975, 77-83 dated 22 February 1977, 79-422 dated 27 June 1979, 82-866 dated 20 September 1982 and 87-332 dated 1 May 1987.
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In Public Notice CRTC 1988-59 dated 13 April 1988, entitled "Comments on the Commission's Policy Concerning Local Advertising", the Commission requested comments from members of the public with respect to a proposal from the Canadian Broadcasting Corporation. The Corporation asked to be exempted from the Commission's policy prohibiting access to a local television advertising market except where a local programming service is provided to that market by the broadcaster.
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The Commission's current policy was clearly expressed in Decision CRTC 75-522 concerning the licensing of a new television service to provide the programs of Sherbrooke's CHLT-TV in Trois-Rivières and has subsequently been reaffirmed in a number of decisions including Decisions CRTC 77-83, 82-866, 86-216, 87-332, 88-436 and 88-437. In addition, the Commission's policy with respect to distant Canadian television signals (Public Notice CRTC 1985-61) discourages stations whose signals enter a distant market from accepting local advertising from such a market.
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In letters to the Commission dated 26 November 1987 and 19 January 1988, the CBC proposed that the Commission's policy regarding local advertising should apply to the Corporation only in exceptional circumstances such as, "where it can be clearly demonstrated that the sale of local advertising by the CBC would jeopardize the continued provision of a local Canadian service in the market in question." The CBC argued that unlike private broadcasters, it must rely on market-to-market cross-subsidization, as well as parliamentary appropriations, to fulfill its national mandate.
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In response to Public Notice CRTC 1988-59, the Commission received a total of twenty-four submissions. Eighteen were submitted by private sector broadcasters, five by industry-related associations and one by a broadcasting consultant.
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All of the comments opposed the CBC's proposal. Private sector broadcasters generally argued that the CBC's mandate to serve 'special' audiences, such as minorities and those living in remote areas, should be funded by Parliament rather than through revenues generated at the expense of local broadcasters. Several broadcasters also pointed out they too provide uneconomic services to remote communities resulting in the cross-subsidization of one market by another, and that any exemption for the CBC would result in unfair competition. Many CBC-affiliated stations expressed concern that an exemption to the current policy for the CBC could result in the Corporation competing with its own affiliated stations for scarce local advertising or in forcing such stations to disaffiliate against their will. Virtually all of the commentators felt that a change in the Commission's policy, as proposed by the CBC, would be detrimental to the local service currently provided by private broadcasters. Several submissions also raised the possibility of the Corporation instituting unfair sales practices owing to the subsidized nature of the CBC's operations. Some commentators pointed out that any additional revenue to the Corporation resulting from acceptance of its proposal would be relatively insignificant in terms of the CBC's overall operating budget. Finally, a number of comments recommended that, if the Commission were to contemplate any significant change to the existing policy, such a change should be preceded by a public hearing.
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As proposed in Public Notice CRTC 1988-59, the Commission sent the comments received on this matter to the CBC and requested the Corporation's response. The CBC's response was received in a letter dated 17 June 1988 from the Director of Corporate Affairs and Affiliate Relations.
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In its response, the CBC indicated that many of the commentators "may have seriously misread the Corporation's purpose in asking for a Commission review of the present local sales policy." The CBC emphasized it had no intention of soliciting local advertising in economically fragile local markets where the existing local program service could be threatened by competition. The Corporation also rejected any suggestion that it intended to provide service only in the most financially viable markets in the country while ignoring the rest. The CBC categorically denied that its selling practices are in any way unfair. While acknowledging there are those who would prefer to have a national broadcaster solely funded through Parliamentary appropriations, the CBC noted that current legislation indicates the Corporation is to be financed by Parliament and by commercial revenues. The Broadcasting Act does not limit the source of these commercial revenues and, according to the Corporation, implies there will be competition between the public and private sectors of the broadcasting industry.
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The CBC, in its reply, suggested applying the following two criteria in the Commission's review of any Corporation request for authority to solicit local advertising. The CBC's reply is as follows:
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1. We agree with those intervenors who recommend that all broadcasters, including the CBC, should be permitted to solicit local advertising in any market in which they maintain a local staff and use local studio facilities to provide a regularly scheduled local broadcasting service. Generally, this would suggest to us that as a minimum a broadcaster seeking local television advertising revenues would have to provide a local supper hour program or equivalent, of 30 minutes or more per day, at least five days per week. In our view, such a production level requires a significant investment in the community by the local broadcaster, sufficient to warrant the solicitation of local advertising.
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2. Our second recommendation deals with the CBC specifically. As noted earlier, we believe the Corporation should, in addition, be permitted to solicit local advertising revenues in financially healthy markets where the Corporation, as a result of a disaffiliation, establishes new facilities to provide the national service to local audiences. This should apply whether or not the new station provides local programming or is, at the time it is established, only a rebroadcaster of a regionally relevant service.
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In addition to the above criteria, the CBC stated in its response that:
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... the Corporation is prepared to limit this activity to new CBC facilities which come on air after 1 July 1988, so long as the market in which the new service is introduced had resident in the year previous to the sign-on date of the CBC service, television stations which taken singly, or as a group, had gross air-time revenues of $10 million or more (based on information provided by Statistics Canada).
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The Commission's Response
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The Commission has carefully reviewed both the comments submitted in response to Public Notice CRTC 1988-59 and the CBC's reply to these comments, and acknowledges the contribution of all.
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The Commission remains convinced that the existing policy linking the ability to solicit local advertising with the provision of local programming is of significant benefit to the Canadian broadcasting system as a whole. The policy encourages all broadcasters to provide a local program service and protects those broadcasters who provide such a service from some of the competition resulting from the importation of distant signals. Further, the Commission is of the view that its policy should apply to both the public and private sectors of the broadcasting system.
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At the same time, the Commission recognizes that the CBC is mandated by Parliament to provide certain services which may be, in and of themselves, uneconomic. Such activities are an important aspect of the Corporation's role and Parliament must ensure they are adequately funded. However, private broadcasters also engage, on occasion, in uneconomic activities that are subsidized by the more profitable aspects of their operations. The Commission allows for the cross-subsidization of activities, where appropriate, in order that all Canadians may be provided with a full range of Canadian television services. Considering the information and analysis presented by the Corporation regarding cross-subsidization, the Commission does not consider it necessary or appropriate to treat the CBC differently in this respect.
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The Commission therefore reaffirms its policy prohibiting access to a local television advertising market unless the broadcaster provides a local program service to that market. As is the case with any such policy, a licensee may request an exemption on a case-by-case basis.
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Fernand Bélisle Secretary General
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