ARCHIVED -  Public Notice CRTC 1988-90

Public Notice

Ottawa, 1 June 1988

Public Notice CRTC 1988-90

REVIEW OF TELEVISION NETWORK POLICY

Table of Contents

Page

I. INTRODUCTION 1

II. BACKGROUND 2

III. THE 13 APRIL 1987 PUBLIC HEARING

3 1. Definition of a Network
4 2. Delegation of Control
5 3. Role of Networks
6 4. Regulatory Framework
7 a) Classes of Television Networks 7
b) Temporary Network Operations 8

IV. PROPOSED APPROACH TO THE DEFINITION RESPECTING TELEVISION 9 NETWORKS

1. Delegation of Control 10
a) Formal Reserved Time 11
b) De Facto Reserved Time 12
c) Editorial Control 13
2. Use of the Word "Includes" 14
3. Two or More Broadcasting Undertakings 16

V. CONCLUSION 16

VI. SUBMISSION OF PUBLIC COMMENTS 17

REVIEW OF TELEVISION NETWORK POLICY

RELATED DOCUMENTS: Decisions CRTC 80-704 dated 17 October 1980, 82-940 and 82-941 dated 14 October 1982, 85-653 dated 8 August 1985 and 86-976 dated 30 September 1986; Public Notices CRTC 1986-355 dated 23 December 1986, 1986-176 dated 23 July 1986 and 1987-8 dated 9 January 1987

I. INTRODUCTION

In Public Notice CRTC 1986-355 dated 23 December 1986, the Commission set out a number of issues with regard to radio and television networks as well as radio syndication and other new audio program developments. The Commission invited public comment on these issues and announced its intention to hold a public hearing, involving separate discussions concerning radio and television, commencing 13 April 1987 in the National Capital Region.

Following the 13 April 1987 Public Hearing, and taking into account the comments received and the discussion at the hearing, the Commission has decided to issue separate radio and television policy proposals for comment. A POLICY PROPOSAL RESPECTING RADIO BROADCASTING NETWORKS AND RADIO SYNDICATION AND PROPOSED AMENDMENTS TO THE RADIO REGULATIONS, 1986, Public Notice CRTC 1988-89 is being issued separately today. The proposal regarding television networks is contained in this document.

II. BACKGROUND

As outlined in Public Notice CRTC 1986-355, network activity has been the subject of regulatory scrutiny since the beginning of Canadian broadcasting. In the early days of radio, proponents of an independent Canadian broadcasting system feared the cultural and economic consequences of broadcasting lower-cost programs acquired from non-Canadian sources. At that time a number of Canadian radio stations were moving towards affiliation with the major broadcasting companies in the United States and decisive action was necessary to protect the developing Canadian system. In addition, there were concerns that, with the development of Canadian radio networks, the responsibility of the local licensee to fulfil the programming and information needs of the local community would be reduced. The potential influence accorded to individuals with the ability to reach mass audiences through broadcast networks also required adequate safeguards to ensure accountability to the public. As well, local licensees recognized that it was in their best interests for network program suppliers to be held responsible for the content of their programming, over which the local licensee could exercise no effective control.

In Public Notice CRTC 1987-8 dated 9 January 1987, the Commission published new regulations respecting television broadcasting. The Commission's primary objective in revising the television regulations was to provide a more streamlined regulatory framework to meet the objectives of the Broadcasting Act (the Act). As part of this streamlining, the Commission removed from the regulations those provisions that were no longer necessary, such as regulations which repeated a provision already contained in the Act, or which called for sanctions the Commission no longer considered appropriate. For example, section 23 (Chain Broadcasting) of the old television regulations, which dealt extensively with networking and affiliation, was removed.

With the exception of the provision prohibiting licensees from affiliating with a foreign network, the Commission considered that the television broadcasting regulations were not the appropriate place in which to set out general policies with respect to the operation of networks. As a consequence, the Commission initiated the public process described below to review and update its policies regarding television networks.

III. THE 13 APRIL 1987 PUBLIC HEARING

In Public Notice CRTC 1986-355 dated 23 December 1986, the Commission outlined several issues with respect to statutory requirements for networks. These issues, together with a series of specific questions contained in the notice, provided the focus for the written comments received by the Commission and the discussion which took place at the 13 April 1987 Public Hearing.

In response to its call for comments, the Commission received a total of 19 submissions directly related to television network issues. Of these, eight parties appeared at the public hearing to expand upon their written comments. The Commission wishes to acknowledge the important contribution made by all participants in the review process. Their ideas and expertise have played an important part in the development of the proposed approach to the definition respecting television networks described later in this document.

Prior to outlining the Commission's proposed policy, it is useful to review the major television issues discussed at the hearing.

1. Definition of a Network

Section 2 of the Act defines a "network" as follows:

"network" includes any operation involving two or more broadcasting undertakings whereby control over all or any part of the programs or program schedules of any of the broadcasting undertakings involved in the operation is delegated to a network operator.

Most of the appearing parties commenting on television issues maintained that the existing definition was generally adequate. However, some felt that a definition of "network" which would be more relevant to the existing broadcasting environment should be included in a new Act.

TVOntario suggested that a new definition should recognize that networks have responsibility for programming, distribution and exhibition, with only well-defined exceptions. The Television Board of the Canadian Association of Broadcasters (CAB), while endorsing the existing definition in principle, argued that it should clearly differentiate between conventional television networks and ad-hoc or "near-networks". This position was echoed by several private broadcasters, including the CTV Television Network (CTV), British Columbia Television Broadcasting System Ltd. (BCTV) and CAP Communications Ltd. Two organizations from Quebec, the Fédération Nationale des Communications (FNC) and the Syndicat Canadien de la Fonction Publique (SCFP) argued that a new definition of a network should promote a diversity of programming with the particular requirement that networks obtain programming produced in local and regional centres.

All commentators agreed that delegation of control was a key test for the existence of a television network, though both the Canadian Broadcasting Corporation (CBC) and CTV said that the intent to form a network would be sufficient. One party, Selkirk Communications Ltd., argued that network licences, and hence a definition of a network, were unnecessary since all the responsibilities associated with a television licence could reside exclusively with the local licensee.

2. Delegation of Control

While delegation of control was considered the single most important factor in determining the existence of a network, all parties also agreed that neither simultaneity nor the means by which programs are delivered were relevant to the determination of the existence of a delegation of control. Most broadcasters felt that affiliation agreements specifying reserved time, while normally a key test for formal delegation of control, were not essential to its determination. Global Communications Limited (Global), for instance, argued that delegation of control exists when stations agree to broadcast programs provided by a third party at given times. The CBC, CTV and the CAB all said the intent of the program originator to provide the same programming to more than one exhibitor, while not allowing that exhibitor to edit, change or supplement the program material, would indicate a delegation of control. Two appearing commentators made the point that it is not possible for a licensee to delegate control to it self. If the originating and transmitting stations are commonly owned, a network could not be said to exist.

3. Role of Networks

A considerable range of opinion regarding the role of television networks was expressed at the hearing. For instance, CTV argued strongly that any new television network must provide a similar high-quality, diverse and balanced Canadian program service as does CTV itself. Both CTV and the CAB warned of the dangers of allowing competitive national or regional television networks which did not have the same programming obligations and which could not be held accountable in the same way as existing conventional networks. The CAB also suggested that conventional networks and "near-networks" should bear responsibilities in relation to their access to the total volume of national advertising revenue. CanWest Broadcasting Ltd. (CKND-TV) suggested that regional networking should be encouraged and, together with Allarcom Ltd., argued in favour of a western-based television network to achieve better regional balance. The SCFP said that networks must use their resources to develop local and regional talent in order to improve the quality of local and regional programming.

4. Regulatory Framework

Almost all of the broadcasters who appeared at the 13 April 1987 Public Hearing supported the Commission's objective of establishing clear and simplified policies and regulatory procedures for television networks. BCTV, for instance, argued for a flexible and fair regulatory scheme which would take into account the size of the operation, actual or potential revenues and available resources. The CAB said that any new television network policy should not pre-empt the emergence of smaller-scale initiatives reflecting Canada's varied local, cultural and linguistic interests. Although Selkirk Communications Ltd. advocated a regulatory framework which rested entirely upon the local licensee, making network licences irrelevant and unnecessary, most broadcasters felt the Commission should recognize the existence of television networks and regulate them according to their role in, and impact upon, the Canadian broadcasting system.

(a) Classes of Television Networks

Several broadcasters argued that it would be appropriate for the Commission to define different classes of television networks. TVOntario suggested that network licences could be assigned on a national or regional basis with sub-classes for public, commercial, educational, specialty and pay services. The CAB and Allarcom Ltd. also raised the possibility of different requirements for different classes of television networks and Allarcom Ltd. emphasized that the Commission should not exempt any class from the requirement to hold a licence. Global made the specific suggestion that networks be regulated according to the volume of network programming they provide. Networks responsible for more than 1,000 hours of programming per year should be subject to detailed regulatory scrutiny and commitments, similar to the existing conventional television networks. However, networks responsible for less than 1,000 hours per year of programming should be regulated in a more supervisory manner and have fewer responsibilities.

(b) Temporary Network Operations

The issue of temporary networks was a matter of considerable concern at the public hearing, particularly for private broadcasters. The CAB, CTV and several other private broadcasters raised the possibility of temporary networks competing unfairly with established national networks. They were particularly concerned about the ability of temporary network licensees to "cherry-pick" the best available programming without being required to accept on-going responsibilities and commitments to the broadcasting system as a whole. BCTV summed up this position by saying:

the Commission should assure that the future licensing of temporary network operations does not encourage the repeated ad hoc distribution of foreign programming where there is no demonstrable or discernible benefit accruing to the production and exhibition of Canadian programs by the network or its affiliates, or the purpose is not charitable in nature.

However, neither Global nor the CBC saw any particular problem with the Commission's current system of licensing temporary television networks.

IV.PROPOSED APPROACH TO THE DEFINITION RESPECTING TELEVISION NETWORKS

Following the 13 April 1987 Public Hearing, the Commission now issues for public comment a proposed approach to the definition of television networks.

In setting out its proposal regarding television networks, the Commission has taken into account the policies proposed in Public Notice CRTC 1988-89, A POLICY PROPOSAL RESPECT ING RADIO BROADCASTING NETWORKS AND RADIO SYNDICATION; AND PROPOSED AMENDMENTS TO THE RADIO REGULATIONS, 1986. Clearly, the Commission's objectives in developing these proposals are the same. The Commission is aware of the need to be consistent in its approach to both radio and television networks. Increasingly, networks and syndicated programming activities are capable of reaching, informing and entertaining Canadians with high quality, diverse programming. Consequently, the Commission regards networks as an important vehicle to achieve the goals set out for the broadcasting system in the Act. However, there are important differences between the radio and television industries. While radio has been, and remains, primarily a local medium, the largest part of the broadcast day for many television stations is occupied with programming acquired from outside the local market. In the case of television network affiliates, the majority of program material is usually supplied by a network operator while the remainder is produced or acquired by the local licensee. Radio uses network programming to complement its local programming and to add diversity, and such programming constitutes relatively small percentage of its total output. Television, on the other hand, uses network programming in large blocks amounting, in many cases, to more than three-quarters of all programs broadcast.

There are three essential elements to the definition of a network that is set out in the Act. These are: the concept of delegation of control; the use of the word "includes"; and the existence of two or more broadcasting undertakings. A discussion of these three elements and the criteria which the Commission proposes to use to determine their existence respecting television is set out below.

1. Delegation of control

The specific reference in the Act to the concept of delegation of control over programs or program schedules requires that the Commission license as a network operation any program distribution arrangement where such delegation occurs.

To ascertain the existence of a delegation of control from a television station to another party, the Commission proposes to use three primary criteria. These involve: Formal Reserved Time; De Facto Reserved Time; and, Editorial Control. Accordingly, delegation of control, and hence a television network operation, will be said to exist when one or more of the primary criteria are present. Notwithstanding the above, the Commission, using the interpretation of the word "includes" discussed below, may determine that a network operation exists even though a clear delegation of control does not exist.

a) Formal Reserved Time

Formal reserved time will be said to exist where a television broadcaster, as a condition of the acquisition of a program or parts thereof, is required by a formal agreement to broadcast the program at a specified time. Where formal reserved time exists, the Commission will consider that a television network operation exists and will require that a network application be filed and a network licence obtained by the person(s) who provide(s) for the proposed programming, before the program is broadcast.

It is the Commission's view that a formal reserved time agreement clearly represents a situation where a local television station has, in effect, consented to relinquish control of the station's program schedule, or parts thereof, to another party. A formal reserved time agreement is generally evinced by the existence of an affiliation agreement or similar contractual arrangement.

Under a formal reserved time agreement, a local station generally has no power to refuse to air a program which it has contracted to broadcast until the expiration of the agree ment, except on a temporary basis and under special circumstances as provided for in the contract. The local station is required to air the program at, or within, specified clock hours or time frames. In contrast, purchase contracts which allow individual television stations to determine the scheduling of the program according to a time frame suggested by the program distributor would not constitute a formal reserved time commitment. Whether the programming is distributed live, by tape, or is tape delayed has no bearing on whether formal reserved time exists.

b) De Facto Reserved Time

De facto reserved time exists between a television station and another party where there is no formal contract or written reserved time commitment, but where there is evidence that a program, or programs, are being broadcast by more than one undertaking at a designated time and where, in the Commission's view, the program or programs affect the Canadian broadcasting system in a way similar to that of a formal, reserved time network.

It is conceivable that programming acquisition arrangements between distributors and local television stations may involve an informal or unwritten requirement for a program or programs to be scheduled at a specified time, as determined by a person other than the licensee of the local station. A useful indicator of the existence of de facto reserved time in such programming is the presence of commercial content that is broadcast, at a pre-determined time, by the local station as a condition of the acquisition of the program(s).

Consequently, the net effect of the distribution and broadcast of this programming on the broadcast system may be similar to the effect of centralized programming patterns as practised by networks and may produce a significant impact on other licensed components of the broadcast system and on a sizeable segment of the population. In such situations, the Commission may consider that a defacto television network operation exists. Whether the program is delivered live, by tape or has been tape delayed has no direct bearing on whether de facto reserved time may be said to exist.

c) Editorial Control

Paragraph 3(c) of the Act states that broadcasters have a responsibility for the programs they broadcast. However, the definition of "network" in the Act implies that broadcasters may delegate control over part or all of a program or program schedule to another party, namely a network operator. The Commission considers that editorial control, or control over the editorial content of programs, is central to the determination of "control" referred to in the definition of "network" in the Act. Editorial control is, therefore, a key criterion in determining the existence of a network. It should be noted that there are two distinct kinds of editorial control: the power to edit or alter the contents of a program, and the power to decide whether or not to broadcast a program. In television, it is common for the local licensee to retain the power to decide whether or not to broadcast a program but, having decided to broadcast, for the licensee not to have the power to edit or alter the program's editorial content. In such a case, the Commission would normally conclude the local licensee has delegated editorial control to a network operator and a network licence would be required.

In all cases where the existence of a network operation is not clear, the Commission will be guided primarily by the impact of that operation on the Canadian broadcasting system as a whole and the necessity for the Commission to regulate and supervise the system with a view to implementing the broadcasting policies enunciated in Section 3 of the Act.

2. Use of the Word "Includes"

In Decision CRTC 80-704, approving the issuing of a licence for the satellite distribution of the proceedings of the House of Commons, the Commission considered that the use of the word "includes" in the definition of a network supplied in the Act is enlarging rather than restricting. Consequently, the Commission is not restricted to treating as networks only those program distribution operations where a delegation of control and the criteria developed for determining it are present. In support of this interpretation, the Commission noted, in Decision CRTC 80-704, the policy in section 3(j) of the Act that the system should be flexible and adaptable to new developments. Furthermore, Section 15 of the Act confers upon the Commission the authority and responsibility to:

regulate and supervise all aspects of the Canadian broadcasting system with a view to implementing the broadcasting policy enunciated in Section 3 of this Act.

The licensing, as networks, of major television program distribution operations that produce a significant impact on the broadcasting system allows the Commission to regulate and supervise centrally-distributed programming at the level of the program source, as well as regulating the affiliated stations. The Commission believes this approach allows it to supervise and regulate the broadcasting system more effectively.

Consequently, the Commission proposes to retain criteria for determining the existence of a television network in addition to those relating to a delegation of control. Accordingly, the Commission may determine that a network exists in the case of any program distribution operation, involving broadcasting undertakings or programming originators, that produces a significant impact upon the Canadian broadcasting system.

The Commission believes it is justified in expecting commitments from certain program service providers as quid pro quo for their access to the broadcasting system and in fair ness to the other regulated elements of the system. For the purpose of licensing network operations, the Commission will continue to proceed on a case-by-case basis. The Commission is of the view, however, that the majority of program distribution operations that fit the definition of a television network will do so as a result of the existence of a delegation of control, as described above.

3.Two or more Broadcasting Undertakings

The network definition set out in the Act applies to situations which involve two or more broadcasting undertakings. In the past, the Commission has received several requests for an interpretation of this clause.

The Commission considers that a network operation may exist in the case of a program arrangement involving a network operation and only one station where the network operator also transmits the programming as a broadcaster. For private broadcasters where the undertakings are owned by the same licensee, no network licence is required.

V. CONCLUSION

The Commission regards television network licensees as a primary component of the Canadian broadcasting system and the network licensing process as an important instrument to help strengthen that system. The programming of television network licensees contributes significantly to achieving the goals set out for the Canadian broadcasting system in the Act.

In considering a streamlined regulatory framework and licensing approach for television network operators, the Commission finds that the wide variation in network structures and programming makes it difficult to construct procedures applicable to all situations. In addition, the Commission is constrained by the Act, which, amongst other things, requires that all applications for network licences be submitted to the public hearing process, with the exception of temporary network licences which may not exceed thirty days in duration.

The Commission has therefore decided to maintain its current licensing procedures for the present time.

VI. SUBMISSION OF PUBLIC COMMENTS

The Commission invites comment from interested parties with regard to the proposed approach to the definition of television networks, set out in this document.

Comments should be submitted, in writing, on or before 29 July 1988 and addressed to the Secretary General, CRTC, Ottawa, Ontario, K1A 0N2.

Fernand Bélisle Secretary General