ARCHIVED - Public Notice CRTC 2001-66-1
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Public Notice CRTC 2001-66-1 |
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See also: 2001-66 Ottawa, 24 August 2001 |
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Ownership of analog discretionary services by cable undertakings - amendment to the Commission's policy |
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| For some time, the Commission's policy has been to restrict cable distribution undertakings from holding or increasing their ownership interests in analog discretionary programming undertakings. In Public Notice CRTC 2001-66 dated 7 June 2001, the Commission announced the decision, reached by a majority vote of its members, to amend this policy by permitting cable companies and their related entities to purchase interests, including controlling interests, in Canadian analog pay and specialty programming services. The Commission stated that it would publish the reasons for its decision at a later date. | |
| In this notice, the Commission discusses the concerns and circumstances that led to implementation of the old policy restricting cable's ownership of such services, and sets forth the reasons for amending the policy at this time. In summary, the Commission's majority considers that, through the evolution of the broadcasting environment, the concerns supporting the original policy are no longer present to the degree that warrants its retention. | |
| Background | |
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1. |
The Commission's policy restricting the ownership of analog discretionary programming services by cable distributors or their affiliates (vertical integration) stems in large measure from the strategic position that cable has held within the Canadian distribution industry as gatekeeper for the delivery of discretionary services to subscribers, the often-limited channel capacity that cable systems had to distribute such services on an analog basis, and concerns about the potential negative consequences of these two factors. In the absence of adequate safeguards, the combination of the cable industry's position as gatekeeper and its limited channel capacity gave rise to the possibility that a cable operator might act contrary to the public interest in its distribution of a discretionary programming service in which it has an ownership interest. Some of the concerns related to the pricing, packaging, marketing, distribution or other terms of carriage applied to such a service in comparison with those applied to a service in which the cable distributor had no such interest. The larger, more fundamental concern was the potential ability of cable companies, in their capacity as gatekeepers, to control the access that programming services have to audiences, thereby affecting the volume of subscriber and advertising revenues that finance the production of Canadian programming. |
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In 1990, the Commission made regulations governing specialty and pay television services. These regulations contain mechanisms designed to preserve the Commission's ability to intervene and limit vertical integration where it perceived the need to do so. Both sets of regulations require the Commission's approval before a person who is (or controls) the licensee of a broadcasting distribution undertaking or any broadcasting undertaking engaged in the exhibition of specialty services acquires 10% or more of the voting interests of a person who is (or controls) the licensee of a specialty or a pay television service. This 10% threshold is in addition to those of 30% and 50% that, by regulation, trigger the need for prior Commission approval in the case of other voting interest transfers involving licensed undertakings. |
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In May of 1995, the Commission issued its Report to the Government on convergence (Competition and Culture on the Information Highway). In its report, the Commission emphasized the need to hasten the arrival of effective and sustainable competition among facilities and services. It noted that, to achieve these policy goals, barriers to competition arising from the monopoly power or dominant position of telephone and cable companies must be removed, and rules put into place to allow service providers equitable access to both cable and telephone subscribers. Although the Commission was prepared, in principle, to permit vertical integration between program distributors and program providers, it stated the following: |
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In Public Notice CRTC 1996-60, the Commission published its Access rules for broadcasting distribution undertakings. These rules applied to larger distributors, including Class 1 cable and direct-to-home (DTH) satellite distribution systems. Among other things, the rules required the distribution of all licensed discretionary services. |
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Subsequently, in Public Notice CRTC 1997-150, the Commission issued new Broadcasting Distribution Regulations. These regulations introduced a number of regulatory mechanisms designed to address concerns about access, competitive entry, and other issues related to what the Commission termed "undue preference". Specifically, section 9 specifies that "no licensee shall give an undue preference to any person, including itself, or subject any person to an undue disadvantage." Other measures that address access and competition concerns are contained in Sections 12 to 15. These outline procedures to be followed for the resolution of disputes between parties, including the licensees of distribution undertakings and of programming undertakings, concerning a range of matters dealing with carriage, the terms of carriage and the setting of wholesale rates. In addition, sections 18 and 38 set out the rules governing access by specialty, pay and pay-per-view programming services to Class 1 and Class 2 cable systems, and to DTH distribution undertakings, respectively. |
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More recently, in Licensing framework policy for new digital pay and specialty services, Public Notice CRTC 2000-6, the Commission acknowledged the key role that distributors could play in launching new digital services. It stated that it would thus be prepared to consider applications for such services involving ownership participation by distributors, including cable operators. The framework contained specific carriage terms for the new services, including measures to ensure equitable terms of carriage for services that are not affiliated with distributors. |
| Request for a change in Commission policy | |
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In a 10 November 2000 letter to the Commission, the Canadian Cable Television Association (CCTA) requested that the Commission review and amend its policy on the ownership of discretionary services by cable. Specifically, the CCTA asked the Commission to permit cable operators or their affiliates to hold equity interests, not just in discretionary services that are distributed on a digital basis (as proposed in PN 2000-6), but those that are distributed on an analog basis as well. |
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According to the CCTA, changes within the broadcasting environment have been such that it should no longer be necessary for the Commission to restrict cable distribution undertakings from holding or increasing their ownership interests in analog discretionary programming undertakings. In support of its argument, the CCTA cited such factors as increasing competition, convergence in the communications sector, and the increasingly significant role played by companies having access to multiple distribution and exhibition platforms. |
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The CCTA noted, in particular, last year's Decision CRTC 2000-747 in which the Commission authorized BCE to acquire ownership of CTV. BCE also owns the licensee of the DTH satellite distribution undertaking known as Bell ExpressVu and various smaller satellite and terrestrial broadcasting distribution undertakings. The number of those subscribing to the basic service of Bell ExpressVu's DTH undertaking makes it the country's fifth largest broadcasting distribution undertaking. BCE also has indirect control of seven analog specialty services and minority holdings in two other such discretionary services. |
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The CCTA argued that BCE's interests in CTV, Bell ExpressVu and numerous specialty services place cable distributors at a competitive disadvantage. It claimed that BCE's ability to offer and market services across a broad range of platforms outstrips that of others, and that this is to the detriment of the competitive environment. The CCTA further claimed that Bell ExpressVu's DTH undertaking and other forms of distribution have taken subscribers away from cable, to the extent that cable, in the CCTA's view, is no longer dominant. |
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In the circumstances, the Commission decided that a review of its policy would be appropriate and, in Public Notice 2000-165, called for public comments on the matter. |
| Commission's determination and reasons for the policy change | |
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In Public Notice CRTC 2001-66, the Commission announced its decision, by majority vote, to allow cable companies and their related entities to purchase interests, including controlling interests, in Canadian analog pay and specialty programming services. |
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The Commission notes that several major changes have swept through the Canadian broadcasting system in a relatively short space of time. Recent years have seen a rapid series of consolidations and mergers, all marking an increasing convergence of the various business sectors that make up the communications industry. This has occurred not just within Canada, but on an international scale as well. Competition among broadcasting distribution undertakings has been introduced. Intensification of competition has prompted media companies to develop business strategies to distinguish themselves from competitors. It has also led many companies to seek entry into new markets, and often, to become more vertically integrated, in order to compensate for erosion of market share in their older, more familiar areas of business. |
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In the broadcasting distribution sector, the DTH industry has expanded at a very fast pace, essentially doubling its market share between 1999 and 2000. Bell ExpressVu shares the Canadian DTH market with Star Choice, a company indirectly owned and controlled by Shaw Communications Inc. Together, they account for approximately 15% of all basic service subscribers in Canada, with Bell ExpressVu having the somewhat greater share of the two. This being said, it is important to note that there are no guarantees that DTH growth will continue at the same rate. It is equally important to remember that cable still accounts for almost 85% of all basic service subscribers. |
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On the evidence, the Commission is satisfied that Canadians today are well served by a reasonably healthy, functionally competitive distribution industry. Each BDU alternative contributes to this achievement; each has its own strengths and weaknesses, and no single technology stands out as having a clear, long-term advantage over the others. It is from this perspective that the Commission has examined its former policy and the policy's rationale. As noted, that rationale was tied to a great extent to concerns for cable's position in the broadcasting distribution industry as gatekeeper, the limited capacity of cable to distribute analog discretionary services, and the possibility that a cable company might tend to act in a manner inconsistent with the public interest in the distribution of a discretionary service in which it held an interest. |
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In the Commission's view, cable retains its position as the dominant form of distribution and will likely do so for some time. The Commission notes, however, that licensed analog discretionary services have now found distribution on virtually all cable systems across Canada for which such distribution is required pursuant to the access rules. Moreover, in the opinion of the Commission's majority, the sections of the Broadcasting Distribution Regulations setting out the access rules and dealing with undue preference or disadvantage, coupled with the regulations' dispute resolution mechanisms, provide sufficient and effective tools to respond to such concerns as may, from time to time, arise with respect to the cable distribution of analog discretionary programming services. |
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Accordingly, the Commission's policy henceforth will generally be to allow cable companies and their related entities to purchase interests, including controlling interests, in Canadian analog pay and specialty programming services. |
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In reaching this determination, the Commission has taken into account all of the comments received in response to PN 2000-165. Certain of these included calls for the introduction of additional safeguards against undue preference that would buttress those already in place. Among the suggested safeguards were those that would directly address terms of carriage, including marketing and promotion, packaging and pricing. Also proposed was a prohibition against the sharing, by affiliated programming undertakings with distributors, of competitively sensitive information regarding other distributors. Others argued that programmers should have access to information concerning the basis on which distributors compensate them for their services. |
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Various interveners were opposed to the removal of all limits on cable's ownership of analog discretionary services. Instead, they proposed that an upper limit or cap be set, either on the number, or on the percentage, of such services that any one cable operator or cable affiliate might own. Others stated that any restrictions should apply to all persons. |
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In PN 2001-66, the Commission responded to many of these concerns by emphasizing that it would apply the following principles in implementing the change in its policy: |
| · All specialty and pay services should be supplied and distributed on fair and equitable terms, including terms related to pricing, packaging, promotion and marketing/promotional costs. | |
| · Unaffiliated undertakings should be accorded terms and conditions that are no less favourable than those accorded to affiliated undertakings, including terms related to pricing, packaging, promotion and marketing/promotional costs. | |
| · Any competitively sensitive information relating to a competitive distributor that is obtained by a programming undertaking which is affiliated with another distributor should not be shared with the affiliated distributor. | |
| · A programming service is entitled to obtain, at its expense and on an annual basis, independently verified subscriber numbers for the service in question to validate the basis for programmer compensation. | |
| · Where a programming service contributes to the costs of marketing and promotion, it is entitled to obtain, at its expense and on an annual basis, an independently verified accounting in respect of its contributions. | |
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The Commission has considered the suggestions by some interveners that it place a cap on the number or the percentage of analog discretionary services that any one cable distributor might own. The Commission believes that arriving at an acceptable basis or formula for any such limit would be extremely complicated. Should the cap be based on revenues exclusively, or should market reach and market share be factored in? The very nature of discretionary services makes meaningful comparison difficult. They differ considerably from one another in their popularity among subscribers and in their financial circumstances. Their existing ownership structures also vary widely; some are now BDU affiliates while others are not. Some services receive national distribution, while others have regional mandates. Some have regulated wholesale rates while others must negotiate these rates with distributors. In the Commission's view, any ownership limit that might be set could well prove to be unacceptably arbitrary, and have unpredictable and potentially inequitable consequences. For all of these reasons, the Commission has rejected the suggestions concerning an ownership cap. |
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In PN 2001-66, the Commission noted the progress made by the industry in establishing a set of joint principles to guide the digital launch in September of this year. These joint principles were announced in Public Notice CRTC 2001-57. The Commission reiterates its encouragement to the industry that it be guided by similar principles in renegotiating the carriage of analog services. |
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As further stated in PN 2001-66, the Commission intends to modify its regulations to remove the prior approval requirement that applies in situations where a person licensed to operate a distribution undertaking seeks to purchase, directly or indirectly, more than 10% of a pay or specialty undertaking [see section 10(4)(d) Specialty Services Regulations, 1990 and section 6(4)(d) Pay Television Regulations, 1990]. Other approval and notification thresholds will remain unchanged. |
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24. |
The Commission emphasizes that this policy does not alter its licensing regime with respect to digital discretionary television services or its policies with respect to ownership transactions. The Commission will thus continue to review applications that come before it from cable operators or their affiliates for authority to acquire effective control of analog discretionary services, or for licences to operate new digital services. The Commission will also continue to review applications by cable operators or their affiliates for authority to increase their voting interests in a discretionary service beyond the thresholds of 30% and 50% set out in the specialty and pay regulations. It will assess all such applications on their own merits, taking into account such ongoing Commission concerns and preoccupations as the preservation of competition and of diversity of voices. |
| Related CRTC documents | |
| . Public Notice CRTC 2000-165 - Proposed review of the Commission's position regarding ownership of discretionary programming undertakings by cable broadcasting distribution undertakings | |
| . Public Notice CRTC 2000-165-1 - Extension of deadlines for comments and replies | |
| . Public Notice CRTC 2001-66 - Ownership of analog discretionary services by cable undertakings | |
| Secretary General | |
| This document is available in alternate format upon request and may also be examined at the following Internet site: http://www.crtc.gc.ca |
Dissenting Opinion of Commissioner Andrew Cardozo |
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| I dissent from the majority because I believe that this policy does not strike the appropriate balance as it will clearly favour one sector of the broadcasting system (big cable) and disadvantage another (specialty broadcasters). In my view, the Commission is obligated to develop policies that are more balanced. | |
| I would have preferred that we kept the Commission policy in place at this time, preventing cable from ownership of analogue specialty services. Failing that, clear safeguards that would ensure fairness and equity in the broadcasting system, as suggested by many intervenors, should have been instituted. | |
| A debate of visions | |
| This debate can be characterized as a contest of visions for the Canadian broadcasting system: one that has the strongest players possible, vertically integrated if necessary, albeit less in numbers; versus one that is made up of several vibrant players of varying sizes, with little or no vertical integration. | |
| The majority of my colleagues have opted for the former. I believe that the latter vision - the vision that has been built over many years - is more appropriate. It was also the vision held by the vast majority of intervenors in this proceeding. | |
| In my opinion the broadcasting system, and in turn Canadians, are best served by the current policy which by and large prohibits cable from owning specialty services. This policy reduces unfairness and inequity in the system and facilitates the presence of several owners. Vibrant competition results in a wide range of television offerings and ensures greater access for a variety of viewpoints. Good for creative and imaginative cultural growth. Good for diversity of news and hence for democracy. | |
| Consensus for safeguards | |
| Support for the Commission policy, or at least having strong safeguards, was very well articulated by numerous intervenors. While these intervenors did not include cable operators, they included most conventional and specialty broadcasters and the creative community such as producers and directors. Trade associations with this point of view included the Canadian Association of Broadcasters, the Canadian Film and Television Production Association, the Directors Guild of Canada, the Alliance of Canadian Cinema, Television and Radio Artists and the Canadian Independent Record Production Association. Citizens groups included the Friends of Canadian Broadcasting and the Public Interest Advocacy Centre. Notable too were the numerous individual Canadians who literally begged and pleaded with the Commission not to permit cable this major ownership role. | |
| Many of the intervenors said that if the Commission were to lift the prohibition, that we should at least have strong safeguards that would ensure fair play on the part of cable distributors. What is particularly interesting is that even the Canadian Cable Television Association (CCTA) proposed safeguards that could be implemented. In essence many of those who wanted the prohibition maintained were prepared to compromise and see it lifted with strong safeguards in place, while those who wanted the prohibition lifted, were also prepared to have the safeguards in place. There was an impressive "compromise consensus" among most players of the broadcasting industry. | |
| This "compromise consensus" could have been characterized as a balanced solution which balanced the needs and desires of competing players. It was then puzzling to me that the Commission came to a solution which would remove the prohibition without the safeguards recommended by so many intervenors. One could say that cable got much more than it asked for and the broadcasters got much less. In my respectful submission, this policy clearly did not strike an appropriate balance. The impact of it clearly favours the interests of one sector of the industry (big cable), while seriously undermining the interests of another (mid-size and small specialty broadcasters). There are no indications that mid-size and small cable operators have any interest - or indeed the resources - to acquire specialty services. | |
| In my view this is also one of the most radical shifts, if not reversals, in policy that the Commission has taken, which was quite at odds with the majority of opinion expressed. Almost no intervenor called for a shift this drastic. | |
| "Pretty-please principles" instead of regulatory safeguards | |
| The majority has lifted the prohibition and said that a set of principles "will apply". The principles are generally phrased in terms of what cable "should" do. Instead of clear and unequivocal safeguards the majority is imposing what can best be described as a set of "pretty-please principles". While the Commission has a range of binding regulatory tools at its disposal, such as regulations and conditions of licence, it has opted for merely 'principles that will apply'. If the cable industry had a squeaky clean record with Canadian subscribers and with broadcasters, this approach may be warranted. Instead the record of this proceeding reveals a high level of mistrust on behalf of ordinary Canadians and numerous complaints from specialty broadcasters who consider that the industry has abused its predominant position. | |
| We are informed by intervenors who opposed the lifting of the prohibition or who were prepared to accept safeguards, in the lists they had filed, of alleged past misdemeanors whereby cable had misused its dominant position. I was unable to overlook these concerns. | |
| Astral for example, provided a list entitled "Examples of Preferential Conduct", with 20 examples, such as "Extracting 'key money' in the guise (of) a 'marketing fee' the impact of which was unduly prejudicial to unaffiliated services", and "Repeated channel reallocation of unaffiliated services while, providing preferential treatment to affiliated services" and "Refusing to provide or honour audit rights to confirm subscriber calculations and wholesale fees due and payable". | |
| CHUM Television provided a list of 19 "Examples of Inequitable Treatment Related to 1996 Licensed Services", mentioned: "Granting preferential carriage to affiliated services on analog third tier or on basic (e.g. TreeHouse, SportsNet) ahead of unaffiliated services in spite of CRTC PN 1996-120 guidelines and dominant BDU commitments made at the hearings" and "Leveraging perceived scarcity to extract maximum rate concessions and access fees (which exceeded reasonable marketing launch costs) from the 1996 licensed services." | |
| Pelmorex Inc. which was prepared to support the lifting of the prohibition, said, "all distributors should be allowed to own programming undertakings only according to the strictest safeguards and conditions of licence under a watchful regulatory regime prepared to enforce those safeguards and conditions of licence." CTV put forward a similar approach and described several necessary safeguards. | |
| During this proceeding, the Competition Bureau took the position which recognized the dominant position that cable enjoys, but supported the lifting of the prohibition, accompanied by safeguards. By inference, is it fair to conclude that this new policy position would not meet with the Bureau's concurrence and would not be conducive to fair competition? | |
| Comments on principles | |
| The principles put forward in the majority, in paragraph 20, only generally address the issues raised by many intervenors, the key problem being that the Commission has not adequately described what recourse it will take if these principles are contravened. | |
| I would comment on one in particular. With regard to "independently verified subscriber numbers", this provision would only be viable if cable companies provided such numbers automatically each year. As it stands, the very request for such numbers by a broadcaster can be perceived as an aggressive act; as a result they are only asked for in extreme situations. In effect, broadcasters can be asked to pay a bill with little knowledge of what they are paying for, and are ill-advised to ask for details or confirmation. | |
| Not a balanced policy | |
| The Commission has an obligation to regulate the broadcasting system in a balanced, fair and equitable manner, taking into consideration past behaviour, and relevant and relative positions of power and control. In my view this policy increases a serious imbalance between specialty broadcasters and cable providers which needs to be corrected. It may well have the effect of handing the specialty industry to big cable on a platter. | |
| One of the most important objectives of a regulatory agency such as the Commission, is to regulate the inequities in the system where they exist. The inequity between cable carriers and specialty services is enormous when one simply considers that without cable carriage a specialty service cannot survive. The reverse is not true because cable has many options to choose from given the range of broadcast services that the Commission has licensed over the years many of which have similarities to each other, although they are generally not wholly competitive. | |
| The major point in the argument put forward by the CCTA is that cable needed to be treated the same as satellite services. Following the purchase of CTV by BCE, the former which owns several specialty services and the latter which owns Bell ExpressVu (the direct-to-home satellite service), cable made the argument that they needed similar treatment as their satellite counterparts. There are however, two major differences. First, satellite does not now enjoy the predominant market position that cable has, i.e. without carriage by a major cable company a specialty service simply cannot survive. Conversely, if a satellite service refuses carriage, a service can certainly operate if cable provides carriage. This market power means that cable can basically dictate who lives and who dies, and when it has a number of its own properties in play, it is essential that the Commission ensure that all are treated fairly. | |
| Second, as the majority notes in paragraph 14, satellite does not enjoy the position of dominance that cable has; satellite has 15% of all basic service subscribers, while cable has 85%. It is worth keeping in mind that cable is not the self-made rough and tumble market operator some may assume. Rather it has grown with considerable help and protection from the Commission whereby the regulatory bargain was that cable would receive this protected growth status (geographic monopoly until very recently) in exchange for carrying the services licensed by the Commission - the Canadian services which would help the Canadian broadcasting system grow. It is the child of the CRTC. Having obtained its predominant or ubiquitous position, fledgling competitive distributors have little room to grow beyond where they are now, and may not offer any real competition over the next decade. | |
| It is fair to note that specialty services have also grown with the care and nurturing of the Commission, the difference however, is that cable as the predominant means of distribution has always been in a more powerful position, and with this policy change, the inequity will be even greater. | |
| In the act of balancing interests, I find nothing in the new policy that will benefit consumers. The Public Interest Advocacy Centre, said, "there is scant evidence that the proposed change will result in greater choice or more efficient and/or cheaper delivery of cable programming to Canadians..There must be clear and compelling evidence that the proposed change will provide significant benefits to the customers of the broadcast distribution undertakings." Certainly, the record showed that many individual Canadians shared this concern. | |
| The big get bigger and the small disappear | |
| Inevitably this policy will lead to a situation where the big cable players will get bigger (Shaw, Rogers and Videotron), which in itself may be a worthwhile goal. But the clear side effect will be that their predominance will result in a playing field that is not at all level. The mid-size and small players (Astral, CHUM, Alliance-Atlantis, Pelmorex, Craig, Radio Nord, Pattison and Levfam) will find it harder to compete and could soon get "gobbled up" by the large integrated cable companies. The unaffiliated ethnic specialties (Fairchild, Asian Television Network and Odyssey) are in an even more precarious situation. Given cable's market power coupled with the hands-off approach in this policy of the Commission, it is unclear whether specialty services will be able to withstand the pressure from big cable to sell. One is left to wonder whether it is reasonable to anticipate that within two or three years, Canada will have three or even two fully integrated players left in the broadcasting system whereby the English and French systems may remain under separate entities in the very short term, but will soon be merged into a couple of Canada-wide behemoths. The evidence from the proceeding, especially a public opinion survey filed by the Friends of Canadian Broadcasting, suggests that the public expects the Commission to foster a more diversified system. | |
| I am not arguing that it is the role of the Commission to place unjustified barriers to mergers and acquisitions, rather, I am arguing that it is not our role to make the survival of some companies untenable such that they will be pressed to sell out to certain other companies. Valuing and fostering a diversity of voices is certainly a valuable objective from the perspective of the Broadcasting Act, just as it is for the benefit of a democratic society. | |
| A Toronto broadcasting system | |
| I would also anticipate that these systems will be totally based in Toronto and Montréal in the short term and then Toronto in the medium term. We have seen the whittling away of broadcast and cable systems based in cities other than these two, and what this next round of consolidation could see is a speedy gravitating of the entire industry to Toronto. There is no question that such a system would be highly efficient from a business point of view with the maximum synergies and a minimum duplication. Whether a Toronto broadcasting system for all of Canada is in the best interests of the country from a national and cultural policy perspective is another matter. In such a system it would not only be major corporate decisions that are made in Toronto, but the production, the funding, the hiring, the day-to-day decisions and the locations of all broadcast centres that will all be in one city. | |
| In this context I note the intervention by Craig Broadcasting Systems Inc. which says, "a loosening of the policy will inevitably lead to increased consolidation and less diversity of voices. We do not own analog specialty or pay services but as an independent western-Canadian based company we view these developments with concern." | |
| Consolidation | |
| It is not enough to consider that this new policy simply recognizes the world-wide phenomenon of consolidation. There is a competing vision and obligation for the Commission to ensure that there remains a diversity of voices and services for Canadian consumers. If our national objective is to meet the major American and international players head-to-head, then perhaps this can only be done by creating one single private sector company that would include all the private sector players currently in existence - distributors, programmers, producers, internet providers, etc. Short of this, we need to be more imaginative. | |
| Cap on the number of services | |
| The majority has decided not to place a limit on the number or percentage of services that one company can own. Even the CCTA supported a cap. | |
| As noted in paragraph 21, it was felt that "any ownership limit that might be set could well prove to be unacceptably arbitrary". Does this mean that the Commission will never limit the number, such that one company could own the entire private system, or will the ownership limit be something less than 100%? Clearly, there will be a limit at some point. | |
| In fact, the Commission has numerical targets and quotas in several areas. We limit the number of conventional television stations and radio stations that one company can own in a market, and are also prepared to make a few exceptions under special and justifiable circumstances. The system works well for all concerned. We have minimum quotas for Canadian content in television and radio and also make exceptions to avoid arbitrariness. | |
| The policy of not stating a limit at this point is a mistake in my view. The market cannot know what the limit is until we decide to impose one on a particular transaction, after the fact. Will that then be the limit for all or for some? One good reason for clear policy is, in my view, that it prevents arbitrariness. It circumscribes the Commission's latitude in a transparent way and ensures that all players will know what the rules are before they undertake acquisitions and mergers. Certainty in the market is something we should facilitate. I cannot see any positive reason for this part of the policy. | |
| The process | |
| I should add that like many intervenors, I am of the view that this proceeding could have been conducted differently. First, I agree that the timing was unfortunate. This proceeding took place at the very time when broadcasters were negotiating for cable carriage of the Category 1 and 2 licences that they had received in the Fall. For the most part, their view was contrary to the position of these very cable companies. Second, I note that many parties had asked for an oral public hearing which would have been an opportunity for a fuller discussion of the issues at stake on such a fundamental issue. | |
| The future | |
| As the majority notes, there are some good reasons to change the Commission policy on this matter and there are many good cable companies that will do good for the system. In my respectful view, however, given the important issues at stake, the broadcasting system would be better off at this time with the current policy being maintained, or at least changing the policy but putting in place some very clear regulatory safeguards, as suggested by so many intervenors. | |
| In my view, the principles described by the majority will only be worthwhile if enshrined as regulatory safeguards with clearly stated consequences for failure to comply. It will be up to cable operators to prove that such regulations will not be necessary in the future. |
Dissenting opinion of Commissioner Barbara Cram |
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| I agree with the majority decision to change the policy save and except that I accept there should be ownership limitations. Given the paucity of evidence in this process on the issue of the appropriate ownership limitations, I would hold a new proceeding to deal with this specific issue. In my view, ownership limits would provide more certainty to industry and lead to a more balanced broadcasting system as a whole. | |
| My reasoning is as follows: | |
| The world trend is towards consolidation, including consolidation of the media. From a business point of view this makes immanent sense. From the point of view of the broadcasting system in Canada especially it makes sense given the size of our market and the costs of production. But the Commission must be concerned about the results to the broadcasting system and the impact upon the viewer. Consolidation and concentration will inevitably lead to less diversity, fewer voices being seen and heard, and less local and regional programming. The question will always be when does the level of concentration become unacceptable. | |
| My colleagues in the majority believe that the process of establishing limits on ownership will be difficult. I agree. This does not however mean we should not undertake the process. The F.C.C. has already undertaken the same process and in fact had set limits on ownership. Regrettably the decision has been overturned because of a lack of a factual basis for the decision. What is important is that the process will recommence and in the United States there is a will and a perceived necessity to establish ownership limits. | |
| The Canadian broadcasting market is many times smaller than that in the United States and the relative diminutive market is exacerbated by the fact that there are in reality two Canadian markets, francophone and anglophone. Therefore the threat of undue concentration is even greater and may well come sooner than in the United States. | |
| The present policy of the Commission on acquisitions is essentially one of non-interference. The Commission does not and should not hold auctions on broadcasting assets that are for sale. Instead the Commission is presented with a "fait accompli", a completed acquisition, for approval or denial. This creates a subtle inertia or momentum for approval because an outright denial would create uncertainty in the market, an "orphaned" asset, and substantial lost costs to both parties involved in the transaction. This inertia has in the past ended up in approval at least in large part, with some minor divestitures perhaps required. | |
| Without any clear ownership limitations, the Commission will now examine each acquisition on a case by case basis. This will, as it has in the past, create precedents, which will then, in fairness, have to be applied to others. The inertia or momentum for approval will continue either until it is too late or until a denial occurs. Neither scenario is acceptable as one creates a homogenous broadcast system as a whole and the other creates uncertainty to both the market and the industry. | |
| With clear ownership limitations, there will be certainty and a clear onus on anyone who wishes to exceed these by establishing extraordinary circumstances. In the context of the sale of WIC, the Commission permitted Corus, an affiliate of Shaw, to acquire the discretionary pay services Home Theatre, SuperChannel, and MovieMax, but did not permit Corus to acquire The Family Channel. In fact, the only denial in recent years of an entire acquisition was that of Rogers attempting to buy a larger share in Sportsnet, this in contravention of the now overturned policy on analog ownership. With such an ownership limitation policy, parties wishing to exceed the limitations will know the risks involved and can choose to proceed with the acquisition or choose not to do so. | |
| Once such an ownership limitation policy is established, it would be my preliminary view that this would constitute the only limitation. As a result, I would expect those acquisitions within the policy could be dealt with administratively and only those which are without the policy would require the extensive review and a full hearing from the Commission. In my view this would create certainty for the industry, reduce the regulatory burden on parties, and not least of all, reduce the workload of the Commission. Most of all the integrity of the broadcasting system and its diversity would be maintained. | |
| My colleagues in the majority speak of any ownership limitation being "unnecessarily arbitrary". I do not agree. It should be noted that both the Competition Bureau and the Writers Guild referred in their interventions to the necessity of establishing ownership limitations. Limitations, in and of themselves, are not arbitrary. I agree however that there is a necessity for strong economic and other evidence as to how much concentration is too much and how much would be acceptable in our market. This is something which, I consider, the present process lacks. I am therefore of the view that a new process dealing with the issue of the appropriate ownership limitation should be commenced. It is also possible that any policy established today may indeed seem 'unnecessarily arbitrary' in a few years time. However, the Commission always has the ability to review and revise any policy from time to time - as we have now done with the analog ownership policy. | |
| In sum I would have approved the present policy change, as in the majority decision, but would also have approved the concept of ownership limitations and commenced a new process to establish the precise limitations. I would also include in this process a question as to whether such limitations should apply to all broadcast entities, including broadcasters, DTH and MDS. |
Date Modified: 2001-08-24
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