ARCHIVED - Broadcasting Notice of Consultation CRTC 2011-788

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Additional references: 2011-788-1, 2011-788-2 and 2011-788-3

Ottawa, 19 December 2011

Notice of hearing

16 April 2012
Gatineau, Quebec

Review of the Local Programming Improvement Fund

Deadline for submission of interventions/comments: 15 February 2012

The Commission will hold a public hearing to review its policies and regulations relating to the Local Programming Improvement Fund, commencing on 16 April 2012 at the Conference Centre, Phase IV, 140 Promenade du Portage, Gatineau, Quebec. The Commission invites written comments and proposals, along with supporting evidence, on the matters for consideration set out below. The deadline for the receipt of comments is 15 February 2012.

Background

The Local Programming Improvement Fund

1.      In Broadcasting Public Notice 2008-100, the Commission set out its determinations on a wide array of issues affecting many of the components of the Canadian broadcasting system. In making these determinations, the Commission noted that it had heard clear evidence of the high level of importance placed by Canadians on local television programming and, in particular, local news programming.

2.      Despite the importance Canadians place on such programming, the Commission found that spending on local programming by public and private television stations had remained flat – and in some cases had declined – in the previous decade, leading to potential reductions in both the quantity and quality of such programming. In comparison, spending on non-Canadian programming had increased substantially. Further, over the same decade, the number of viewing choices available to Canadians through satellite and terrestrial broadcasting distribution undertakings (BDUs) had greatly expanded, leading to a fragmentation of the viewing and advertising revenues that television stations had previously enjoyed. In addition, Canadians had increasingly begun to turn to on-line or new media platforms as a source for information. Given these stresses, it is unsurprising that the profitability of over-the-air (OTA) local television stations had also greatly declined, particularly in non-metropolitan markets, and that the business case for such stations had changed and would continue to change.

3.      Over the same decade, Canadian BDUs had generally experienced (and continue to experience) considerable growth in revenues, strong operating margins and healthy levels of profitability, due in part to the investments made by these BDUs and their related companies in the provision of Internet access services. As noted in Broadcasting Public Notice 2008-100, the financial contribution level for BDUs of 5% of gross broadcasting-related revenues had been established in 1995. In that notice, the Commission stated that it had considered various proposals to increase this level of contribution.

4.      Consequently, in that public notice, the Commission determined that it would be appropriate to increase BDU financial contributions to Canadian programming, and that the additional contribution would be directed to a new fund designed to improve the quality of local programming in smaller markets. Accordingly, the Commission established the Local Programming Improvement Fund (“LPIF” or “the Fund”) to support the production of such programming provided by private and public conventional television stations operating in non-metropolitan markets.[1]

5.      In Broadcasting Public Notice 2008-100, the Commission set out the following as the Fund’s overall objectives:

6.      The Commission also set out its intention to conduct a comprehensive review of the LPIF via a public process by its third year of operation (i.e., the 2011-2012 broadcast year), as well as a number of preliminary criteria by which the LPIF might be evaluated. The Commission indicated in particular that LPIF recipients would be expected to demonstrate how LPIF funding was used to make measurable improvements to the on-screen local programming available to audiences in their local markets, taking into consideration a number of “indicators of success,” which included the following:

7.      The Commission also proposed the following, similar criteria by which the overall performance of the LPIF could be evaluated:

8.      Finally, the Commission stated that following its comprehensive review of the LPIF, it would determine whether the Fund should be maintained, modified or discontinued.

LPIF allocation formula

9.      The Commission set out its initial policy regarding the receipt and allocation of LPIF funding in Broadcasting Public Notice 2008-100. In that notice, the Commission concluded that licensed BDUs should be required to contribute 1% of their gross revenues derived from broadcasting activities in the previous broadcast year to the LPIF. This LPIF funding was intended to provide support for incremental expenditures on local programming, and, in order to qualify for such support, stations were required to provide a local programming service that included original local news.

10.  In Broadcasting Regulatory Policies 2009-406 and 2009-406-1, the Commission re-examined certain issues relating to its LPIF policy and made specific determinations as to the implementation of the LPIF. Taking into consideration a range of factors, including the economic downturn, the increasing consolidation within the broadcasting industry, and the Commission’s intent to impose harmonized local programming levels on conventional television stations in metropolitan and non-metropolitan markets, the Commission concluded in Broadcasting Regulatory Policy 2009-406 that, for the 2009-2010 broadcast year:

11.  In regard to the increase in the required contribution by BDUs, the Commission notes that, in Broadcasting Regulatory Policies 2009-543 and 2011-455, it announced that it had made an amendment in this regard to the Broadcasting Distribution Regulations and other Commission regulations.

12.  In Broadcasting Regulatory Policy 2009-406, the Commission also established the specific LPIF allocation formula:

13.  Broadcasting Regulatory Policy 2009-406 also set out those expenses that would be considered eligible local programming expenses.

14.  As set out in Broadcasting Regulatory PolicyCRTC 2010-167, broadcasters submitted that the temporary revised terms and conditions had contributed to maintaining the operation of small market stations that might otherwise have ceased operation. The Commission concluded that, amongst other things, the aforementioned determinations, set out in Broadcasting Regulatory Policies 2009-406 and 2009-406-1, including the suspension of the requirement for incremental spending on local programming, would remain in effect until it had completed its comprehensive review of the LPIF in the third year of its operation.

Eligibility criteria for LPIF funding

15.  As part of its determinations set out in Broadcasting Regulatory Policy 2009-406, the Commission emphasized that all local television stations, in particular, those accessing LPIF funding, should be required to broadcast minimum levels of local programming in the communities they serve. The Commission therefore established harmonized levels of local programming for both metropolitan and non-metropolitan, English- and French-language markets.

16.  In English-language non-metropolitan markets, the Commission determined that local television stations would be required to broadcast, in instances where local programming levels had been harmonized, a minimum of seven hours of local programming per broadcast week.

17.  In French-language non-metropolitan markets, the Commission determined that local television stations would be required to broadcast, in instances where the local programming levels had been harmonized, a minimum of five hours of local programming per broadcast week.

18.  For both markets, in instances where the local programming levels had not been harmonized (i.e., for broadcasters that did not have renewal applications before the Commission at the April 2009 public hearing), local television stations would be required to maintain their existing local programming levels, as set out in their most recent licence renewal decisions, until such time as their broadcasting licences were renewed and the harmonized levels applied.

19.  Finally, stations that operated regional services and were permitted to count regional programming towards meeting their local programming commitments or obligations would be allowed to continue to do so for purposes of meeting the requirements relating to accessing the LPIF.

Financial state of the television sector

20.  As noted earlier, the Commission’s data showed at the time that private television broadcaster spending on local programming had been flat since 1998, whereas local program spending in non-metropolitan markets had actually declined since the same year. The situation was even more problematic in the French-language markets. The Commission’s economic analysis on spending by private broadcasters on local programming in markets outside metropolitan areas revealed that English-language stations in this group spent 38% more on local programming than did French-language stations, on a per station, per capita basis.

21.  As reported in Broadcasting Public Notice 2008-100, in regard to profitability, from 1998 to 2007, the profit before interest and taxes (PBIT) margins for the private OTA television sector had also decreased, from 11.1% to 5.2%. In metropolitan markets, those margins decreased from 15.9% to 9.2%, whereas in non-metropolitan markets, they decreased from 3.2% to -4.0%.

22.  The private OTA television sector experienced a further decline in PBIT margin over the two years immediately prior to the establishment of the LPIF. Specifically, the PBIT margin for that sector in the 2007-2008 broadcast year was 0.4%, whereas in the 2008-2009 broadcast year it was -5.9%. In regard to non-metropolitan markets only, the PBIT margin for the OTA television sector was -4.2% for the 2007-2008 broadcast year, and -15.8% for the 2008-2009 broadcast year. For the 2009-2010 broadcast year, OTA television stations reported a positive PBIT margin of 0.5%, with non-metropolitan markets reporting 0.4%.

23.  The following table illustrates PBIT as a percentage of total revenue for the 2007-2008 through 2009-2010 broadcast years.

Profit before interest and taxes, in dollars and as a percentage of total revenues, for non-metropolitan and metropolitan markets, for the 2007-2008 through 2009-2010 broadcast years

 

Broadcast year
2007-2008

Broadcast year
2008-2009

Broadcast year
2009-2010

Non-metropolitan markets

$-39,674

-4.2%

$-107,113

-15.8%

$2,975

0.4%

Metropolitan markets

$47,721

4.0%

$-9,515

-0.7%

$8,496

0.6%

Total

$8,047

0.4%

$-116,628

-5.9%

$11,471

0.5%

Issues

24.  The Commission announces that it will conduct a public hearing to review its policies and regulations relating to the LPIF and, in particular, to examine the performance of the Fund and its effectiveness in supporting the production of local programming. Although the Commission will examine a number of issues as part of this review, for the purposes of eliciting input from interested persons, it has identified the following as key considerations:

25.  Interested persons may also wish to provide comments on matters other than those identified above in order to assist the Commission in its review of the Fund.

Evaluation of the LPIF objectives and performance of the LPIF recipient stations

26.  The Commission’s review of the LPIF will take into consideration the Fund’s stated objectives, as well as the interests of Canadians in receiving high quality local programming and the various challenges faced by the conventional television sector.

LPIF objectives

27.  The LPIF’s stated objectives are as follows:

28.  In regard to the objectives set out above, the Commission seeks comments on the following questions:

Indicators of success

29.  As noted earlier, the indicators of success identified by the Commission are the following:

30.  In regard to these indicators of success, the Commission will also examine, as part of its review of the LPIF, the reports submitted by LPIF recipient television stations for the 2009-2010 and 2010-2011 broadcast years in order to assess how LPIF funding was used to make measurable improvements to the on-screen local programming available to audiences in their local markets. These reports will be added to the public record of this proceeding as they become available.

31.  A preliminary review of 76 recipient stations’ reports from the first year of the Fund’s operation indicates that much of the funding has been directed to local news and current events. These reports also indicate that the Fund allowed certain stations to maintain news operations or regional bureaus that otherwise might have shut down. Approximately 40% of reporting stations added further hours of local news programming, for example, by creating additional newscasts on weekends or holidays, or by lengthening weeknight newscasts. Approximately 30% of the recipients used LPIF funding to hire additional journalism staff, in particular meteorologists and sports reporters, whereas approximately 15% reported spending some of their LPIF funding on travel, overtime and equipment, to improve the quality and reach of existing coverage.

32.  Nearly half of reporting stations also indicated that they used LPIF funding to help underwrite one-time or short-term coverage of community civic, sporting and cultural events. Approximately 35% of reporting stations reported using LPIF funding to begin or expand the broadcast of locally focused magazine series, documentaries and reality television, whereas slightly fewer than 25% of reporting stations reported using LPIF funding to purchase at least some of their programming from local independent producers.

33.  In regard to the above, the Commission seeks comments on the following question:

Incremental local programming as a condition of receiving LPIF funding

34.  As discussed above, the LPIF was originally intended to support incremental expenditures on local programming so as to improve both the quality and quantity of this programming in those non-metropolitan markets that had experienced the greatest declines in such expenditures. The Commission also noted above that the incremental programming spending requirement was subsequently suspended. As a result, LPIF funding has been used primarily to sustain existing local programming expenditures and local television stations.

35.  As part of its review of the LPIF, the Commission will take into consideration updated financial information from the 2009-2010 and 2010-2011 broadcast years. The Commission receives such information as part of the annual returns submitted by licensees by 30 November following the end of each broadcast year. Accordingly, financial information from the 2010-2011 broadcast year will be added to the record of this proceeding as it becomes available.

36.  The Commission has reviewed local programming spending prior to the establishment of the LPIF through the examination of the financial data for non-metropolitan television markets for the 2007-2008 and 2008-2009 broadcast years. It notes that during that two year period, there was a 1.4% increase in overall spending on local programming by stations in those markets. However, the Commission also notes that during this period, English-language stations saw a 1.7% decrease in spending, whereas French-language stations saw a 6.6% increase in spending.

37.  With the introduction of the LPIF for the 2009-2010 broadcast year,[3] local programming expenditures for LPIF eligible stations saw an overall increase of 9.8% in 2009-2010, from the 2007-2008 base broadcast year. In regard to the language of station programming, expenditures by English-language stations on local programming increased by 1.3%, whereas expenditures by French-language stations on local programming increased by 24.2%. The following table illustrates this change.

English- and French-language Television Stations Eligible for Local Programming Improvement Fund Funding – Local Programming Expenses ($)

Broadcast year

2006-2007

2007-2008

2008-2009

2009-2010

English

124,047,374

127,093,737

124,880,581

128,714,684

French

74,600,145

74,956,711

79,919,006

93,065,693

Total

198,647,519

202,050,448

204,799,587

221,780,377

38.  In regard to the above, the Commission seeks comments on the following questions:

39.  Additionally, in regard to the above, the Commission seeks comments on the following questions:

LPIF eligibility and the LPIF allocation formula

Eligibility of stations for LPIF funding

40.  In order to be eligible to receive LPIF funding, a station must:

41.  In regard to the above, the Commission seeks comments on the following:

Vertical integration

42.  Since the establishment of the LPIF, the television industry has undergone significant consolidation whereby large media companies are now both contributors to and recipients of the LPIF. In this regard, the Commission seeks comments on the following question:

LPIF allocation formula

43.  As noted above, the LPIF allocation formula seeks to support and contribute to the fulfillment of the Fund’s objectives through the following specific funding allocations:

44.  The following table sets out the Fund’s distribution in different regions across Canada for each of its first two years of operation:

Local Programming Improvement Fund distribution by region

 

Broadcast year
2009- 2010

Broadcast year
2010-2011

Change between broadcast years (%)

Atlantic

$18,877,635

18.9%

$20,982,054

19.8%

11.1

Quebec

$21,195,970

21.2%

$22,751,314

21.4%

7.3

Ontario

$24,769,338

24.8%

$26,010,604

24.5%

5.0

Prairies

$23,812,815

23.8%

$24,224,065

22.8%

1.7

British Columbia and Territories

$11,382,770

11.4%

$12,131,788

11.4%

6.6

Canada

$100,038,528

100%

$106,099,825

100%

6.1

Note: Minor variances are due to rounding.

45.  The following table sets out the Fund’s distribution by language of station programming for each of the first two years of operation:

Local Programming Improvement Fund distribution by language of station programming

 

Broadcast year
2009- 2010

Broadcast year
2010-2011

Change between broadcast years (%)

French

$32,712,821

32.7%

$35,649,256

33.6%

9.0

English

$67,325,707

67.3%

$70,450,569

66.4%

4.6

Total

$100,038,528

100%

$106,099,825

100%

6.1

46.  In regard to the above, the Commission seeks comments on the following questions:

BDU contributions to the LPIF

47.  Licensed BDUs were originally required to contribute 1% of their gross revenues derived from broadcasting activities in the previous broadcast year to the LPIF. Due to the strong financial performance of Canadian BDUs, the Commission determined that these BDUs should be required to further support the production of local Canadian programming beyond the existing 5% level. This required contribution was later increased to 1.5%, effective the 2009-2010 broadcast year.

48.  In regard to BDU contributions to the LPIF, the Commission seeks comments on the following questions:

Should the LPIF be maintained, modified, or discontinued?

49.  In Broadcasting Public Notice 2008-100, the Commission stated that following its comprehensive review of the LPIF, it would determine whether the Fund should be maintained, modified or discontinued.

50.  Accordingly, and in light of the issues identified above, the Commission also seeks comments on whether there continues to be a need for the LPIF. Comments should include evidence of the on-going importance or the potential value of the availability of such funding. Alternatively, interested persons may wish to provide evidence that such funding is no longer necessary or that it could be better directed in other ways.

Supplementary information

51.  For the convenience of interested persons, the Commission presents in the table below information relating to contributions by major BDUs to the LPIF and amounts received by major broadcasters, for the 2009-2010 broadcast year.

Contributions by major broadcasting distribution undertakings (BDUs) to the Local Programming Improvement Fund (LPIF) and amounts received by major broadcasters – 2009-2010 broadcast year

Major BDUs/broadcasters

Payments made to the LPIF ($) 

Funding received from the LPIF ($)

Bell Canada (including CTV)

22,546,735

23,574,487

Canadian Broadcasting Corporation English

15,023,319

Canadian Broadcasting Corporation French

17,716,514

Cogeco Cable Inc.

7,836,922

Quebecor Media Inc.

12,447,342

6,119,743

V Interactions inc.

2,141,879

Rogers Communications Inc.

25,267,146

1,127,212

Shaw Communications Inc. (cable)

18,126,000

Shaw Communications Inc. (satellite)

10,272,458

Shaw Communications Inc. (television)

8,673,901

Total (major BDUs/broadcasters)

96,496,603

74,377,055

Other BDUs/broadcasters

4,179,628

25,661,473

Total (all BDUs/broadcasters)

100,676,231

100,038,528

Source: Aggregate Annual Returns 2009-2010


52.  In addition, information relating to LPIF recipient television stations, as well as LPIF financial statements, for the 2009-2010 broadcast year, are available by clicking on the following links:

53.  The Commission invites written comments and proposals, along with supporting evidence, from interested persons on the matters for consideration identified above as well as on other issues that relate to the Commission’s policies and regulations relating to the LPIF. The deadline for filing comments, proposals and supporting evidence is 15 February 2012.

Procedure

The new Canadian Radio-television and Telecommunications Commission Rules of Practice and Procedure, SOR/2010-277 (the Rules of Procedure), set out, among other things, the rules for content, format, filing and service of interventions, the procedure for filing confidential information and requesting its disclosure, and the conduct of the public hearing. Accordingly, the procedure set out below must be read in conjunction with the Rules of Procedure and its accompanying documents, which can be found on the Commission’s website under “CRTC Rules of Practice and Procedure.”

The Commission invites interventions that address the issues and questions set out above. The deadline for filing interventions is 15 February 2012.

In accordance with the Rules of Procedure, a document must be filed with, not merely sent to, the Commission by 5 p.m. Vancouver time (8 p.m. Ottawa time) on the date it is due. The Commission takes no responsibility for postal delays and will not notify a party whose submission is received after the deadline date. Late submissions will not be considered by the Commission and will not be made part of the public file.

Interveners are permitted to coordinate, organize and file, in a single submission, interventions of other interested persons who share their position but who do not wish to appear at the hearing as a “Joint Supporting Intervention.” More information on how to do so and a template for the covering letter to be filed by the parties can be found in Changes to certain practices for filing interventions – Expansion of filing practices to include the filing of joint supporting comments for broadcasting policy proceedings, Broadcasting Information Bulletin CRTC 2010-28-1, 10 December 2010.

Following the public hearing, parties may have an opportunity to file brief final written comments.

Parties wishing to appear at the public hearing, either in person or by video conference from one of the Commission’s regional offices, and parties requiring communications support must state their request on the first page of their intervention. Parties requesting appearance must provide clear reasons, on the first page of their intervention, as to why the written intervention is not sufficient and why an appearance is necessary. Only those parties whose requests to appear have been granted will be contacted by the Commission and invited to appear at the public hearing. While interventions will not otherwise be acknowledged, they will be considered by the Commission and will form part of the public record of the proceeding, provided the procedures set out in the Rules of Procedure and this notice have been followed.

Persons requiring communications support such as assistance listening devices and sign language interpretation are requested to inform the Commission at least twenty (20) days before the commencement of the public hearing so that the necessary arrangements can be made.

Submissions must be filed by sending them to the Secretary General of the Commission by only one of the following means:

by using the
[Intervention/comment/answer form]

or

by mail to
CRTC, Ottawa, Ontario K1A 0N2

or

by fax at
819-994-0218

Submissions longer than five pages should include a summary.

Each paragraph of the submission should be numbered. In addition, where the intervention is filed by electronic means, the line ***End of document*** should be entered following the last paragraph of the document, as an indication that the document has not been altered during electronic transmission.

Important notice

All information that parties provide as part of this public process, except information designated confidential, whether sent by postal mail, facsimile, e-mail or through the Commission’s website at www.crtc.gc.ca, becomes part of a publicly accessible file and will be posted on the Commission’s website. This information includes personal information, such as full names, e-mail addresses, postal/street addresses, telephone and facsimile numbers, and any other personal information parties provide.

The personal information that parties provide will be used and may be disclosed for the purpose for which the information was obtained or compiled by the Commission, or for a use consistent with that purpose.

Documents received electronically or otherwise will be put on the Commission’s website in their entirety exactly as received, including any personal information contained therein, in the official language and format in which they are received. Documents not received electronically will be available in PDF format.

The information that parties provide to the Commission as part of this public process is entered into an unsearchable database dedicated to this specific public process. This database is accessible only from the web page of this particular public process. As a result, a general search of the Commission’s website with the help of either its own search engine or a third-party search engine will not provide access to the information that was provided as part of this public process.

The Commission encourages parties and interested persons to monitor the record of the proceeding, available on the Commission’s website, for additional information that they may find useful when preparing their submissions.

Examination of documents

A list of all interventions will also be available on the Commission’s website. The list is accessible by selecting “View all proceedings open for comment” from the “Public Proceedings” section of the Commission’s website and clicking on the “Interventions/Answers” link associated with this notice.

The public may examine public interventions and related documents at the following Commission offices during normal business hours.

Location of Commission offices

Toll-free telephone: 1-877-249-2782
Toll-free TDD: 1-877-909-2782

Les Terrasses de la Chaudière
Central Building
1 Promenade du Portage, Room 206
Gatineau, Quebec
J8X 4B1
Tel.: 819-997-2429
Fax: 819-994-0218

Regional offices

Metropolitan Place
99 Wyse Road
Suite 1410
Dartmouth, Nova Scotia
B3A 4S5
Tel.: 902-426-7997
Fax: 902-426-2721

205 Viger Avenue West
Suite 504
Montréal, Quebec
H2Z 1G2
Tel.: 514-283-6607

55 St. Clair Avenue East
Suite 624
Toronto, Ontario
M4T 1M2
Tel.: 416-952-9096

360 Main Street
Suite 970
Winnipeg, Manitoba
R3C 3Z3
Tel.: 204-983-6306
Fax: 204-983-6317

2220 – 12th Avenue
Suite 620
Regina, Saskatchewan
S4P 0M8
Tel.: 306-780-3422

100 – 4th Avenue South-West
Suite 403
Calgary, Alberta
T2P 3N2
Tel.: 403-292-6660
Fax: 403-292-6686

858 Beatty Street
Suite 290
Vancouver, British Columbia
V6B 1C1
Tel.: 604-666-2111
Fax: 604-666-8322

Secretary General

Related documents

Footnotes

[1] In Broadcasting Public Notice 2008-100, as reiterated in Broadcasting Regulatory Policy 2009-406, “non-metropolitan markets” are defined as those markets of which the population with a knowledge of English or French is less than one million.

[2] Since individual news stories are not tracked and since, as discussed below, the LPIF’s original incremental local programming spending requirement was suspended, the Commission will assess these indicators and criteria through the measurement of the overall amount of local programming offered by eligible stations. 

[3] The second year of the LPIF program was completed on 31 August 2011. Broadcasters were obligated to file with their annual returns information on local programming expenditures by 30 November 2011. The private conventional television sector’s financial performance for the 2010-2011 broadcast year will be added to the public file of this proceeding once this information has been received and compiled by the Commission.

Date modified: