After rejecting the proposal on two previous decisions, the CRTC has succumbed to intense political lobbying and is now recommending a form of fee-for-carriage (FFC) tax that could cost Canadian consumers hundreds of millions of dollars annually.

The CRTC Broadcasting order , announced yesterday, means that satellite and cable companies will be forced to negotiate a fee with broadcasters for the mandatory carriage of local television signals that are already available for free over the air.

In hearings last April, the CRTC released figures which suggested that cable and satellite companies would be required to pay conventional broadcasters over $352 million annually under the original fee-for-carriage proposals.

The actual amount from these revised proposals, however, is unknown since it will be subject to negotiations between the broadcasters and broadcast distributors.

Not surprisingly, reaction to the Broadcasting Order from the big television broadcasters who stand to gain hundreds of millions of dollars annually under the new policy was effusive.

"We're very happy with that," said Paul Sparkes, CTVglobemedia's executive vice-president of corporate affairs

Reaction to the Broadcasting Order from cable and satellite company's was quick and negative.

"The CRTC today has essentially placed a tax on all cable and satellite customers," said Phil Lind, Vice Chairman, Rogers Communications Inc. (RCI).

"It is unfortunate that TV networks that are already receiving millions in consumer subsidies for the very local programming they continue to cut are allowed once again to dip their hands in the pockets of Canadian consumers," said Mirko Bibic, Bell's Senior Vice President of Regulatory and Government Affairs. "There is no public policy merit in imposing yet another regulatory tax on consumers - especially when this is money broadcasters will simply send south of the border. We intend to participate in the Federal Court of Appeal hearing. We do not believe the CRTC has the jurisdiction to impose this TV tax."

Before the new fee-for-carriage tax regime can be implemented, the CRTC must first consult with the Federal Court of Appeal to determine if it has the jurisdiction to impose such changes.

Read the complete broadcasting order below and then discuss in Digital Home's Canadian Television Industry forum .
Broadcasting Order CRTC 2010-168

Route reference :  2009-411
Ottawa, 22 March 2010
Reference to the Federal Court of Appeal – Commission’s jurisdiction under the Broadcasting Actto implement a negotiated solution for the compensation for the fair value of private local conventional television signals
InA group-based approach to the licensing of private television services, Broadcasting Regulatory Policy CRTC  2010-167 , 22 March 2010, the Commission set out its determinations with respect to a group-based approach to the licensing of private local television services, including the determination that a value for program distribution regime is necessary to ensure the fulfillment of the policy objectives set out in section 3 of theBroadcasting Act(the Act). However, the Commission did not determine the legal issue as to whether it has the jurisdiction under the Act to implement a negotiated solution for compensation for the fair value of private local conventional television signals. Consequently, the Commission determined that it would refer the matter to the Federal Court of Appeal. Accordingly, in this order, the Commission refers this question to the Court for hearing and determination and requests disposition of the matter on an expedited basis.
Introduction
1.Section 3(2) of the Broadcasting Act (the Act) states that the Canadian broadcasting system constitutes a single system that is to be regulated by a single independent public authority, the Canadian Radio-television and Telecommunications Commission. Section 5(1) of the Act requires the Commission to "regulate and supervise all aspects of the Canadian broadcasting system with a view to implementing the broadcasting policy set out in subsection 3(1) of the Act."
2.The Commission is given broad powers under the Act to fulfill its mandate, including the power to issue broadcasting licences on such conditions as it deems appropriate for the implementation of the broadcasting policy set out in section 3(1) of the Act and to require broadcasting distribution undertakings (BDUs) to carry, on such terms and conditions as it deems appropriate, programming services specified by the Commission. The Commission is also given the power by section 10 of the Act to make regulations respecting a number of subjects including: the carriage of any foreign or other programming services by distribution undertakings; the resolution, by way of mediation or otherwise, of any disputes arising between programming undertakings and distribution undertakings concerning the carriage of programming originated by the programming undertaking; and such other matters as it deems necessary for the furtherance of its objects.
3.In fulfilling this mandate, the Commission has created a comprehensive regulatory regime to ensure that each part of the broadcasting industry contributes to the fulfillment of the policy objectives in the Act. For example, the Commission has:
  • imposed a series of obligations on programming undertakings, including quotas for the exhibition of, or expenditure on, Canadian programming;
  • constructed rules regarding what programming services BDUs are required or permitted to distribute, including a requirement that certain BDUs distribute local television stations and other services as part of the basic package provided to all customers (i.e., mandatory carriage);
  • mandated wholesale fees for the distribution of particular specialty services, with a rate that is, in some cases, set by the Commission or, in other cases, negotiated between the parties; and
4.The Commission applies these existing regulatory obligations to a different extent in different circumstances in a manner that is fluid and continues to adapt to changing circumstances. For example, the Commission has permitted parties, by conditions of licence, to negotiate alternative solutions to the program deletion obligations, which have been incorporated into the regulatory regime.
The Proceeding
5.In Policy proceeding on a group-based approach to the licensing of television services and on certain issues relating to conventional television, Broadcasting Notice of Consultation CRTC  2009-411 , 6 July 2009 (as revised by Broadcasting Notice of Consultation CRTC  2009-411-3 , 11 August 2009), the Commission initiated a proceeding to examine a group-based approach to the licensing of television services, including an examination of whether or not a negotiated solution for the compensation for the fair value of local conventional television signals is appropriate. In the course of the proceeding, the Commission received 289 comments addressing these issues. The Commission also received approximately 12,000 comments as part of a campaign organized by Rogers Communications Inc.
6.Among the issues raised during the proceeding was whether the Commission has the jurisdiction under the Actto implement a negotiated solution for compensation for the fair value of private local conventional television signals. BDUs presented a legal opinion that such a regime would establish a new copyright in the signals of private local television stations and is therefore ultra viresthe powers of the Commission. Local television stations presented legal opinions that such a regime falls within the Commission’s jurisdiction under the Act to supervise and regulate the broadcasting system.
7.In A group-based approach to the licensing of private television services,Broadcasting Regulatory Policy CRTC  2010-167 , 22 March 2010 (Broadcasting Regulatory Policy  2010-167 ), the Commission set out its determinations regarding the proceeding on a group-based approach to private local television licensees, including the determination that a negotiated solution for the compensation for the fair value of private local conventional television programming services is necessary for the fulfillment of the policy objectives set out in section 3 of the Act. The Commission also provided the following outline of how such a regime would function:
1. Licensees of private local television stations would choose whether i) they will negotiate with BDUs for the value of the distribution of their programming services, failing which they will be able to require deletion of the programming they own, or for which they have the exhibition rights, from all signals distributed in their market, or ii) they will continue to benefit from existing regulatory protections.
2. Licensees of private local television stations would make their choice by a date set by the Commission, and this choice would be valid for a fixed term of three years.
3. If a licensee of a private local television station chose option i):
a) It would forego all existing regulatory protections related to the distribution of local television signals by BDUs, whether imposed by regulation or by condition of licence, including mandatory distribution and priority channel placement on analog basic, and simultaneous substitution.
b) BDUs would be required, at the request of private local television stations, to delete any program owned by the licensee of that local television station or for which it has acquired exclusive contractual exhibition rights.
c) Deletions would be exercised against the signal of any programming undertaking distributed by the BDU, whether foreign or domestic, affiliated or not, including that of the private local television station making the request.
d) It could negotiate with a BDU for a fair value in exchange for the distribution of its programming service in lieu of the deletion rights set out in b) and c). This compensation could be monetary, non-monetary (e.g., simultaneous or non-simultaneous substitution, carriage arrangements, marketing and promotion), or both, and could be negotiated on an individual station basis or as part of a broader negotiation with entire ownership groups.
e) Parties to the negotiation would be given a fixed period after the date on which the licensee of a private local television station chose option i) to conclude negotiations, during which the existing regulatory protections would continue to apply. This period could be shortened or extended by agreement between the parties.
f) The Commission would minimize its involvement in the terms and conditions of the resulting agreements, intervening only in cases where there is evidence parties are not negotiating in good faith, and would consider acting as arbitrator only where both parties make a request.
4. If the licensee of a private local television station chose option ii), all regulatory protections for private local television stations in force at the time the choice is made, and as amended during the term in which that choice is valid, would remain in force. These would include, where provided by regulation or by condition of licence: mandatory carriage, priority channel placement on analog basic, program deletion, simultaneous or non-simultaneous substitution, and any payments to individual stations or funds approved by the Commission in lieu of these obligations, including payments for carriage of distant signals as provided for in Broadcasting Public Notice  2008-100 .
8.In Broadcasting Regulatory Policy  2010-167 , the Commission did not determine the legal issue as to whether or not it has the jurisdiction under the Act to implement such a regime. Rather, the Commission stated that it would refer the matter to the Federal Court of Appeal for determination. Consequently, the decision to implement the regime will only be concluded after the Court has ruled on this reference.
9.With respect to its determination to refer this matter to the Federal Court of Appeal, the Commission stated the following in its regulatory policy:
There is, however, a significant potential impediment to the implementation by the Commission of this market-based resolution. In response to Broadcasting Notice of Consultation  2009-411 , the Commission was presented with two legal opinions, both worthy of consideration. One submitted that the Commission had the requisite authority to introduce a regime of broadcast regulation that would have the effect of requiring appropriate negotiation, such as those described above, between broadcasters and BDUs; the other took the position that BDUs have a continuing right to disseminate the broadcaster’s over-the-air signal without negotiation or remuneration by virtue of the provisions of the Copyright Act.
While the Commission has found that it is necessary to provide the licensees of private local television stations with the right to negotiate a fair value for the distribution of their programming services by BDUs, it recognizes that there is a valid dispute between parties over the Commission’s legal authority to impose such a regime. Therefore, given the importance of the question to the ability of the Commission to ensure that the objectives of the Act are met, and the continuing need for certainty in dealing with the approaching group licensing renewals, the Commission has decided to refer the question of its jurisdiction to the Federal Court of Appeal (the Court). The Commission will request disposition of the issue on an expedited basis.
Order
10.Pursuant to section 18.3 and section 28(2) of the Federal Courts Act, the Commission therefore orders that the following question of law be referred to the Federal Court of Appeal for hearing and determination and requests disposition of the matter on an expedited basis:
Is the Commission empowered, pursuant to its mandate under theBroadcasting Act, to establish a regime to enable private local television stations to choose to negotiate with broadcasting distribution undertakings a fair value in exchange for the distribution of the programming services broadcast by those local television stations?
Procedure
11.The Commission expects to receive directions on procedure from the Federal Court of Appeal. The Court’s directions on procedure will be available at the Court, and copies can be obtained from the Commission on request.