Appendix C 27 April 2011 Bell Canada - BNC 2010-783 - Comments Page 1 of 28
CRTC Policy on Exclusive Program Rights
Peter S. Grant, Grant Buchanan and Bram Abramson
McCarthy Tétrault LLP
April 2011
Table of Contents
I. INTRODUCTION...... 2
A. Context ...... 2 B. Programs and Platforms...... 3
II. PROGRAM EXCLUSIVITY ...... 4
A. Rivalry Between Programming Services ...... 4 B. Canadian Market Integrity ...... 5
III. PLATFORM EXCLUSIVITY ...... 10
A. Material Impact on Competition...... 10 B. Access to Content ...... 15
Appendix C 27 April 2011 Bell Canada - BNC 2010-783 - Comments Page 2 of 28 - 2 -
CRTC Policy on Exclusive Program Rights
I. INTRODUCTION
1. This memorandum reviews the policies of the CRTC in regard to exclusive rights in audiovisual programming. These policies have focused largely on the environment built through regulated broadcasting distribution undertakings (BDUs). However, they relate in a number of ways to the broader, multi-platform environment through which audiovisual programming is increasingly distributed. This review examines program exclusivity on licensed and unlicensed programming undertakings, as well as platform exclusivity for such programming undertakings on licensed and unlicensed distribution undertakings.
A. Context
2. Over a number of years, the Commission has determined that concerns that it may have regarding vertical integration are best handled through the undue preference provisions found in various sets of regulations and licence conditions. More recently, the Commission has revisited its approach to reviewing exclusivity in three new contexts.
3. First, the Commission has applied an undue preference condition to unlicensed mobile and Internet platforms1 in order to address issues involving vertically-integrated distributors with ownership interests in content providers.2 Mobile and broadband have taken on increased prominence as platforms through which Canadian consumers obtain audiovisual content.3 However, the Commission has not yet provided guidance as to the role of the undue preference condition with respect to rights for the mobile and broadband platforms.
4. Second, the Commission has effectively created a provisional prohibition on distribution undertakings integrated with programming undertakings. This temporary moratorium prevents certain such vertically-integrated entities from entering into exclusive arrangements that would prevent them making available to their competitors, on commercial terms, mobile and broadband rights to television programming from their conventional and specialty services.4
5. Third, the Commission has convened a review of the regulatory framework relating to vertical integration. That review was launched in response to recent increases in vertical integration within the Canadian broadcasting industry. Among the Commission’s goals for
1 Amendments to the Exemption order for new media broadcasting undertakings (Appendix A to Public Notice CRTC 1999-197); Revocation of the Exemption order for mobile television broadcasting undertakings, Broadcasting Regulatory Policy CRTC 2009-660, 22 October 2009. 2 Review of broadcasting in new media, Broadcasting Regulatory Policy CRTC 2009-329, 4 June 2009, paragraph 59. 3 The Commission has acknowledged this regularly: for instance, ibid., paragraph 11. 4 Change in effective control of CTVglobemedia Inc.’s licensed broadcasting subsidiaries, Broadcasting Decision CRTC 2011-163, 7 March 2011, paragraph 83 (regarding BCE Inc.; see also Commission’s expectation regarding other vertically-integrated entities); Change in the effective control of Canwest Global Communications Corp.’s licensed broadcasting subsidiaries, Broadcasting Decision CRTC 2010- 782, 22 October 2010, paragraph 89 (regarding Shaw Communications Inc.). Appendix C 27 April 2011 Bell Canada - BNC 2010-783 - Comments Page 3 of 28 - 3 -
that review is to put in place norms for commercial interaction that confirm the ability of broadcast market participants to negotiate fairly for rights.5
B. Programs and Platforms
6. Our review of the Commission’s policies in regard to exclusive rights in audiovisual programming distinguishes program exclusivity from platform exclusivity.
7. Program exclusivity refers to exclusivity in content rights held by a programming undertaking or other property, such as a website, that is typically available to be accessed through multiple distribution undertakings or other platforms. For example, CTV, a programming undertaking that can be accessed through virtually all regulated broadcasting distribution undertakings (BDUs), holds exclusive rights in Grey’s Anatomy.
8. As it is basic to the rivalry between programming services, program exclusivity has not often been contested before the Commission. However, in limited circumstances—such as non- Canadian “eligible list” services and transactional services—the Commission has established a rule against program exclusivity, which it has applied on a case-by-case basis. Applying a rule against program exclusivity in limited circumstances has assisted in maintaining a separate Canadian rights market.
9. Platform exclusivity refers to exclusivity in content rights held by a distribution undertaking or other property, such as a mobile or broadband provider, that can be accessed only by subscribers to that particular platform. For example, many Canadian distribution undertakings are integrated with video-on-demand services that can be accessed only by subscribers to that BDU. Platform exclusivity would involve that VOD undertaking securing exclusive rights in a program, such as a blockbuster film. Non-subscribers would have to become a subscriber to that particular BDU in order to gain access to the film.
10. Policy concerns relating to exclusivity have typically been framed around platform exclusivity. Because BDUs are available to virtually all Canadians, and because the Commission policies have required that conventional, specialty and pay programming services be made available to all BDUs, platform exclusivity has not been as frequent a policy concern as it might otherwise have been. The Commission has rarely prohibited platform exclusivity per se, but has found it to constitute an undue preference where it hindered a competing platform’s ability to enter or compete effectively in the market.
11. As consumers increasingly access content on multiple platforms using multiple devices, however, platform exclusivity has received renewed attention.
5 Review of the regulatory framework relating to vertical integration, Broadcasting Notice of Consultation CRTC 2010-783, 22 October 2010, paragraphs 7 and 9. Appendix C 27 April 2011 Bell Canada - BNC 2010-783 - Comments Page 4 of 28 - 4 -
II. PROGRAM EXCLUSIVITY
A. Rivalry Between Programming Services
12. Exclusive content purchases by Canadian conventional and, later, pay and specialty programming services, have been a constant in audiovisual media markets since the inception of over-the-air broadcasting. Linear programming services differentiate themselves from each other on the basis of content that is acquired exclusively. Virtually no program aired by licensed Canadian conventional, specialty and pay services is acquired by the licensee on a non-exclusive basis.
13. Program exclusivity of this type is fundamental to the ordinary commercial dealings between programming services and rightsholders. For instance, a draft Terms of Trade Agreement filed with the Commission on 3 April 2011 by the Canadian Media Production Association, on behalf of independent producers, and by Astral Media Inc., Bell Media Inc., Corus Entertainment Inc., Rogers Broadcasting Limited, and Shaw Media Inc, on behalf of all of their respective CRTC-licensed programming services, provided for these programming services to acquire “exclusive, Canadian rights” on CRTC-licensed and other platforms.
14. Because program exclusivity of this type is routine among programming services accessed through the BDU platform, it has not often been contested before the Commission. However, in 2006, when the Commission considered applications for English-language pay television services, two applicants asked the Commission to find that incumbents’ exclusive arrangements for non-Canadian programming conferred an undue disadvantage on the new pay television entrant.6 In rejecting their requests, the Commission considered
that the current approach of allowing pay television services to obtain exclusive rights to programming will provide an opportunity for pay television services to diversify the programming that they obtain. Having considered the submissions made by the applicants and interveners, the Commission is not convinced that it would be appropriate to intervene in private contractual relations between the pay television licensees and the distributors of programming rights in these circumstances. The Commission further considers that an unregulated market for the acquisition of non-Canadian programming is a more effective approach for introducing rivalry to the pay television industry. For these reasons, the Commission will not take action to limit pay television licensees in their ability to obtain exclusive rights to programming, as proposed by Spotlight Ltd. and Allarco.7
15. The Commission thus encourages rivalry between licensed linear programming services, by allowing them to participate in an unregulated market for exclusivity in both Canadian and non-Canadian programming. Conventional, specialty and pay services, which have no prohibition against exclusive programming acquisition, are responsible for over 94% of the
6 Applications for new pay television services, Broadcasting Decision CRTC 2006-193, 18 May 2006, paragraph 18. 7 Ibid., paragraph 83 (emphasis added). See also Refusal to open up the French-language general interest pay television services genre to competition, Broadcasting Regulatory Policy CRTC 2010-861, 19 November 2010, where, as part of its application to open up that genre to competition, TVA had requested that exclusive content distribution arrangements between genre-related services and content distributors be prohibited for a three year transitional period. Appendix C 27 April 2011 Bell Canada - BNC 2010-783 - Comments Page 5 of 28 - 5 -
revenues of licensed Canadian programming undertakings.8 Similarly, because more than 90% of Canadian households subscribe to a BDU,9 it has not generally been possible to combine this form of program exclusivity with platform exclusivity. As a result, it has not been necessary to consider, as has been done in other jurisdictions, the issue of balancing rivalry between programming undertakings with broad access to culturally-significant programming.10
B. Canadian Market Integrity
16. The Broadcasting Act states that “the Canadian broadcasting system shall be effectively … controlled by Canadians.”11 In fostering an unregulated market for program exclusivity among licensed linear Canadian services, the Commission has taken care to maintain the integrity of a distinct Canadian market for such rights. Thus, the Commission’s policy of simultaneous substitution for BDU retransmission of conventional (over-the-air) services has supported the Commission’s approach of allowing broadcasters to buy exclusive rights by limiting parallel imports and, thus, preserving the economic value of those rights. To a lesser extent, the Commission’s policy of genre exclusivity for specialty services has also supported this approach. By reducing the number of programming services likely to compete directly for programming, a significant number of distinct Canadian services has been able to flourish notwithstanding the ability of any single owner of these services to exclude the others from exhibiting particular programming.
17. In certain instances, the Commission has looked beyond policies like simultaneous substitution and genre exclusivity in order to maintain a distinct Canadian rights market. This has particularly been the case in sectors where programming services have close ties to the U.S. market. In these sectors, protecting the integrity of a distinct Canadian rights market has required a different approach to exclusivity. In that regard, the Commission has adopted rules against program exclusivity for non-Canadian (eligible list) services, pay-per- view services, and video-on-demand services.
Lists of eligible satellite services
18. For many years the Commission has maintained lists of non-Canadian services that it has authorized to be distributed in Canada.12 In order to become eligible for such distribution in Canada, a non-Canadian service must be “sponsored” by a licensed broadcasting undertaking, which must file information about and assurances from the non-Canadian service. Importantly, one of these required assurances is that
the non-Canadian service provider … does not hold, will not obtain, nor will it exercise, preferential or exclusive programming rights in relation to the distribution of programming in Canada. For example, the provider of a non- Canadian service would have to satisfy the Commission that it does not
8 CRTC Financial Summaries (2009). 9 CRTC, Communications Monitoring Report 2010, page 89. 10 See discussion below, paragraphs 84-89, of anti-siphoning rules in jurisdictions in which only over-the-air services have traditionally between highly-penetrated, as well as changes in approaches to anti-siphoning in order to adapt to the emerging multi-platform environment. 11 S.C. 1991, c. 11, paragraph 3(1)(a). 12 See, for instance, Specialty programming services, Broadcasting Public Notice CRTC 1984-91, 2 April 1984. Appendix C 27 April 2011 Bell Canada - BNC 2010-783 - Comments Page 6 of 28 - 6 -
currently, nor will it in future, deal in rights to programming in a manner that unduly precludes a Canadian programming undertaking from acquiring that programming.13
19. This requirement, which was reaffirmed as recently as 2008,14 addresses the concern that a non-Canadian entity might refuse to negotiate Canadian rights to its programming while seeking approval to come into Canada directly with that programming. However, the prohibition only relates to the ability of non-Canadians to exert market power in the Canadian audiovisual rights market, which could arguably undermine the Broadcasting Act’s requirement that “the Canadian broadcasting system shall be effectively … controlled by Canadians”.15 There is no prohibition, for instance, against the acquisition by a Canadian conventional, specialty or pay television licensee of preferential or exclusive rights in the very same programs.
Pay-per-view services
20. As with the non-Canadian linear services whose redistribution the Commission authorizes into Canada, the Commission’s rule against program exclusivity on transactional (pay-per- view and video-on-demand) services was developed with a goal of maintaining a distinct Canadian market in rights to popular audiovisual media content.
21. The question of maintaining a distinct rights market was not the only one raised with respect to transactional services, which allow consumers to purchase individual programs rather than packages of programs, as in pay television. When pay-per-view services first came into the market in 1990 and 1991, one of the licensees
undertook to implement various strategies and approaches to minimize any negative impact on First Choice, including a commitment not to purchase films or events on an exclusive basis, thereby maintaining the same "orderly market" that currently exists with respect to program windows. The Commission expects the applicant to adhere to this commitment. 16
22. The Commission would later maintain the same “expectation” in respect of that licensee in its 1995 licence renewal.17 However, today’s rule against pay-per-view and video-on- demand services acquiring exclusive Canadian rights in content dates back to events underway in 1994. The Government of Canada and the CRTC were then engaged in a dialogue relating to the so-called “Information Highway.” The cabinet had issued an Order
13 Call for proposals to amend the lists of eligible satellite services through the inclusion of additional non- Canadian services eligible for distribution on a digital basis only, Public Notice CRTC 2000-173, 14 December 2000 (emphasis added). 14 Application for addition to the lists of eligible satellite services for distribution on a digital basis, CRTC Form 304, updated 1 April 2011, Appendix 4; Information requirements for sponsors of non-Canadian services for addition to the lists of eligible satellite services for distribution on a digital basis, Broadcasting Circular CRTC 2008-9, 17 December 2008, paragraph 3. 15 S.C. 1991, c. 11, paragraph 3(1)(a). 16 Viewer’s Choice Canada, Broadcasting Decision CRTC 91-160, 26 March 1991. 17 Licence renewal for Viewer's Choice, Broadcasting Decision CRTC 95-71, 28 February 1995 (“The Commission expects VCC to adhere to its commitment not to purchase films or events on an exclusive basis, thereby maintaining the same "orderly market" that existed prior to VCC's inception with respect to program windows.”). Appendix C 27 April 2011 Bell Canada - BNC 2010-783 - Comments Page 7 of 28 - 7 -
in Council requiring the CRTC to report on wide-ranging questions relating to convergence and new technologies, including the question of how “the presence of new programming services“ would impact existing broadcasters.18 At the same time, a joint venture called Power DirecTV (which brought U.S. DBS19 powerhouse DirecTV together with Power Corporation of Canada acting as the majority Canadian shareholder) sought to enter the Canadian direct-to-home (DTH) satellite market, including the provision of a DTH pay-per- view service.
23. The addressable Canadian audience for new BDU entrants such as Power DirecTV was small relative to that of the U.S. The perception was therefore that DirecTV would be in a position to simply add Canadian rights to its already-substantial programming purchases. Thus, the concern was that DirecTV would persuade the sellers of that valuable Hollywood programming not to make it available to any competitor to Power DirecTV’s proposed DTH PPV service, Power DirecTicket. If DirecTV sought such an arrangement, U.S. program suppliers would presumably not wish to jeopardize their relationship with their major U.S. DBS distributor merely to reap the relatively small reward of serving Power DirecTicket’s limited Canadian competition.
24. In addition to the ongoing Information Highway dialogue, the Ministers of Canadian Heritage and Industry Canada therefore20 convened a panel to review DTH satellite policy, tasking it with
adjust[ing] current policies to take into account the North American reach of DTH distribution undertakings while respecting long-standing broadcasting policy objectives of ensuring that competitive Canadian programming is produced….21
DTH satellite distribution undertakings will present new challenges in this area. As “North American” broadcasters, they may seek to obtain “North American” distribution rights as opposed to national, regional or local rights. The availability of U.S. DTH services in Canada, in an integrated fashion or through the grey market, could alter the way in which broadcast programming rights are acquired for Canadian markets.22
25. In April 1995, the resulting Policy Review Panel attached to its report a “Proposed Direction Concerning [DTH] Pay-per-view Television Undertakings” requiring the CRTC “to prohibit, by appropriate means, the undertaking from acquiring exclusive rights to pay-per-view distribution of feature films and other programming within Canada”.23 The report stated:
18 Order in Council P.C. 1994-1689, 11 October 1994; Call for comments concerning Order in Council P.C. 1994-1689, Public Notice CRTC 1994-130, 20 October 1994. 19 Direct Broadcast Satellite (“DBS”) is the U.S. term that is equivalent to DTH in Canada. 20 Partly in response to the CRTC’s initial attempt to govern the sector through an Exemption Order Respecting Direct-to-Home Satellite Distribution Undertakings which was silent on this question: Public Notice CRTC 1994-111, 30 August 1994. 21 Departments of Canadian Heritage and Industry Canada, Policy Discussion Respecting Direct-to-Home Satellite Distribution Undertakings, Canada Gazette Part I, 26 November 1994, page 4507, paragraph 9. 22 Ibid., page 4510, paragraph 20. 23 Canada, DTH Policy Review Panel, Direct-to-Home Satellite Broadcasting: Report of the Policy Review Panel (Ottawa: Departments of Canadian Heritage and Industry Canada, April 1995), page 39. Appendix C 27 April 2011 Bell Canada - BNC 2010-783 - Comments Page 8 of 28 - 8 -
Existing Canadian pay-per-view services have said that competition could seriously undermine their ability to stay in business because bigger services could acquire exclusive “North American” rights and hence impede their access to product….
These concerns would be valid if rights for pay-per-view exhibition were acquired on an exclusive basis, and if competing pay-per-view services operating in Canada were foreign and hence unlicensed. However, the Panel has clearly recommended that DTH pay-per-view should be licensed, and should, as a condition of licence, acquire pay-per-view rights on a non- exclusive basis.24
26. The Commission’s report to the Governor-in-Council on convergence, issued in May 1995, supported this approach: “[w]hen licensing competitive pay-per-view or VOD undertakings offering feature films, it would be reasonable to impose conditions of licence prohibiting the acquisition of exclusive Canadian rights for any foreign or domestic film.”25 Accordingly, Cabinet issued a July 1995 Order-in-Council prohibiting DTH PPV undertakings from acquiring “exclusive or other preferential rights” in programming.26 When each of the five DTH PPV services was licensed in December 1995, including Power DirecTV’s service, the decisions included conditions of licence stating: “[t]he licensee shall not acquire exclusive or other preferential rights to pay-per-view programming exhibited as part of its service”. Accompanying those conditions of licence was the following explanation:
By virtue of paragraph 5(a) of Order-In-Council P.C. 1995-1106, dated 6 July 1995 (the Order), the Commission is required “to prohibit, by appropriate means, [DTH PPV undertakings] from acquiring exclusive or other preferential rights to pay-per-view distribution of feature films and other programming within Canada”…. [T]he licensee will be prohibited, by condition of licence, from acquiring exclusive or other preferential rights to pay-per-view programming.
The term “preferential rights” is broad in scope and could be the subject of different interpretations in light of the particular circumstances at hand. For this reason, the Commission considers that, in dealing with complaints relating to the acquisition of preferential rights, it is preferable to allow the parties to frame the issues as they see fit, and to put forward their respective views as to what might constitute a breach of the condition of licence, on a case-by-case basis.27
27. In curtailing program exclusivity for DTH PPV services, as the Commission had done for linear non-Canadian signals, Cabinet and the CRTC sought to avoid a situation in which
24 Ibid., page 27 (emphasis in original). 25 CRTC, Competition and Culture on Canada's Information Highway: Managing the Realities of Transition (Ottawa: Public Works and Government Services Canada, 1995) (emphasis added). 26 Direction to the CRTC (Direct-to-Home (DTH) Pay-Per-View Television Programming Undertakings) Order, SOR/95-320, 6 July 1995. 27 The Partners of Viewers Choice Canada DTH PPV, Decision CRTC 95-904; Home Theatre, Decision CRTC 95-905 ((now Shaw Pay-per-View); Joel Bell OBCI, Decision CRTC 95-906 (Power DirecTicket); Gary Maavara OBCI, Decision CRTC 95-907 (Sports/Specials DTH PPV), Canal Première, Decision CRTC 95-908, all 20 December 1995. Appendix C 27 April 2011 Bell Canada - BNC 2010-783 - Comments Page 9 of 28 - 9 -
Canadian rights to blockbuster non-Canadian programming could otherwise have been routinely bundled with U.S. rights. The bundled sale of Canadian rights with U.S. rights in such programming, which it would have been rational for sellers to pursue for the reasons set out above, would have rendered it unfeasible for Canadian firms to bid on such rights unless they were integrated with U.S. operations. Instituting a rule against program exclusivity for programming services linked with U.S. rightsholders was intended to avoid that result by maintaining a distinct Canadian market in programming rights.
28. Former CRTC chairman André Bureau, then with Astral Communications, captured the mood of the time in his June 13, 1995 appearance before the House of Commons Standing Committee on Canadian Heritage’s hearings ahead of Cabinet’s Order-in- Council:
The issue we are discussing today is that if those directives were to be approved in their present form, we would be in direct competition with an American company called DirecTv that has signed contracts with every American studio. Coincidentally, they are exclusive contracts. USSB, which is another Direct-to-Home service, like DirecTv, has no right to buy those films. So, our reaction is: Well! Even in the massive American market, where competition is so important, they allow that sort of thing to happen.
Also, DirecTv has a potential market worth hundreds of millions of dollars. Our potential market is infinitely smaller. Does anyone really believe that the day Power DirecTv is given permission to become affiliated with DirecTv, that absolutely nothing will change in terms of the way the system currently operates and that we, as Canadian broadcast rights holders, will be able to go to the U.S. and suggest that they purchase our broadcast rights? Their reaction will be to say: “Listen, those rights were already acquired by DirecTv.”28
29. Power DirecTV never launched. Neither of the DTH services which did launch were closely associated with foreign companies buying U.S. rights. The entire underpinning of the rule against exclusivity flowed from a fear that North-American-footprint DirecTV’s vertically-integrated DirecTicket service would acquire North American rights and cut out the possibility for Canadian licensees to offer it to their subscribers. Yet the threat on which the rule against exclusivity was founded was never realized.
28 Canada, House of Commons, Standing Committee on Canadian Heritage, 35h Parl., 1st Sess., Evidence (testimony of Astral Communications Inc.), 14 June 1995. Appendix C 27 April 2011 Bell Canada - BNC 2010-783 - Comments Page 10 of 28 - 10 -
III. PLATFORM EXCLUSIVITY
A. Material Impact on Competition
30. As noted above, restrictions on program exclusivity by DTH PPV services were put into place in response to concerns about the integrity of the Canadian rights market. However, discussion of these restrictions also raised the matter of competition between providers of distribution platforms. The Commission’s 1995 Convergence Report referred to concerns rooted in the scenario in which pay-per-view programming services or packages could become exclusive to one or another BDU, resulting in platform exclusivity over the pay-per- view content:
[a]ccess by content providers to competing distribution systems, and the purchase of exclusive rights, were … raised as concerns that need to be addressed to ensure fair and sustainable competition, particularly when distribution network providers own or control content services. 29
31. In June 1995 the House of Commons Standing Committee on Heritage held hearings where the Directors Guild of Canada testified that
the panel wrongly ignored the inherent policy problem in allowing a DTH distributor to own and operate a pay-per-view service being carried on its satellite system….
The structure blessed by the panel, which not only allows vertical integration but ignores its discriminatory effects, will materially harm any competing Canadian pay-per-view services. It will be inconsistent with sound public policy to have all distribution gate-keepers give equitable access to Canadian-licensed services.30
32. All of the DTH PPV services licensed in 1995 had been made subject to the anti-exclusivity rule.31 In Decisions CRTC 97-283 to 97-287, the Commission licensed five VOD services, making them subject to the Pay Television Regulations, 1990.32 The Commission did “not intend to include in the access provisions of the new [broadcasting distribution] regulations any obligations on BDUs with respect to the provision of access to VOD services.”33 But, to balance out the ability of VOD services to become exclusive to one or another BDU platform, and reflecting its understanding that PPV and VOD were substitutes because both relied heavily on recent-release feature films, the Commission did impose a condition of licence prohibiting these platforms from program exclusivity. In transposing this condition of licence to VOD services, the Commission explained that
29 CRTC, Competition and Culture, supra note 25. 30 Canada, House of Commons, Standing Committee on Canadian Heritage, 35h Parl., 1st Sess., Evidence (testimony of the Directors’ Guild of Canada in relation to a brief filed jointly with CFTPA, WGC, CIRPA, APFTQ, SARDEC and ADISQ), 13 June 1995. 31 Supra, note 27. 32 SOR/90-105. The licences were granted to the partners of Canal Indigo, the partners of Viewer’s Choice Canada, Alliance Communications Corporation and Shaw Communications Inc. on behalf of a general partnership, Allarcom Pay Television Limited and Electronic Digital Delivery Inc. 33 Licensing of new video-on-demand programming undertakings - Introduction to Decisions CRTC 97-283 to 97-287, Public Notice CRTC 1997-83, 2 July 1997, paragraph 23. Appendix C 27 April 2011 Bell Canada - BNC 2010-783 - Comments Page 11 of 28 - 11 -
[c]onsistent with the Government's Convergence Policy Statement and with the Commission's licensing approach for DTH PPV services, VOD undertakings are prohibited, by condition of licence, from acquiring exclusive or preferential rights to any programming exhibited as part of their services.34
33. The conditions of licence imposed on each of these VOD licensees were virtually identical to those imposed on the DTH PPV undertakings in 1995, thus extending the Commission’s developing approach to addressing exclusivity:
[T]he licensee is prohibited, by condition of licence, from acquiring exclusive or other preferential rights to any programming exhibited as part of its service.
The term "preferential rights" is broad in scope and could be the subject of different interpretations in light of the particular circumstances at hand. For this reason, the Commission considers that, in dealing with complaints relating to the acquisition of preferential rights, it is preferable to allow the parties to frame the issues as they see fit, and to put forward their respective views as to what might constitute a breach of the condition of licence, on a case-by-case basis.35
34. DTH-based PPV services and VOD services were now subject to the anti-exclusivity rule. Terrestrial PPV services were not. This would change following the 1998 NFL Sunday Ticket decision, in which the Commission was asked to address the NFL’s sale to Rogers of rights to a package of pay-per-view football games.36 ExpressVu could not get access to the package, as the NFL did not wish to license any Canadian DTH carrier to carry the package out of a concern for spill-over back into the United States where DBS rights had already been sold. Nor was Rogers, as the platform provider of a terrestrial pay-per-view service, subject to the anti-exclusivity rule. The Commission therefore applied undue preference rules instead. It found a preference, but did not find the preference undue. First, Rogers had paid market value for the package, which the Commission had elsewhere found to be an indicator of an arm’s-length relationship.37 Second, ExpressVu’s disadvantage had not put it at a “substantial disadvantage in the market”38 because, the Commission found, the games were only a small part of the service (which consists of movies, other sporting events, special events, concerts etc.) offered by the PPV operators. The rest of the programming was available to ExpressVu. As Rogers put it, “one is only speaking of exhibition of certain additional NFL football games, on a discretionary PPV basis, on seventeen Sundays in a season, in a situation where ExpressVu already distributes to its subscribers coverage of a substantial number of NFL games.”
34 Public Notice CRTC 1997-83, supra, paragraph 35. 35 For instance, New national video-on-demand service—Approved, Decision CRTC 97-283, 2 July 1997, paragraph 18 (emphasis added). 36 ExpressVu Inc. vs. Rogers Communications Inc., CRTC Broadcasting Letter Decision, 18 September 1998. 37 Star Choice - Merger of licensee companies authorized to provide national direct-to-home (DTH) satellite services -Approved; Proposed licence amendment - Approved in part, Decision CRTC 97-677, 22 December 1997. 38 Referring to Bell Canada – Introduction of megalink service, Telecom Decision CRTC 92-5, 3 April 1992. Appendix C 27 April 2011 Bell Canada - BNC 2010-783 - Comments Page 12 of 28 - 12 -
35. The Commission was soon called on to extend its anti-exclusivity rule to terrestrial pay-per- view services by moving the prohibition from conditions of licence into the Pay Television Regulations, 1990. This, it was argued, would create a symmetrical regime for satellite and terrestrial BDUs’ PPV services, rather than forcing complaints regarding platform exclusivity on pay-per-view services to be filed under the Broadcasting Distribution Regulations:
In March 1998, ExpressVu, now Bell/ExpressVu, filed a complaint with the Commission against Rogers Communications Inc. and its subsidiary Rogers Cablesystems Ltd. The complaint alleged that Rogers had contravened section 9 of the Broadcasting Distribution Regulations by purchasing the exclusive rights to distribute certain pay-per-view programs. Section 9 states that no licensee "shall give an undue preference to any person, including itself, or subject any person to an undue advantage." The Commission ultimately found that there had not been, in those circumstances, a breach of section 9 since it was not persuaded that any preference given had been undue.
Bell/ExpressVu, in a related proposal, requested that the Commission amend the Pay Television Regulations, 1990 to include a section comparable to section 9. The Commission, in its disposition of the complaint, stated that, while it had not imposed specific conditions of licence requiring that pay-per-view licensees not acquire programming on an exclusive basis, the circumstances of the complaint highlighted the absence of a regulation for pay television licensees that addresses this matter.39
36. The Commission agreed, and granted Bell ExpressVu’s request. The new rule inserted into the Pay Television Regulations, 1990 read as follows:
“pay-per-view program” means a scheduled program that is provided by a licensee for distribution by a distribution undertaking on a pay-per-view basis…40
39 Call for comments on proposed amendments to the Pay Television Regulations, Public Notice CRTC 1999-83, 12 May 1999, paragraphs 1-2. 40 The rule was moved from conditions of licence to the Pay Television Regulations, 1990, only in respect of PPV services. As regards VOD, the Commission stated the following (Amendments to the Pay Television Regulations, Public Notice CRTC 1999-204, 23 December 1999): Look Communications Inc. requested that the Commission remove the word "scheduled" from the definition of "pay-per-view program" and broaden the types of programming to which the amendment would apply. The Commission considers that the amendment is sufficient and will capture the types of scheduled "mass appeal" programs that have been or will be of most concern until such time as a sufficiently competitive market has been established. When the next group of VOD licences was awarded in 2000, the previous licensees having failed to launch, the regulatory framework that applied to them was set out in Public Notice CRTC 2000-172, in which the Commission was “of the general view that the framework established in 1997 continue to be appropriate. However, a number of framework issues related to the VOD applications were raised at the 14 August 2000 public hearing. These issues and the resulting modifications are addressed below…”. Exclusivity was not raised or “addressed below” in Public Notice CRTC 2000-172. As a result, one could argue that, since the Commission had set out non-exclusivity as part of the framework established in 1997, and then failed to disturb it in reaffirming and modifying the VOD framework in 2000, licensees could reasonably expect that non-exclusivity remained part of the VOD framework. On the other hand, Appendix C 27 April 2011 Bell Canada - BNC 2010-783 - Comments Page 13 of 28 - 13 -
6.1 (1) No licensee shall distribute any pay-per-view program for which it has acquired exclusive or other preferential rights.41
37. The new rule was phrased as a per se prohibition. Further, it was now shorn of the standard conditions-of-licence notation that “in dealing with complaints relating to the acquisition of preferential rights, it is preferable to allow the parties to frame the issues as they see fit, and to put forward their respective views as to what might constitute a breach of the condition of licence, on a case-by-case basis”. In this manner, a rule against program exclusivity put into place to maintain a distinct Canadian market in audiovisual rights, and thereby ensure the viability of companies not integrated with U.S. operations, became the basis for a broader approach to platform exclusivity built on the Commission’s undue preference rule.
38. Yet the Commission was careful to specify that the rule “should not be taken as an obligation on the buyer to require the seller to make any offers to others”. 42 Rather, the Commission pledged to “take into account all of the circumstances surrounding the acquisition or exhibition of rights when determining whether a particular contract or arrangement is in fact … preferential”. Thus, “[t]he Commission’s view is that it is preferable to consider what constitutes a breach of the regulations on a case-by-case basis.” 43
39. Nor was this case-by-case approach disturbed by further amendments to the Pay Television Regulations, 1990 in 2001, that completed the anti-exclusivity rule’s integration into the Commission’s undue preference standard:44
6.1 (1) No licensee shall give an undue preference to any person, including itself, or subject any person to an undue disadvantage.
(2) For the purposes of subsection (1), a licensee shall be considered to have given itself an undue preference if the licensee distributes a pay-per- view program for which the licensee has acquired exclusive or other preferential rights.45
40. Finally, the same rule was extended to VOD services in 2011 in the form of a proposed standard condition of licence (rather than by revising the Pay Television Regulations, 1990).46
41. Over the past decade, close to twenty new VOD services have been licensed, all vertically integrated with BDUs. During that time the Commission has not applied the anti-exclusivity
the VOD licences themselves contain no explicit prohibition against exclusivity, nor was any such prohibition set out explicitly in the 2000 decision itself. 41 The Commission removed the now-superfluous conditions of licence, noting in each case that the matter was now contained in the Pay Television Regulations, 1990, as amended, in Viewers Choice DTH PPV, Broadcasting Decision CRTC 2002-385, 27 November 2002, and Shaw DTH PPV, Broadcasting Decision CRTC 2003-132, 30 April 2003. 42 Public Notice CRTC 1999-204, supra note 40, paragraphs 8-11. 43 Ibid. 44 Public Notice CRTC 2000-171; Public Notice CRTC 2001-17. 45 SOR/99-455, s. 2; SOR/2001-75, s. 1. 46 Standard requirements for video-on-demand undertakings, Broadcasting Regulatory Policy CRTC 2011- 59, 31 January 2011, Appendix, paragraph 11. Appendix C 27 April 2011 Bell Canada - BNC 2010-783 - Comments Page 14 of 28 - 14 -
rule to any transactional service directly. As in the Sunday Ticket case,47 only the general rule against undue preference to arrangements has been applied where exclusivity was at issue. However, the Commission’s disposition of complaints against Shaw by MTS and Sasktel48 (2003) and TELUS49 (2005) is instructive.
42. In 2003, the Commission rejected Shaw’s argument that offering its PPV channel (Viewer’s Choice) to its own platforms on better terms than to SaskTel’s and MTS’ was justified by Shaw’s U.S. suppliers’ restrictions on dedicated DSL distribution of the content. The Commission considered that Shaw had not provided evidence supporting its assertions and that, without such evidence, the difference in treatment was undue because it subjected MTS and SaskTel to “a disadvantage that is significant in the circumstances.” Indeed, this exclusivity would “make it difficult, if not impossible, for either of the complainants to offer a fully competitive cable service, particularly in view of the relatively early stage of launch of their respective services.” 50
43. In 2005, when TELUS went before the Commission with a similar complaint, the Commission reached the opposite conclusion. It found that TELUS had produced insufficient evidence that it would suffer “a material adverse impact” from the “alleged preference and/or disadvantage,” and that TELUS’ requirement for the service was mitigated by the ability to seek similar programming elsewhere:
The Commission is not persuaded by TELUS’ arguments that it should be entitled to offer, through Shaw PPV, PPV programming that is exactly the same as that offered by its BDU competitors in western Canada. Rather, the Commission considers that TELUS has other adequate alternatives that would permit it to offer a competitive PPV service. There is, however, nothing on the record of this proceeding to indicate that TELUS has explored these alternatives.51
44. More relevant than the difference between the two conclusions, each of which highlighted evidentiary issues, is the Commission’s approach in these decisions to considering exclusivity over a pay-per-view service. In introducing the rule against program exclusivity within PPV services, the Commission cautioned that it “should not be taken as an obligation on the buyer to require the seller to make any offers to others”, and will be applied only after having taken into account the circumstances surrounding the acquisition or exhibition of rights in that particular case. As the Commission has repeatedly stated, its analysis of these circumstances will look into whether the preference or disadvantage—which arises, in this context, from platform exclusivity—has
(a) a material adverse effect on the complainant, or some larger group of which the complainant is a part, or
47 Supra, paragraph 34. 48 Complaints by Saskatchewan Telecommunications and MTS Communications Inc. alleging breaches of section 9 of the Broadcasting Distribution Regulations against Shaw Communications Inc. and of section 6.1(1) of the Pay Television Regulations, 1990 against Shaw Pay-Per-View Ltd. (formerly Corus VC Ltd.), Broadcasting Decision CRTC 2003-408, 21 August 2003. 49 Complaint by TELUS Communications Inc. alleging denial of access to certain pay-per-view programming by Shaw Pay-Per-View Ltd., Broadcasting Decision CRTC 2005-189, 6 May 2005. 50 Paragraphs 24-26. 51 Paragraph 23 (emphasis added). Appendix C 27 April 2011 Bell Canada - BNC 2010-783 - Comments Page 15 of 28 - 15 -
(b) impacts, or is likely to impact, the objectives of the broadcasting policy for Canada set out in the Broadcasting Act.52
45. In applying this framework, the Commission’s decisions looked in particular at the degree to which platform exclusivity affected the complainants’ ability to “offer a fully competitive cable service” or “offer a competitive PPV service.” Similarly, the Commission’s recent decision in Bell’s and TELUS’ complaints against Québecor Inc.’s Vidéotron BDU and VOD services focused on the fact that the exclusivity affected BDU competitors and, through them, platform competition:
[T]he Commission considers that given the emerging role of VOD in the BDU business model and the popularity of TVA’s programming in Quebec, it would be difficult for a new BDU seeking to penetrate the Quebec market to attract subscribers if it cannot offer TVA programs on its VOD service. The Commission is of the view that the agreement between Illico and TVA will likely have a significant adverse effect on TELUS and Bell due to their reduced ability to compete in the Quebec distribution market.
This adverse effect on competition can also hinder the achievement of certain broadcasting policy objectives. Specifically, the Commission has routinely observed that healthy and viable competition between BDUs is an effective and appropriate means of promoting greater choice for subscribers and spurring innovation with a view to achieving a number of the policy objectives set out in section 3 of the Act. One of the objectives of the Act, as set out in section 3(1)(t)(ii), is that BDUs “should provide efficient delivery of programming at affordable rates, using the most effective technologies available at reasonable cost.”53
46. The latter decision was not reached under the current explicit prohibition on VOD program exclusivity, which had not yet been adopted at the time that decision was issued.54 However, the reasoning and test applied by the Commission were similar, relating back to evidence of harm to competition or to achieving policy objectives.
B. Access to Content
47. Transactional services, including pay-per-view and video-on-demand, make up a relatively small proportion of the Canadian broadcasting system.55 Transactional services are generally associated with premium-paid content, such as recently-released films and niche
52 Broadcasting Decision CRTC 2005-189, supra note 49, paragraph 25. 53 Complaint by TELUS Communications Company against Videotron Ltd. under section 6.1 of the Pay Television Regulations, 1990, Complaint by Bell Canada against Videotron Ltd. under section 6.1 of the Pay Television Regulations, 1990 and section 9 of the Broadcasting Distribution Regulations and against TVA Group Inc. under section 15 of Television Broadcasting Regulations, 1987, Broadcasting Decision CRTC 2011-48, 26 January 2011, paragraphs 26-27. 54 As noted above, the Pay Television Regulations, 1990 had been modified only to extend the DTH PPV anti-exclusivity rule to terrestrial PPV services, and had therefore defined “pay-per-view” programs as “scheduled” programs. Any VOD exclusivity was addressed in the CRTC’s decisions and conditions of licence, not in the Pay Television Regulations, 1990: supra, paragraph 36 and note 40. 55 CRTC, Communications Monitoring Report 2010, page 67. Appendix C 27 April 2011 Bell Canada - BNC 2010-783 - Comments Page 16 of 28 - 16 -
live sporting events, programming that is aimed at a limited audience that is willing to pay a higher price for a particular program.
48. That is not the case for the traditional, linear portion of the broadcasting system. The issue of widespread access to certain content has therefore been more squarely before the Commission when approaching platform exclusivity in the linear portion of the system. In order to review the manner in which the Commission has balanced access to content with platform competition, we must begin with the structure of the Canadian broadcasting system itself which, since the 1970s, has evolved in conjunction with BDUs as a highly-penetrated platform for accessing audiovisual media programming. By 1977, 46.8% of Canadian households were BDU subscribers.56 By 1997, this had risen to nearly 80%;57 and by 2007, to 88.7%,58 growing to 90.1% in 2009.59
49. This high BDU penetration rate is in sharp contrast to comparable jurisdictions. In Australia, for instance, only 34% of households subscribe to cable or satellite BDUs.60 In the United Kingdom, only 52% of households subscribe to “pay” television.61 Jurisdictions such as these developed approaches designed to ensure that rights purchases by subscription television, which reached relatively small portions of the population, would not prevent the broader citizenry from accessing public-interest content or events of great importance by free-to-air television. Article 14 of Europe’s most recent Audiovisual Media Services Directive, for instance, allows member states to ensure that the acquisitions by broadcasters under their jurisdiction of exclusive rights in “events of major importance for society” do not deprive a substantial proportion of the public of the possibility of viewing such events.
50. That approach itself is under significant pressure. Like the Canadian delivery model, the free-to-air and subscription model in those countries is also evolving towards a multi- platform environment in which audiovisual content is accessed through multiple screens and devices. Here we review the approach that the Commission has adopted thus far in balancing consumer access to public-interest content with fostering competition within Canada’s BDU platform environment.
51. The approach that the Commission has focused on is ensuring that programming in the public interest is carried across all BDU platforms. The resulting system organizes linear services into, roughly, the following tiers:
(a) local services which are broadcast over the air;
(b) basic services, including the local services as well as cross-border services generally available over the air, and which must be provided to all subscribers;
56 Canada, Task Force on Broadcasting Policy (G. L. Caplan & F. Sauvageau, co-chairmen), Report (Ottawa: Minister of Supply and Services, 1986), page 552. 57 CRTC, Broadcasting Policy Monitoring Report 2001, page 60. 58 CRTC, Communications Monitoring Report 2009, page 163. 59 CRTC, Communications Monitoring Report 2010, page 87. 60 Australian Subscription Television and Radio Association (ASTRA), “Facts and Figures”, citing OzTAM Establishment Survey Q1/2011, online:
(c) specialty and pay services operating in protected niches in which competition is not yet feasible, and which must be offered to subscribers (Category A);
(d) open-access tiers of more highly-specialized (Category B) or broadly competitive (Category C) services, which may be offered to subscribers; and
(e) non-Canadian news, third-language, or niche services which do not compete with higher-tier services, and which may also be offered to subscribers.
52. This tiered scheme has played a fundamental role in reconciling consumer access to public- interest content with the competition-based approach to platform exclusivity noted above.
Ongoing Access to Category A Services
53. A review of the Commission’s policy statements indicates that withholding a licensed service from a BDU could constitute an undue preference or disadvantage. During the 1996 consultations on the Commission’s new framework for regulating broadcasting distribution undertakings,
several prospective new entrants requested that the Commission prohibit incumbent distributors from acquiring exclusive rights or preferential access to Canadian and non-Canadian programming services.
They argued that, in order to have fair and sustainable competition, equitable access to all programming services by new entrants must be guaranteed, especially given the Commission’s general policy of licensing only one specialty or pay television programming undertaking in any given genre.
In support of their request, these parties argued that operators of Canadian and non-Canadian programming services may have little incentive to affiliate with new entrants, given the latter’s likely small market share and the programmers’ concern about damaging relations with incumbent distributors.62
54. In response, the Commission resolved to import an undue preference provision into the Broadcasting Distribution Regulations to address distribution undertakings’ dealings with programming services, including
situations where a distributor enters into an affiliation agreement or other contractual arrangement that has the effect of denying another competitor access to the service of a licensed programming undertaking, or where the distributor acquires a programming service under terms and conditions that are significantly advantageous to itself or its affiliate.63
55. In implementing this undue preference provision, the Commission set out
62 New regulatory framework for broadcasting distribution undertakings, Public Notice CRTC 1997-25, 11 March 1997, paras. 48-50 (emphasis added). 63 Ibid., para. 54. Appendix C 27 April 2011 Bell Canada - BNC 2010-783 - Comments Page 18 of 28 - 18 -
a number of circumstances that, in its view, could constitute instances of undue preference or disadvantage under section 9 of the regulations. The following examples are for purposes of illustration and do not constitute an exhaustive list:
(a) The acquisition of a programming service for distribution by a licensee, other than the service of an exempt programming undertaking, at a price or upon terms and conditions that are more advantageous than the price or terms and conditions available to another licensee, when such differences are not justified by a difference in cost. Legitimate cost differences include economies of scale and other direct and legitimate economic benefits reasonably attributable to the number of subscribers served by the licensee.
(b) The acquisition of a licensed programming service for distribution by a licensee upon terms or conditions that have the direct or indirect effect of preventing another licensee from acquiring that programming service.64
56. At the time the CRTC created the undue preference provision and set out these examples, which relate to platform exclusivity, Categories B and C services did not exist. BDUs were required to distribute the services of all licensed television programming undertakings, including specialty services, appropriate for their markets. Further, each programming undertaking had been awarded a scarce licence through a competitive hearing process in which the Commission had found it in the public interest to grant that licensee’s proposal ahead of its rivals.65 It was therefore logical for the CRTC to find that a linear specialty service’s exclusivity to some BDU platforms would unduly disadvantage other, excluded BDUs who were, nonetheless, required to carry that specialty service. At the same time, this allowed consumers to have access through their BDUs to programming services which had been awarded scarce licences on the basis that their content was in the public interest.
Ongoing Access to Category B and C Services
57. Public Notice CRTC 2000-6, in which the Commission introduced digital Category 1 (must- offer: Category A) and Category 2 (open-entry: Category B) specialty services, stated the following without distinguishing between licence category:
An additional concern raised in this proceeding was that licensees of distributor-affiliated programming services could potentially confer an undue preference on the distributor to which they are affiliated. For example, such a licensee might refuse to be carried by a competing distributor or might agree to more advantageous terms of carriage with its affiliated-distributor. The Commission intends to propose an amendment to its regulations to introduce a prohibition against pay and specialty services granting undue
64 Broadcasting Distribution Regulations, Broadcasting Public Notice CRTC 1997-150, 22 December 1997, paragraph 100 (emphasis added). 65 Access rules for broadcasting distribution undertakings, Broadcasting Public Notice CRTC 1996-60, 26 April 1996, sections 2.1 and 2.2. Appendix C 27 April 2011 Bell Canada - BNC 2010-783 - Comments Page 19 of 28 - 19 -
preference similar to the provision applicable to distributors by virtue of the Broadcasting Distribution Regulations.66
58. As this language suggests, the Commission
(a) explicitly considered concerns over platform exclusivity arising from vertical integration;
(b) concluded that, in order to compete in the market, distribution platforms required the ability to offer Canadian consumers ongoing access to non-must-offer licensed linear services; and
(c) had this conclusion in mind in inserting the undue preference language now found in the pay and specialty services regulations.
59. In setting out its draft amendments for public comment in 2000, the Commission again explained that
[t]he proposed amendments to the Pay Television Regulations, 1990 and the Specialty Services Regulations, 1990 address the concern that a licensee of multiple programming services could confer upon itself an undue preference in negotiating the terms of carriage for all its services. The proposed amendments also address the concern that licensees of distributor-affiliated programming services could potentially confer an undue preference on the distributor to which they are affiliated. The proposed amendments therefore introduce a prohibition against pay and specialty services, respectively, granting an undue preference or advantage similar to the provision applicable to distributors by virtue of the Broadcasting Distribution Regulations.67
60. The Commission’s framework for BDU platform exclusivity with respect to open-entry Category B and C services thus addresses situations where a licensed service is withheld from a licensed platform, or where it is made impractical for the platform to access the service, as an undue preference or advantage from the standpoint of competition between BDU platforms. This framework thus addresses competition among BDUs by ensuring their access to programming services.
61. The reverse situation, where Category B and C programming services’ wish to avoid discrimination when they seek distribution from vertically-integrated platforms, was not addressed in the above discussion, although such services also have recourse to undue preference and dispute resolution provisions. Open-entry programming services are also granted some protection against exclusion by vertically-integrated competitors by the
66 Licensing framework policy for new digital pay and specialty services, Public Notice CRTC 2000-6, 13 January 2000, paragraph 43 (emphasis added). 67 Call for comments on proposed amendments to the Broadcasting Distribution Regulations, Pay Television Regulations, 1990 and Specialty Services Regulations, 1990, Public Notice CRTC 2000-150, 7 November 2000, paragraph 11. Appendix C 27 April 2011 Bell Canada - BNC 2010-783 - Comments Page 20 of 28 - 20 -
Broadcasting Distribution Regulations’ requirement that a certain number of unrelated programming services of this type be distributed for every related one.68
62. The latter requirement does not distinguish between services, nor even between genres of services. CRTC regulation of platform exclusivity with respect to Category B and C services is focused on maintaining the ability of BDUs to compete. It is not focused on safeguarding consumers’ ability to access particular Category B or C programming services, in line with the open-entry, competitive basis for the Category B and C classes of service. Rather, where the content that these services provide was in the public interest, culturally significant, or of major importance to society, and would not be made available to consumers as an outcome of market competition, the Commission is able to designate them as part of the basic service69 or as Category A services70 in order to ensure ongoing access to them.
Ongoing Access to Exempt Services
63. Exempt programming services that are not part of the basic or Category A, B or C tiers are channels such as still-image or teleshopping services whose regulation the Commission has not found will contribute in a material manner to implementing broadcasting policy.
64. In providing examples of situations where excluding a rival programming service in a vertically-integrated BDU environment will constitute undue preference, the Commission in 1997 was careful to specify that such examples included licensed BDUs and licensed programming services, but excluded exempt programming services. In fact, “it was generally acknowledged that access by distribution undertakings to the services of exempt programming undertakings would not be of concern to distributors.”71
65. The Commission does maintain a vertical-integration-related rule requiring BDUs to carry an unrelated exempt service for every related one.72 However, this rule does not distinguish between such services, nor even between genres of service, and does not address consumers’ ability to access these services. As is the case with Category B and C services, this form of regulation does not seek to safeguard consumer access to exempt services whose content the CRTC has determined, as a result of its exemption decision, either does not make an exceptional contribution to Canadian programming and the objectives of the Act, or will be made available to consumers without regulatory protections as an outcome of market competition.
Temporary Service Disruptions
68 Broadcasting Distribution Regulations, SOR/97-555, subsection 18(14). 69 Criteria for assessing applications for mandatory distribution on the digital basic service, Broadcasting Regulatory Policy CRTC 2010-629, 27 August 2010. 70 Amendment to the timeframe for consideration of new Category A services, Broadcasting Information Bulletin CRTC 2010-198, 31 March 2010. 71 Public Notice CRTC 1997-25, supra note 62, paragraph 51. 72 Broadcasting Distribution Regulations, section 21, applied in complaint by Torstar Corporation alleging undue preference by Cogeco Cable Inc., Broadcasting Decision CRTC 2007-401, 23 November 2007, and Request for dispute resolution by Torstar Corporation relating to the distribution of ShopTV Canada by and Rogers Cable Communications Inc., Broadcasting Decision CRTC 2010-590, 18 August 2010. Appendix C 27 April 2011 Bell Canada - BNC 2010-783 - Comments Page 21 of 28 - 21 -
66. The Commission has long wrestled with issues relating to short-term disruptions, during negotiations, in individual BDU platforms’ access to programming services. These issues are difficult because they pit programming services’ most fundamental negotiating tool—the ability to walk away—against consumers’ ongoing access to the service.
67. In 2008 the Commission noted that while BDUs “are generally required, by regulation, to distribute pay and specialty services that operate in the market that they serve … currently there is no similar obligation for the programming services to provide their signals to distributors” during a dispute.73 The Commission therefore resolved to, and did, amend the pay and specialty services regulations “to provide that [certain] programming undertakings not withhold their signal from BDUs in the event of a dispute”.74
68. This amendment applied only to services that have access rights,75 as “a programming service that does not have the benefit of mandatory distribution must have the ability to remove its service.”76 This approach was consistent with the CRTC’s general policy on such matters:
The Commission notes that, when BDUs are obliged to distribute a pay and specialty service, its general policy has been that a programmer should not be permitted to withhold the service from BDUs and their subscribers, for example, during negotiations as to new affiliation agreements.77
69. Thus, in response to Bell Canada’s request that during a transitional period following the implementation of non-must-offer Category C classes of licence, mainstream sports services with program exclusivity not be permitted to withdraw their signal from a BDU platform during a dispute, the Commission
acknowledge[d] the possibility raised by Bell that popular services may have an advantage over BDUs in negotiating terms and conditions. The Commission is satisfied, however, that any concerns about news diversity, undue preference or withholding of signals during a dispute will be addressed as outlined in Broadcasting Public Notice 2008-100 and Broadcasting and Telecom Information Bulletin 2009-38. The Commission does not consider additional measures to be appropriate or necessary given that dispute resolution procedures will remain available to the services in question.78
73 Regulatory frameworks for broadcasting distribution undertakings and discretionary programming services, Broadcasting Public Notice CRTC 2008-100, 31 October 2008, paragraph 218. 74 Ibid.; Implementation of certain elements of the regulatory framework for broadcasting distribution undertakings and discretionary services, and changes to contributions to Canadian programming, Broadcasting Regulatory Policy CRTC 2009-543, 31 August 2009. 75 Under section 18, paragraph 9(1)(h) or subsection 9(4) of the Broadcasting Distribution Regulations, SOR/97-555. 76 Broadcasting Regulatory Policy CRTC 2009-543, supra note 74, paragraphs 26-27. 77 Review of the regulatory frameworks for broadcasting distribution undertakings and discretionary programming services, Broadcasting Notice of Public Hearing CRTC 2007-10, 5 July 2007, footnote 6. 78 Conditions of licence for competitive Canadian specialty services operating in the genres of mainstream sports and national news, Broadcasting Regulatory Policy CRTC 2009-562, 4 September 2009, paragraph 58. Appendix C 27 April 2011 Bell Canada - BNC 2010-783 - Comments Page 22 of 28 - 22 -
70. In the result, Category B and Category C services can be held back during a dispute, such as a dispute over terms in affiliation agreements.
71. The regime that the Commission has proposed to implement for private English- and French-language broadcasters goes still further.79 That regime sets out certain arrangements for licensees of private local television stations that choose to negotiate with BDUs for the value of the distribution of their programming services. Licensees that so choose can not only hold back their service from BDUs, but can also require BDUs to delete any program for which the private local television licensee has acquired exclusive contractual exhibition rights.80
72. In this manner, the Commission has provided for temporary (or even longer-than-temporary) platform exclusivity on BDUs. In the case of Category B, C and, as proposed, conventional services, the right to exclude is two-way. A non-must-offer programming service that is vertically integrated with a BDU platform may withhold its signal from other BDUs at least until the completion of CRTC dispute resolution.
73. In this equation, the ability of subscribers to a particular BDU platform to access the withheld Category B, C, or conventional service is set against the service’s ability to resort to hard bargaining. With respect to the consumer effects of temporarily losing access on a BDU platform to Category B or C services, this is consistent with the Commission’s tiered licensing system, as noted above. With respect to losing access on a BDU platform to conventional services and their licensed programming , the ability to access the service over the air, in some areas, or through a free local package delivered by a BDU, in other areas,81 may partly mitigate consumer effects.
Siphoning
74. As the foregoing illustrates, the Commission’s regulatory approach to platform exclusivity with respect to access to content has focused on the highly-penetrated BDU platform, balancing competition between BDU platforms for programming services with rules governing subscriber access to services or classes of service within the platform. As a result, Canada has never implemented anti-siphoning rules to preclude key programs from migrating from a more widely-available platform (conventional free-to-air television) to a less widely-available but more lucrative platform (subscription television). In 1984, there was a discussion of this issue when TSN was first licensed, and concerns expressed that in migrating to the sports service, Canadians without subscription television would be precluded from seeing those games. In its application, TSN committed that it would not siphon or compete for the rights to the major sporting events covered by conventional
79 The Commission referred to the Federal Court of Appeal the question of whether the Commission is empowered by the Broadcasting Act to establish a regime such as this. Leave to appeal Canadian Radio-television and Telecommunications Commission's Broadcasting Regulatory Policy CRTC 2010-167 and Broadcasting Order CRTC 2010-168 (Re), 2011 FCA 64, was to be sought by 29 April 2011. Reference to the Federal Court of Appeal – Commission's jurisdiction under the Broadcasting Act to implement a negotiated solution for the compensation for the fair value of private local conventional television signals, Broadcasting Order CRTC 2010-168, 22 March 2010. 80 A group-based approach to the licensing of private television services, Broadcasting Regulatory Policy CRTC 2010-167, paragraph 164, items 3(a), (b) and (c). 81 Addition of a general authorization permitting broadcasting distribution undertakings to distribute a local package, Broadcasting Regulatory Policy CRTC 2010-840, 10 November 2010. Appendix C 27 April 2011 Bell Canada - BNC 2010-783 - Comments Page 23 of 28 - 23 -
television licensees.82 However, TSN’s commitment was never reflected in a condition of licence, and the system has evolved considerably since that time.
75. The fact, as the Commission has noted, that Canadians have “steadily adopted a wide array of Internet-connected and multimedia-capable devices and … spending more time accessing broadcasting content over the Internet and through mobile devices”, has raised the siphoning question again.83 The CRTC’s 2009 update to the regulatory exemption (the “New Media Exemption”) for broadcasting that is delivered and accessed over the Internet or delivered point-to-point to a mobile device, conditioned continued exemption on complying with the following undue preference condition:
The undertaking does not give an undue preference to any person, including itself, or subject any person to an undue disadvantage. In any proceeding before the Commission, the burden of establishing that any preference or disadvantage is not undue is on the party that gives the preference or subjects the person to the disadvantage.84
76. The broadcasting exemption orders for Internet and point-to-point mobile had not previously been conditioned on undue preference. This condition was added in 2009 because of concerns over vertical integration:
The Commission considers … that the ownership structure within Canada’s wireless industry suggests that the potential for unduly preferential treatment needs to be addressed because the industry structure comprises vertically integrated companies with ownership interests in content providers. 85
77. For instance, the Commission offered the following as an example of undue preference in the new media context:
a new media broadcasting undertaking engaged in programming distribution that acquires content from an affiliated programming undertaking either to the exclusion of non-affiliated programming undertakings or on more favourable terms or conditions than those applicable to non-affiliated programming undertakings.86
78. The specific concern the Commission cited was not the ability of distribution platforms to access programming undertakings, nor the ability of those programming undertakings to access programs, however. Rather, the Commission’s concern was that programming services and channels be able to access platforms and, through them, audiences:
[T]he Commission notes that closed services are the norm in advance of greater mainstream adoption of more sophisticated devices. As such, the process of selecting content for those services must not subject unaffiliated
82 Action Canada Sports Network, Decision CRTC 84-339, 2 April 1984. 83 Broadcasting Regulatory Policy CRTC 2009-329, supra note 2, paragraph 11. 84 Broadcasting Order CRTC 2009-660, supra note 1, Appendix. 85 Broadcasting Regulatory Policy CRTC 2009-329, supra note 2, paragraph 59. 86 Ibid., paragraph 64. Appendix C 27 April 2011 Bell Canada - BNC 2010-783 - Comments Page 24 of 28 - 24 -
programming undertakings to undue disadvantage with respect to reaching mobile audiences.87
79. In its final submission in the more recent Shaw-Canwest proceeding, TELUS sought to build a bridge between the Commission’s concern with channels’ ability to access platforms, and TELUS’ concern with platforms’ ability to access channels:
The issue of access and the need to limit market power was addressed in terms of undue preference in the CRTC New Media policy review of 2009 and the blocking of access to platform[s] was set out by the CRTC as one example of the extension of undue preference to new media. Similarly the denial of content from Canadian broadcasters or distributors to any platform raises the same issues that have clearly prohibited it in a linear world.88
80. However, as the Commission stated in implementing the undue preference condition,
The Commission further notes that the wording of the undue preference provision is similar to that found in other broadcast regulations, and that the latter have not interfered on traditional platforms with the sorts of exclusive distribution agreements parties expressed a desire to protect.89
81. Because program exclusivity within a platform is the sort of exclusive distribution arrangement that parties have typically expressed a desire to protect, policy concerns more likely relate to platform exclusivity. In fact, recent policy concerns relating to exclusivity have been framed with respect to platforms. For instance, the Commission recently stated the following in its decision on BCE Inc.’s acquisition of CTVglobemedia Inc:
The availability of content on multiple platforms (television, wireless, Internet, tablets, etc.) in an environment where some companies control several of these platforms raises potential concerns about the exclusivity of content.90
82. At the same time, the Commission imposed the following provisional restriction on both Bell Canada and on Shaw Communications:
Until the Commission implements its determinations in the vertical integration proceeding, BCE is prohibited from entering into new exclusive programming agreements that would prevent it from making available to its competitors, on commercial terms, mobile and broadband rights to television programming from its conventional and specialty services.91
The Commission expects Shaw to fulfill its commitment to the principle of programming non-exclusivity by making available to its competitors, on
87 Ibid., paragraph 60, emphasis added. 88 TELUS Communications Company, Submission re: Broadcasting Notice of Public Hearing CRTC 2010- 498-4, 30 September 2010 (emphasis added). 89 Broadcasting Order CRTC 2009-660, supra note 1, paragraph 16 (emphasis added). 90 Broadcasting Decision CRTC 2011-163, supra note 4, paragraph 79. 91 Ibid., paragraph 83 (emphasis added). Appendix C 27 April 2011 Bell Canada - BNC 2010-783 - Comments Page 25 of 28 - 25 -
commercial terms, mobile and broadband rights to television programming from its OTA and specialty services.92
83. Similarly, after having studied the impacts of private television ownership changes and the move towards new view platforms, the Standing Committee on Canadian Heritage’s recommendation relating to exclusivity focused on ensuring “that taxpayer-supported content be available on as many distribution platforms as possible.”93
84. In this respect, it is useful to recall the approach taken to anti-siphoning rules in jurisdictions which have not been in a position to rely on a single platform to reach a substantial portion of their populations. Article 14(1) of the European Union Audiovisual Media Services Directive, noted earlier and which is the most recent restatement of the European anti- siphoning framework, states:
Each Member State may take measures in accordance with Union law to ensure that broadcasters under its jurisdiction do not broadcast on an exclusive basis events which are regarded by that Member State as being of major importance for society in such a way as to deprive a substantial proportion of the public in that Member State of the possibility of following such events by live coverage or deferred coverage on free television. If it does so, the Member State concerned shall draw up a list of designated events, national or non-national, which it considers to be of major importance for society. It shall do so in a clear and transparent manner in due time. In so doing the Member State concerned shall also determine whether these events should be available by whole or partial live coverage or, where necessary or appropriate for objective reasons in the public interest, whole or partial deferred coverage.94
85. This approach thus contemplates measures to ensure that clearly-identified “designated events” that are “of major importance for society” be available either live, or by deferred coverage, using the mode of television (free-to-air) that is most widely available in European Union jurisdictions. The designation “of major importance for society” has been interpreted by the European Commission as requiring at least two of the following four criteria to be met:
(i) a special general resonance within the Member State, and not simply a significance to those who ordinarily follow the sport or activity concerned;
92 Broadcasting Decision CRTC 2010-782, supra note 4, paragraph 89 (emphasis added). 93 Canada, House of Commons, Standing Committee on Canadian Heritage, 40th Parl., 3rd Sess., Impacts of Private Television Ownership and the Move towards New Viewing Platforms, Report (Ottawa: Speaker of the House of Commons, 2011), page 12 (emphasis added). 94 Directive 2010/13/EU on the coordination of certain provisions laid down by law, regulation or administrative action in Member States concerning the provision of audiovisual media services, L 95/1, 10 March 2010 (emphasis added). An additional provision regarding “short news reports”, at Article 15, provides for media service providers with exclusive licences for certain newsworthy events to give linear general news programme providers access to the events’ footage in order to choose and air short extracts. The general news programmes obtaining the short news reports can be required to acknowledge their source and to compensate the costs directly incurred in providing access to the short extract. Appendix C 27 April 2011 Bell Canada - BNC 2010-783 - Comments Page 26 of 28 - 26 -
(ii) a generally recognised, distinct cultural importance for the population in the Member State, in particular as a catalyst of cultural identity;
(iii) involvement of the national team in the event concerned in the context of a competition or tournament of international importance;
(iv) the fact that the event has traditionally been broadcast on free television and has commanded large television audiences.95
86. In the U.K., for instance, the Broadcasting Act and Ofcom Code on Sports and Other Listed and Designated Events provide for the Secretary of State to designate events as “Group A” or “Group B” events:
Live coverage of Group A events must be made available to all “qualifying broadcasters”, which are those who reach 95 percent of the population over the air.
Exclusive live coverage of Group B events is permitted for subscription television, but only where highlights are available from a qualifying broadcaster.
87. In 2009 the United Kingdom Department for Culture, Media and Sport initiated a consultation on whether it should be revised in light of changes in the media environment. However, in 2010 it decided to defer the review until 2013 in order to give the United Kingdom’s “Digital Switchover”, ending in 2012, time to take hold, particularly as it was expected to result in the “widespread availability of a significantly increased number of television channels.”96
88. Similarly Australia, though not subject to the jurisdiction of the European Union, has since 1994 had a similar approach to the U.K.’s in place. The Australian scheme was updated in 2009 and 2010, as “the scope and nature of television broadcasting in Australia ha[d] changed substantially.”97 At the time, subscription television in Australia continued to be limited to only 34% of households. The resulting report recommended listing a “Tier A”, for “nationally iconic” events, and “Tier B”, for “regionally iconic” and “nationally significant” events: 98
New media services that are not affiliated with over-the-air services cannot buy or pre-empt exclusive rights in Tier A or B programming.
Subscription television services not affiliated with over-the-air services cannot buy or pre-empt the purchase of television rights in Tier A or B programming until 26 weeks
95 See, for instance, Commission Decision of 25 June 2007 on the compatibility with Community law of measures taken by Italy pursuant to Article 3a(1) of Council Directive 89/552/EEC on the coordination of certain provisions laid down by law, regulation or administrative action in Member States concerning the pursuit of television broadcasting activities, 2007/475/EC. 96 “Decision on Free-to-Air Listed Events deferred until 2013”, DCMS press release, 21 July 2010. 97 Australian Government, Department of Broadband, Communications and the Digital Economy, Sport on television: A review of the anti-siphoning scheme in the contemporary digital environment, Discussion paper, August 2009. 98 Australian Government, Department of Broadband, Communications and the Digital Economy, Sport on television: A review of the anti-siphoning scheme in the contemporary digital environment—Review Report, November 2010. Appendix C 27 April 2011 Bell Canada - BNC 2010-783 - Comments Page 27 of 28 - 27 -
before the event.
If the programming is Tier A programming, then an over-the-air broadcaster that had bought the rights during the pre-26-week period must exhibit the event in full and live on its main channel to at least 50 percent of the national audience
If the programming is Tier B programming, then an over-the-air broadcaster that had bought the rights during the pre-26-week period must exhibit the event in full and live on a digital multiplex channel, or else within four hours on its main channel, to at least 50 percent of the national audience
If the broadcaster determines that it will not be able to use the programming in this way, it may offer it to another OTA service or, if there is no taker, to a subscription service.
89. Anti-siphoning regimes are clearly complex, and grow more so as the number of platforms in use simultaneously increases. Unlike regulatory responses to those forms of exclusivity which will have a material impact on competition, anti-siphoning regimes have sought to respond to an additional concern—ensuring that content that is of major importance to society reaches a substantial proportion of the citizenry. To do this, anti-siphoning regimes such as Australia’s and the United Kingdom’s have been required to do two things. They have had to designate which content meets the threshold of importance such that its availability should be guaranteed even where platform exclusivity in it would not have a material impact on competition. They have then had to regulate the rights market in order to make such content sufficiently available without impairing platform competition beyond what is required to achieve this purpose.
90. Despite their complexity, and notwithstanding the identification of the over-the-air platform, anti-siphoning regimes are relatively platform-agnostic in that they function from the standpoint of viewers, seeking to ensure that most citizens have access to the designated programming. So, too, has the Canadian approach linked the contributions that programming services make to achieving the goals of the Broadcasting Act with their availability across competing BDU platforms to Canadian viewers. In the Canadian context, and in light of high BDU penetration, the Commission has balanced access to content with platform competition through the rules it has established within the BDU platform. It has especially done so through the tiered scheme which establishes basic, Category A, B, C and exempt services in relation to the contributions these services are required to make, through licence commitments and genre restrictions, to the achievement of the objectives of the Broadcasting Act.
91. Having thus created a system of incentives for third-party services to create and designate content that is of importance to society, rather than designating such content directly, the Commission has regulated the terms of platform access, and temporary disruptions, to these services, in order to further the broadcast policy goal of making content of major social importance widely available. At the same time the Commission has pursued a second broadcast policy goal, avoiding adverse impacts to competition, by applying anti- exclusivity provisions case-by-case to transactional services offering blockbuster content. As more audiovisual content is made available and accessed through other platforms, the Commission has revisited how it balances enabling platform competition with achieving these policy goals. The goals themselves, however, have not changed. Some of the Appendix C 27 April 2011 Bell Canada - BNC 2010-783 - Comments Page 28 of 28 - 28 -
techniques or lessons of the past outlined in this report may therefore be relevant in this evolving environment.