Chasing Asper: The CRTC’s Changing Stance on Convergence Through the Evolution of the Canadian Media Industry
Chris Hope
Communications Law
December 2002
Osgoode Hall Law School York University
Table of Contents
Introduction………………………………………………………………………………. 1
The Canadian State of Convergence
i) Opening the Door to Global Domination……………………………………….. 2
ii) Beyond Global………………………………………………………………….. 7
Balancing Act – The CRTC’s Contemporary Mandate Interpretation
iii) The Struggle for Diversity and Viability………………………………………. 8
iv) Internal Politics at the Flashpoint of Convergence……………………………. 11
At the Heart of Regulatory Power
v) The CRTC Defends its Jurisdiction……………………………………………. 12
Projecting the Future
vi) New Objectives from the Chair……………………………………………….. 15
vii) Future Limits and Natural Boundaries……………………………………….. 17
Conclusion……………………………………………………………………………….. 19
ii Chasing Asper: The CRTC’s Changing Stance on Convergence Through the
Evolution of the Canadian Media Industry
Introduction
The millennium marked the beginning of an era of unprecedented change and expansion in the Canadian media industry. The government has struggled to maintain its regulatory composure through the process. For its part in reporting the change and the implications of the concentration of the powers of the very entities processing their paycheques, the Canadian media has portrayed the range of issues in the convergence debate with often questionable accuracy and in many cases an overtly owner-tailored bias. As a result, many paper-reading media-savvy Canadians have yet to receive a truly objective picture of the facets of convergence.
This paper does not strive to address the process and effects of convergence in its entirety, for that is the domain of lengthy books. Instead, it attempts to provide a detailed examination of the
CRTC’s interactions and responses to media conglomerates on a number of specific issues of convergence, with the goal of objectively determining the Commission’s present and projected future stance on the issues of convergence within its regulatory powers. While I have consulted a number of media sources through personal contact, interviews and standard research, I have attempted to check and – where possible - cross-reference the material they presented.
To begin, this paper traces the recent evolution of the CRTC with a particular focus on its attempts to address public policy concerns raised by the concentration of media ownership. For this purpose I will focus on the application, the decision, and the results of the decision that “kicked the doors open”1 to modern convergence – CanWest/Global.2 The context of Global is essential for a complete understanding of the reasoning behind the CRTC’s apparent shift in values that appeared
1 Morrison, I., Personal Communication; Friends of Canadian Broadcasting Office, Toronto; November 6, 2002. 2 Broadcasting Decision CRTC 2000-221[hereinafter Global]
1 to coincide with this decision. It occurred at a time of inner turmoil for the commission, in a period through which a number of decisions appeared to bring the free-market aspect of the CRTC’s philosophy to the forefront of its reasoning. The appointment of Charles Dalfen as Chair in
November 2001 and his subsequent reorganization of the Commission itself appears to have somewhat solidified the CRTC’s thinking in favour of market economics over even minimal regulation in concentrated media ownership, yet Dalfen’s comments from as recently as November
6, 20023 suggest that the CRTC may yet reconsider the aggressive market stance it has embraced for the past two years. With reference to recent decisions and the current CRTC/Competition Bureau jurisdictional dispute, I will attempt to determine the role the CRTC intends to take in the new world of converged media. This will include an investigation of the CRTC’s recent regulatory tendencies in dealing with converged media operators and the limits of the CRTC’s power to assist the industry with reference to its core mandate of maintaining and promoting Canadian values and diversity. Finally, I will address the present commission’s apparent operational paradox of attempting to foster both local independent voices and a strong national industry in an attempt to project the direction of the CRTC beyond convergence.
The Canadian State of Convergence: i) Opening the Door to Global Domination
On January 9, 2000 the first – and largest convergence deal in history was struck in the U.S. between America Online and Time Warner.4 It marked the first time that print, music, broadcast, broadcast content, cable networks, and major internet services would come under the jurisdiction of one corporate governor.
3 See Evans, Mark. “Canadian Telco Duopoly Unacceptable” The National Post (6th November 2002) 4 Cribb, Robert. “AOL Time/Warner Merger Means Changes for Canada” The Toronto Star (10th January 2000)
2 In Canada, the CRTC operated in a state of flux. Due more to internal political turmoil5 then a lack of functional power, the CRTC acted under the direction of an interim chair, awaiting a much anticipated overhaul of its operations. It was through this structure that convergence would burst into Canada.
In the early spring of 2000, the CRTC deliberated on the Can-West/Global bid to take over
Western International Communications.6 WIC’s holdings included the key regions of Hamilton and
Victoria – both already subject to existing CanWest Global television operations. The application clearly contradicted the CRTC’s “Policy Framework for Television”7 released only months before which stated:
The Commission will continue its current policy which generally permits ownership of no more that one over- the-air television station in one language in a given market. This policy ensures the diversity of voices in a given market, and helps to maintain competition in each market.
According to the Commission’s notes on approval, the decision to allow CanWest to operate two stations in the same market hinged on Global’s credibility to uphold its promises to create a significant proportion of high-quality local programming that would represent the interests of the communities serviced by the stations, without encroaching into the existing markets. Global’s credibility is incongruous to the reverence paid it by the CRTC. Previously referred to in the industry as “the loveboat network” for its proliferation of mediocre American content8, Global had a less-than-exemplary record of CRTC condition compliance in its previous undertakings. Although this record improved over the course of the late 1980’s9, the CRTC had recently penalized the network for failing in its provision of local news for the Vancouver and Courtenay B.C. markets warning:
5 Fraser, M., Personal Communication; Ryerson University, Toronto; November 27, 2002. 6 Broadcast Decision CRTC 2000-70 [hereinafter WIC] 7 Public Notice CRTC 1999-97 [hereinafter broadcasting policy 1999] 8 Pitts, Gordon. Kings of Convergence – The Fight for Control of Canada’s Media (Toronto: Doubleday of Canada Ltd., 2002) 54. 9 See Broadcasting Decisions CRTC 1986-1086, 1989-113.
3 The Commission attaches great importance to the commitments made by licensees of private television stations to local news. The licensee's failure to meet its commitments to local news during the current licence term is the reason that the Commission has, by majority vote, granted CKVU-TV a short-term licence renewal.10
Under normal circumstances this alone would have been enough to limit favour from the
Commission. Regardless, on the take-over of WIC the CRTC commented:
The Commission must also acknowledge the costs of providing such local service in the communities concerned and, in this context, has taken into account Can-west Global’s ability to deliver on its commitments to increase substantially the amount of local programming aired on these two stations. Further, it has considered CanWest Global’s commitment, through adherence to a Code of Conduct and other measures, to provide diversity by ensuring that the services offered by CHCH-TV and CHEK-TV remain distinctive and clearly distinguishable from the services provided by CIII-TV in Ontario and CHAN-TV in the Vancouver area.
With this decision in its favour, CanWest was permitted unprecedented permission to own
two stations serving a single market in a single language. Immediately following the decision
CanWest owner and president Izzy Asper commented:
“We are attempting to become the major player in Canada in terms of news… Now that Can-west has cleared up its long-running battle to take over WIC it’s free to grow in other directions… We now believe that convergence is the path to the future. It’s inevitable. [CanWest] will have to look at anything that sells advertising, including radio, cable, internet, billboards and newspapers.”11
Turning to section 21 of the broadcasting policy 1999, Asper’s comment must have caused the
CRTC to shudder:
In the past, the Commission has examined problems arising from vertical integration on a case-by-case basis, when considering applications for new services or for transfers of ownership or control involving broadcasters and independent production companies. The Commission acknowledges that the potential for preferential treatment exists in such cases, yet remains of the view that vertical integration can lead to benefits, such as cost savings and increased efficiencies. Appropriate safeguards, where required, will be applied on a case-by-case basis.
When CanWest purchased Hollinger less then a month later, the CRTC’s opportunity for the application of “appropriate safeguards” to Global had long passed.
On the unveiling of the acquisition of the national newspaper chain, newly appointed
CanWest CEO Leonard Asper exalted in the revenue increases for the new company that would
10 Broadcasting Decision CRTC 1995-106 11 See Scoffield, Heather. “TV World Faces Shake-out as Third Network Okayed” The Globe and Mail (7th July 2000)
4 result from selling bundled advertising packages, streamlining combined news media operations, and possibly multi-tasking journalists to serve both print and broadcast media. In his words:
“It just seems like we have so many toys in our sandbox – that’s what it feels like, or to use a military analogy, we really feel like we have a navy and airforce and artillery. When you need one you always have it – you can either have a concerted attack, of if necessary, an air attack only.”12
Was the CRTC made aware of this plan before approving CanWest’s broadcast licences for WIC?
A review of the submission material for the bid reveals a strategic focus on CanWest’s commitments to the standard tenets of the CRTC in the application: Canadian content, local programming, diversity programming, and non-interference with existing market, but never, even in
CanWest’s bid to offer more comprehensive news coverage does CanWest make reference to the intention to acquire other media assets to provide that content. Asper himself notes that he hand- wrote the purchase agreement at his cottage to insure the utmost security for the agreement until it was signed.13
Regardless of the sum of his motives for secrecy in the acquisition of Hollinger, Asper’s intentions of cross-media ownership were nothing if not well known to the industry. It is improbable that the CRTC could have simply overlooked the fact that Asper has not only publicly maintained his intention to establish large-scale broadcast and print networks through his career, but he has engaged in a number of high-profile failed attempts at acquisition. In the late 1970’s Asper put forth a viable bid to take over the FP Publications Group chain of newspapers only to see the deal rejected by his own board14 and he continued high profile print media acquisition attempts into the early 1980’s without success. Regardless, at the time of the CanWest decision, this record could only have served as a blunt warning to the CRTC of an active desire for things to come.
12 See Pitts, Gordon. Kings of Convergence – The Fight for Control of Canada’s Media (Toronto: Doubleday of Canada Ltd., 2002) 151. 13 Ibid. at 145. 14 Asper takes pride in his past attempts as he boasted to media critic Matthew Fraser in an early 2002 i - Channel television interview, I On Media with Matthew Fraser (i–Channel broadcast, February 13, 2002). Transcript available at:
5 It is purely ironic that CanWest’s 2000 application was ultimately approved on the promise of diversity of voices and representation in the media as Asper was on the verge of acquiring - this time successfully - a significant percentage of the Canadian news media. By putting the new media empire under a single head of power, Asper single-handedly destroyed the context for the very claim of diversity the CRTC was so eager to focus on in the Global application:
On balance, the Commission is satisfied that these outcomes, coupled with the application of certain conditions, safeguards and expectations intended to minimize the potential for undue competitive advantage and increase diversity, outweigh the Commission’s policy concerns associated with the common ownership of like undertakings in the same market.
CanWest, for the benefit of the CRTC maintains the claim that the services of the existing network and the newly acquired stations are fundamentally different in their programming targets and demographic reach. However, the technical fact remains that CHCH in Hamilton overlaps the existing Global service to reach all of Ontario while it’s operating partner CHEK in Victoria, reaches across Vancouver – two of the largest television markets in Canada. When reporting to their other regulator – that is CanWest shareholders, the company takes a different approach to defining the “distinctiveness” of their separate services, proudly referring to them as assets in the
CanWest model of convergence that is “essentially one of horizontal integration .”15
Global clearly marked the success of a calculated circumvention of the CRTC’s intention to regulate large conglomerates for adherence to its policy objectives through licence approval. Critics agree that CanWest would not have been granted the overlapping television licences if considered on the basis of the pending acquisition.16 Indeed, had the CRTC included as a condition of licence that Global’s licences for the two networks were contingent on the fact that CanWest was not to proceed with further media acquisitions, the degree of Global’s television concentration could have
15
6 effectively been curbed.17 Yet, when all factors are considered in the current phase of the CRTC’s interpretation of its regulatory goals - even if the “benefits” of planned convergence were prominently declared as an aspect of the application – there is a strong probability that the “new” commission would have approved it.
ii) Beyond Global
Through a combination of Global-as-precedent and the CRTC’s belief in the value of promises for industry leading Cancon programming from media conglomerates large enough to pay for it, within a period of months converged media players swept the industry. Bell Globemedia and
Quebecor quickly filled the newly perceived convergence vacuum, and over a series of closely timed broadcast decisions, the CRTC’s evolving perspective on the benefits and perils of massive ownership became apparent.
Following Global the Commission clearly intended to preclude the same form of regulatory circumvention. In the next decision involving the possibility of convergence the commission addressed the potential of cross-media ownership as a factor before awarding licences for the former CTV network to new owner BCE:
The Commission notes that, prior to the hearing, reports appeared in the press about plans by BCE to purchase The Globe and Mail and certain other newspaper assets from Thompson Canada Limited. These reports have prompted questions about a potential reduction in diversity of editorial voices arising from media cross- ownership. Such questions are also raised by the recent sale of certain Canadian daily newspapers by Hollinger Inc. to CanWest Global Communications Corp., and the proposed purchase of the TVA television network by the newspaper publisher Quebecor Inc.18
While BCE marked the entrance of the second converged player into the broadcasting industry, it also marked the CRTC’s tightening of regulations regarding the nature of BCE’s internal relationships through structural separation clauses.
17 Supra note 1. 18 Broadcasting Decision CRTC 200-747 [hereinafter BCE]
7 The third broadcast decision of convergence following Global suggests a progressive reluctance on the part of the CRTC to be perceived to be relinquishing any of its regulatory power – even with the consideration of voluntary codes of conduct suggested by applicants. On the purchase of the TVA network by newspaper and cable service owner Quebecor the commission recalled the primary objectives of its mandate in the face of convergence stating:
The application to transfer control of TVA raised certain concerns regarding ownership, especially cross- ownership, and its potential impact on TVA’s editorial independence and the diversity of voices in Quebec. In the context of complex transactions with wide ramifications, such as the current case, the Commission must ensure that its regulation of broadcasting undertakings complies with the Canadian broadcasting policy objects set out in section 3 of the Broadcasting Act… which deal with the strengthening of the Canadian fabric, development of Canadian expression, as well as the broadcast of a wide diversity of opinion.19
When the dust settles on the three largest convergence deals in Canadian history to date, the question remains as to what the CRTC will take from the experience to apply for the future achievement of its goals in the converged broadcasting industry. To project this, an analysis of the context of the era through which the CRTC took - what some critics call - a “radically different direction”20 is necessary.
Balancing Act - The CRTC’s Contemporary Mandate Interpretation: iii) The Struggle for Diversity and Viability
The CRTC has traditionally addressed conglomerate media ownership with caution. This appears to flow from the Commission’s desire to protect Canadian viewers from an industry sweep of the middle of the market phenomena21, and to encourage the provision of service to the fringes of the Canadian market. This desire appears to be loosely based on Section 3(1)(d)(ii) of the
Broadcasting Act which states:
19 Broadcasting Decision CRTC 2001-384 [hereinafter Quebecor] 20 Cobb, Chris. “Industry Lawyer to be Named CRTC Chairman” The Ottawa Citizen (28th November 2001) 21 Salter, Liora. Class Lecture; Osgoode Hall Law School of York University (Communications Law), Toronto; September 25, 2002.
8 It is hereby declared that the broadcasting policy for Canada that the Canadian broadcasting system should encourage the development of Canadian expression by providing a wide range of programming that reflects Canadian attitudes, opinions, ideas, values, and artistic creativity, by displaying Canadian talent in entertainment programming and by offering information and analysis concerning Canada and other countries from a Canadian point of view.
It appears that the CRTC has chosen to interpret this section strictly with the assumption that ownership concentration invariably results in the eroding of the “reflection” of diversity in programming. At times, this belief has occasionally led to internal conflict in CRTC rulings, where the commission has attempted – with varying degrees of success to balance the insurance of diversity with the funds necessary to implement it.
Two related decisions best demonstrating the opposite ends of the spectrum of the CRTC’s reasoning with regard to local representation vs. stability of scale are both with reference to Rogers ethnic television applications. Both are recent and both remain the subject of significant industry criticism.22 The first of the two, referred to as the Multivan decision23 gives evidence of the CRTC opting for local ownership for its prospects of local representation over virtually all other promises.
Rogers Broadcasting, although considered to have put forth an extremely strong application24, was denied on the basis of the non-local geographic location of its operation.25 On the other hand, the recent Rogers CFMT Too (now referred to as Omni 2) decision26 provides evidence of the opposite end of the local operation vs. heavy potential for capital investment scale. In the Rogers decision, the CRTC expressed reluctance in awarding a licence for a second television undertaking in the
Toronto market because of the one-station-per-owner-per-market27 rule, but ultimately rationalized the decision on a promise of rigid adherence to a reflection of local issues and concerns within
22 see Fraser, Matthew. “Ted Rogers, another skater who wuz robbed of his prize – CRTC displays bias in awarding ethnic broadcast licences” The National Post (18th February 2002), and Tuck, Simon. “Under new leader, CRTC faces old criticisms – Regulator seen to still favour established broadcasters” The Globe and Mail (19th April 2002) 23 Broadcasting Decision CRTC 2002-39 [hereinafter Multivan] 24 Supra note 22. 25 In addition, the statement of the majority in this decision strongly suggests that the ethnicity of the owners of the competing applicants was largely a factor in the awarding of the licence. This caused an extreme opposition by dissenting commissioners. (Further commented on in this paper in the section marked “New Objectives”).
9 ethnic communities28 due to the viability of Rogers’ significant financial commitments owing to the
economics of scale:
The Commission is further of the opinion that Rogers’ financial commitments over and above normal programming expenses will have a significant and positive effect upon the provision of original Canadian ethnic programming. It notes in particular that the Rogers’ funding initiative will contribute to a strengthened independent ethnic production industry, given the lack of funding currently available to producers of ethnic programming.
In this case, the allowance of a degree of market concentration was allowed to diversify the market,
marking a shift from the CRTC’s belief in independent ownership resulting in better fringe
representation as stated in Multivan.
The extent of the CRTC’s changing flexibility on ownership is also apparent in its dealings with CanWest. In 1997 CanWest was denied in a licence application for Vancouver Television
Inc.29 on the basis of the CRTC’s one station rule:
Central to the commission’s concern is that the approval of CanWest’s application would provide that company with ownership of two English-language television undertakings whose services would both be broadly available in the Vancouver extended market. This would be contrary to the Commission’s long- established policy against the common ownership of two undertakings in the same class, operating in the same language and serving the same market.
Although CanWest put forth an application emphasizing virtually the same goals as those approved
in Global three years later, this application was flatly rejected. The prevention of future market
concentration was clearly at the heart of the 1997 decision, with the commission expressing
reticence at facing a possible erosion of its credibility in preventing future concentration after
previously licensing two (then) WIC affiliates in the same market, CHAN and CHEK30:
The Commission is concerned that approval of CanWest’s application as filed, would convert the policy exception into a virtual rule in that market. Such a decision could lead to any future applicant seeking an application for an undertaking providing a new, conventional television service in the Vancouver area to expect the same concessions as those proposed by CanWest for itself concerning the operation of two stations in the same market… Moreover in the commission’s view, the historical rationale supporting WIC’s ownership of television stations in each of Vancouver and Victoria does not apply in the case of CanWest.
26 Broadcasting Decision CRTC 2002-82 [hereinafter Rogers] 27 [hereinafter one station] 28 As stated to be a priority under the CRTC’s Ethnic Broadcasting Policy; Public Notice CRTC 1999-117. 29 Broadcasting Decision CRTC 1997-39 30 Broadcasting Decision CRTC 1995-99
10 Had the commission relaxed the one station rule and allowed Global dual access in 1997, convergence would likely be operating to a far greater extent at the present in the Canadian media industry and concerns of local representation would likely take even greater regulatory precedence.
iv) Internal Politics at the Flashpoint of Convergence
While the Canadian media marketplace has evolved and re-defined itself over the past three years, so too has the CRTC.
As the year 2000 drew to a close the internal workings of the CRTC were in need of attention. Although over the course of her mandate then-Chair Françoise Bertrand brought new direction to the commission with progressive initiatives such as the “From Vision to Results at the
CRTC”, an attempt to increase public input into CRTC processes,31 the millennium saw a CRTC so divided it could at times be fairly be analogized to a hung jury. In the process of publishing “some of the worst broadcast decisions ever,”32 Minority reports appeared with alarming frequency, containing strong language at times questioning the very principles on which decisions were hinged.
In the words of Commissioner Stuart Langford in 1999:
Fairness is not always easy to define. For instance, it does not necessarily mean equal treatment. But it can mean that and the Commission has in the recent past given it precisely such an interpretation… to subject HGTV's application for a wholesale rate to a completely different test of appropriateness from that used in considering the other 1996 applicants can be seen as, "inconsistent with fair and equitable treatment." Yet, that is precisely what has happened...33
With six months left in her term as Chair, Françoise Bertrand accepted a position in the private sector and left the CRTC.
Although some critics claim that interim Chair David Colville radically changed the
CRTC’s direction34, evidence of his regulatory goals for the CRTC does not bear this out. While it
31 < http://www.crtc.gc.ca/eng/BACKGRND/VIS9805.HTM> (last accessed November 28, 2002) 32 See Zerbisias, Antonia. “CRTC Betrays Its Own Principles and Viewers” The Toronto Star (9th April 2002) 33 Broadcasting Decision CRTC 1999-454 34 Supra note 20.
11 may be said that the latter days of Bertrand’s tenure as Chair saw the operations of the commission mired in internal political struggles35, both Bertrand and Colville shared a vision of the CRTC as a regulator acting only when necessary to sustain a viable market.36
In the end, perhaps Colville was somewhat more plainly spoken in his goals. The decisions following his acceptance of the interim post demonstrate that his thinking was pervasive in the commission. Colville would oversee the controversial CanWest, Bell Globemedia, and Quebecor decisions - permitting the rapid wave of convergence in the name of overall Canadian market viability. It would be Colville who would take the mixed blessing of being remembered as the
‘temporary Chair’ under whom the Canadian media landscape completely evolved over the course of a few months.
Charles Dalfen took over as the official chair in November of 2001, and at least initially appeared to share David Colville’s vision of the CRTC. It seems as if Colville’s drastic legacy from his brief filling-in period may only now begin to evolve in practice, as Dalfen gains experience with his revised version of the CRTC through decision processes.
At the Heart of Regulatory Power: v) The CRTC Defends its Jurisdiction
While the notion of the CRTC’s obsession of where the control lies in networks and the broadcast industry appears in many cases to have been subjectively taken by the Commission to refer to the issue of concentration of ownership, reality dictates that the roots for the sentiment come
35 Supra note 5. 36 For Colville see Pitts, Gordon. “Outgoing CRTC head says successor will need thick skin to deflect critics”, The Globe and Mail, July 9, 2001. For Bertrand see Supra note 31 (which states as a goal for the CRTC to “rely more on market forces to permit fair and sustainable competition”)
12 from a purely pro-national statement for ownership. This is clearly the only function articulated in s.3(1)(a) of the Broadcasting Act which states merely:
The Canadian Broadcasting system shall be effectively owned and controlled by Canadians.
The extent of a single national owner’s holdings is not and never has been an explicitly mandated regulatory jurisdiction of the CRTC. Although the Commission has attempted to enforce structural separation in the licences of converged media owners, both Global and BCE have recently threatened constitutional challenges on the basis of separation clauses being tantamount to the denial of their free speech as principals in corporations. As tenuous as this argument appears in the face of the potential subjugation of the entire workforces of organizations to protect the owner’s right, the CRTC has taken the charge seriously and has backed away from the enforcement of its rigid separation clauses. Instead the commission is now prepared to approve far weaker self- generated voluntary “commitments” in the licence renewal process.37
Yet, in the face of this apparent capitulation the CRTC appears more than ever poised to regulate – or not regulate as it sees fit – all issues regarding both consumer and industry protection stemming from the convergence of media.38
In this respect the commission finds itself at direct loggerheads with Competition Bureau head Konrad Von Finckenstein, who sees the corporate aspect of regulatory protection as falling within the exclusive domain of the Bureau. The CRTC’s assertion of jurisdiction in this area illustrates that it is now seeking to solidify intrinsic powers of governance for the entire broadcasting system. At the consumer level the CRTC seeks to allow market forces to operate, taking action only where necessary to insure that Canadian viewers are given clear access to the
37 Broadcasting Decision CRTC 2001-458; See also Zerbisias, Antonia. “Networks Balk at New Rules for Licences” The Toronto Star (26 April 2001)
13 system, while at the industry level the CRTC appears to be challenging the mandate of the Bureau to protect media players from each other.
This is a clear indication of the direction of the CRTC from a structural and division of powers analysis under Charles Dalfen, the commission’s present chair. Dalfen is currently completing the process of “setting a new agenda for the priorities of the commission”39 which it appears includes the attempt at the branching out of the accepted powers – much to the chagrin of
Von Finckenstein. To this end in a defensive move the Competition Bureau recently counter- challenged the jurisdiction of the CRTC before the Heritage Committee citing that it should be determined that the legal regulation of the Competition Bureau and not the cultural regulation of the
CRTC should be embraced as the viable model of regulation for the future. In his submissions on behalf of the Bureau Von Finckenstein stated:
The current regulatory model is not sustainable in the evolving communications environment. The Bureau expects that, within the next five to ten years, the system will experience substantial pressure as the result of potential North Americanization of the television rights market, the advent of online broadband technologies delivering non-Canadian programming into Canada on an unregulated basis, the increasing popularity of new media technologies and services, and the ongoing fragmentation and possible reduction of broadcasting viewership.40
Regardless of the outcome of the Heritage Committee’s report on where the jurisdiction should lie, the CRTC and the Competition Bureau will still face a fundamental constitutional challenge stemming from the fact that - even on an exceedingly restrictive reading of the
Constitution:
A) Through the powers enumerated under s.92, regulation of the print industry remains under the exclusive jurisdictional domain of the provinces.
B) Under the Broadcasting Act the CRTC has virtually limitless powers to regulate as broadly as it deems necessary to “regulate and supervise all aspects of the Canadian Broadcasting System”[my emphasis].
38 See Fraser, Matthew. “Bad News for Firms Cozy with CRTC – Policy Winds are Blowing in Favour of Competition Bureau” The National Post (27th May 2002) 39 Hyatt, Laurel. “Familiar face, different game – Charles Dalfen returns to the CRTC after a 22-year hiatus. He Faces a very different broadcasting world.” Broadcaster Magazine (April 2002) 40 Supra note 38.
14
Unless the Heritage Committee is prepared to amend the Constitution, the Competition Bureau and the CRTC will continue operating in their – at times overlapping - spheres of regulation.
The Heritage Committee has yet to table its decision, but it will no doubt provide an answer that will attempt to create consensus as to the distinct regulatory role of the Competition Bureau and the CRTC for the complicated future market of converged media.
With the reality that convergence is quickly becoming the norm in the broadcasting industry, the question arises - can the CRTC protect diversity of viewpoints and promote a strong industry through concentration? An analysis of the comments of commissioners and their actions since
Global suggests the CRTC – and specifically its current chair – believe this to be the delicate balance in the new regulatory role of the CRTC.
Projecting the Future: vi) New Objectives from the Chair
On the eve of the appointment of Charles Dalfen in November 2001, Ian Morrison, the
Director of the Friends of Canadian Broadcasting lauded him as a consensus builder with “a backbone of steel,” whose appointment would inevitably lead to a desperately required reformation of the CRTC. 41 Media watchers referred to Dalfen’s regulatory stance alternately as “pro- competition,” and “a believer in the need for government to protect consumers.”42 Dalfen’s first communication on accepting the position contained his personal definition of the function of the
CRTC:
As Canadians, do we want to be independent and, if we want to be independent, how do we insure that our institutions play a role in helping us preserving that independence? We’ve been asking ourselves these
41 “Toronto Telecommunications Lawyer Appointed New Chairman of CRTC” Canadian Press News Service (28th November 2001) (via Quicklaw) 42 Jack, Ian. “Lawyer Nominated to Head CRTC” The National Post (31st August 2002)
15 questions for more than 100 years and will continue to… The CRTC is right where the rubber hits the road on that issue and so it will get debated. But I look forward to the debate because it’s and absolutely vital one.43
A year after his appointment, no real precedents yet exist to suggest that Dalfen’s approach for the CRTC is a particular departure from the that of the interim chair, and it’s safe to say that
Dalfen’s talents for consensus have yet to reach the broadcast hearing committees of the CRTC.
Multivan clearly indicates that all is not yet well in the Commission – as stated by Commissioner
Cindy Grauer in her dissent to the decision:
I disagree with the view of the majority that local ethnic ownership should have been the determining factor in awarding this licence. While the majority’s position on ownership is clear, the foundation upon which it rests is difficult to identify. Neither the Broadcasting Act nor the Commission’s policies nor the Call for applications in the present proceeding attached any significance to local ownership. It is troubling to me that, in the current policy environment and given the criteria identified in the Call, the majority has chosen to base its decision on a previously unidentified factor.
As scathing as these comments appear, they are further supported by Commissioner Martha Wilson, suggesting that serious ideological divides continue into the “new” Commission.
It should be noted that potentially the most controversial decision of the year – the awarding of a Toronto licence to Craig Broadcasting over the Torstar group44 - was made with the distinct absence of the Chair. Dalfen excused himself from the decision due to fears of conflict of interest calls that could arise from his previous role as counsel in the preparation of the application. It’s interesting to note that, had the application been considered with Dalfen at the forefront, all things being equal, the Torstar bid would have likely been given more consideration then it received. The bid embodies a number of values that Dalfen highly values in the industry that were either passed on or discounted by the committee – among them being a strong financial backing necessary for the operation of high production value/high quality Canadian content.
Dalfen clearly believes that convergence is a tool for the overreaching mandate of the CRTC to nurture a strong Canadian broadcasting industry. For Dalfen, an industry containing large
43 See Zerbisias, Antonia. “New CRTC Head Determined to Raise Profile – Charles Dalfen Confident He Can Make a Difference.” The Toronto Star (29th November 2001)
16 vertically integrated players will not use their size and power to simply negotiate better deals with
American networks as some critics fear45, but instead will hold enough power in the market to serve nationally and compete internationally, both in business and in potential quality of production.
It appears however that Dalfen believes slightly less in the ability of industry players to self- regulate when contrasted with his immediate predecessor. While David Colville appeared to take a hands-off approach to regulation through the early convergence decisions, Dalfen appears to seek a fine and sustainable balance between the incorporation of Broadcasting Act derived safeguards and the maintenance of competition in the industry. When faced with the existance of a “duopoly” in the telecom industry in early November 2002, Dalfen stated that it was in the interest of Canadians to have a better choice between telecommunications carriers, advocating for “at least three” players in each market.46 When this market philosophy is transposed to broadcasting it suggests that Dalfen would allow the proliferation of converged networks provided the tenets of the Act were met and the Canadian public retained the choice between at least a handful of broadcasting networks.
vii) Future Limits and Natural Boundaries
According to Dr. Matthew Fraser, Professor of Communications at Ryerson University, the driving force behind media convergence is simply a desire among media players to protect their turf through cross-promotion.47 In the wake of Global, industry players have rushed to carve out significant niches of the market and like Global, it seems the next logical step in their expansion plans is to establish complimentary services – particularly in television – within the same market.
In its April 2000 application for a third licence to service the Toronto market in what would ultimately become the Craig decision, Global appears to be attempting to refer to its own dual
44 Broadcasting Decision CRTC 2002-81 [hereinafter Craig] 45 Zerbisias, Antonia. “So What is it the Aspers Want from Chrétien?” The Toronto Star (20th June 2002) 46 Supra note 3.
17 market entry as a precedent to push the multiple holding notion to a new level. Craig also marked
Alliance/Atlantis’ first attempt at a second holding through which to access the Toronto market.48
This obviously runs contrary to the CRTC’s one station rule, stemming from the commission’s concerns with the over-service of the middle of the market and the denial of access of the fringes. For the time being, applicants have little choice but to clearly differentiate service proposals for multiple services in the same market along the CRTC’s criteria of language as in the recent Rogers decision – or as the Global decision and subsequent further attempts appear to suggest – significant socio/economic/cultural diversity.
Yet in the face of this concern a novel theoretical argument persists for the creation of monopolies actually serving to further the CRTC’s mandate for diverse service in the case of concentrated ownership of multiple services in the same market.49 The argument, based on the
Beebe Model of Program Choice50 operates on the theory that competitors tend to duplicate and imitate programs, while unregulated monopolists tend to attempt to differentiate programming offerings to attract separate subsets in order to minimize self-competition. In the short term, this appears to be a viable and economical way for the CRTC to meets its service goals, and at first glance dismisses Dalfen’s concerns that intense concentration functionally narrows the choice of consumers within a given market.51 However, the Beebe Model fails to address the fact that in the absence of a higher standard of accounting for diversity, monopolies operating in the Canadian market would likely embrace the middle of the market, moving to subdivide the peak of the existing market to precisely target sub-groups of the within it. The inevitable result would be a complete non-servicing of the fringes. Granted, that even with the CRTC’s current strict approach of insuring
47 Fraser, Matthew. “Second Chance for Real Convergence” The National Post (19th August 2002) 48 Supra note 26. 49 Supra note 16. 50 Owen, Bruce and Steven Wildman. Video Economics. (Cambridge: Harvard University Press, 1992) 84. 51 As projected from Dalfen’s anti-duopoly telecom comments (Supra note 3.)
18 multiple single market ownership only on the condition of insuring diversity, the Canadian broadcasting system arguably fails to provide an equal quality of service beyond the main market, the service does exist, and it necessarily contributes to the overall quality of the broadcasting system.
In reality the economic return picture for servicing the fringes suggests “equal” service to be a utopian goal, and indeed the CRTC’s provisions for regulatory leniency on those providing it reflects this. Practically speaking, fringe service will likely never drastically improve from the quality level achieved under the current system.
Conclusion
Insuring diversity is absolutely essential in meeting the needs of the “Canadian Broadcasting
System” as set out in the Broadcasting Act for the benefit of all Canadians. Until more specific means of regulation are implemented to reach across the industries of convergence, the current
CRTC jurisdiction is the only cultural mandate that can be enforced against converged media operations. As the outcry against Izzy Asper’s controversial hands-on opinionated editorial style has shown in the operation of the Hollinger newspaper chain52, Canada has no protocol of regulation for its print media. Even with the pending Heritage Committee decision the CRTC is likely to be left in the uncomfortable position of attempting to solve the problems that arise from complete media groups, while only ever having the jurisdiction to regulate half of them.
In the wake of the regulatory battle that has resulted from the introduction of the CRTC to the phenomena of convergence, industry advisor Peter Grant foresees no future weakening of the
CRTC; and particularly not resulting from the Heritage Committee’s forthcoming review decision.
Although Grant suggests that perhaps the concerns arising from the concentration of media
19 ownership may be best addressed through the creation of a government agency with the specific
jurisdiction to approve mergers and acquisitions within the print-media industry, in his view, the
CRTC will retain a crucial regulatory role in the future of Canadian broadcasting:
The commission has never more important then today. Yes, it’s now supervising 160 television channels where it used to only supervise 3 or 4, but each of them has a distinct role to play. They all have unique economics, they all contribute in their own way to the objectives of the broadcasting act, and we have a unique problem in Canada being probably the most vulnerable country in the world just because of our proximity to the U.S. and the fact that we have permitted historically the U.S. 4 + 1 commercial and PBS signals to go into virtually every market in this country. And that has affected all kinds of issues of public policy and has made us uniquely vulnerable so we have to keep all of our tools available to try to address that. And I would argue that we have been, with some gaffes, surprisingly successful in the past twenty years.
Viewing the absolute evolution of the Broadcasting industry in the past twenty years against
Grant’s evaluation of the CRTC’s regulatory success, it would appear that the CRTC has succeeded in its mandate to remain “readily adaptable to scientific and technological change.”53 Although the
past three years have marked a number of departures from the traditional operation of the CRTC, a
look to the commission’s historical success suggests that these anomalies are merely part of a
pronounced step in the CRTC’s maturing process. Through a particularly radical period of re-
structuring in the Canadian broadcasting industry, the CRTC under Charles Dalfen is now on the
verge of clarifying its strategy to face the challenge of enforcing a timeless regulatory mandate in a
future of accelerated development.
52 Zerbisias, Antonia. “A Tricky Dance for Asper Journalists” The Toronto Star (26th September 2002) 53 Broadcasting Act, S.C. 1991, c.11 s.3(d)(iv)
20