Foreign Ownership, Television Broadcasting and Canadian Culture: an Appeal for Increased Liberalization of the Foreign Ownership Restrictions MONIQUE T. LAFONTAINE A thesis submitted to the Faculty of Graduate Studies in partial fulfilment of the requirements for the degree of Master of Laws Graduate Programme in Law York University North York, Ontario May 1999 National Library Bibliotheque nationale IN .canad du Canada Acquisitions and Acquisitions et Bibliographic Services services bibliographiques 395 Wellington Street 395, we Wellington OttawaON KtAON4 OttawaON KtAON4 Canada Canada Your 1V. Vatre mMnnar Our 61o Notre retbronte The author has granted a non- L'auteur a accorde une licence non exclusive licence allowing the exclusive pennettant a la National Library of Canada to Bibliotheque nationale du Canada de reproduce, loan, distribute or sell reproduke, pr$ter, distribuer ou copies of this thesis in microform, vendre des copies de cette these sous paper or electronic formats. la forme de microfiche/fd.m, de reproduction sur papier ou sur format electronique. The author retains ownership of the L'auteur conserve la propriete du copyright in this thesis. Neither the droit d'auteur qui protege cette these. thesis nor substantial extracts fiom it Ni la these ni des extraits substantiels may be printed or otherwise de celle-ci ne doivent Stre imprimes reproduced without the author' s ou autrement reproduits sans son permission. autorisation. Foreign Ownership. Television Broadcasting and Canadian Culture: A.Appeal for Increased Liberalization of the Foreign Ownership Restrictions Monique Laf'ontaine a thesis submitted to the Faculty of Graduate Studies of York University in partial fulfillment of the requirements for the degree of Master of Laws @ 1998 Permission has been granted to the LIBRARY OF YORK UNIVERSITY to lend or self copies of this thesis, to the NATIONAL LIBRARY OF CANADA to microfilm this thesis and to tend or sell copies of the film, and to UNIVERSITY MICROFILMS to publish an abstract of this thesis. The author reserves other publication rights, and neither the thesis nor extensive extracts from it may be printed or otherwise reproducedwithout the author's written permission. ABSTRACT The Canadian television broadcasting industry is currently at a cross-roads. This sector has changed exponentially over the past decade. Many new services, such as specialty programming services and pay television, as well as new methods of distribution, have entered the communications scene. There have also been a number of key trends, including glcbalization and techno logical advancements, that are affecting the television broadcasting industry and the CRTC's ability to regulate television. Moreover, as a result of these trends, the foreign ownership restrictions have and will likely continue to attract negative attention to the regulation of television broadcasting in Canada. This thesis reviews the history of the regulation of broadcasting in Canada, with a particular emphasis on the foreign ownership resmctions. It also discusses the challenges that a number of key trends are posing on the regulation of television. Finally, in tight of the changing communications environment, this thesis suggests that, while there continues to be a need for continued regulation, the federal government should consider relaxing the foreign ownership resmctions. ACKNOWLEDGEMENTS I would first like to thank Professors Mary Condon and Bill Angus for their assistance as Directors of the Graduate Program in Law at Osgoode Hall Law School. I would also like to thank the staff of the graduate program office, particularly Lea Dooley, as well as the staff and librarians of the Osgoode Hall Law School Library for their tremendous help. Further, I am grateful to the Harley D. Hallett Scholarship Fund for their financial assistance. I would like to express my appreciation to my supervisor, Professor B. Jamie Cameron. who was committed to my project, taught me a great deal and was very encouraging. I would also like to thank Ms. Janet Yale and Professor Liora Salter for their excellent comments and suggestions. J'aimerais dgalement remercier tous les membres de ma famille pour leur appuit. leur amour et leur aide durant mes Ctudes supCrieurcs. Un grand mrci ;l mes parents, Jeannette et Marcel, et ii mes trois soeurs Louise, Rosanne et Francine. Emally, I would like to thank my colleagues in the graduate program in law and some special fiends that were very supportive during my studies. Many, many thanks to Chantal Morton, Drew Blair - my computer consultant, Michele Vaillancourt, Tonya Lindo, Michael Halewood, Niarnh Laylor, Linda Charbo~eauand Ruth Fletcher. TABLE OF CONTENTS Abstmct ............................................................ i .. Acknowledgements ................................................... u Chapter I .Introduction IntroductiontoThesis .................................................. 1 Chapter 2 .The Regulation of the Canadian Broadcasting System 2.1 Introduction ...................................................... 2.2 Rationale for Government Intervention . .. ............................... 9 2.3 The Structure of the Canadian Television Broadcasting Industry .............. 14 2.4 The Package of Measures ........................................... 16 (i) Foreign Ownership ...........................................18 (ii) Canadian Content Quotas ..................................... 19 (ii) Support for the Roduction of Canadian Programming ................22 (iv) The CBC .................................................. 25 (v) Income Tax Deductions ....................................... 28 (vi) TaxCredits ................................................ 29 (vii) "4 + 1 " Caniage Rules ....................................... 30 (viii) Simultaneous Substitution .................................... 31 (ix) Specialty and Pay Television ...................................32 (x) Canadian Content Expenditures and Exhibition ..................... 36 (xi) Distribution and Linkage ...................................... 38 (xi) Priority Carriage ............................................ 39 (xiii) Carriage of Video Channels by Distributors ....................... 40 (xiv) Educational Broadcasting and Community Channels ................ 41 2.5 Conclusion ...................................................... 42 Chapter 3 .The History of the Foreign Ownership Restrictions 3.1 Introduction ..................................................... 43 3.2 The Early Days of Broadcasting ...................................... 43 3.3 The 1920s .The Birth of Canadian Broadcasting Policy .................... 46 3.4 The 1950s and 60s .The Fist Express Limitations to Foreign Ownership Restrictions ....................................................... 54 3.5 The 1980s .Foreign Ownenhip Remains Unchanged ...................... 69 3.6 Conclusion ...................................................... 74 Chapter 4 .The Current Foreign Ownetship Resfnfnctionsin Television Broodcasting 4.1.Introduction ..................................................... 75 4.2 Current Measures ................................................. 75 4.3 The Issue of Control ............................................... 82 4.4 Telecornmunications ............................................... 98 4.5Conclusion ...................................................... 111 Chapter 5 .The Ttends That Arc Affecting the Replcdion of Television Broadcasting & the Foreign Ownemhip Restrictions 5.1 Introduction .................................................... 116 5.2 Globalization .......................................... ......... 116 (i) Globahtion and Television Broadcasting .................. 120 (ii) Pressure from Abroad ................................. 125 5.3 Technology ..................................................... 139 (i) Direct-to-Home Satellite Broadcasting ............... 141 (ii) The Internet ................................... 153 (iii) Convergence .................................. 161 5.4 Conclusion ..................................................... 169 Chapter 6 .Conclusion ............................................. 171 Appendix 1 .Bibliography ........................................... 178 Chapter I - Introduction Television programming is the form of culture most widely consumed in Canada and most industrialized nations. It has been described as the most pervasive and popular of cultural industries' with Canadians spending an average of 22.7 hours per week watching television.' It is estimated that in Canada, 99.946 of the homes are equipped with television sets3, that approximately 7,800,000 rrdllion homes receive cable distribution services, and that somewhere between 200,000 - 300,000 homes receive satellite broadcasting services. The high demand for television broadcasting in Canada stems from the many needs that television satisfies. It serves as a mode of entertainment or escapism and it can be, among other things, informative, artistic, funny and suspensefbl. It also allows viewers "to gain vicarious experience of the external world, to learn, and to cultivate their minds.''4 'Liss Jefikey, "Private Television and Cable" in Michael Dorland. ed., The Cultural industries in Canada: Problem. Policies and Prospects (Lorimer: Toronto, 1 996) 203 at 206. 'Sheridan Scott and Pamek Dinsrnore. "Convergence and Careers" (Address to Canadian Women in Communications. April 1997) [unpublished]. 'European Television Task Force. Europe 2000: