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