On January 29, 2015, the CRTC released two policy decisions resulting from its highly publicized Let’s Talk TV proceeding on the future of television in Canada. These two decisions primarily impact over-the-air (“OTA”) television stations.
During the proceeding, the CRTC considered whether to eliminate simultaneous substitution or to permit broadcasters to shut down their transmitters, two long-standing features of the OTA Canadian television regulatory regime. The Commission declined to take these steps, in favour of maintaining the status quo for the most part.
Simultaneous substitution is the practice whereby a broadcasting distribution undertaking (“BDU”) temporarily replaces the signal of a non-Canadian television station with that of a Canadian television service when the two signals contain the same program and are broadcast simultaneously. This enables a Canadian broadcaster that acquires broadcast rights to American programming to protect its investments by substituting its program featuring Canadian ads over the U.S. signal. A well-known example of this practice is when the signal of the Canadian broadcaster is substituted over the U.S. signal during the NFL Super Bowl.
Given that the estimated value of advertising revenue attributable to substitution in the 2012-2013 broadcast year was approximately $250 million, the CRTC decided to maintain the simultaneous substitution regime, but with one notable exception. As of the 2017 NFL season, simultaneous substitution will be prohibited for the Super Bowl. This responded to consumers’ complaints that they want to see the American Super Bowl ads and that errors in effecting simultaneous substitution often cause viewers to miss some programming, like key game plays.
Furthermore, the CRTC announced that it will adopt a “zero tolerance” approach to errors in simultaneous substitution. Broadcasters and BDUs will need to collaborate to ensure that this practice is performed “flawlessly,” in the words of CRTC Chairman Jean-Pierre Blais. The CRTC announced its intention to amend its regulations by adopting measures to deal with “recurring and substantial” simultaneous substitution errors. These include requiring BDUs to provide a compensatory rebate to its customers through a specific monetary amount and revoking a local television broadcaster’s privilege to request simultaneous substitution for a period of time or with respect to a type or types of programming. A notice of consultation will be issued accordingly.
Access to OTA television signals
Today, Canadians who choose not to subscribe to the services of a BDU are able to receive free television programming over-the-air using a television set and a suitable antenna. The CRTC rejected proposals by some broadcasters to shut down their OTA television transmitters.
The CRTC found that “a significant number of Canadians would be adversely affected by a transmitter shutdown at this time.” Thus, it adopted a carrot-and-stick approach to encourage local broadcasters to maintain OTA transmitters. It will “continue to require conventional television licensees to maintain an over-the-air presence in order to retain certain regulatory privileges.” In particular, broadcasters that shut down transmitters will forego mandatory distribution as part of the cable and satellite basic service or will no longer be eligible to demand simultaneous substitution. In other words, the CRTC did not issue a blanket prohibition on the shutdown of transmitters but established the conditions which may make taking such action less attractive.
Additionally, the decision identifies certain broadcasters for whom the election to shut down transmitters is even more limited. In particular, the CRTC found that OTA transmission is an “appropriate and efficient way” for the CBC to provide programming to Canadians. This finding speaks to the CBC’s fulfillment of its obligation under the Broadcasting Act to make its programming available throughout Canada by the most appropriate and efficient means and as resources become available for the purpose. Additionally, the CRTC cited Bell Canada’s 2013 commitment to keep all of its conventional television stations open until 2017.
Given that nearly all Canadians (97%) live within range of a transmitter, the high quality images offered through digital signals which are available in almost all urban areas, and the lack of any subscription cost (the consumer pays nothing beyond the cost of the equipment), the CRTC stated its belief that OTA television is an increasingly important competitive alternative to cable and satellite services. In his speech announcing the decision, CRTC Chairman Blais stated that OTA television services are an essential public service.
The CRTC concluded that local programming, especially news, provided by OTA television stations serve an important public interest and noted that a significant number of Canadians were concerned over the potential loss of this locally reflective programming. Shutting down transmitters would result in the loss of such programming.
The CRTC declined to create a new mandatory fund from which broadcasters could draw to create local programming. It found that there is sufficient funding within the broadcasting system to enable the creation of this programming, but that funds may need to be reallocated to ensure it continues to be produced. The CRTC announced its intention to examine the overall state of funding of locally relevant and reflective television programming offered in the broadcasting system when it reviews its community television policy later this year.
The CRTC will be issuing additional policy decisions later this year on other “hot button” topics that were discussed during the Let’s Talk TV proceeding. This will include the degree to which Canadians will be able to exercise control over the selection of the channels they can access from cable and satellite BDUs and the regulatory framework that will apply to over-the-top content distributors like Netflix.
It is clear that the CRTC wants to ensure that the Canadian television system continues to meet the needs of Canadian consumers. However, it is also apparent that the CRTC will not be persuaded to dismantle existing regulatory measures where it has been demonstrated that those measures provide substantial benefits to Canadians and support the Canadian broadcasting system. In the case of simultaneous substitution and OTA television, the CRTC appears to have determined that the status quo, for the most part, strikes the appropriate balance between meeting consumer demands for programing and supporting Canada’s television broadcasting industry.