Canada: CBC Licences Renewed – Radio Advertising Return

Last Updated: May 31 2013
Article by Scott M. Prescott and Yael Wexler

Introduction

On May 28, 2013, the Canadian Radio-television and Telecommunications Commission (CRTC or Commission) issued its highly anticipated decision renewing the broadcasting licences for Canada's national public broadcaster, the Canadian Broadcasting Corporation (the CBC). The renewals are for terms of five years until August 31, 2018, for its English- and French-language, conventional television, specialty television and radio services. Specifically, the CRTC's decision renewed the licences for Télévision de Radio-Canada (network and stations); CBC Television (network and stations); Radio One (network and stations); Radio Two (network and stations); ARTV; RDI; La Première Chaîne (network and stations); Espace Musique (network and stations); Bold; Documentary; and CBC News Network.

This bulletin outlines some of the more significant elements of that decision, including the authority granted to the CBC to include four minutes per hour of national paid advertising on its Radio 2 and Espace Musique radio networks for a three-year period. The Vice-Chairman of Broadcasting, Tom Pentefountas, dissented on this point.

In addition to this change, the Commission established conditions of licence regarding the CBC's reporting requirements, programs of national interest, children's programming, balanced reporting in news, Canadian content, programming reflecting local, regional and official language minority communities and terms of trade with the independent production sector. It also addressed the CBC's digital media strategy.

Broad issues of corporate governance and the public broadcaster's long-term corporate strategy and vision for the CBC were also addressed in the Commission's proceeding. In order to respond to the significant financial constraints it faces, and still meet consumer demand for innovative, digital content, the CBC requested greater programming flexibility, modified conditions of licence, and the ability to find new sources of funding from the Canadian broadcasting system.

THE COMMISSION'S DECISION

Advertising on Radio 2 and Espace Musique

The Commission established conditions of licence for Espace Musique and CBC Radio 2 that, for the first time, permit the broadcast of a maximum of four minutes of national paid advertising per hour, and limit the number of times that programming can be interrupted for advertising to no more than twice per clock hour. The Commission noted the CBC's commitment to only solicit and accept national advertising from companies or organizations that have a national interest in reaching the Canadian consumer.

During the hearing, the Commission had heard from interveners and members of the public who expressed serious concern about the addition of commercial advertising on the CBC services, given the unique nature of the public broadcaster's mandate set out in the Broadcasting Act and its sources of funding, which set it apart from private, commercial undertakings. The CBC has been prohibited from including commercial advertising on its radio stations since 1975, and a similar proposal was rejected in the previous licence renewal decision issued in 2000. This time the Commission accepted that increasing advertising revenues was one step the CBC must undertake as "there is no doubt that the CBC is facing significant financial pressures."

In his dissent, Vice-Chairman Pentefountas noted that the amount of advertising would only generate $11 million in revenues, a sum far below the budgetary cuts the CBC is imminently facing. What the CBC stands to gain from these revenues, in his opinion, does not justify what the Canadian broadcasting system could be losing in terms of irrevocably changing the nature of the role and services of the public broadcaster.

Significantly, the Commission only granted the CBC the authority to solicit advertising for a temporary three year period. If the CBC wishes to continue to broadcast advertising after that, it will have to apply to the Commission to do so and "provide evidence that advertising has not had an undue negative effect on the advertising markets, that advertising has not been unduly disruptive to listeners, that periods the CBC's level of investment in radio has been maintained and that the variety and diversity of the service that Espace Musique and Radio 2 provide has not been diminished."

Mandatory Distribution of Specialty Services

The Commission renewed the mandatory distribution orders for RDI and CBC News Network issued pursuant to paragraph 9(1)(h) of the Broadcasting Act, on the basis that both services satisfied the Commission's test for mandatory distribution on the digital basic service as set out in Broadcasting Regulatory Policy 2012-629. As a result, RDI must be distributed as part of the digital basic service in English language markets and CBC News Network must be similarly distributed in French-language markets. The current wholesale rates are maintained ($0.10 for RDI and $0.15 for CBC News Network).

Local, Regional and Official Language Minority Community Reflection

Under the Broadcasting Act, the CBC is required to serve local and regional audiences, provide an equivalent quality of programming in both official languages, reflecting the needs and circumstances of each official language community, as well as official language minority communities. To ensure achievement of these objectives, the Commission has imposed conditions of licence that will require minimum programming requirements that reflect these languages and groups on conventional television services.

The specialty services RDI and ARTV, and the CBEF Windsor radio station are also required to ensure that French official language minority communities are adequately reflected through new programming and production requirements.

Canadian Content on Conventional Television

The Commission has maintained higher levels of Canadian programming content for the CBC's conventional television stations than for private television stations. The current expectations to devote 75% of the broadcast day and 80% of prime-time to Canadian programming were converted into conditions of licence.

The Commission also imposed a condition of licence on the CBC's conventional English-language television stations to broadcast one Canadian feature film per month and encouraged the public broadcaster to establish a regular timeslot in primetime for the monthly broadcast of these films. In doing so, the Commission rejected the argument that it is difficult to air Canadian feature films in prime time due to mature content. With respect to French-language conventional television, the Commission concluded that Télévision de Radio-Canada already provides sufficient support for Canadian feature films and that no further regulatory intervention was necessary to support this programming sector.

Digital Media

A part of the CBC's strategy is to establish digital media platforms. This is in response to evolving consumer trends demanding innovative and attractive web-based and digital services, and the Government of Canada's expectation, set out in a 2011 paper called Improving Canada's Digital Advantage, that the CBC will maximize its digital platform presence. The CBC proposes to invest 5% of revenues in digital media by 2015, which is double the current investment.

Given that the CBC's digital media broadcasting undertakings are exempt from regulation, the Commission opted not to impose specific reporting or other requirements for the CBC regarding its digital media undertakings.

Terms of Trade

The Commission concluded that it has jurisdiction under the Broadcasting Act to establish conditions of licence setting out the terms of trade under which a broadcaster like the CBC acquires programs from independent Canadian producers.

The Commission imposed conditions of licence requiring the CBC to enter into terms of trade agreements with the Canadian Media Production Association (CMPA) and Association des producteurs de films et de télévision du Québec (APFTQ), representing English- and French-language independent producers within a year of the decision. The Commission encouraged the parties to use mediation, through the Commission or privately, to break impasses in current negotiations. Until such time as the terms of trade agreements are in place, the CBC will be subject to the continued requirement to file with the Commission monthly detailed progress reports on negotiations over terms of trade with the producers' organizations. Failure to secure terms of trade agreements by the deadline, the Commission warned, could result in a show cause hearing or final offer arbitration.

CBC Ombudsmen

The Commission also imposed conditions of licence concerning the ombudsmen for the CBC's French- and English-language services. These ombudsmen respond to viewer and listener complaints relating to news, current affairs and public affairs content on radio, television and digital media.

Conclusion

This decision is significant for a number of reasons. It represents the first, large-scale assessment of the CBC's performance in achieving its mandate in thirteen years. In allowing paid national advertising on two of the CBC's radio networks, the Commission (with one dissent) changed the direction it has taken since 1975 with respect to commercial advertisements and the public broadcaster. The Commission has established new obligations for the broadcast of Canadian programming, local programming and programming for official language minority communities. The Commission has also set a deadline for the CBC, CMPA and AFTPQ to enter into terms of trade agreements. Finally, the decision appears to grant much of the regulatory flexibility and approbation the CBC sought in order to continue investing in its digital media broadcasting undertakings.

The next opportunity for the CBC, the Commission and Canadians to measure the CBC's performance against its mandate will occur when the three-year term on advertisements on Radio 2 and Espace Musique expires. Following that, all of the CBC broadcasting services will be up for renewal again in five years.

As with every CRTC licence renewal, this decision can be appealed, with leave, to the Federal Court of Appeal on matters of law and jurisdiction and may be subject to review by the Governor in Council, on petition, on matters of policy.

View the CRTC's full decision.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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