Heritage committee unlikely to suggest changes to foreign ownership in BDUs

The House of Commons Standing Committee on Canadian Heritage will likely recommend the status quo regarding foreign ownership in the broadcast distribution and broadcasting industries when it releases its report on the Canadian broadcasting system next March. Few members of the committee have expressed agreement with the cable industry’s contention that foreign investment rules must be eased so that cablecos can generate the necessary capital to introduce new products, such as video-on-demand (VOD), and continue the rollout of high-speed Internet access services (CCR, Dec. 5/02). At a committee hearing on December 4, most committee members expressed agreement with union representatives and broadcasters such as CHUM Ltd., Astral Media Inc. and Alliance Atlantis Communications Inc., who urged that no changes be made to current regulations that restrict foreign ownership to 20 per cent direct investment and 33 per cent indirect investment. Committee member Sarmite Bulte, Liberal MP representing the Toronto riding of Parkdale-High Park, and Christiane Gagnon, Bloc Québécois member from Quebec City, told CHUM, Astral, Alliance Atlantis and the unions that they should appear before the Standing Committee on Industry, Science and Technology to express their view that the status quo was vital. Some members of the Heritage committee worry that the Industry committee, which begins an examination of foreign investment restrictions in the telecommunications industry in late January, will lose sight of the fact that changes in the telecom industry could ultimately lead to similar changes in the broadcast distribution sector (CCR, Nov. 22/02). "I understand that you have said you would not get into a debate with the cable and telecom industries about their needs (for capital)," Bulte said to Astral Media chair André Bureau. "But I think this is not about a question of need anymore. It’s turning into a debate about the consequences of decisions that are made … including unintended consequences of what will happen if we open up telecom to foreign ownership. It’s the end of us (on the content side because of the likely trickle down effect). I would urge you all to get … into a debate about the unintended consequences (of opening up the telecom industry)." Her appeal followed a warning by Alliance Atlantis chair and CEO Michael MacMillan that changes to foreign ownership regulations in the telecom industry would eventually result in similar changes in the broadcast distribution undertaking (BDU) business, with a chain reaction to broadcasting as well. He said it would be disingenuous of broadcast players to sit back. But not all broadcasters agree. CanWest Global Communications Corp., for example, supports relaxing foreign ownership rules for broadcasters (CCR Update, Nov. 28/02). No one in the cable industry is currently advocating that the rules be changed for broadcasters. Rather, the cable industry is advocating a structural separation, whereby distributors would have different company divisions for their programming activities and their pipelines. But MacMillan contends that changes in foreign ownership rules in the BDU industry, sparked by changes in the telecom industry, would eventually lead to changes in the broadcasting sector because of the intertwined natures of these businesses. "We know that now. It’s the only possible outcome that could flow from (foreign ownership changes in the telecommunications industry)," he stated. In her presentation to the committee at the December 4 hearing, Phyllis Yaffe, CEO of Alliance Atlantis Broadcasting Inc., pointed out that a distributor as a gatekeeper to programming channels was much different from a telephone company controlling a phone line. "Unlike a phone company, the BDU has an active role in ‘controlling or influencing’ the content it offers: it makes critical decisions about which services to market, promote and package as well as the appropriate level of resources that should be devoted to marketing and promotion. It also negotiates vital wholesale prices and sets program packages, sets retail prices and programs barker channels. So BDUs make ‘programming’ decisions every day: they play an indispensable role in shaping the nature and character and the perspective of Canadian programming services," she told the committee. "…And as we go to the world of hundreds of channels and digital channels, there is more influencing in choosing on the part of the service offered as to what people get to see and hear, what’s economic, how it’s packaged, what gets carried." Other members of the committee, including New Democrat MP Wendy Lill and Liberal MP Dennis Mills, publicly expressed concerns about the effect foreign ownership changes would have on Canadian content on the airwaves. The lone vocal supporter of change was Jim Abbott, Canadian Alliance member representing Kootenay-Columbia BC. He said at the December 4 hearing that he felt like a butcher at a vegetarian convention because he was amongst committee members and presenters who are against changes to the existing rules. Abbott questioned how ownership changes would result in content changes. He noted that not much has changed for Tim Horton’s customers, after the donut chain was sold to American interests. Rogers Cable Inc. president and CEO John Tory made a similar analogy when he appeared before the committee at the end of November. He noted that when the Montreal Alouettes were sold to American owners, there were no cries for changes to Canadian Football League rules. But union representatives as well as CHUM, Astral and Alliance Atlantis responded that Canadian programming was different from donuts. They contend that if foreigners were allowed to control Canadian BDUs, they would promote their own non-Canadian content. "Once you introduce non-Canadian BDU control alongside existing cross-ownership of programming services, it becomes far more difficult to ensure continued Canadian control over programming decisions," Yaffe said. CHUM, Alliance Atlantis and Astral maintain that the "ideal solution" is to maintain the existing ownership rules for both broadcast distributors and broadcasters. But if changes are ultimately recommended to BDU ownership, they want policy makers to bar any non-Canadian who acquires control of distribution from retaining any interest in a Canadian programming service. Mills, representing the Toronto-Danforth constituency, noted during the December 4 hearing, "We need 1,000 CEOs who think like you (MacMillan) do… We can’t fudge on the issue of ownership. We have to set the lead for the Industry committee."

Heritage committee unlikely to suggest changes to foreign ownership in BDUs

Broadcast | December 13, 2002

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