The CRTC and BDUs – time to “un-regulate”

Pop quiz: What travels half way across Canada, with no support and lots of opposition and is awarded a CRTC licence? Answer: A broadcasting distribution undertaking (BDU) applicant.There are a couple of recent developments on the broadcasting distribution side of the CRTC house that suggest it might be time for some regulatory streamlining. BDU competitive applications are a slam-dunk… The first development involves the licensing of new BDUs on a competitive basis with incumbent operators and the second involves the approval process for transfers of control of BDUs. For many years now, the CRTC has made it clear that it was prepared to license cable BDUs on a fully competitive basis, whether the area to be served was rural or urban. That in itself is not news. In early January this year the CRTC followed this policy and approved a new Class 2 cable system for Whistler, B.C., a community which is already served by an incumbent BDU (Broadcasting Decision 2003-5; CCR Update Jan. 8/03). What made the decision noteworthy was the almost complete lack of support for the competitive application. Not surprisingly, the incumbent BDU intervened in opposition (CCR, Aug. 29/02). However, in addition, the CCTA itself had intervened, arguing that there was evidence that in very small markets such as Whistler, competition from multiple providers might not be sustainable. The Mayor of Whistler expressed similar concerns. Even the local Chamber of Commerce questioned the benefit of the application for local residents. Despite this, the CRTC approved the application as being consistent with its overall policy that service to the public should have a higher priority than the economic viability of any incumbents against whom the new entrant would compete. The commission appeared to equate an additional service provider who was willing to compete, with necessarily improved service to the public – even if the public that took the trouble to participate seemed to be unimpressed. …So are BDU transfers The other development that is somewhat related, has been the commission’s attitude toward BDU acquisitions. The commission abolished the requirement for tangible benefits in such transfers in 1996. Since that time, it has approved all cable BDU applications that have come before it, where the purchaser was a qualified "Canadian." These have included major transfers of subscribers (see, for example, the Cogeco acquisition of about 300,000 Ontario subscribers from Rogers in Decision 97-157) and – by a majority vote – transfers to conglomerates (see the approval in Decision 2001-45 of the acquisition of 32,000 Québec subscribers from Câblevision du Nord de Québec inc. by Télébec ltée, a subsidiary of BCE Inc., which also controls the direct-to-home satellite BDU Bell ExpressVu). Granted, the commission did state in 1996 that it would continue to assess such applications to ensure that the applicant was a qualified Canadian and that the commission was satisfied that there were no show stoppers in the form of concentration of ownership, cross-media ownership, etc. However, in light of the actual track record and the decisions noted above, it is difficult to envisage a transaction that the CRTC would not approve, although it is conceivable that there might be a transaction that was so large it brought the Competition Bureau into the picture. A small step for BDU kind So where do these developments leave us? On the new entrant front, it appears that any qualified applicant, regardless of the support or opposition to its plan, can get a licence. Similarly, it would appear that virtually any acquisition – assuming that it only involves BDUs – is fair game. Why not remove the last regulatory hurdle to BDU competition and sector rationalization and have the CRTC withdraw from the field of "regulation?" Why not implement an application checklist, in which a senior officer of a new BDU entrant (who needs a licence/permission to offer service or to acquire the assets/shares of another BDU) certifies that it is "Canadian" as defined, files a map showing the area that it proposes to serve or acquire, and a statement that it will comply at all times with the Broadcasting Act, Regulations and applicable CRTC policies? The CRTC would post the application on its web site and in its public offices. To comply with the formalities of section 19 of the Broadcasting Act, it would also publish notice of the application in the Canada Gazette, using current rules of procedure. In all cases where no prima facie legal objections were raised in any opposing interventions (e.g., evidence that the applicant was in fact not "Canadian"), the CRTC would hold a "public hearing" in the office of the Chairman within 10 days after the time for interventions had expired and would approve the application and issue the licence, subject to the condition that the applicant adhere to the commitments contained in its application. The need for a "public hearing" in this case is another formality required by section 18 of the Act in cases in which a new licence is to be issued, something that in my view is long overdue for amendment. This approach of "un-regulation" would accomplish a number of worthy objectives. It would reduce regulatory lag time. It would free up some CRTC staffers for other tasks, like dealing with competitive complaints on a more timely basis. It would promote certainty of outcome and certainty of timing. It would accord with the current practice in telecommunications with respect to applications for licences for international telecommunications service providers and the intent of Parliament that normal telecommunications tariff applications be processed within a specific period of time. Finally, "un-regulation" would stop the current wasted resources that some applicants must expend in order to achieve what are now quite clearly foregone conclusions. In this regard, it is a sad irony that the applicant for the apparently unwanted competitive BDU licence in Whistler had to travel to Toronto to appear at the oral public hearing in order to get his licence. Anthony Keenleyside is the partner responsible for communications matters in the Ottawa office of McCarthy Tétrault LLP.

The CRTC and BDUs – time to “un-regulate”

Broadcast | February 28, 2003

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