Court justices question CRTC-granted power of signal blackouts

OTTAWA—Supreme Court justices raised questions at a hearing Tuesday about whether the CRTC's proposed value-for-signal regime goes too far by giving local TV stations the right to black out signals from carriage by cable or satellite TV distributors. The CRTC’s proposed value-for-signal regime, released in March 2010, would allow local, over-the-air TV stations to elect to negotiate carriage terms with broadcast distributors, such as cable companies, for carrying their signals. Right now, over-the-air stations are carried on basic cable packages without receiving carriage fees. Under the CRTC policy, local TV stations could choose to lose their regulatory protection with the commission but gain the right to pull their programming from distributors as a final negotiation tactic in carriage negotiations, potentially leading to signal blackouts, which has happened under a similar system in the United States called the retransmission consent regime. At the court hearing, Justice Michael Moldaver pointed to the TV distributors' argument and said the regime as proposed by the CRTC goes further than any existing regulations. “It gives broadcasters the right to pull the blackout trigger,” he said. The question came during a presentation by Benjamin Zarnett, counsel with Goodmans LPP who is acting for broadcasters Bell Media Inc. (owned by BCE Inc.), V Interactions Inc., and Newfoundland Broadcasting Co. Ltd. During the presentation, Chief Justice Beverley McLachlin said Canada has so far avoided the kind of regulation in the U.S. that has led to signal blackouts. “We've avoided this kind of marketplace struggle that we've seen going on south of the border,” Justice McLachlin said. “I have some discomfort thinking that this was in keeping with the scheme that Parliament set out,” she said. “It's one thing to say that they can set their rates , etcetera, and people might grumble or not, but it's another thing to say that you're going to be able to just black it out.” The CRTC policy is intended to give local over-the-air stations another revenue stream amid ad market fragmentation, competition with online sources, and declining advertising revenues for local stations. When the commission issued the decision in 2010, it immediately referred it to the Federal Court of Appeal for a determination on whether it has the jurisdiction to implement it. The Federal Court of Appeal’s three-judge panel issued a two-to-one split decision last year that upheld the commission’s authority to implement it. TV distributors Cogeco Cable Inc., Rogers Communications Inc., Telus Communications Co. and Shaw Communications Inc. appealed that decision to the Supreme Court. The distributors argue that the CRTC policy is outside its authority because it treads on the Copyright Act by effectively giving over-the-air broadcasters a new signal retransmission right. At the hearing Tuesday, Zarnett said the policies under the Broadcasting Act and Copyright Act each have their own attributes. There may be some overlap between the regimes, he said, but the CRTC has broad policy powers under the Broadcasting Act and its value-for-signal decision is a broadcasting regulation. “You can’t be a little bit copyright,” Zarnett said. “Some of the attributes overlap. That doesn’t make it copyright.” Justice McLachlin said she has difficulty believing the policy does not overlap with the Copyright Act. “I have, I must confess, some difficulty accepting your argument that this is in no way treading on copyright, directly, indirectly, or in any kind of way,” Justice McLachlin said, noting that the regime in the Copyright Act does not give over-the-air broadcasters a carriage right for their signals as proposed by the CRTC. The commission's proposed policy would give TV stations something “functionally equivalent” to copyright, she said. “That's the elephant in my room.” Zarnett said the CRTC has powers under the Broadcasting Act to ensure that each element of the broadcasting system contributes a share. The commission has allowed market forces to work a great deal in the broadcasting system, he said. The CRTC looked at the American retransmission consent regime and viewed it as a structure that works well, Zarnett said. Questions at the hearing also involved maintaining a role for struggling, over-the-air TV stations. Justice Rosalie Abella said there is concern about what could happen to local, over-the-air TV stations if they were denied the right to seek carriage fees from TV distributors under the CRTC policy. “One of the concerns that’s raised on the other side is that, if something isn’t done, financially, millions of Canadians will lose the benefit of over-the-air stations,” she said during a presentation by Kent Thomson, counsel with Davies, Ward, Phillips & Vineberg who is acting for Shaw. Justice Marshall Rothstein asked whether the commission could use funding mechanisms that would “essentially do the same thing” as the value for signal regime. Thomson answered yes, noting that funds like the $350-million Canada Media Fund or the $100-million Local Programming Improvement Fund, serve similar purposes. “There are third-party funds, administered by third parties, that can be used for this purpose. That can be done,” he said. “This cannot be done,” he added, referring to the value-for-signal policy. Officials from BCE, which owns the CTV network of 27 local stations, told CRTC commissioners at a hearing Monday that 10 of those stations are unprofitable without subsidies from the LPIF and another six are unprofitable with the subsidies. Bell told commissioners it would consider closing some local stations if it does not receive additional revenue streams such as that under the value-for-signal regime. Shaw, which finalized its purchase of the Global Television network in 2010, is against value for signal. Bell, which finalized its acquisition of the CTV network in 2011, said last year that it would elect to negotiate value for signal under the regime. The CRTC held a separate hearing about fee-for-carriage in 2008, during which CTV and Global said over-the-air broadcasters should be permitted to charge distributors 50 cents per signal per subscriber each month for the carriage of local, over-the-air channels. The CRTC rejected that proposal in broadcasting decision 2008-100 issued in 2008. sdoyle@thewirereport.ca

Court justices question CRTC-granted power of signal blackouts

Broadcast | April 17, 2012

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