Industry Canada comes under fire for timing, substance of notice on use of foreign satellites for subscription radio

Opponents to the entry of two American-based subscription radio services into Canada are attacking an Industry Canada proposal that would essentially permit their plans to move ahead. The proposal has given the opposition a second opportunity to express their views against XM Satellite Radio and Sirius Satellite Radio, which both plan to operate with their Canadian partners, satellite subscription radio services that use U.S. satellites. The subscription radio services would be similar to those currently operated by the two companies in the United States with a limited number of Canadian audio channels added. Industry Canada issued a "clarification" notice last year in the middle of a CRTC licensing process that stated that under an exception, foreign satellites could be used to broadcast subscription radio services in Canada. Opponents to the proposal, many of whom expressed similar views during the CRTC licensing hearing, say the change would eventually pave the way for foreign control and content to trickle into other parts of the broadcasting sector. In a flurry of submissions last month to the department, the opponents state that allowing the use of foreign satellites to deliver primarily U.S. based programming over satellite subscription radio is against the Broadcasting Act and Telecommunications Act.Industry Canada issued gazette notice DGTP-007-04 proposing to allow specialized satellite broadcast services such as subscription radio offerings to use foreign facilities when no Canadian satellites are available. Canadian satellite radio services have been proposed by both XM and Sirius with Canadian partners to satisfy Canadian ownership requirements, but the services being proposed are basically mirror those offered in the United States with a few Canadian channels added (CCR, July 30/04). Sirius has formed a joint venture with the Canadian Broadcasting Corp. and Standard Radio, and Canadian entrepreneur John Bitove is backing the bid by XM. A third subscription radio proposal has been submitted by CHUM Ltd., in partnership with Astral Media, but it would use a terrestrial network. All three of these subscription radio licence applications are currently before the CRTC."The CRTC (licensing) hearing process was announced, and then in the middle of the hearing process, all of a sudden (Industry Canada) wakes up and sticks this thing out about clarifying a policy," says Ian Morrison of the watchgroup Friends of Canadian Broadcasting tells Canadian Communications Reports. "It is very clear to me that the department has been lobbied…It is akin to changing the law in the middle of a trial. Regardless of what the government’s motivation was in issuing this thing, we felt that its timing was improper and its substance unjustified."Morrison further points out that the CRTC notified both Industry Canada and Canadian Heritage in a letter dated October 17, 2003 that an application had been received for a Canada-wide subscription satellite digital radio service. "I am certain that you will understand that a clarification of the government policy is fundamental to the commission’s review of this application," writes CRTC secretary general Diane Rhéaume to then Industry Canada deputy minister Jean-Claude Villiard and Canadian Heritage deputy minister Judith LaRocque.Morrison questions why Industry Canada waited for over a year before making the clarification.Peter Miller, CHUM’s VP of planning and regulatory affairs of radio and television, adds, "One issue is of process. We’re uncomfortable with Industry Canada and Canadian Heritage making any preliminary determination on this, while the issue if before the commission. I mean it would be one thing if they dealt with it early, but now there are specific applications that are being addressed by the commission…The matter is before the commission. The (CRTC) should make its decision."He adds, "If Industry Canada were to change its policy sometime in the next two months, it would be unprecedented. I can’t think of a CRTC hearing where in the middle of the CRTC making its decision, Industry Canada makes a decision. I mean Industry Canada either sets the way before the CRTC starts, or the CRTC makes a decision subject to Industry Canada and Canadian Heritage approvals. The notion of Industry Canada and Canadian Heritage making a decision on this in the middle of a (CRTC) decision-making period is unprecedented. So the best thing that Industry Canada and Canadian Heritage can do is absolutely nothing. Wait for the CRTC to issue its decision and then look at it.Opponents to Industry Canada’s proposal contend that subscription radio is not an "exceptional" situation, and that allowing the use of foreign satellites for the delivery of this service will inevitably negatively affect Canadian content in other parts of the broadcasting world. "In exceptional circumstances, where no Canadian satellite facilities are available, or likely to be available in a reasonable time frame, to accommodate specialized satellite delivery of broadcasting service to the public e.g. satellite radio services including vehicular reception, the use of foreign satellite facilities is permitted to distribute Canadian programming services," reads the department’s notice of change."There is nothing that is key to Canada’s national interest involved in a couple of applications for some kind of pay radio. And if indeed it were so exceptional, why did Industry and Heritage wait a year before doing something after the CRTC wrote them a letter saying this is an issue coming up," asks Morrison.Miller says that the issue is more than one of foreign-owned infrastructure but also of content. "This isn’t just use of foreign infrastructure. This is the use of foreign service providers to provide a service to Canadians. So quite frankly, the precedent at issue is that this isn’t just a simple manner of who owns the facilities and the pipeline, because what they are talking about is someone who owns both the pipeline and the oil."Sirius and XM are proposing to carry drastically lower levels of Canadian content on their services, than CHUM-Astral. "Can we have a sustainable broadcasting system where some people have 5% Cancon and others have 35% Cancon?" Miller asks. "Our view is ultimately that this is not something you could contain within the audio universe. Once you set that precedent for subscription audio services, it affects other services. It affects television as well. We heard just last week that Sirius plans to provide a limited number of video services for in-car use. So the issue of this being a precedent that you can’t just contain to audio services has now been proven correct already. They are already talking about providing video service."Morrison notes, "From a Canadian content point of view, this is all completely bad because if it were to happen, there would be an argument from Canadian terrestrial broadcasters about why they should be held to a higher standard than this competition. So we would see a downward vacuum, pulling all Canadian content down."Telesat Canada reports that it could take until 2010 before Canadian satellite facilities are available – a timeframe that according to supporters of Industry Canada’s proposal is too long to wait, but according to opponents is feasible. In the CRTC subscription radio licensing process, Telesat indicated that the 2010 time frame would be achievable if the government were to obtain the rights to orbital spectrum through the next World Radiocommunication Conference, scheduled for either 2006 or 2007.Opponents of the proposal to use the foreign satellites state that the terrestrial subscription radio service proposed by CHUM-Astral would be adequate to service the Canadian population until a Canadian bird is available. The Society of Composers, Authors and Music Publishers of Canada (SOCAN) and the National Campus and Community Radio Association/L’Association nationale des radios étudiantes et communitaires (NCRA/ANREC) are among those who state that a five-year wait is not unreasonable. "If Canadian satellite facilities could be available in five years, SOCAN fails to understand how this would not satisfy the departments’ proposed ‘likely to be available in a reasonable time frame’ test," states the association’s submission to Industry Canada.In its December 13 submission, the NCRA/ANREC writes, "While there are currently limitations that have prevented Canadian owned satellite facilities in this area, it is not an immutable fact that there will never be one. And while it is true that there is a pressing need for development in the area of digital broadcasting, particularly for specialized radio broadcasting, it is only the service, and not the distribution means, that needs to be realized…The Canadian broadcasting system requires protection from foreign service providers. It also requires protection from leaps in technology directed by those foreign providers, which have the capacity to render its format useless."If Telesat is unable to get Canadian facilities in place, there is also Ciel Satellite Communications Inc., which was recently licensed by Industry Canada as a second Canadian satellite operator. "Now that there is a second operator, there definitely will be much more attention paid to possible business opportunities out there – things like satellite radio and everything else that’s going to come down the pipe," says Gerry Wall, VP of government affairs and regulatory matters at Ciel.Miller notes that CHUM would consider using a Canadian satellite, if it were available, down the road to expand its proposed radio service to more remote areas of Canada. "I guess the quintessential issue for Canadian policy has always been are we prepared to invest in a truly Canadian broadcasting system even if it takes a little while to get there? Do we have any immediate plans (to use a Canadian satellite). Of course, not. But looking forward, when you looked at the business models for these services, if, indeed, the penetration levels are in the 6% to 10% range, I suspect based on some of the numbers that we crunched a Canadian satellite wouldn’t be viable. But once the penetration levels get up to the 15% to 20% even plus, than all of a sudden that changes that picture quite dramatically."He adds, "Our terrestrial service is by definition not going to give universal service (in the first term of licence). It can’t. Canada is geographically too big a country to cover through terrestrial transmitters. Within the first licence term, we can go to 75% (of the country). If penetration levels were higher, we can increase that, or as I suggested if penetration levels are that much significant, then all of a sudden the notion of a Canadian satellite service becomes viable…Obviously, the satellite applicants want to make a big deal about geographic coverage. But think of it this way, if they have virtually no Francophone channels, are they servicing the 20% to 25% of the Canadian population that is Francophone?"Other opponents to Industry Canada’s proposal include the Directors Guild of Canada (DGC), the Canadian Independent Record Production Association (CIRPA), the Canadian Recording Industry Association (CRIA), and the Alliance of Canadian Cinema, Television and Radio Artists (ACTRA). The Canadian Cable Telecommunications Commission (CCTA) also notes in its December 13 submission that "a general blanket policy, which permits the use of foreign specialized satellite facilities where none exist in Canada, without proper public consultation, is inappropriate and unfair to Canadian distributors and programming services."Other Canadian players, such as Global Television Network Inc., Star Choice Communications Inc. and Canadian Satellite Communications Inc. (Cancom) are more neutral. Global doesn’t oppose the proposed amendment as long as it is confined solely to digital satellite radio services. Star Choice and Cancom states that "it would be contrary to public interest to introduce a general exception to the policy. Instead, we submit that the policy be modified to provide for exceptions on a case-by-case basis. Moreover, we believe that if and when Canadian facilities become available, the application of the exception should cease," states a joint December 13 submission by Star Choice and Cancom.The Canadian Association of Broadcasters (CAB) did not take a stance, for fear of alienating some of its members. "The CAB respectfully submits that it does not wish to put forward a position in response to the merits of the proposed amendment in DGTP-007-004. Rather the CAB encourages its members to state their individual positions on this matter," reads the association’s December 13 submission."The CAB regrettably did not take a position…I think the argument was made that because CAB members had applications before the commission, the CAB shouldn’t take a position because it would be to the determent or benefit of one set of applicants against another," Miller notes. "The reality is that the CAB didn’t take a position at the hearing. They did put in a weak intervention in the satellite thing…It was an issue that absolutely split the CAB membership."CAB member Standard Radio has joined with CBC on the Sirius application. Canadian Satellite Radio (CSR), the service being proposed by Bitove and XM, announced last October that it had reached a deal with Corus Entertainment that could see the Canadian radio and TV broadcaster acquire a small minority ownership interest in CSR. Under the deal Corus will also provide Canadian content to CSR, as well CTV Inc. for the service’s proposed "Laugh Canada" comedy channel.Lending support to the proposed amendment are automakers General Motors, Ford, DaimlerChrysler and Honda, as well as Sirius and XM’s Canadian partners, such as the CBC. Other supporters state that a big grey and black market will emerge if Canada fails to adopt the amendment to the satellite use policy."If Ford is not able to supply Sirius in Canada, the mobile nature of the medium makes it a logical candidate for a grey market," comments the automaker in its submission. "A terrestrial multichannel service will be of no assistance in avoiding that problem as far as Ford’s customers are concerned. Canadian drivers will want the same satellite delivered mobile radio service as Ford is now installing for its American customers. A mobile radio service that falls off the dial as soon as one is out of range is not the kind of option that we think our Canadian customers will find attractive.""It therefore seems evident that, if Canadians are to enjoy the benefits that this exciting new technology has to offer within any reasonable timeframe, there is no alternative but to permit the use of non-Canadian satellites," writes Sirius Canada CEO Kevin Shea in a December 13 submission.CBC argues that the narrow exception proposed by the government will maintain the basic principle of relying on Canadian facilities for distribution of broadcasting services to Canadians, and will create a pragmatic solution where no Canadian satellites exist. "In the CBC/Radio Canada’s view, there is no basis for concern that this clarification would establish an inappropriate precedent or otherwise undermine the general policy. The exception is narrow, as it should be, and strikes the appropriate balance between principle and pragmatism," the public broadcaster states in its submission.

Industry Canada comes under fire for timing, substance of notice on use of foreign satellites for subscription radio

Broadcast | January 14, 2005

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