Speed, transparency to be top issues in new vertical integration proceeding

The CRTC’s capacity to quickly and transparently deal with broadcasting disputes will be at the forefront in a new proceeding to review the commission’s powers to regulate vertically integrated companies, industry observers tell The Wire Report. “It’s not helpful if you have to fight over access to hockey content, and you get a positive decision but you don’t get that decision before the baseball season starts,” Michael Hennessy, Telus Communications Co. senior vice-president of regulatory and government affairs, said in an interview. On Friday the CRTC announced a new public consultation on the possible effects of consolidation in the Canadian broadcasting industry and its existing safeguards to prevent anti-competitive behaviour. The broadcasting industry has increasingly converged since the beginning of the decade: in 2001, Quebecor Media Inc. acquired the TVA television network; in 2007, Rogers Media Inc. purchased five Citytv stations; on Friday the CRTC approved Shaw Communications Inc.’s purchase of Canwest Global Communications Corp.’s television properties; and BCE Inc. announced last month an agreement to wholly acquire CTVglobemedia Inc. “The aim of this public hearing is to put in place norms for commercial interaction amongst interested parties within the broadcasting sector that would provide all players with a fair opportunity to negotiate for such key elements as programming rights and details of carriage,” the commission said in its notice of consultation. “With specific regard to programming rights, the Commission reiterates its view that generally it prefers to see distribution of programs on a non-exclusive basis, as this enhances consumer choice and furthers a competitive workplace.” The proceeding will review a 2005 commission framework intended to ensure that negotiations for broadcasting rights between distributors and television programmers are conducted according to “good commercial practices.” On Friday the CRTC said there is now significant concern that large, integrated broadcasting distributors could “act in a manner that would be detrimental” to the broadcasting system. As part of the proceeding, the commission added that it intends to consider using reverse onus provisions for undue preference allegations, so that it will be incumbent upon the party to disprove the allegations. “It is the commission’s preliminary view that the reverse onus provisions should be made generally applicable to all programming undertakings as well as to all broadcasting distribution undertakings,” the commission wrote. Hennessy said the reverse onus provisions will be an essential component of any new regulatory tool. “If you know that exclusivity, on its face, is wrong, then it shouldn’t be up to the complaining party to have to … make the case,” he said. “It’s critical at that point to move quickly to the carrier to prove what they’re doing isn’t wrong. Reverse onus is also a critical element of ensuring that there’s timeliness,” he said. In its notice Friday, the CRTC said it will review a policy that says it considers, on a case-by-case basis, whether it should suspend a proposed distribution packaging change until a final decision is made if the proposed change is the subject of a terms-of-carriage dispute. Moving forward, the commission said parties to a dispute should “generally be held harmless” during the dispute-resolution process. If the CRTC is not going to intervene in an allegation about a distribution package until a final decision is reached—its speed resolving such matters is an issue. Richard J. Paradis, a lecturer at the Université de Montréal’s communications department and president of consulting firm Group CIC, said in an interview the commission’s ability to respond quickly to allegations will be critical, and that the regulator may consider establishing a binding commercial arbitration process for broadcasters, modelled on Industry Canada’s telecom framework. Hennessy said Telus supports adopting an arbitration process, adding that the commission should base its framework on transparency, fairness and timeliness. “The last piece of that of that puzzle is probably to get as many broad principles in place, in terms of ex ante rules, so that you don’t have to deal with so many things ex post,” he said. Hennessy said the commission may also review its ability to issue administrative penalties and fines. He added that the proceeding will touch upon three key points: the ability of independent producers to negotiate broadcasting rights and terms of carriage; fair and equitable treatment for competitors; and exclusivity of content. But self-dealing or undue preference rules are going to be a top issue at the hearing. “The issue is how do you ensure that the terms and conditions of service are equitable and fair,” Hennessy said. “I think it’s critical that there’s transparency for the commission, if it’s the arbitrator, to be able to look at agreements that vertically-integrated carriers have with other players in the system to ensure everything’s fair.” Paradis said the two main issues to be considered at the hearing will be self-dealing and program exclusivity. “The commission will be looking for independent broadcasters, the few that are left, to express … what they think is going to be required in terms of … transparent regulation, to make sure if there’s any undue preference, or otherwise, it can be dealt with quickly and not damage any broadcaster that wants to complain about what’s going on in the market,” he said. Norm Bolen, president and CEO of the Canadian Media Production Association (CMPA), said he hopes the proceeding on vertical integration will inform the CRTC’s licence hearings for group broadcasters next year. The CMPA argues it is difficult for independent producers to negotiate terms of trade with large, integrated companies. “Broadcasters are taking more and more rights from independent producers on content,” he said. “We need a rebalance between the producers and the broadcasters.” The Alliance of Canadian Cinema, Television and Radio Artists (ACTRA) indicated in a release Friday it will participate in the consultation. Steve Anderson, national coordinator with OpenMedia.ca, said in an interview the hearing may touch on net-neutrality issues and the CRTC’s regulatory exemption for new media. Anderson said he is concerned distributors will throttle access to competitors’ content online. “I think one of the major concerns is that they could be discriminating against other people’s content. They have more of an economic incentive to give preferential treatment to their own, especially in the wireless marketplace,” he said. Paradis agreed that new media regulation may come up in the proceeding, but said it could be dealt with in a separate consultation. A hearing is scheduled for May 9, 2011 in Gatineau. The deadline to submit written comments is March 7, 2011. In an interview with BNN Friday, CRTC chairman Konrad von Finckenstein said the commission will issue a decision within 31 days of the hearing. kfournier@thewirereport.ca

Speed, transparency to be top issues in new vertical integration proceeding

Broadcast | October 25, 2010

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