CRTC issues Shaw a shortened distribution licence, starts ‘campaign’ for monetary penalties

The CRTC’s decision Friday to grant Shaw Communications Inc. a shorter-term distribution licence is furthering a debate about whether the commission should have the power to administer monetary penalties for non-compliance with regulations. Mark Goldberg, head of telecom consultancy Mark H. Goldberg & Associates Inc., wrote in a blog posting Monday that the decision to renew Shaw’s licence for five years only may mark the beginning of a campaign by the CRTC to increase its regulatory powers. “Right now, if a company falls afoul of the rules, the CRTC has to wait until it is time to renew the licenses, and as punishment, it can either cut them off completely by not renewing their licence (highly unlikely) or it can make the carrier go through the time-consuming renewal process more frequently by granting shorter licence periods,” Goldberg wrote. “According to the addendum, some companies have demonstrated that the a shorter licence term at the next licence renewal (a number of years away), is a better business decision than incurring short-term costs needed to comply with their regulatory obligations.” CRTC officials appeared before the House of Commons heritage committee last week and called for the power to impose administrative fines across all of its regulated sectors. The commission said the change should be made by amending the CRTC Act instead of the telecommunications and broadcasting acts. On Friday the commission renewed Shaw’s broadcasting distribution licence for British Columbia, Alberta, Saskatchewan and Manitoba for a five-year period from Dec. 1, 2010 to Aug. 31, 2015. In an additional section included in the decision, the commission said giving short licence terms to broadcasters is a “sub-optimal” tool to deal with non-compliance issues in a competitive, vertically-integrated market, and suggested a need for the power to impose administrative monetary penalties. Shaw had asked the commission for a maximum licence term of seven years, but the CRTC denied the request, saying a shorter licence term would allow it to review the company’s compliance with its conditions of licence and broadcasting regulations. The move came just after Shaw was late on its contributions to the Canada Media Fund (CMF). In September, when the CRTC announced a consultation on Shaw’s licence renewal, it noted the company had paid four of its monthly contributions to the CMF in arrears. Shaw also made a catch-up payment to the CMF in March 2010. Shaw said during its licence renewal hearing that the missing payments were a mistake and were corrected as soon as the situation came to light. But CRTC chairman Konrad von Finckenstein said during the proceeding that Shaw’s late payments did not inspire confidence in the company, adding that granting a five rather than seven-year licence was the only way for the CRTC to deal with the matter. Shorter licence terms afford companies less certainty when gathering capital for their operations. In its decision Friday, the CRTC said Shaw was in non-compliance with its regulations from September 2009 to February 2010, and as a consequence granted Shaw a five-year licence instead of the maximum of seven years. The commission said it would have given the company a shorter licence term had it not been for its acquisition of Canwest Global Communications Corp.’s broadcasting assets and “the need for a degree of regulatory certainty.” The CRTC previously granted Shaw a two-year licence term, from September 2008 to August 2010, while it reviewed the company’s compliance with regulations regarding Shaw’s distribution of sponsorship messages on their community channels, its channel realignment and to monitor the company’s audit practices. Broadcasting expert Martha Fusca, president and CEO of Stornoway Communications, said in an interview that she expects administrative penalties to come up as part of the CRTC’s hearing on vertical integration. Fusca said hefty monetary penalties can affect companies’ non-compliance. “I’m certain the CRTC, as well as perhaps other affected groups, would under certain circumstances want to see more immediate action ,” she said. “What monetary penalties would give you is the ability to get a quicker response.” But Ian Morrison, a spokesman for watchdog group the Friends of Canadian Broadcasting, said monetary penalties may not have made a difference in Shaw’s case because granting shorter-term licences still hurt the company’s bottom line. Morrison said the decision Friday to shorten the distributor’s licence to five years took into consideration Shaw’s “misbehaviour.” But Ken Stein, Shaw’s senior vice-president of corporate and regulatory affairs, said the decision to grant the company five years instead of two was a vote of confidence in the company. The CRTC said in its decision that Shaw may be granted an extra one-year administrative renewal if it complies with its licence terms during the five-year period—a condition the company is sure to meet, Stein said. “I don’t think we’ve had any kind of disrespect of the commission,” he said. Stein also noted that the commission is moving towards five-year licences. In its group-based policy to licensing private television services, released in March, the commission said it intends to grant shorter licence terms. “It is the Commission's intention, given the pace of change in the broadcasting environment and the desire to assess the impact of the new group-based approach, to impose a five-year, rather than a seven-year, licence term for licences controlled by the designated groups,” the CRTC said. Broadcasters, however, will have the opportunity to discuss the appropriateness of five-year terms at the group licensing hearings to be held in the spring. In its decision Friday, the commission made a direct reference to the need for penalties for non-compliance with regulations. “Once again, the Commission is required to rely on sub-optimal regulatory tools to address non-compliance issues, resulting in less effective and more costly regulation, to the detriment of the broadcasting system and all Canadians,” the commission said. “Canada would benefit from amendments to the Canadian Radio-television and Telecommunications Commission Act to provide more timely and relevant regulatory compliance tools. These should include the ability for the Commission to issue administrative monetary penalties (AMPs) with regard to non-compliance matters and transgressions by licensees. Most G20 members have granted their communications regulators the authority to issue AMPs.” The commission also noted that short-term licence renewals are an ineffective solution for the radio sector, where 68 of the 127 radio undertaking licences reviewed since Jan. 1, 2010, were renewed on a short-term basis due to non-compliance. “Canada is in the process of defining our role and priorities within the digital economy. Now would be the best time to cut through these delays and curtail regulatory bureaucracy by providing the Commission with the tools to act in the least intrusive and least invasive manner,” the CRTC said. kfournier@thewirereport.ca

CRTC issues Shaw a shortened distribution licence, starts ‘campaign’ for monetary penalties

Broadcast | November 8, 2010

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