Broadcasters win value-for-signal court victory; CRTC policy gets green light

In a victory for broadcasters Monday, the Federal Court of Appeal issued a split decision that said the CRTC has the power and jurisdiction to implement its controversial value-for-signal regime. The commission released its policy decision in March 2010, but referred it to the Federal Court of Appeal for a determination on whether it has the jurisdiction to implement it. “No one believed it could be won,” a broadcasting industry source, who asked not to be named, told The Wire Report by email Monday, noting that the court decision came after “a long hard battle.” “Who knows what will happen next but it is an important day in the broadcasting business as there is now a further acknowledgement that economic rent must be paid to broadcasters for their product.” In the 2-1 split decision, Justice Karen Sharlow wrote that the Broadcasting Act empowers the CRTC to establish its value for signal regime, which will give over-the-air broadcasters the right to negotiate “value” for the carriage of their signals with cable and satellite distributors. In the event that negotiations fail, broadcasters will have the power to pull or “delete” their programming from broadcasting distributors. The 57-page court decision ends, for now, a pitched battle that for years sharpened the divide between broadcasting distributors like Rogers Communications Inc. and Bell Canada and broadcasters like CTVGlobemedia Inc. and Global Television. Justice Carolyn Layden-Stevenson supported Justice Sharlow’s decision. But Justice Marc Nadon wrote a dissenting opinion. Although the court decision confirms the CRTC’s jurisdiction to implement the system, its future remains uncertain. Under the regime, broadcasters will elect to negotiate for carriage of their signals, but now that choice will more or less be in the hands of major distributors like Shaw Communications Inc. and Bell, which since the CRTC made its decision last year, have purchased Global and CTV, respectively. Justice Sharlow noted in her decision that the Broadcasting Act says Canadian broadcasting “constitutes a single system and that the objectives of the broadcasting policy set out can best be achieved by providing for the regulation and supervision of the Canadian broadcasting system by a single independent public authority.” Much of the decision alluded to the importance of the broadcasting objectives laid out in section 3(1) of the act. “he Commission determined in the 2010 Policy that a value for signal regime is necessary to fulfil the objectives of the broadcasting policy stated in subsection 3(1) of the Broadcasting Act,” Justice Sharlow wrote, adding that the CRTC’s decision had relied on paragraphs in section 3(1) that emphasize the creation and presentation of Canadian programming. Justice Sharlow added that, during the court proceeding, distributors had “not challenged the soundness of the Commission’s policy analysis, its understanding of the relevant facts, its conclusion that a value for signal regime is justified on the basis of the policy objectives set out in subsection 3(1) of the Broadcasting Act, or the reasonableness of the proposed value for signal regime.” Instead, the distributors argued that the CRTC’s value-for-signal regime effectively gives broadcasters a new copyright, or retransmission right, under the Copyright Act. In the court decision, Justice Sharlow acknowledged the “theoretical possibility” of a conflict between the broadcasting and copyright acts. But she alluded to section 31 of the Copyright Act, which says it is not an infringement for a broadcaster to retransmit signals so long as, among other conditions, they are lawful under the Broadcasting Act. “That necessarily means that a BDU wishing to take advantage of the user right in … the Copyright Act must do so in compliance with the Broadcasting Act, any regulations made under the Broadcasting Act, and any conditions the Commission has attached to the retransmitter’s broadcasting licence,” Sharlow wrote. “Parliament has ranked the objectives of Canada’s broadcasting policy ahead of those statutory retransmission rights. I see nothing in the Copyright Act that would justify a reversal of that ranking if the Commission determines that the objectives of Canada’s broadcasting policy require the imposition of a regulation or licensing condition that would permit a private local television station to demand cash or other consideration from a BDU for the right to retransmit its signals.” Justice Sharlow added that the CRTC has the power to adopt a regulation or licensing condition that obliges distributors to negotiate value for signal “provided the Commission determines that the imposition of such an obligation is required to meet the objectives of Canada’s broadcasting policy …” She added that “it is irrelevant that such an obligation might be characterized as an obligation to pay a royalty,” noting that broadcasting distributors must pay similar fees to support local programming as part of their licence obligations. “Even now, the Commission requires BDUs to compensate private local television stations in respect of the retransmission of their signals, and it is not suggested that those requirements are not properly imposed,” she wrote. “It seems to me that the proposed value for signal regime is different only in degree, not in kind, substance or function.” Justice Sharlow added that there is no indication Parliament intended to preclude the CRTC from proposing a value-for-signal regime. “Indeed, the possibility that the Commission might adopt a value for signal regime has been under consideration for some time, but the record discloses no hint that Parliament or the Government of Canada would consider such a regime to be an improper or undesirable intrusion into copyright policy,” she wrote. Phil Lind, vice chairman of Rogers, said in interviews Tuesday that the company intends to appeal the decision to the Supreme Court of Canada. Justice Nadon, in his dissenting opinion, wrote that the commission’s value-for-signal policy clearly conflicts with the Copyright Act. Although Parliament delegated power to the CRTC through the Broadcasting Act, Justice Nadon said that “power is not absolute.” He added that the Copyright Act says “royalties must be paid only for the retransmission of distant signals and not for the retransmission of local signals.” The CRTC policy gives local, over-the-air broadcasters the power to charge for the carriage of their local signals. But Parliament intended to treat local and distant signals differently, he said. “ne aspect of this different treatment is that royalties can be imposed on persons retransmitting distant signals but cannot be imposed on persons retransmitting local signals,” Justice Nadon said. “he Copyright Act uses the term ‘royalty’ (or ‘royalties’) liberally—more than 60 times. If Parliament had intended that royalties be paid for the retransmission of local signals, it could easily have said so. It did not.” sdoyle@thewirereport.ca

Broadcasters win value-for-signal court victory; CRTC policy gets green light

Broadcast | March 1, 2011

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