Supreme Court quashes CRTC value-for-signal regime

The Supreme Court of Canada said the CRTC does not have the jurisdiction to implement a value for signal policy to compensate local TV stations for the carriage of their signals. A decision issued Thursday said the commission's proposed policy would conflict with the Copyright Act by creating “a new type of copyright” on local TV stations' signals. “The value for signal regime would rewrite the balance between the owners’ and users’ interests as set out by Parliament in the Copyright Act,” said the decision, supported by five justices and dissented by four. “Because the CRTC’s value for signal regime is inconsistent with the purpose of the Copyright Act, it falls outside of the scope of the CRTC’s licensing and regulatory jurisdiction under the Broadcasting Act.” Local TV stations and broadcast distributors have fought legal and regulatory battles over the policy, formerly known as “fee for carriage,” for more than half a decade. “It's phenomenal. It's fantastic. It's been a long, long battle,” Phil Lind, vice-chair of Rogers, said in a phone interview Thursday. “We went to our first hearing on this in 2006.” The CRTC held a separate hearing about fee-for-carriage in 2008, during which CTV (now owned by BCE Inc.) and Global (now owned by Shaw Communications Inc.) said over-the-air broadcasters should be permitted to charge distributors 50 cents per signal per subscriber per month for the carriage of their local signals. The CRTC rejected that in decision 2008-100 issued in 2008. Following another consultation on the issue, the commission proposed the value-for-signal regime in March 2010 to provide an additional revenue stream for over-the-air broadcasters experiencing lower revenues in a fragmented advertising market. Before moving to implement the policy, the commission referred it to the Federal Court for a ruling on whether it had the jurisdiction to implement it. That reference to the court weaved its way to Canada's highest court, which in the decision Thursday, Cogeco Cable Inc. et al. v. Bell Media Inc. et al., ruled in the favour of broadcast distributors. Chief Justice Beverley McLachlin, with justices Louis LeBel, Morris Fish, Marshall Rothstein and Michael Moldaver, supported the decision, while justices Rosalie Abella, Marie Deschamps, Thomas Cromwell and Andromache Karakatsanis dissented. Bell supported the value for signal policy, seeking compensation for the local signals of its CTV stations, while Rogers Communications Inc., which owns Citytv, and Shaw, with its Global stations, are against it. Broadcast distributors Telus Corp. and Cogeco Cable Inc., which do not have local television stations, also argued against the value-for-signal policy. Rogers, which has 2.3 million cable TV subscribers, had argued that a fee-for-carriage regime would lead to higher costs and could increase subscriber bills by $6 to $10 per month. The value-for-signal regime, laid out in broadcasting decision 2010-167, said local, conventional broadcasters would have the option to negotiate “value” for their over-the-air signals in exchange for giving up the CRTC's regulatory protections of their signals. Under the policy, similar to the retransmission consent regime in the United States, stations would have the authority to pull or black out their signals from distributors, including their rights to popular American programming, if the two sides could not reach a carriage deal. The CRTC said it would “minimize its involvement” in disputed carriage negotiations, and would intervene only in cases where parties do not negotiate in good faith. “Reading the Broadcasting Act in its entire context reveals that the creation of such rights is too great a stretch from the core purposes intended by Parliament and from the powers granted to the CRTC under the Broadcasting Act,” the decision Thursday said. “It would be incoherent for Parliament to set up a carefully tailored signals retransmission right in the Copyright Act, specifically excluding BDUs from the scope of the broadcasters’ exclusive rights over the simultaneous retransmission of their signals, only to enable a subordinate legislative body to enact a functionally equivalent right through a related regime,” the court said. Lind said the decision means the CRTC can no longer move ahead with the policy. The Conservative government could decide to implement a compensation regime, though he does not expect that. “The government, although not publicly, has certainly quietly supported our position for a long time,” Lind said. “Stephen Harper's is a consumer-based government.” He said BCE is the last remaining vertically integrated broadcaster supporting the policy, and it alone is not likely to have much sway with the government. The government indicated Thursday that it will not take any legislative steps to address the court's finding. "The Supreme Court of Canada has made its decision. We will not be making changes to the legislation," Sébastien Gariépy, a spokesman for Heritage Minister James Moore, said in an emailed statement. Broadcasting industry insiders told The Wire Report in interviews in August that, even if the Supreme Court was to approve the policy, they expected the CRTC to rethink the proposed regime given different marketplace conditions, new leadership at the top of the commission, and a changed regulatory environment. The Supreme Court said broadcasters have argued at parliamentary committees for the right to authorize or refuse the retransmission of their local signals by distributors, and that through amendments to the Copyright Act, Parliament chose not to amend the statute to meet their requests. Parliament's silence on the issue “suggests that it is Parliament's intention to maintain the balance struck” under the Copyright Act, the decision said. “The recent legislative history of the Copyright Act supports the view that Parliament made deliberate choices in respect of copyright and broadcasting policy,” the court said. BCE division Bell Media said in a statement Thursday that it was disappointed with the decision because the regime would have benefitted TV viewers with "long-term stability for their local television stations, which currently rely on an advertising market that has seen permanent structural change, and is no longer able to fund such a model on its own." Mirko Bibic, Bell's chief regulatory officer and executive vice-president, said in a statement that TV stations cannot rely on an uncertain advertising market and that "the financial model for local television is broken." Bell said a large majority of Canadians get their local news from TV stations while the ad market for local television "is in permanent decline." Bell Media's local TV stations' total revenues and operating income declined in 2012, the release said, adding that small market stations remain financially challenged, particularly as the CRTC decided in July to phase out its $105-million local TV fund. "Bell Media believes the Canadian television industry as a whole must work together toward a new model for local TV, one that provides viewers with stable local TV stations well into the future," Bibic said. The dissenting justices said the proposed regime was necessary to preserve the viability of local television stations and fulfil CRTC policy objectives under the Broadcasting Act, and referred to the commission's mandate and powers under the Broadcasting Act, including the power to set rates. “The regime is merely an extension of the current regime, which places conditions, including financial ones, on BDUs for the licence to retransmit local stations’ signals,” the dissenting opinion said. Lind said the decision is also important as some American stations expressed interest gaining compensation for the carriage of their signals in Canada under the Broadcasting Act, in addition to fees paid under the Copyright Act. Rogers said this year that if the Supreme Court quashed value for signal, the company would use the decision to legally challenge the distant signal regime under the Broadcasting Act. Peter Bissonnette, president of Shaw Communications, said in an emailed statement that the company was very pleased with the decision. “We opposed value for signal because it was not in the best interests of customers," Bissonnette said, adding that the company believes its customers are best served through more choice and "greater regulatory flexibility.” "We look forward to working with other industry participants and the CRTC to develop a regulatory framework that encourages investment, innovation and market-based solutions for conventional television," Bissonnette said. —With reporting by Simon Doyle at sdoyle@thewirereport.ca and editing by Nicholas Kyonka at nkyonka@thewirereport.ca news@thewirereport.ca

Supreme Court quashes CRTC value-for-signal regime

Broadcast | December 13, 2012

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