Michael Geist
June 2005

Appeared in the Toronto Star, June 20, 2005

RECONCILING CANADIAN CONTENT REQUIREMENTS IN THE AGE OF THE INTERNET 

From policy decisions on Internet telephony to third language television broadcasters, the Canadian Radio-television and Telecommunications Commission has faced more than its fair share of criticism in recent months.  With last week’s much anticipated pay radio decision, the Commission was no doubt prepared for yet another flurry of negative commentary.

Criticism did indeed rain down – within hours groups were claiming that the decision ran counter to Canadian broadcasting law or that is somehow threatened online music businesses.  From my perspective, however, the Commission made the best of a bad hand and delivered a policy approach that prioritizes Canadian artists by adapting Canadian content requirements to emerging new technologies.

The background to the decision was widely reported last week: the CRTC was presented last fall with three competing proposals for pay radio.  The two satellite proposals were Canadianized versions of XM and Sirius, existing U.S. services that have millions of subscribers and are effectively already available to Canadians through the grey market (some estimate that 100,000 Canadians subscribe to the U.S. services).  Their backers argued that it was impossible to add Canadian content directly to existing channels but that if granted a license, they would add several Canadian channels to meet adapted Canadian content requirements. A third proposal, developed by CHUM and Astral, took a different approach by promising far greater Canadian content but with a terrestrial transmission approach that would only serve a limited number of urban Canadian areas.

The CRTC approved modified versions of all three proposals.  Most notably, the satellite providers were set two minimums -- at least eight Canadian channels (double the initial proposals) as well as a minimum of one Canadian channel for every nine foreign channels. Moreover, the CRTC created programming obligations to promote new Canadian music and mandated contributions of five percent of gross revenues toward Canadian talent development.

While the some groups claim the CRTC did not do enough to protect Canadian content, it is important to recognize that the CRTC did not find itself in a strong regulatory position on the pay radio issue.  The headlines may have trumpeted the arrival of satellite radio to Canada, yet the reality is that it already exists here. If the Commission loaded the license requirements with significantly larger Canadian content requirements, there would be every reason to believe that the U.S. services would have walked away from the market, content to generate some revenue through a grey market that features no mandated Canadian content.

Moreover, the CRTC thankfully avoided the temptation to intervene in the competitive marketplace by trying to pick winners.  Despite the clamour of quick IPO’s, pay radio is by no means a guaranteed success.  It faces stiff competition not only from free radio, but also from webcasting, free and fee-based music download services, as well as the growing popularity of podcasting.  Given that challenging economic environment, the CRTC sensibly avoided selecting one proposal over another by leaving it to the market to determine how many pay radio services the Canadian market would support.

The Commission also wisely decided to promote Canadian content by encouraging its availability, rather than by locking it down.  Canadian musical artists lent their support to this approach last fall, emphasizing the value of new distribution channels such as satellite radio.

The CRTC could have set limitations on access by adopting the Canadian Recording Industry Association’s recommendation that mandatory anti-copying technology accompany the introduction of the pay radio services. CRIA argued that “latent in this technology are very significant threats to creators of music.”  By siding with the artists, the CRTC has paved the way for greater availability and funding for new Canadian music.

In the long term, the most important aspect of the decision is that the Commission set an important precedent on Canadian content requirements that promises to extend its viability in an increasingly complex communications environment. While critics argue that the opposite is true – namely that the Commission has been rendered redundant and that the reduction of Canadian content requirements from 35 percent on conventional radio stations to the ten percent found on satellite radio will lead to a stampede for lowering Canadian content requirements in other media – this need not be the case.

Rather, the CRTC has provided a textbook example of how it can still use its limited policy levers to promote Canadian content.  While critics call for the elimination of Canadian content requirements, the reality is that a completely open market in culture invariably leads to the cheapest form of culture, which is typically U.S. in origin given its efficiencies of scale.  By mandating 326 hours each day of Canadian content with a prioritization of new music and artists not found on the music charts, the CRTC has followed the path found in many other developed countries whose cultural policy is designed to provide their own artists with the airplay that is a pre-requisite for success.

Further, the decision should not result in a reduction of Canadian content requirements in other media.  The CRTC decision paves the way for an adaptable approach, one that responds to emerging technologies by avoiding “one size fits all” solutions.  In the case of satellite radio, setting a minimum number of channels was reasonably viewed as the better approach to mandating content percentages.

In fact, much to the chagrin of Canadian content requirement critics, the issue is bound to arise in a host of other emerging media.  For example, webcasting from large providers has experienced dramatic growth in recent years and may soon face questions about Canadian content requirements.  Similarly, music download services, which are fast becoming the industry’s preferred retail delivery channel, may also encounter pressure to meet Canadian content minimums. 

While policy makers have been rightly reluctant to pursue such regulations for fear that they would involve “regulating the Internet”, ignoring the Internet by neglecting to embrace its remarkable potential risks rendering Canadian cultural policy increasingly irrelevant. 

The CRTC faced the same choice on pay radio.  Given the option between adaptation and irrelevance, the Commission chose to adapt its approach and it is Canadian artists and consumers who are left as the ultimate winners.


Michael Geist is the Canada Research Chair in Internet and E-commerce Law at the University of Ottawa. He can be reached by email at mgeist@uottawa.ca and is on-line at www.michaelgeist.ca.

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