Proceedings of the Standing Senate Committee on
Transport and Communications
Issue No. 39 - Evidence - October 3, 2018
OTTAWA, Wednesday, October 3, 2018
The Standing Senate Committee on Transport and Communications met this day at 6:45 p.m. to examine how the three federal communications statutes (the Telecommunications Act, the Broadcasting Act, and the Radiocommunication Act) can be modernized to account for the evolution of the broadcasting and telecommunications sectors in the last decades.
Senator David Tkachuk (Chair) in the chair.
[English]
The Chair: The Standing Senate Committee on Transport and Communications is called to order.
Last June, the Senate authorized the committee to examine and report on how the three federal communications statutes, Telecommunications Act, the Broadcasting Act and the Radiocommunication Act can be modernized.
This evening we continue this special study. I would like to welcome our witnesses. From Innovation, Science and Economic Development Canada we have Ms. Pamela Miller, Director General, Telecommunications and Internet Policy Branch; and Aline Chevrier, Senior Director, Spectrum Licensing and Auction Operations. And from Canadian Heritage, we have Thomas Owen Ripley, Director General, Broadcasting and Digital Communications Branch; and Drew Olsen, Director, Marketplace and Legislative Policy.
Thank you for attending. Mr. Ripley, please.
[Translation]
Thomas Owen Ripley, Director General, Broadcasting and Digital Communications Branch, Canadian Heritage: Mr. Chair, you made the introductions. First, I would like to thank you for inviting us to appear before the committee this evening. We’re pleased to talk about the review of communications legislation announced by the government.
[English]
As it is a joint review, we propose to jointly walk you through the issues and associated processes this evening. My colleague Pamela will begin by talking about the impetus for the review and the telecommunications issues at play.
Pamela Miller, Director General, Telecommunications and Internet Policy Branch, Innovation, Science and Economic Development Canada: Thank you, Owen.
Honourable senators, telecommunications and broadcasting play a significant role in the economic and social lives of Canadians. However, new technologies and business models are introducing disruptive change and challenges, while also creating new opportunities.
To keep up and ensure that Canadians continue to benefit from an open and innovative Internet, the government committed in Budget 2017, to review and modernize the Broadcasting Act and the Telecommunications Act.
The government stated that the review will examine issues such as telecommunications and content creation in the digital age, net neutrality and cultural diversity and how to strengthen the future of Canadian media and Canadian content creation.
On June 5, 2018, the Minister of Innovation, Science and Economic Development Canada and the Minister of Canadian Heritage launched the review. It was announced that the Radiocommunication Act would also be reviewed as it is an integral part of the communications legislative framework and takes the policy objectives of the Telecommunications Act as its own.
The ministers announced that the review would be led by a self-governing panel of experts who reflect a diversity of expertise and a balance of sectors, language and gender. Ms. Janet Yale was announced as the panel chair along with six other members: Peter Grant, Hank Intven, Marina Pavlovic, Monique Simard, Monica Song and Pierre Trudel.
We are pleased at the deep expertise and range of viewpoints present. A terms of reference was also published that outlined priority issues for the government.
The panel was conceived to have a joint review given the linkages between the sectors. For example, in Canada there is a high degree of vertical integration and concentration. The sectors are also subject to similar global trends, benefit from policies that encourage competition, innovation, affordability and are regulated by the independent Canadian Radio-television and Telecommunications Commission, the CRTC.
I will now provide a short background on telecommunications legislation. The Telecommunications Act is grounded in common carriage principles that the provider of a service must offer it without discrimination and give its customers the same level of service it would give itself. The Radiocommunication Act provides a technology neutral framework for the management of radio frequency spectrum.
The policy objectives for both acts include to render high quality, reliable and affordable telecom services to Canadians across the country, support competition and investment, and respond to the economic and social needs of users.
Amendments have been made to update both acts since they were introduced, including following the last comprehensive review that was completed in 2006. The amendments include, starting with the Telecommunications Act, giving the CRTC the power to establish a fund to access basic telecommunications services in 1998. In 2005, enacting provisions to support the establishment of the do-not-call list. In 2012, removing foreign investment restrictions for companies smaller than 10 per cent of the overall telecommunications market. In 2014, giving the CRTC power to issue general administrative monetary penalties, authority to regulate resellers, and to share confidential information with the Competition Bureau. As for the Radiocommunication Act, in 1996 authorities regarding spectrum auctions were introduced, and in 2014 ISED was given spectrum-related administrative monetary penalty powers.
The government’s terms of reference to the panel outlined seven main telecommunications areas that are essential for the review to consider. These are: universal access and deployment; competition, innovation and affordability; net neutrality; consumer protection, rights and accessibility; safety, security and privacy; effective spectrum regulation; and governance and effective administration.
Universal access and deployment is critical, because access to the internet is essential for all Canadians. Funding programs have supported access in areas where the business case for the market is difficult. Challenges around efficient and reasonable access to passive infrastructure, such as poles and ducts, can raise the cost of deploying telecom infrastructure. The government has asked if the right legislative tools are in place to support universal access and deployment, and whether the governance over passive infrastructure is right.
On competition, innovation and affordability, the government recognizes that competition is key to promoting innovation, choice and affordable services. Given a concentrated industry and integrated carriers, the government asked whether new tools could better promote competition.
On net neutrality, the government is committed to this principle given its importance to freedom of expression and innovation — key pillars of the internet. In fact, the House of Commons unanimously passed a motion that the review be guided by net neutrality and explore opportunities to further enshrine it in legislation. Net neutrality principles are already reflected in the act, and the flexibility inherent in a principles-based act has enabled the CRTC to act quickly and implement a framework tailored to different circumstances. Net neutrality is a guiding principle for the review and the panel will examine ways to further strengthen it.
Consumer protection rights and accessibility are in the act as the policy objective to respond to the economic and social requirements of users and the CRTC has authority to regulate conditions of service. The government has asked whether more is required.
Safety, security and privacy are broader than telecommunications. However, the internet’s reach in our lives has raised these as important issues. Security and safety are not explicitly referenced in the act as policy objectives, while privacy is. The panel was asked to examine the extent to which changes are needed on these issues within the context of telecommunication legislation.
Effective spectrum regulation is needed given the changes with 5G networks and the number of devices, including smart devices, that will be connecting to them. The panel was asked whether we have the right tools to ensure that Canadians benefit from innovation safely, securely and efficiently.
Lastly, governance and effective administration, given responsibilities are assigned to different organizations and decision makers. The panel was asked whether the allocation is correct and whether the balance between Governor-in-Council review and independent regulation is appropriate in the modern context.
We look forward to the panel’s recommendations on these issues. So I will now hand it back to Owen to speak to the Broadcasting Act.
[Translation]
Mr. Ripley: Thank you, Pamela.
The Broadcasting Act was enacted in 1991 and predates the rise of the Internet. Historically, Canada’s broadcasting system was a closed system that relied on licences issued by the regulator, the CRTC, to Canadian-owned companies. Foreigners aren’t allowed to hold broadcasting licences in Canada.
[English]
In return for the privilege of holding a licence and for protected access to the Canadian market, licencees have to broadcast or distribute a minimum amount of Canadian content and devote a percentage of their revenues to supporting the creation of Canadian programming. As an example, this is how the Canada Media Fund is funded.
However, Canada’s broadcasting system is not closed anymore. While our system has served us well, it is being disrupted by the nature of the open internet and the free flow of content and information. Canadians now have access to a seemingly infinite amount of choice of content that they want to consume from both domestic and foreign sources. Creativity is being harnessed in ways that Parliament could not have predicted back in the 1980s and 1990s.
This is why the government asked the CRTC, pursuant to section 15 of the Broadcasting Act, to report on: future distribution models that are likely to exist in the future; how and through whom Canadians will access their programming in the future; and the extent to which these models will ensure a vibrant domestic market that is capable of supporting continued creation, production and distribution of Canadian programming, in both official languages, including original entertainment and information programming.
[Translation]
This report was released by the CRTC on May 31, 2018, and was designed to feed into and inform the legislative review.
Now, let me briefly walk you through some of the key broadcasting issues of the legislative review.
[English]
As I mentioned, the act was enacted before the rise of the internet in 1991. Now in 2018, 61 per cent of Canadians watch internet television in a given month. In 2016, real-time entertainment content represented 71 per cent of internet download traffic on fixed networks in North America during peak use hours.
With this new reality in mind, the panel was asked to provide recommendations on how the various legislative and regulatory tools and mechanisms that support Canadian content and the creative industries can be adapted to the digital world.
Broadcasting also has implications for our democracy. Canadian news media are in the process of a disruptive and dramatic change and are facing reduced revenues. In 2016, 42 per cent of Canadian advertising revenues came from the internet and this number continues to grow. Moreover, given the rise of social media platforms, the phenomenon of online disinformation is also growing and has the potential to undermine our democratic institutions and processes. As such, the panel has been asked to examine whether current legislative provisions are sufficient to ensure the provision of trusted, accurate and quality news and information, and what can be done to ensure the continuing viability of local news.
[Translation]
When it comes to CBC/Radio-Canada, the government believes that the national public broadcaster should be a leading partner among the cultural and news organizations, and should play a leading role in showcasing Canadian cultural content in French and English and in reflecting Indigenous peoples and our country’s diversity both in Canada and internationally. The panel was asked to look, among other things, at how its mandate could be updated in light of the more open, global, and competitive communications environment.
[English]
Moreover, a legislative framework for the communications sector should take cultural diversity into account. It is important to ensure that Canadians of all backgrounds and experiences can create and access content that speaks to them. As such, the panel will provide recommendations on how the act can ensure that the online environment will also respect and have room for linguistic duality, Indigenous cultural expression and gender equality.
[Translation]
There are several other important issues and topics, all of which are addressed in the terms of reference provided by the government to the review panel. We would be pleased to answer your questions regarding any of these issues.
This provides an overview of the approach and policy issues identified for consideration in the review.
[English]
The panel’s work is well on its way. It met regularly over the course of the summer and consultations were launched last Tuesday, on September 25. At that time, the panel published a discussion document and call for comments called Responding to the New Environment: A Call for Comments. Submissions are due by November 30.
The panel’s consultation process will also include participating in a number of industry and academic conferences and meeting with a cross-section of experts, creators, stakeholders and other interested parties, including from Indigenous and official language minority communities. Several video explainers will be created and posted online, as will all submissions after the deadline.
[Translation]
The panel plans to issue a report on the comments provided during the consultations in the spring. It will also determine whether further consultation is needed before submitting its final report and recommendations by January 31, 2020.
Thank you, and we look forward to answering your questions.
[English]
The Chair: I just have a few to start with. The panel that you talk about, there are seven members? Where are they all from?
Ms. Miller: The seven members on the panel are a combination of the chair and six panellists. I can go through their bios if that would be helpful for you.
The Chair: I don’t want you to read the whole bio, but you might say where they’re from and what they do.
Ms. Miller: Janet Yale is well-known in the telecom and broadcasting sector and has worked for the President and CEO of the Canadian Cable Television Association and later was the Executive Vice-President at Telus. She was a director general at the CRTC and a general counsel at the Consumer’s Association of Canada. She ticks all the boxes: telecom, broadcasting, regulator and consumers. She has come from the non-profit sector, having worked with the Arthritis Alliance.
The Chair: That’s too long.
Ms. Miller: Peter Grant is a very well-known broadcasting expert, a pioneer in communications law at McCarthy Tétrault LLP, the gold standard lawyer in telecom, and very was involved with the inception of the Telecommunications Act.
The Chair: Where is he from?
Ms. Miller: He is a professor at University of Victoria. He was previously with law firms.
Marina Pavlovic is associate professor in the Faculty of Law at the University of Ottawa.
Monique Simard was President and CEO of Société de développement des entreprises culturelles, or SODEC, and previously Director General of the National Film Board. In 2018, she was appointed as Chair of the Board of the Québecor Fund, so she comes from the media sector.
Monica Song is a lawyer and partner with Dentons. Pierre Trudel is a full-time professor of public law at the Public Law Research Centre at Université de Montréal and comes from the media and cultural sector.
It is a balanced panel with different viewpoints represented.
The Chair: No Maritimers and no Prairie people. Just someone from the University of Victoria, who used to live here, and everybody else is from Toronto and Montreal. Is that the way it is, or am I overstating that a little?
Ms. Miller: In terms of the actual panel members, I don’t know their actual history of their entire careers, but I suspect some of them may have been living in other parts of Canada in different places. I think an important part of the consultation is that it’s completely open and they have a call for submissions right now. They will meet with key stakeholders and will be doing a lot of outreach. It will be very inclusive in terms of opportunities for participation.
The Chair: What brought on the special study? Was it a lobby from industry, or was it a government initiative? Why is the government doing this?
Ms. Miller: That was announced in Budget 2017, so it came in the statement. It was announced that this would be undertaken. As we said in our opening remarks, there is a recognition that technology is changing and this is of key importance to Canadians. It’s always good to update legislation and make sure that we have the right legislative frameworks in place. That was the impetus.
The Chair: Our committee did a couple days of testimony on some of the problems of the news media in the country and the advertising dollars available. Some unique perspectives and recommendations were brought forward. You mentioned, Mr. Ripley, something called disinformation. What is disinformation?
Mr. Ripley: I had the privilege of appearing before you when this committee looked at section 19, and I read your report over the summer.
I define disinformation as intentional misinformation. So it is an actor seeking to mislead by putting out something that’s false or misleading, but with a purpose.
The Chair: You mean like politicians do? I’m just saying.
Mr. Ripley: I will leave that to you, Mr. Chair.
The Chair: I’m just saying. Doesn’t that kind of bother you? Who will decide this?
Mr. Ripley: I agree that the policy issues around online disinformation engage many important policy principles. It’s an issue that I think many jurisdictions are struggling with. That said, increasingly there is a recognition of the potential impact of the issue of online disinformation on democratic institutions and processes. That first came to light, prominently, with the U.S. election. Subsequently, the same issue came out during the French, Italian and Mexican elections.
So, how do you ensure that Canadians are equipped to determine what they think is true and what they think is false? How do you determine that they have good digital and media literacy skills? How do you ensure there is good quality information in the system for them to draw upon? How do you ensure you have journalists who are covering our important civic institutions and are committed to holding public officers to account? I think that’s important for both elected and unelected officials. And then, how do you have institutions that are equipped to deal with the issue of online disinformation?
This has always, to a certain extent, been part of the Broadcasting Act framework. You may be aware, for example, there are advertising provisions that begin during an election period. The Broadcasting Act principles themselves are founded on a principle of ensuring accuracy in the information ecosystem and ensuring there is a responsibility for information that circulates in that closed system. Those are things that licensees who get a broadcasting licence must be mindful of.
What we’ve observed is those principles don’t apply as neatly to an open Internet, where it’s a more distributed model wherein you and I can push out information, and you don’t have a broadcaster who is responsible for that from a business model perspective.
The Chair: I think it exists everywhere, but that is just sort of my view.
Senator Gagné: I have two types of questions for Heritage Canada and for Innovation, Science and Economic Development.
[Translation]
I have before me the Canadian broadcasting policy. It sets out a number of principles. I’ll focus on two principles set out in paragraph 3(1)(d) of the act, which states as follows:
(d) the Canadian broadcasting system should:
(i) serve to safeguard, enrich and strengthen the cultural, political, social and economic fabric of Canada,
(ii) encourage the development of Canadian expression by providing a wide range of programming that reflects Canadian attitudes, opinions, ideas, values and artistic creativity, by displaying Canadian talent in entertainment programming and by offering information and analysis concerning Canada and other countries from a Canadian point of view,
I also read the Canadian telecommunications policy. I’m trying to identify the issue regarding our ability to always be in a position to achieve the set objectives.
My question is the following. Has an evaluation of the policy’s success been conducted, and are these objectives still achievable in the Internet age?
Mr. Ripley: I would say that we’ve identified section 3 of the act and the policy as the most important. They represent the reason for the creation of the system, and as I mentioned in my speech, a closed system.
As you know, the CRTC remains responsible for implementing these principles. The CRTC’s role with respect to the system is to look at section 3 and ask, “Okay, we have the ability to issue licences and we have other regulatory responsibilities, but how do we implement these principles?” The commission uses a number of tools. These include the conditions for licencing broadcasters and cable companies, and the creation of certain funds inside and outside the CRTC system, such as the Canada Media Fund.
That’s how I see the implementation of section 3. I would say that, all things considered, the national public broadcaster also helps fulfill the mandate and the principles set out in section 3.
Senator Gagné: You mentioned the CRTC. Obviously, I understand that the CRTC was given the mandate to implement the regulations. Is there a conflict when it comes to the CRTC’s dual mandate to ensure diverse Canadian productions and control prices?
Mr. Ripley: I would say that the CRTC’s role is to look at the principles. Yes, there’s a balance in the way that we must combine these things and find a policy that meets a number of objectives.
We shouldn’t necessarily think of the creation of Canadian content to the exclusion of a reasonable price for Canadian consumers. I don’t necessarily think that we have one mandate to the exclusion of the other.
Senator Gagné: Isn’t the pressure stronger on one side than the other? Are we finding a balance?
Mr. Ripley: Obviously, in Canada and around the world, we’re discussing ways to find the proper balance in the system. That’s why these issues were examined. Are we finding the right balance? Do we have the right players within the system who are able to support Canadian content, or do we need to look at the whole picture and make changes? I would say that these important issues must be considered.
Senator Gagné: My next question is for the representatives of Innovation, Science and Economic Development Canada.
In terms of legislation, your main responsibility is related to the Telecommunications Act. You want to ensure that we’ll be able to achieve the objectives set out in the Canadian policy. We’re talking about Canadian ownership, the free and competitive market, access in rural and remote areas, consumer protection, and so on.
To what extent do you take the Canadian broadcasting policy into account?
Ms. Miller: The question is quite simple, because they’re the same.
[English]
The objectives in the Telecommunications Act are duplicated in the Radiocommunication Act. They work together the same. They are seamless.
[Translation]
Senator Gagné: There’s no friction?
[English]
Ms. Miller: No, they are the same objectives. Section 7 is duplicated. It would sit with reference to the way it’s described in the Radiocommunications Act. It’s with reference to the objectives in the Telecommunications Act. That’s why we included radiocom in the review.
[Translation]
They’re the same objectives.
Senator Gagné: I’m talking about broadcasting.
Ms. Miller: Yes, broadcasting.
[English]
I would say the two acts have different purposes. One is about carriage. The Telecommunications Act is about carriage. It’s about the network itself. As I described in my remarks, it’s about common carriage. It establishes principles of nondiscrimination. That’s our foundation for net neutrality. With subsection 27(2) and section 34 in the act, you cannot discriminate based on the type of content or based on who owns the content. We have a strong foundation for net neutrality in the act. We also have a strong foundation for consumers because we have respect for the interests of users, and we have a reference to competition and investment. We really have a strong framework in place for the network part. It works hand in glove with broadcasting because broadcasting is about content. The two acts have different purposes but work together because we are on the network side and the Broadcasting Act is on the content side.
Sorry for the confusion, but the Radiocommunication Act, which governs the spectrum part, works very much with the Telecommunications Act. That’s why it’s been scoped into review.
[Translation]
Mr. Ripley: I would add that, in the review, we asked ourselves whether we had the right principles for each act concerning broadcasting. As you know, it’s a long list. Can anything be removed from or added to the list? Is this the right balance? It’s the same thing for telecommunications.
Senator Gagné: Thank you.
[English]
Senator Mercer: I really don’t know where to begin. This is a big subject, so I may be all over the map. I have some questions that have some connection to where we are going.
I want to get on the record, though, that the review of the panel’s bios is significant. There are no Atlantic Canadians on there that I can identify. There are no consumers. I don’t mean large-scale consumers; I mean Joe or Mary consumers who would have an opinion. This is a difficult subject for all of us because the world is changing so fast. We want Canadians to succeed and we want Canadians to be treated fairly. I have a difficult time seeing how Canadian media, culture and communications will survive in a world that is moving so fast with the Internet, and things like Netflix. These entities are interfering with what we have developed over the years, namely, good broadcasting networks. I also know that if you watch either public or private television, that the competition is killing them.
I have been very critical of the local CTV network in Halifax, where I live. The opening line of the evening news every night is “live and local.” Well, it’s live but it’s not local because the first three or four stories — with all due respect to my friends in New Brunswick — are about what’s happening in downtown Moncton or Saint John.
I understand the problems the media are having. They have had to consolidate their services and serve a bigger market with a smaller number of people. How are we going to attack that issue without interfering directly in the marketplace? And I don’t think we should interfere, but we need to make the marketplace fair.
Are we using dollars that we collect through various means, for example, the spectrum? How many billions of dollars have the Government of Canada collected on spectrum? Senator Tkachuk sat around this table for months talking about spectrum. There is still spectrum to be sold. Is that money realized from selling spectrum going to be rededicated to protecting or helping the industry survive as a Canadian entity?
Some people like to build walls. You can’t build walls for technology or electronics. They will go over or around any wall. That’s my first question.
Senator Gagné: That was a question?
The Chair: How do you want to handle it? He wants you to comment on his comments.
Mr. Ripley: I’m happy to comment. With respect to the panellists, I would reiterate what my colleague Pam said. There was an effort to identify a diverse range of folks. A number of consultations have preceded this. For example, on the broadcasting side, there was an effort under way a couple years ago called “Canadian culture in a digital world”.
In terms of the panellists, effort was made to identify individuals with an expertise, both on the broadcasting side as well as the telecom side. This is a complex area, so the thinking is you do need folks with a degree of expertise who can come back with solid recommendations to government in terms of how to actually implement legislative recommendations.
News is indeed a topic that is concerning. There has been much coverage recently, in newspapers and in broadcast reporting, on the topic of news. I encourage you, if you haven’t already had the opportunity, to look at work that the CRTC has done in the context of the section 15 report that I mentioned in my opening remarks called Harnessing Change. Whether you agree with the CRTC’s recommendations or not, there are some interesting statistics in there and it’s a trove of data. I would point the committee to that as you carry out this work.
There are a number of things that are under way on the news side. For example, the CRTC has made efforts to provide broadcasters with additional flexibility in this space by, within the ownership groups, moving some money from the community programming side to the news side. So the CRTC has given broadcast licensees some flexibility in that space to try to give them the ability to put more money into local news.
It has created a local news fund for independent broadcasters to draw upon to support their news functions. But it is acknowledged that conventional broadcasters, like the CTV station that you identified, are facing significant challenges in this respect.
In the section 15 report that I mentioned, the CRTC frames that kind of business model as in decline given the rise of streaming services. So those business models do face challenges. The government is aware of those. The last budget contained a commitment to invest $50 million in journalism in underserved communities. Our department is currently working on the implementation of that. We discussed that briefly when we were here last time.
There is a commitment to look at rules around charitable status, which the Department of Finance is looking at. Our minister’s most recent mandate letter made a commitment to continue to work with media organizations. There is broad recognition that having a sustainable source of local news in particular is going to be a challenge. We must think about how we continue to ensure that we have news to turn to.
Ms. Miller: I could speak to the spectrum auction revenues. Those revenues go into the consolidated revenue fund, and then they are subject to the normal budgetary process of government. So they would be determined in the normal budget cycle.
Senator Mercer: Maybe spectrum should be rededicated to the sector they take the money out of. You did raise the issue that I also had down in my notes about this new idea of media becoming charities. I have worked in the charitable sector my entire career. I have developed case statements for $120 million campaigns and $100,000 campaigns. I’m not sure how I would build the case for someone to give money to the local CTV station in my community. It’s much more difficult to do.
I compliment the government for trying to come up with something that will help, because communities across the country are losing their identity. Even communities where there is a big market — Toronto, for example — electronic and print media are losing their markets.
How is charitable status for a media outlet going to work?
Mr. Ripley: That question is still to be determined. It’s our colleagues at Finance are leading the work on that because they are responsible for charitable status in Canada. I agree with your point that that issue will not be a solution to the issues facing the media sector. There is an acknowledgment that some changes in that could help with specific types of journalism. For example, where you might see a foundation wanting to support journalism on Indigenous-related issues or something like that. But I don’t think it will be a panacea that will suddenly buoy all newspapers and broadcasters across the country.
Senator Mercer: I have more questions but I will pass. I just remind you that Department of Finance doesn’t manage the charitable sector, CRA does.
Mr. Ripley: Thank you.
The Chair: I’m always confused by this question of worrying about the news and where people are going to get the news from. People will watch the news. You can fund CTV in Saskatoon, or CBC in Regina, till the cows come home, but if no one is watching it, you are not disseminating news. It doesn’t matter how much money the government gives. The government could give money to the National Post,The Globe and Mail or any of the TV stations, but that will never solve the problem. If nobody is reading or listening to them, that’s the reason the revenue is declining. That problem will only be solved by the marketplace.
Not that long ago radio was supposed to be dead. Radio is very much alive. You want local news in Saskatoon, you go CKOM radio, news all day long and you go to their website. It’s got all the local stories. Why are they beating the StarPhoenix? I have no idea but they are. People aren’t reading the StarPhoenix. Maybe because they are writing about something that people don’t want to read. Governments can’t make those decisions.
I see all the stuff you’re putting out there, but this looks like — I hate to use these words — a conservative, old-school panel. There are no new thinkers on it. These guys are not going to do anything to change what’s happening in broadcasting today. Only the marketplace will do that.
Mr. Ripley: On the question of a new model, senator, I think you put your thumb on it to an extent. In the old model, the business model revolved around bringing people to a product or a space. You read the National Post, The Globe and Mail and Le Journal de Montréal. The internet has changed that because it is a distributed model. We use aggregators now to access our content. We look at Facebook, Twitter and Google searches. Not everyone is typing in National Post and The Globe and Mail or Le Journal de Montréal and starting from that perspective. They are opening up their feed and they may see a CBC article that they like, or a National Post article.
So, yes, this has fundamentally changed the business model for those organizations that used to depend on bringing readers to them so they could collect the advertising and classified ad dollars that were associated with that. That system is breaking down and it is challenging. You are seeing different media organizations respond to that challenge differently. Obviously there is the paywall model that some are trying. There are those that are trying to build closer relationships with local communities, for example, to have a funded-by-the-community type model. There are those who are seeking to find an advertising model that works, or some combination of all of those things. I agree with you that there is no mature model or apparent model that is going to replace what we have come from.
In terms of your comments about the panel, I won’t comment on that other than to say the government’s been clear in its terms of reference of the types of issues we expect them to grapple with.
The Chair: I’ve got no problem with that. I’m just saying that’s my opinion.
[Translation]
Senator Boisvenu: In the House of Commons, when this committee was established, the measure was heavily criticized by all the opposition parties. The issue is that the sector is constantly holding consultations. We hold consultations over a long period, but the technology is developing so quickly that, by the time the report is produced, it’s already outdated.
The other issue in Quebec and other places is that consumers are prisoners of monopolies. Previously, Bell was the only telephone service provider. Then Vidéotron arrived. These two companies incorporated Internet, telephone and cellphone service. Quebec has two companies, Bell and Vidéotron, and clients switch from one to the other. When one company makes a good offer, the clients drop the other company, and vice versa. There’s no competition. It’s like the price of gas in Sherbrooke. Everyone talks to one another about the prices. The sector is very rigid as a result of the lack of competition. You’re going to conduct this study. Congratulations! But where will we be in two or three years? The consumers will still be prisoners of two companies that have incorporated all the information. If we choose Vidéotron, we’re also required to have the telephone and Internet service.
Will you be opening up the market in the future?
We discussed the same principle last week concerning television packages. I’m forced to pay for channels that I won’t watch. What can I say? I’m not interested in Radio-Canada, but I’m a prisoner.
In Canada, we set rules that favour sellers and not buyers. I don’t know whether this is part of your mandate, but one day the consumers must become the rulers. We must eliminate situations that force us to make choices that we don’t want to make, because the companies have a monopoly. We’ve lost our freedom as consumers.
Perhaps I should have asked the minister this question, but will you be taking this route, or will you simply be amending the regulations?
Mr. Ripley: I can start to answer, but others may want to elaborate.
Senator Boisvenu: I’m talking to you about this matter without judging you, you know. I think you’re very nice.
Mr. Ripley: I’ll say two things. First, you’re right. When we look at the Canadian market, yes, we do have major players. We know that choices are sometimes limited. However, in relation to the global market, even our largest companies are fairly small compared to the major players in the world. We must find a way to resolve the concerns that you raised. We must find solutions for Canadian consumers and citizens. We must create a framework, a market where our companies can compete with the major players in the world. That’s the reality today. Our broadcasters must compete with the Netflixes and Amazons of the world. It’s hard for them.
Senator Boisvenu: If people watch programs online now, the reason is that they can choose to go where they want. Television doesn’t provide that choice. We’re prisoners of our cable system. This is no longer working for us. People are leaving the conventional system and going online, because they can pick and pay. This pick-and-pay system could bring clients back to our providers. If nothing is done, in five or 10 years, conventional television as we know it will no longer be viable.
Mr. Ripley: We already have products on the market that are more consumer-oriented and that give consumers this type of choice. We have over-the-top services. Many Canadians subscribe to this type of service. We’re seeing virtual BDUs emerge in the United States. These companies give you the option of choosing the channel to which you want to subscribe. That’s one of our reasons for conducting this review. We must find a flexible framework that can handle all the new technology. Otherwise, our conventional broadcasting system, which must meet cultural needs in Canada, will be completely based on old technology, and so on.
Senator Boisvenu: I have one last question. Consumers support some channels, even though it isn’t their responsibility. For example, when I purchase a package, and only five stations out of 20 interest me, I support the 15 other stations that I didn’t choose. It’s almost undemocratic. It’s a total lack of freedom.
Mr. Ripley: I imagine that you’re aware of this, but the CRTC has already done some work in this area.
I don’t know whether anyone would like to comment on Let’s Talk TV.
Drew Olsen, Director, Marketplace and Legislative Policy, Canadian Heritage: As part of Let’s Talk TV, a process that ran from 2013 to 2015, the decision was made to implement a system where you can choose the television channels that you want. Some channels are mandatory and you’re forced to have them, but you can choose other channels. The major cable companies are required to offer the channels on an individual basis, but they provide packages that you can choose as a consumer.
[English]
Senator McIntyre: Thank you for your presentations. In the last year, the government and Netflix have come to an agreement that would see the company invest a minimum of $500 million in original Canadian productions over the next five years. Some stakeholders are concerned that this deal allows Netflix to get around existing Canadian broadcasting rules. Can you provide the committee with some details about this agreement with Netflix?
Mr. Ripley: I’m limited about what I can talk publicly given the strong protections in the Investment Canada Act, but I will certainly do my best.
First, a few clarifications. I wouldn’t frame this as a deal. Netflix made certain engagements under the Investment Canada Act, which is a process that applies in the cultural sector as well as other sectors, as part of establishing a business in Canada.
The $500 million commitment is for original productions in Canada, so it is not purely Cancon. It can include that. I don’t know if you caught it last week, but Netflix published a blog where they did a summary of their first year in Canada including the projects they supported and the partners they invested in. They pointed to some of the types of productions that would qualify as Cancon, but it is important to clarify that the $500 million commitment is original productions in Canada, so it could include both.
With respect to your last point, Netflix and the question is it circumventing rules that would otherwise be applied to broadcasters. As you may know, in 1999, the CRTC published what is called the digital media exemption order. If you fall within the parameters of that order, you are excepted from most regulatory obligations that apply to others. Entities that are operating in Canada pursuant to that order, for example, do not have to spend a percentage of their revenues on Canadian content and those types of obligations.
Senator McIntyre: Along that same tone, is Netflix held to the same standards as traditional broadcasters, or is a separate set of rules applied to them?
Mr. Ripley: A separate set of rules applies to any entity that falls under the digital media exception order. If you are a licensed broadcaster in Canada, you would have certain conditions of licence that are placed on you. We’ve had all the large ownership groups recently go through their licence renewals, so you will see a commitment in those to spend a certain amount on Canadian programming. For example, 30 per cent of their revenues have to be spent on Canadian programming. Of that, there is a subset that has to be spent on certain types of content referred to as programs of national interest, or PNI. You may have heard creative groups talk about that. That would be things like long-form drama, documentary and kids’ programming. The French market has a slightly different definition which could include music videos and those types of things. There is obligation often to support and have a certain number of hours of local news programming. Those are the types of obligations that would apply to your traditional broadcaster. If you are an entity that operates under the digital media exemption order, you do not have those same types of obligations because you are not required to seek a licence from the CRTC.
Senator McIntyre: My next question concerns the governance and effective administration as per the panel’s terms of reference number 7. As I understand it, the Governor-in-Council — that is, the GIC powers — sets the conditions of the relationship between the government and the CRTC. We also know the current GIC powers are limited to a few sections within the Telecommunications Act.
Do you think that the GIC powers should be expanded in order to address the issues in telecommunication and radio communications we are facing today?
Ms. Miller: The sections in the Telecommunications Act, I think as outlined in the terms of reference, refer to the fact they are within the Telecommunications Act. They don’t pertain to the Broadcasting Act but to the Telecommunications Act, which allows the Governor-in-Council the power to vary a CRTC decision or to have a CRTC decision reconsidered. That applies to all CRTC decisions pertaining to telecommunications. It is comprehensive relating to telecom decisions made by the CRTC. The Governor-in-Council can also make a binding policy direction to the CRTC regarding telecommunications, but I will let my colleague speak regarding broadcasting.
Senator McIntyre: The only thing I’m driving at is whether the GIC powers should be expanded.
Ms. Miller: Regarding the Telecommunications Act, it does have the ability now to address CRTC decisions in the act as it stands today.
Senator McIntyre: Okay. That’s fine. Perhaps a final question. You mentioned in your brief that there are several other important issues and topics. Could you briefly elaborate on those?
Mr. Ripley: Given the time constraints we had, certainly on the broadcasting side we didn’t want to go through line by line on the terms of reference. I think some of the other things that I would have alluded to, for example, are the sort of more nuts and bolts around governance and effective administration on the broadcasting side.
Regarding the question you just asked my colleague, on the broadcasting side you have a section 7, which is a binding direction to the CRTC. You have a section 15, which is asking the CRTC to study and report on a certain topic, and then obviously you have the petition power. There are questions that can be discussed about whether that’s the appropriate balance. For example, you cannot currently ask the government to review a policy decision on the broadcasting side of the house. For example, should the government have that power? Do we currently have the right balance there?
I’m not sure, Drew, if there are other things you would like to point out.
Mr. Olsen: The other power is the section 28 power to review licensing decisions in the broadcasting context. The Governor-in-Council powers under the Broadcasting Act are deliberately quite limited to separate out the media from the government. The CRTC regulates the media sector independently. The government has quite limited powers to intervene in CRTC matters on the broadcasting side. As Owen pointed out, there’s a specific policy direction on a broad matter of general application and they’re asked to do a report, or the Governor-in-Council can refer a licensing decision back to the CRTC but cannot vary one.
Senator Dasko: I’m here as a substitute for Senator Bovey, who couldn’t attend today. I am from Toronto. I don’t know your panel members, but I do know Janet Yale. I have met her many times, and she is a superb person and expert in the field. I have great confidence in her participation in your panel.
I have a very basic question for you, and excuse me for being so elemental about this. As we’ve heard today and in many other places, conventional television and newspapers are experiencing declining viewers and readers. Is it the position of the Government of Canada that these industries must be saved? I know it’s a very basic question, but I’d like you to tackle it.
Mr. Ripley: I would approach the question from the perspective of saying that entities like newspapers and conventional media broadcasters have served a very important function, and that function remains important. It is critical that Canadians have news and information about their communities, what their decision makers are doing and are able to access that information. That way, at the end of the day, they can make informed decisions, as I noted in my opening remarks, and participate in democracy at various levels of government.
It’s also stepping outside the news and information space. It’s important that Canadians see themselves, their experiences and their linguistic differences reflected in the content we consume. Historically, certain types of entities have played those roles. I will not rule out the possibility that those entities might look different and that there may be a different mix of those entities in the future.
As we talked about, the conventional newspaper business model is under significant challenges at the moment, given how the ad market now functions. Historically, news was cross-subsidized by advertising dollars. The Googles and Facebooks of the world have broken that cross-subsidization to a certain extent, and it’s difficult to see an immediate fix to that.
Do I rule out that creativity and innovation will bring forward a new business model that will find a viable way forward? No. As I said, there are glimpses of what might work, but again, I don’t see the emergence of a viable business model that will be the solution, or silver bullet, for all these problems.
Senator Dasko: So they could disappear?
Mr. Ripley: I would respond to your question by saying that, yes, the functions those entities have carried on are important. Part of this exercise is ensuring we have a legislative and regulatory framework that is flexible enough to support those kinds of functions, whether it’s a conventional broadcaster, newspaper or another entity carrying them out. That’s the challenge we’ve given the review panel to work through.
The Chair: CBC operates a website that is really a newspaper. They are in direct competition with The Globe and Mail and the Saskatoon StarPhoenix. We’re worried about Google and Facebook taking away advertising dollars from newspapers. But, isn’t the CBC also taking away advertising dollars from newspapers?
Mr. Ripley: It is true that the CBC currently finances itself, partly, through advertising dollars. There are three income streams for the CBC: the parliamentary appropriation, the revenue they make from licensing their specialty services and then advertising revenues.
The Chair: You didn’t answer my question. Is that not an unfair competition? They run a newspaper. They’re in competition with all those other people. We’re all worried about Google and Facebook taking money away. What about the CBC? Don’t they run a newspaper? Isn’t that a problem for the National Post, The Globe and Mail or the Vancouver Sun?
Mr. Ripley: There are a few points I will make. One is — and I don’t have the exact figures in front of me; CBC would be best placed to answer this question — that the revenue they make from advertising on their digital services is relatively small compared to the $5 billion currently generated by advertising revenues in Canada.
Second, you have to ask yourself this question: If you took the CBC completely out of the ad business, would all that money necessarily flow to private sector competitors? There would obviously be a redistribution of that advertising money. I’m not sure what the answer to that is, but I think we could safely assume at least some of it would go to other Internet-based companies. So it’s not clear to me whether it would all necessarily go to The Globe and Mail, National Post, et cetera.
The Chair: We don’t know that with Google or Facebook either. We don’t know any of that, actually.
If there is no one else, thank you very much. We have appreciated the conversation today for sure.
(The committee adjourned.)