The CRTC should not licence the United States-based satellite radio service applicants, or if it does, should impose substantial conditions of licence to address the harm they will inflict on the Canadian market.  Licensing the two services, which have yet to receive the required technical permission from the Government of Canada, would constitute a threat to the integrity of Canadian broadcasting policy and could set a precedent for the reduction in Canadian content exhibition requirements for other broadcasters.

Statement to the CRTC
by Ian Morrison
Spokesperson
Friends of Canadian Broadcasting

Re: Pay Radio [PN CRTC 2004-6]

Mr. Chair, and Commissioners: thanks for granting Friends of Canadian Broadcasting an opportunity to appear today. As you know, Friends is a watchdog for Canadian content, and is supported by 60,000 households. We wish to speak to the Commission from a listeners' point of view.

Friends opposes the licensing of the satellite applicants in their present form [Footnote: CSR-XM and CBC-Standard-Sirius] and we support licensing of the CHUM-Astral application. Why?

The Broadcasting Act states that "each element of the Canadian broadcasting system shall contribute in an appropriate manner to the creation and presentation of Canadian programming", and "each broadcasting undertaking shall make maximum use, and in no case less than predominant use, of Canadian creative and other resources in the creation and presentation of programming, unless the nature of the service provided by the undertaking, such as specialized content or format or the use of languages other than French and English, renders that use impracticable, in which case the undertaking shall make the greatest practicable use of those resources" [Footnote: Broadcasting Act, Section 3 (1) (e & f)]. These broadcasting policies should govern the Commission's evaluation of the three applications.

The United States-based satellite radio services should not be licensed by the Commission because they will harm our domestic broadcasting and music industries. Friends believes that the threat of the grey market is being over-stated by the satellite-based applicants. Even were that not the case, importing almost 200 US channels in combination with a handful of Canadian services (some of them duplicating existing Canadian services) would do much more damage, for example, in the music industry by reducing the proportion of exposure that Canadian artists will receive in the Canadian market.

If, nonetheless, the Commission decides in principle to licence the satellite-based applications out of a concern for grey market threats, Friends believes conditions should be attached to such licences to attenuate to some degree for the damage they will inflict on the Canadian market.

Article 6 (2) of the Broadcast Distribution Regulations provides that "a licensee shall ensure, in respect of each of analog and digital technology, that a majority of the video and audio channels received by the subscriber are devoted to the distribution of Canadian programming services". It would appear that neither the XM nor the Sirius applications comes remotely close to meeting this standard.

The Commission's longstanding nurturing of the Canadian music industry constitutes a major success. In essence, through exhibition requirements the Commission has made a 35% Canadian content standard a floor in Canadian music radio. The Sirius and XM applications cannot even begin to meet this standard. While there may be some modest benefit to the Canadian music industry through exhibition opportunities for Canadian musicians in the US market, no reasonable observer would be justified in concluding that this could begin to compensate for the lack of play in the Canadian market.

A substantial expenditure requirement imposed upon the US-based satellite services as a condition of licence would attenuate to some degree for the damage they would inflict on Canadian artists through massive importation of foreign music. Friends doubts that the business plans of the satellite-based applications have been designed to bear an expenditure requirement sufficient to compensate for the damage they inflict on the Canadian market.

Recent Commission decisions for specialty television broadcasters have required 35% to 53% of previous year gross revenues for Canadian program expenditures, in addition to these broadcasters' exhibition requirements.

Something in this range should be required of the two United States-based applicants, both to attenuate for the damage they would cause through low use of Canadian creative resources and to avoid creating a precedent whereby other licensees might seek to buy out of exhibition requirements. This latter point is very important, as Canadian music-format radio broadcasters may be expected to ask whether they should continue to be required to bear content obligations not required of a principal competitor for the ears of their audience.

Grounds for reducing this level of expenditure requirement might include any substantial incremental costs to bring a US service with a North American footprint into Canada. We doubt that the applicants could document such incremental costs. Also, should the Commission require the US-satellite applicants to increase their CanCon obligations as a condition of licence, documented costs to achieve this might also be deducted from the required expenditure requirement.

These expenditure requirements should be directed to Canadian talent development, advancing the careers of Canadian artists, such as FACTOR, MusicAction, among others, including French-language music, which appears to constitute a minute element of the proposed satellite services.

We also note that neither of the US satellite-based applicants appears to have yet received the required satellite policy changes from the Government of Canada. I am referring to the letter your Secretary-General sent to the Deputy Ministers of Heritage and Industry on October 17th, 2003. The absence of this policy change in and of itself would be sufficient grounds, in our view, for the Commission to deny them a licence during this hearing process. If they were to come back at a later date if and when the proposed satellite policy changes were in place, this might afford them the time to reconsider their plans in order to align their proposals with Canadian broadcasting policies and priorities.

In summary, Friends sees in both the satellite-based applications a threat to the integrity of Canadian broadcasting policy. Abandoning a strategy which has served our country well by licensing services that do not meet established carriage and expenditure requirements is unjustified. It could also create a precedent-setting expectation that existing licensees could reduce their exhibition requirements. As well, to eliminate the incentive for other licensees to imitate these US-based applications, imposing a substantial expenditure requirement is absolutely essential.

Finally, in our view, the CHUM-Astral application conforms with Canadian broadcasting policy and is worthy of sympathetic consideration by the Commission.

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For information: Jim Thompson 613-447-9592

Related Documents

December 13, 2004 - Submission to Industry Canada re Proposed Clarification of the Government Satellite-use Policy for the Delivery of Broadcasting Services
FRIENDS' response to a proposal from Industry Canada and Heritage Canada to "clarify" the Canadian government's satellite-use policy for the delivery of broadcasting services.

November 1, 2004 - CBC News: Pay-radio hopefuls face the CRTC
FRIENDS criticizes low quantity of Canadian programming in two of the three proposed satellite pay radio applications currently before the CRTC.

September 15, 2004 - Policy Brief: Submission to CRTC re satellite-based radio service applications [PN CRTC 2004-6]
FRIENDS opposes two satellite-based radio applications which in our view pose a threat to the integrity of Canadian broadcasting policy by coming nowhere near established Canadian content exhibition requirements.