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Petition to His Excellency The Governor in Council

Jul 11, 2013

Mr. Wayne G. Wouters
Clerk of the Privy Council and Secretary to the Cabinet
1000 – 85 Sparks Street
Ottawa, Ontario K1A 0A3

E-mail: info@pco-bcp.gc.ca

Dear Mr. Wouters:

Re: Petition to the Governor in Council
Broadcasting Decision CRTC 2013-263 relating to the renewal of the licences for Radio 2 and Espace Musique of theCanadian Broadcasting Corporation/Société Radio-Canada

Friends of Canadian Broadcasting is filing today the attached Petition to His Excellency the Governor in Council pursuant to Section 28 of the Broadcasting Act (Canada).  The Petition relates to the decisions of the CRTC to renew the licences of the CBC/Radio-Canada's radio services Radio 2 and Espace Musique, which are contained in Broadcasting Decision CRTC 2013-263.

Friends is supported by more than 175,000 Canadian families and is not affiliated with any broadcaster or political party.  As indicated in a broad cross-section of public opinion polls, Friends also represents the views of a strong majority of Canadians on important broadcasting issues, particularly regarding issues affecting our national public broadcaster. 

The Commission’s decisions would permit CBC/SRC to broadcast advertising content on its radio services for the first time since 1974, when the practice was abolished by the CRTC because of inconsistency with CBC/SRC radio’s public service mandate. CBC listeners feel betrayed by these decisions and are rightly concerned that CBC/SRC is drifting from its mandate and becoming more and more commercial in both purpose and content – especially on radio.

As detailed in the attached Petition, the decisions:

  • Ignore the views expressed by the vast majority of CBC/SRC's listeners who intervened in the recent public hearing – giving voice to the views of taxpayers that pay for CBC/SRC's services;
  • Undermine the unique, public and non-commercial character of CBC/SRC's radio services;
  • Going forward, will encourage even greater commercialization of CBC/SRC's radio services in pursuit of advertising revenue – the beginning of an inevitable drive by CBC/SRC to generate more revenue from radio; and
  • Place CBC/SRC in direct and unfair competition with private broadcasters, which are often the only source of local programming in small and medium markets; threatening their viability and failing to consider the impact on these broadcasters.

In addition to these mandate-altering considerations, other aspects of the decisions raise serious issues. 

First, the CRTC’s extensive on-line public consultation on CBC/SRC's renewal applications ended 8 months before CBC/SRC amended its applications to commercialize Radio 2 and Espace Musique.  The public was caught by surprise, and the CRTC never reopened its online consultation to address this substantial amendment.  Canadians were not consulted by CBC/SRC; and the CRTC process was short-circuited.

Second, it is now clear that CBC/SRC's plans are based on reallocating all but a tiny portion of its Parliamentary appropriation that would otherwise be used to operate Radio 2.  This calls into question the integrity of CBC/SRC's use of public funds for its primary public broadcasting mandate, and the allocation of funding between French- and English-language services.

Third, the CRTC's "three year review" puts off a full examination of important policy questions that should be answered before this step is taken, not after, and is legally flawed.  Contrary to what the CRTC intends, in three years' time, CBC/SRC will be subject to no conditions of licence at restricting advertising or requiring a full-range of music.  Full commercialization will be a fait accompli.

The CRTC's acceptance of advertising on Radio 2 and Espace Musique is mandate-altering for these services, and contrary to the role they play in fulfilling broadcasting policy objectives through our national public broadcaster.  Friends respectfully submits that, given the serious problems we have identified with these decisions in the Petition, the Canadian public, CBC/SRC and the Commission would all be well served by a second look at the issue of advertising on Radio 2 and Espace Musique.  His Excellency the Governor in Council should refer the decisions back to the CRTC for reconsideration. 

Yours truly,

Ian Morrison
Spokesperson

c.c. Canadian Broadcasting Corporation
Canadian Radio-television and Telecommunications Commission
Minister of Canadian Heritage
Canadian Broadcasting Corporation

Enc.

Petition to His Excellency The Governor in Council

In the Matter of: Broadcasting Decision CRTC 2013-263

(Renewal of the licences for Radio 2 and Espace Musique of Canadian Broadcasting Corporation/Société Radio-Canada)

By: Friends of Canadian Broadcasting

INTRODUCTION AND EXECUTIVE SUMMARY

1. This is a Petition by Friends of Canadian Broadcasting ("Friends") to His Excellency the Governor in Council pursuant to section 28 of the Broadcasting Act (Canada).  This Petition is made with respect to the decisions of the Canadian Radio-television and Telecommunications Commission ("CRTC") to renew the licences of the Canadian Broadcasting Corporation/Société Radio-Canada ("CBC/SRC") for Radio 2 and Espace Musique (the "Decisions").  The Decisions are contained in Broadcasting Decision CRTC 2013-263, which was made on May 28, 2013.  

2. Friends respectfully requests that the Governor in Council refer the Decisions back to the CRTC for a reconsideration and hearing.  For clarity, Friends does not request that the Commission reconsider other decisions contained in Broadcasting Decision CRTC 2013-263, which relate to CBC/SRC's other licensed broadcasting services.  This Petition relates only to the Decisions to renew the licences for Radio 2 and Espace Musique (the networks and stations for those programming undertakings as listed in Appendix 1 to Broadcasting Decision CRTC 2013-263).

3. Friends was established in 1985 with the mission to defend and enhance the quality and quantity of Canadian programming in the Canadian audio-visual system.  Friends is supported by more than 175,000 Canadian families and is not affiliated with any broadcaster or political party. As indicated in a broad cross-section of public opinion polls, Friends also represents the views of a strong majority of Canadians on important broadcasting issues, particularly regarding issues affecting our national public broadcaster. 

4. Friends supports a strong CBC/SRC on behalf of Canadians - who finance all of CBC/SRC's activities through their tax dollars.  Since 1985, Friends has participated in a large number of CRTC and other public policy proceedings.  Friends frequently conducts independent research and surveys to better understand what Canadians want from their system. Friends participated in the CRTC's public proceeding that led to the Decisions and conducted public consultations in advance of that proceeding to better understand Canadians' expectations of CBC/SRC and its services. Friends is, therefore, well positioned to represent the loyal listeners of CBC/SRC's radio services. 

5. The Decisions would permit CBC/SRC to broadcast advertising content on its radio services for the first time since 1974, when the practice was abolished by the CRTC as being inconsistent with CBC/SRC's public mandate. CBC/SRC listeners feel betrayed by the Decisions and are rightly concerned that CBC/SRC is drifting from its mandate as the national public broadcaster - with a specific role and mandate under the Broadcasting Act and privileged access to public funding through the appropriation made by Parliament - and becoming more and more commercial in its purpose and content. 

6. As explained in more detail in this Petition, the Decisions:

  • Ignore the express views of the vast majority of CBC/SRC's listeners, as reflected in submissions made to the hearing - who also happen to be the same taxpayers that pay for CBC/SRC's service.
  • Undermine the unique, public and non-commercial character of CBC/SRC's radio services, and CBC/SRC's distinctive role as part of the "public" element comprising a part of the broadcasting system contemplated in subsection 3(1)(b) of the Broadcasting Act. It is true that content choices, particularly commercialized content choices deploying enhanced digital advertising techniques (such as the on-line CBC Music service), are proliferating via the Internet. But, in this environment, CBC/SRC's distinctive, non-commercial and public character in the delivery of radio services is more important than ever.
  • Going forward, the Decisions will encourage even greater commercialization of CBC/SRC's radio services. Radio 2 listeners have already experienced CBC/SRC's unilateral decision to abandon the Classical music format in pursuit of younger demographics. The CBC/SRC's move to place advertising on these radio services was also taken unilaterally without public consultation. There seems to be no aspect of the public mandate that is not at risk from the pursuit of more commercial revenue without regard to Canadians' wishes.
  • Last, the Decisions place CBC/SRC in direct and unfair competition with private broadcasters, which are often the only source of local programming in small and medium markets; and serve distinctive audiences in larger markets. These broadcasters have been filling the gap left when Radio 2 changed its format and abandoned a large portion of its audience. The Decisions will harm these broadcasters and destabilize the balance between public and private elements in the broadcasting system.

7. In addition to these mandate-altering considerations, other aspects of the Decisions are highly problematic:

  • The Decisions are based on a deficient consultation process by CBC/SRC. Consequently, the CRTC's own process has been inadequate - although the views of the Canadian public regarding CBC/SRC's plans could not have been clearer. The CRTC's extensive on-line public consultation on CBC/SRC's renewal applications ended 8 months before CBC/SRC amended its applications to commercialize Radio 2 and Espace Musique. The public was caught by surprise, and the CRTC did not reopen its online consultation to address this substantial amendment. Canadians were not consulted by CBC/SRC; and the CRTC process was short-circuited.
  • The Decisions are based on the CRTC's acceptance of CBC/SRC's unprecedented step to withdraw funding from its Parliamentary appropriation from Radio 2 and to use that money to support other services - some of which are already highly commercialized and supported by advertising. The tacit approval is at odds with Parliament's own allocation of resources to CBC/SRC for its radio services, including Radio 2. It also overturns the traditional balance of public resources between French- and English-language services.
  • The Decisions include an ambiguous and legally flawed "three-year review" plan. A review in three years is not necessary given the strong views expressed by Canadians to the CRTC in this matter. In any event, the questions that the CRTC has said it would look at in three years should be answered now, before this irreversible step is taken. Finally, the conditions of licence imposed on CBC/SRC regarding the three year review will actually do the opposite of what the CRTC intends. Under its existing conditions of licence in three years, CBC/SRC will be free to provide an unlimited amount of advertising on Radio 2 and Espace Musique and the requirements ensuring a diversity of music will no longer apply. There is little reason to think that this outcome can be avoided unless action is taken now.

8. It is our respectful submission that the Decisions derogate from the achievement of broadcasting policy objectives set out in section 3(1) of the Broadcasting Act and should be referred back to the CRTC for reconsideration and hearing.

THE VIEWS OF CANADIANS

9. The views of Canadians on CBC/SRC's plans to air advertising on Radio 2 and Espace Musique could not be clearer. 

10. By the CRTC's own count the CRTC received 965 interventions on the renewal of the licences for Radio 2 and Espace Musique that directly addressed the amendments regarding advertising.  893 of these interventions - or 92.5% of them - opposed advertising on CBC/SRC's radio services.

11. Private radio broadcasters filed some of these interventions, to be sure.  But, the vast majority reflects the views of individual Canadians and loyal CBC/SRC radio listeners.  These are the same Canadians whose tax dollars provide the money that supports CBC/SRC. 

12. These Canadians expect, in return, to receive high quality programming that is distinctively Canadian and that reflects CBC/SRC's position as the national public broadcaster under the Broadcasting Act.  If these listeners wished to hear commercial radio with advertising content, then there are options available to them to hear commercial radio.  They tune to CBC/SRC's services precisely because it is commercial-free, and support CBC/SRC on that basis.

13. A large number of submissions to the CRTC addressed this issue directly, and the CRTC heard in person from several individuals at the public hearing how important CBC/SRC's commercial-free radio services are to Canadians.  Time and again, in their written submissions, Canadians rejected CBC/SRC's proposal to sell ads on radio.  The following exchange between Commissioners and one Canadian, a Ms. Cathy Hunt, is representative of the views of a substantial majority of CBC/SRC listeners and Canadians in general:

10695   COMMISSIONER POIRIER: Okay.

10696   The other issue is advertising. How can we distinguish a public and a private broadcaster? Is it only by advertising or other means we have to make sure that we can distinguish both of them? Because there is advertising on TV and it is CBC, our public broadcaster.

10697   MS HUNT: Yes.

10698   COMMISSIONER POIRIER: So why are you against advertising on Radio 2, I imagine?

10699   MS HUNT: Well, because it's not there now and I am a Radio 2 listener and so I appreciate the constant content without advertising, without breaks to ask me to consume. I just want to consume the radio content.

10700   And I am concerned, as I said in my letter, that to add that now to a radio station that does not -- or broadcasting that does not presently have adverts is going down what is potentially a slippery slope of saying, oh, well, we did it in Radio One and it has helped us in this manner and so now we can -- maybe we will only -- maybe we need it in Radio -- sorry, I was saying Radio 2, inserted it in Radio 2, now maybe we need to have it in Radio One. But then we will be arguing about, well, we won't do it for these hours, we will do them for these hours, and the beauty of our public radio in particular is the fact that we don't have that.

10701   I have friends in the States and particularly in New York State. They adore the CBC. They are mad, they are like -- they are rabid CBC fans. They make me look pale. You know, that is one of your joys, is that not only the quality of the content and the kind of coverage things get and they feel very fair-handed coverage, it is this piece of just listening to conversations and productions without the invasion of advertisers calling on them to get their money.

10702   COMMISSIONER POIRIER: Yes, okay. But we were told by the --

10703   MS HUNT: That's the radio portion.

10704   COMMISSIONER POIRIER: Okay. We were told by the CEO of CBC, Mr. Lacroix, that if we don't accept them providing advertising and getting their revenues from national advertising, they would have to change their format and programming, less capitation, less live entertainment, maybe more repetition.

10705   So as a really great listener to Radio 2, between the two choices, to lose quality or to get advertising, I know it's a tough question, but which one would you choose?

10706   MS HUNT: It is.

10707   COMMISSIONER POIRIER: It is, but that's what we were told here.

10708   MS HUNT: I know. It's a tough one because, you know, I think that that is always going to be the call, you know. I'm frustrated and a different level of this is that, you know, I would -- and I don't know that the CBC is even in a position to do this, but I mean I just feel like it's being choked of funding, first of all -- I know you're not in a position to do anything about that, but where, when are we as Canadians allowed to -- you know, how do we open a dialogue? Who is a leader to open a dialogue to discuss the business of public funding?

10709   I have seen the CBC adjust its programming and use some repetition in the summer months. I am always very pleased when the fall comes back. I'm not sure. I really have to say I don't know that I really want to hear advertisers. I really don't want to hear Sleep Country talking to me on Radio 2. I don't listen to Radio 2 constantly so that the odds are I might be okay with a bit of repetition, as sad as that might sound.

10710   COMMISSIONER POIRIER: So you would prefer them to find another way to stabilize their revenues than advertising on Radio 2. That's what I conclude.

10711   MS HUNT: That's a fair conclusion, yes.1

14. We have reproduced this exchange at length because it is so instructive and representative of the substantial majority of comments made by individual Canadians to the Commission.  It shows:

  • The intense loyalty of CBC/SRC radio listeners and the support CBC/SRC's radio services enjoys from these listeners;
  • The commercial-free character of the radio services is integral to their identity, and to the perceived integrity of their programming as public radio services;
  • Canadians understand that this initial foray into advertising on radio is just the first step - inevitably, CBC/SRC will be back seeking more advertising on Radio 2 and Espace Musique, and likely seeking to commercialize Radio One and Première Chaîne in the name of financing constraints and necessity; and
  • Even when presented with the choice between ads and reduced programming - which is a false and exaggerated choice in our view given the relatively modest budgets of Radio 2 and Espace Musique ($40 million combined out of a total CBC/SRC budget of more than $1.5 billion) - Canadians have repeatedly said "No Ads on Radio".

15. These same views were expressed not only by individual Canadians, but also by advocacy groups representing Canadians.  Community associations and community broadcasters also opposed commercializing CBC/SRC radio in the public hearing, both due to its inconsistency with CBC/SRC's mandate, and to its impact on other community media.  The following groups opposed advertising on Radio2 and Espace Musique:

Stand on Guard for CBC

Public Broadcasting in Canada for the 21st Century

National Campus and Community Radio Association

I Love CBC Peterborough

Fédération nationale des communications

Fédération culturelle canadienne-française

Public Interest Advocacy Centre and OpenMedia.ca (Reimagine CBC)

Conseil provincial des sociétiés culturelles du Nouveau-Brunswick

Conseil culturel et artistique francophone de Colombie britannique

Campagne Tous amis de Radio-Canada Campagne

Association canadienne-française de l'Alberta

Assemblée de la francophonie de l'Ontario

Alliance des radios communautaires/Association des radiodiffuseurs communautaires du Québec, and

Alliance Culturelle de l'Ontario

16. We estimate, conservatively, that these groups, together with Friends, represent directly the views of more than 400,000 Canadians.  In comparison, the number supporting advertising on radio amounted to very few.   We can't say the position among Canadians and community groups against advertising was unanimous; but it was close to it.

17. Given the one-sided nature of the debate for the Canadian public, it was surprising to Friends and to others that the CRTC decided to permit advertising on Radio 2 and Espace Musique.  The Decisions are even more surprising given the recent pronouncements of the CRTC that it will be guided more by the interests of Canadians themselves - as consumers - and the appointment of a Chief Consumer Officer to reflect those views.  When that appointment was made the Chairman of the CRTC stated that,

The Chief Consumer Officer's role is to better understand the concerns of Canadian consumers and bring them to the Commission's attention during the decision-making process. This will be achieved by leading research activities on consumer issues to identify trends and best practices, including those in other jurisdictions. . . . 

This will ensure that consumer issues are integrated into all aspects of the CRTC's work and that its decisions are more relevant to Canadian consumers.2

18. Regrettably, the Decisions take an opposite position to the views expressed by the vast majority of individual Canadians, and groups representing Canadians as participants in the broadcasting system.  Canadians' interests as "consumers" are not limited to how much they pay for cable or cell phone service (for example).  Their interests as consumers extend to their "consumption" of the public services offered by our broadcasting system, and which they pay for through their taxes.  This includes the services of our national public broadcaster, which Canadians fund directly as taxpayers to the tune of more than $1 billion each year - and indirectly as consumers hundreds of millions more.  

19. Canadians have a direct interest, and should have an equally direct say, in how that money is spent and how CBC/SRC is run.  Their interests as consumers could not have been more strongly and clearly expressed in this proceeding and it is profoundly disappointing and concerning that it was not taken into account, nor given more weight. It is difficult to think of another hearing in which the views of Canadians were so universally expressed but not accepted by the Commission. 

20. Regrettably, the outcome has been the Decisions in which the Commission has told Canadians, in effect, "We know better"; notwithstanding that it is Canadians that use, pay for and care deeply about CBC/SRC's public services.

UNDERMINING THE DISTINCTIVE, NON-COMMERCIAL PUBLIC SERVICE OFFERED BY CBC/SRC RADIO

21. The Broadcasting Act identifies three different elements of the broadcasting system; namely, the public, private and commercial elements.3 Within this framework, CBC/SRC is given pride of place as the national broadcaster.4 Clearly, the framework of the Broadcasting Act - indeed the long history of broadcasting in Canada - recognizes the privileged and important position of CBC/SRC in the broadcasting system and the responsibilities it has commensurate with that position.  Friends has consistently been a strong supporter of a well-funded CBC/SRC to ensure it has the resources to fulfill this role under the Act.

22. Friends recognizes that Broadcasting Act does not expressly prohibit the reliance of public broadcasters on advertising and other sources of revenue.  CBC/SRC's television services and digital media services generate advertising revenue.

23. But - and this is a large "but" - reliance on advertising has always been viewed as problematic to the mandate of the national public broadcaster.  The national public broadcaster has a mandate to do more than attract an audience for the sake of making money.  That is the mode of operation of the commercial element of the broadcasting system (which also, of course, is required by regulation to make appropriate contributions to broadcasting policy objectives even in while they compete and look for profit).

24. Public broadcasters must keep their eye solely on the objectives they have as public broadcasters.  They have no other objectives.  For CBC/SRC, these objectives are set forth explicitly in sections 3(1)(l) and (m) of the Broadcasting Act.  The pursuit of an audience to make money from ratings is not one of these objectives; it has never been viewed as the purpose of the public broadcaster.  If it were, then it would be clear that CBC/SRC has been a failure since it loses more than $1 billion each year - a point that Friends made at the CRTC's public hearing. 

25. However, when the profit motive is mixed in with public objectives through the pursuit of advertising dollars, the public objectives become confused.  This confusion translates into programming choices that don't reflect the public mandate of the public broadcaster to the extent they should; but rather place more emphasis on the commercial imperative to attract audience ratings to sell content to advertisers to generate revenue to produce more popular content to sell to advertisers - and the cycle continues.

26. For almost 40 years - since the CRTC forced CBC/SRC radio out of the advertising business in 1974 - the CRTC has consistently (until these Decisions) guarded against the negative influence that commercializing CBC/SRC's radio services would have on their public nature.  

27. It is not necessary to review each and every CRTC decision since 1974 that addresses issues of advertising and public funding.  In all of these decisions the themes of rapid and transformative technological change, the level of public funding for CBC/SRC, and the role of commercialization resurfaced time and again.  In all of these proceedings, the CRTC recognized the important and unique character of CBC/SRC radio services in the Canadian landscape, the strong connection between Canadians and these services, and how important the non-commercial mandate is to this character and connection.

28. For example, in 1988 - also a time of budgetary restraint at the federal level - the Commission stated the following:

The CBC is also a public service. The Canadian people have determined, through Parliament, that there is a need for a quality radio programming service spanning the country and has provided public funds to enable the Corporation to meet its special obligations and responsibilities. The resources now in place are the legacy of more than fifty years of government appropriations. Without such sustained support Canadians would not now be receiving national AM and FM radio services offering balanced schedules of programs that appeal to a broad cross-section of Canadians and others designed to meet more specialized needs.

Public funding has also enabled the Corporation to broadcast without commercial advertising, other than such presentations as opera or sports coverage that can only be obtained with sponsorship messages. Not being subject to the market forces that determine and shape private radio broadcasting in this country allows the Corporation to try innovative approaches, to aim for the highest program quality and to provide coverage of certain aspects of the Canadian cultural, political, economic and social life that would not be feasible for broadcasters in the private sector. 5

29. Similarly, in 2000 (CBC/SRC's most recent previous renewal decision for radio), the Commission was even more succinct:

36. Canadians' expectations of their national public broadcasting service stem from their keen awareness that they fund its operations. Canadians expect decisions affecting the programming of the CBC to be dictated first and foremost by the public interest.

37. Canadians' special attachment to CBC radio is due in large part to the sense that it is a unique, non-commercial public service. This was confirmed once again by the strong reaction of interveners against a proposal from the Corporation to broadcast messages from sponsors during some of its radio programs. The firm and virtually unanimous opposition to this proposal is an important factor in the Commission's denial of the CBC's sponsorship proposal.6 [emphasis in original]

30. Until now, the CRTC has consistently maintained this position despite often repeated "wolf at the door" claims of technological transformations, funding cuts and the need for revenue diversification through advertising.  These claims were raised once again at the 2012 hearing.  On this occasion, for the first time, the CRTC accepted them.

31. The significance of this fundamental shift was aptly summarized by the Vice Chairman of the CRTC in his respectfully framed dissenting opinion, which is attached to Broadcasting Decision CRTC 2013-263.  He wrote:

My deepest concern is that the proposed changes for Radio 2 and Espace Musique will fundamentally and irrevocably change the nature of the service and the unique radio listening experience for audiences.  Especially since I do not believe that the regulatory panacea that the public broadcaster is requesting of the Commission is the only means at its disposal to ensure that it can continue offering distinct, quality radio programming that is so important to Canadians, if we rely on the interveners' testimonies

.  .  .

I am strongly of the opinion that the nature of the service will change as soon as the funding of operating costs hinges even minimally on advertising revenue shares.  The licensee will become more and more dependent on audience ratings, which will influence the sound and feel of its programming. Listeners will perceive deterioration in the service and will begin to tune in less and less or will stop listening altogether.  They will notice that the sound has changed, increasingly resembling that of commercial radio.  Not only will approval of the proposal destroy a rich heritage, listeners will question the role of CBC/SRC in the Canadian broadcasting system, as well as CBC/SRC's use of public funds.

32. Vice Chairman Pentefountas is not alone.  Friends agrees with his analysis and a large number of interveners - the people that actually listen to Radio 2 and Espace Musique - also agree with his analysis.  CRTC panels and public broadcasting experts for the last 35 to 40 years have also agreed with this same analysis.

33. Nor do the current technological challenges surrounding digital media and the Internet justify such a fundamental change in direction for CBC/SRC's radio services.  The opposite is the case. 

34. Choice is proliferating.  CBC/SRC is now increasing, not decreasing, the risk that its long-standing loyal listeners will sever their connection with CBC/SRC's radio services because advertising content will make those services far less attractive.  Canadians now have many other options.  If CBC/SRC's services are not truly, distinct, public and non-commercial - as they have been now for decades - then what distinctive value will they have for previously loyal listeners? There are other non-Canadian public service options available on the Internet - and likely many attractive commercialized options as well.

35. In this kind of environment, CBC/SRC should be playing to its strengths with its radio services.  It should embrace the loyalty and strong support Canadians consistently show for its commercial-free public content.   Instead, it has decided to conduct a risky experiment against the wishes of its listeners.  Even CBC/SRC's own research identifies the risk of audience loss due to the commercialization of Radio 2 and Espace Musique. 7

36. This kind of risk and decline in the traditional audience will only intensify the greater commercialization of these services and the broadcast of more advertising-friendly programming in the hopes of increased ratings, rather than distinctive Canadian content.  This is because the Parliamentary appropriation that should have been available to Radio 2 and Espace Musique will have been allocated to support other CBC/SRC services.  Therefore, when revenues do not meet expectations, CBC/SRC will have no other way to meet budget than to drive up advertising sales on radio.   The "downward spiral" will commence and the public character of CBC/SRC's radio services will have been sacrificed to sell ads. 

37. The risk CBC/SRC is taking is, actually, difficult to understand given the overall size of CBC/SRC's total budget (more than $1.5 billion each year), and the modest amount of this that is spent on Radio 2 and Espace Musique ($40 million combined, each year).  The financial benefit CBC/SRC expects to receive from this activity is modest compared to its total budget - amounting to even less than the combined expenses for the two services according to CBC/SRC's calculations (though, Friends believes that these calculations are understated).  As Vice Chairman Pentefountas pointed out in his dissenting opinion, "I find it unfathomable that we're upsetting the balance of the Canadian radio broadcasting ecosystem for $10 million in revenues in the case of Radio 2 and a few million dollars in the case of Espace Musique. " 8  Friends agrees.

38. Once CBC/SRC changes the public nature of its radio services through advertising, there is little chance of "jumping back up the cliff".  The public and commercial-free character of the services - which is what makes them so cherished by Canadians - will be debased.  At that point, the value and relevance of the services as part of the public element of the broadcasting system will inevitably decline.

39. Friends does not believe that the CRTC has properly appreciated the potentially corrosive effect on these public broadcasting services of a dependence on commercial revenue, or properly evaluated the risk in comparison to the revenue to be earned.   While it may occasionally make sense to abandon the "received wisdom" of literally decades of experience, in this case, it's a clear mistake.

THE REAL THREAT OF A GREATER COMMERCIALIZATION OF RADIO

40. Despite CBC/SRC's protests to the contrary, the Decisions set a damaging precedent by permitting advertising on CBC/SRC's radio services.  Many interveners expressed the same view as Friends that permitting commercialization on Radio 2 and Espace Musique, will lead to increasing pressure to commercialize Radio One and Première Chaîne.

41. Unfortunately, assurances by CBC/SRC management to the contrary cannot be accepted at face value.  In part, this is because questions of CBC/SRC's larger financial health are beyond management's control.  In a time of budgetary restraint, Friends understands that management is under tremendous pressure to find supplemental revenue for a variety of reasons.  It is predictable that management would look to its flagship radio services, Radio One and Première Chaîne, to pull more weight for the good of the Corporation.  After all, the argument would go, without more revenue, the services will not be able to continue to offer the type of excellent programming that they currently offer; plus, CBC/SRC can be trusted to manage its advertising inventory responsibly to ensure that its aspirations to make money don't interfere with its public mandate.

42. This is exactly the argument that is being made now to support advertising on Radio 2 and Espace Musique, and that has underpinned the increasing commercialization of CBC/SRC's television services since 2000.  Friends has documented this increased commercialization in our intervention in this renewal proceeding.9  We found that between 2001 and 2011, advertising content on CBC television almost doubled.  In other words, presented with the opportunity to present ads and generate more revenue - CBC/SRC has been as aggressive as any commercial television broadcaster could be.

43. The other reason why the Decisions set such an alarming precedent is that CBC/SRC management itself has not been consistent on the issue of advertising over time and has a history of making unilateral decisions without proper public consultation.  We need only look to CBC/SRC's last licence renewal when it requested the right to present sponsorship messages on Radio 2 and Espace Musique.  At that time, CBC/SRC emphasized that it "has no intention of reverting to on-air advertising".  However, at the very next renewal proceeding, CBC/SRC has indeed proposed reverting fully to on-air advertising.  It made this proposal with no advance warning, and without seeking views from its most important constituency - the listening public.  Even as recently as 2011, when CBC/SRC filed its original licence renewal applications, CBC/SRC committed to no advertising on Radio 2 and Espace Musique. Less than a year later, management completely reversed its position.

44. The potential revenues to be derived from greater commercialization of Radio One and Première Chaîne will be profoundly alluring for CBC/SRC management - and perhaps for all policy makers in a time of hard choices and shrinking budgets.  We have estimated that advertising on these services could generate $135 million or more for CBC/SRC.  Obviously, this is a very attractive proposition.  Commercializing Radio 2 and Espace Musique sets the precedent and will lead the way for this to become a reality.

45. One could expect strong public opposition to commercial content on Radio One and Première Chaîne, but experience has shown that public opposition has not deterred management.  The conversion of Radio 2 format from classical music to focus on a younger demographic, over the objections of its existing listenership base and despite a decline in audience share, is a case in point. 

46. Until now, the CRTC's firm hand has stopped commercialization of CBC/SRC's radio services as a matter of principle.  This principle has now been overturned.  CBC/SRC has crossed the line first set down by the CRTC in 1974.  The way is now open to CBC/SRC to achieve  commercialization of its other radio services.

47. Vice Chairman Pentefountas has summed up the situation well in his dissenting opinion:

The Commission is putting itself in a position from which it will be very difficult if it wants to be consistent for it to refuse to extend this option to the public service's talk radio stations. . . .  Reasons and justifications can always be found or created for the licensee to ask for more, including such very legitimate reasons as a drop in advertising revenues or parliamentary appropriations.  But the fact remains that the CBC/SRC has done an about-face with respect to its May 2011 commitments.  If the recent past is any indication of the future, how can we believe the CBC/SRC's statements today?

48. The Decisions make commercialization of Radio One and Première Chaîne a real threat.  The CRTC has removed the clear and simple principle that until now has acted as a stop sign on the road to commercialization.

THE NEGATIVE IMPACT ON OTHER BROADCASTERS

49. Friends is concerned not only about the impact that advertising will have on Radio 2 and Espace Musique, but also the consequential effect on private broadcasters.  Private broadcasters in small and medium sized markets, and small broadcasters in larger markets, are most at risk.

50. The Canadian radio broadcast advertising market is complex.  On the one hand, it is sold on a highly integrated basis (especially at a national level).  On the other hand, it is comprised of hundreds of different local markets, each with their own characteristics and mix of local broadcasters and economic conditions. 

51. The Decisions downplay the impact of adding advertising to CBC/SRC's radio services.   The Decisions do so on the basis that: (1) Radio 2 and Espace Musique are "niche" services; (2) CBC/SRC would solicit only "national" advertising; (3) the projected revenue share for CBC/SRC in any particular market would "represent but a small proportion of overall revenues both nationally and within the targeted markets"; and (4) growth in local and national advertising markets overall for all stations would offset the potential impact. 10

52. Unfortunately, this analysis misapprehends the nature of the national advertising market, and the significance of the addition of a new advertising player with significant market share and marketing resources - CBC/SRC - simultaneously into the vast majority of radio markets across Canada.

53. The significance of the Radio 2/Espace Musique "niche" is different when viewed from the perspective of smaller broadcasters serving small and medium sized markets, and smaller broadcasters providing similar "niche" programming in larger markets.  The Decisions do not take into account this difference. 

54. In a small or medium sized market in which there are only a few local radio stations - and Radio 2 or Espace Musique - the proportionate market share of the CBC/SRC station is much higher than its overall national share (which is still a substantial figure).  Accordingly, adding new inventory into a small or medium sized market will have a much larger impact on that market because the relative share of CBC/SRC is that much greater. 

55. In larger markets, such as Toronto, Vancouver or Montréal, for example, the addition of one more national buy may not have such a dramatic effect across the commercial landscape.  However, it is likely to have a disproportionately negative effect on independent radio stations that program similar diverse formats targeting a similar older demographic as Radio 2 and Espace Musique.  MZ Media Inc., for example, which operates classical music and talk radio formatted stations in Toronto made a compelling case that the commercialization on Radio 2 would have a material impact on its services. 

56. A number of factors are at play in this analysis including: the disproportionate size of the Toronto "national buy" and the likelihood that a large portion of CBC/SRC's new national sales revenue would be drawn from that market; the overlap in programming and target demographics between Radio 2 and the MZ Media stations; the fact that smaller independent radio services are lower in the hierarchy of sales than services offering multiple platforms and markets at the same time (such as CBC/SRC); and the intensely competitive nature of the Greater Toronto Area radio market.  MZ Media estimated that the impact of national advertising on Radio 2 on that market would be the equivalent of two new commercial stations - based on the financial analysis recently conducted by the CRTC and others at the Toronto radio hearings to consider new commercial radio licences.

57. The Decisions do not appear to have taken any account of these concerns and the CRTC's proposed remedies of limiting total advertising time and format restrictions are not helpful given the expected disproportionate impact of the introduction of national advertising on Radio 2 and Espace Musique in large, highly competitive markets.

58. Nor does the performance of the radio advertising market in the past - or any reasonable assessment of growth in the future - have the potential to offset the impact on small and medium sized markets, and smaller broadcaster in larger markets.

59. The CRTC's recently released financial data for commercial radio shows only modest growth in the past year (ended August 31, 2012) in national time sales (at 2.62%) and a contraction in local time sales (-0.27%).   Combined revenue has increased at the paltry rate of only 0.4%, well below the rate of inflation for the same period.11

60. Looking at individual small and medium size markets, results vary, but the picture is often even grimmer.  Total advertising revenue declined the last year in five out of six of the medium-sized markets.12  Similarly, five out of six markets showed a more substantial decrease in national advertising sales in particular.13  Small markets showed virtually static results, year to year, with a 3.85% decline in national advertising sales.

61. When these actual financial results are taken into account, there is very little reason to accept the CRTC's apparent optimism that growth in the national advertising market will offset the impact of advertising on Radio 2 and Espace Musique.  When the actual impact on smaller stations and in small and medium sized markets is taken into account, it seems highly likely that the Decisions will have a significantly destabilizing effect on commercial radio services in these markets.

62. Friends is concerned about this impact not only for the viability of the commercial radio services themselves, but also on the impact on local service to the affected communities.  Often, commercial radio service is the primary source for in-depth daily local news and information programming in small markets.  If indeed the impact on these markets is disproportionate, then the overall impact on broadcasting service in these markets will, undoubtedly, be profoundly negative.

63. The situation of smaller independent broadcasters in large markets is also of concern.  Already these smaller broadcasters face significant competitive disadvantages in attracting advertising revenues.  The forces of industry consolidation are too well known to review here. Unfortunately, the Decisions will give these forces additional strength and further undermine the viability of smaller, independent voices in larger markets.

64. In sum, the CRTC has not given proper consideration to the multiple and different effects that will follow from the Decisions, and the impact on the important services offered by the full range of Canada's private broadcasters. 

OTHER CONSIDERATIONS

65. The four issues addressed above are more than sufficient to warrant a reconsideration and hearing of the Decisions.  However, Friends believes it is important to note other aspects of the Decisions that give rise to serious concern.

The consultation process

66. CBC/SRC's consultation process with Canadians - the people to whom CBC/SRC is supposed to answer - was wholly inadequate.

67. On March 29, 2012 the Minister of Finance presented the Canadian federal budget in the House of Commons.  The budget announced, for the first time, a funding reduction of 10% to CBC/SRC's Parliamentary appropriation.  On April 4, 2012 - six days later - CBC/SRC filed its application with the CRTC to carry advertising on Radio 2 and Espace Music.

68. Absolutely no consultation was undertaken with Canadians on how CBC/SRC should respond to the new reality set out in the federal budget.  A change of this magnitude should have been preceded by public input.  For other public broadcasters around the world such as BBC, formal mechanisms are in place to make sure this would happen in similar circumstances.  This is not the case for CBC/SRC.  CBC/SRC took no account of how Canadians themselves wished the Corporation to respond; it simply forged ahead with what can only have been a pre-determined strategy. 

69. This step had direct consequences on the CRTC's consultation process.  This process had already been delayed twice over the preceding year to accommodate CBC/SRC's apparent funding uncertainties.  Accordingly, the CRTC's 2011 on-line consultation had already taken place.  That consultation, which forms part of the public record of the renewal proceeding, did not include any consultation on CBC/SRC's advertising plans - because they had not yet been announced. 

70. Similarly, consultations undertaken by stakeholder groups, such as the Re-imagine CBC campaign, did not have the opportunity to consult Canadians specifically on the issue of advertising.  It is apparent, reviewing that document (which includes input from more than 10,000 Canadians) that the substantive consultation that shaped the survey happened before CBC/SRC announced its advertising plans.

71. The voices of individual Canadians in opposition to CBC/SRC's plans were already strong and almost unanimous.  We conclude that these voices would have been even stronger - most probably overwhelming - if CBC/SRC itself had consulted properly on the issue, and if the CRTC's process had unfolded in a more orderly manner.

72. A reconsideration and hearing would provide Canadians with a complete opportunity to express their views on this important matter.

CBC/SRC unprecedented withdrawal of Parliamentary funding from Radio 2

73. It became clear, over the course of the CRTC's hearing, that CBC/SRC had taken the unprecedented step of reallocating virtually all of the Parliamentary appropriation that would otherwise be used to operate Radio 2.  Vice Chairman Pentefountas has identified the issue succinctly:

The CBC/SRC has another trick that is raising serious doubts and which should concern Canadian taxpayers. This is the creative accounting with which the licensee is arbitrarily bleeding its Radio 2 service to justify its application. In fact, the CBC/SRC intends for almost all of Radio 2's revenues to come from advertising sales. In its letter to the Commission dated 16 July 2012 regarding the application to amend the licences for Radio 2 and Espace Musique, it clearly indicated that should the licence amendment application be approved, Radio 2 would no longer receive parliamentary appropriations. The CBC/SRC anticipates that nearly all (98%) of Radio 2's revenues will come from advertising sales. Keep in mind that the licensee expressed the intent to at least compensate a portion of the shortfall. I would say that 98% constitutes more than a portion.

74. CBC/SRC's position is untenable  It is inconsistent with CBC/SRC's mandate as the national public broadcaster and runs against the basis on which Parliament has voted funding for its services, including Radio 2.  Until this admission was made, no Canadian could have anticipated that virtually none of CBC/SRC's $1 billion appropriation would be used to provide Radio 2 as a non-commercial public service.

75. Similarly, CBC/SRC's position runs against its traditional practices of allocating Parliamentary funding between French-language and English-language services on the basis of an approximate 60/40 split.  Whereas CBC/SRC indicates that virtually none of the Parliamentary appropriation will be made available to Radio 2, it indicates, in effect, that it will protect Espace Musique's budget for service in French.  This is an invidious and divisive approach to public broadcasting for the two official languages.  It is extremely difficult to reconcile with CBC/SRC's mandate to provide services in English and French, and of equivalent quality in English and French, as required under sections 3(1)(m)(iv) and (v) of the Broadcasting Act.

76. The assumptions and rationale underlying this difference in treatment could be reviewed thoroughly in a reconsideration of he Decisions, although it is exceedingly difficult to believe that there is any reasonable justification for such an approach.

The flawed three-year review plan

77. Friends opposes the CRTC's three year review plan.  The Commission has indicated that CBC/SRC should come back in three years' time and show how its advertising plans have not had an undue impact on private broadcasters, have not been disruptive to listeners, have not undermined CBC/SRC's investment in radio, and have not diminished service on Radio 2 and Espace Musique.

78. What if all of this has happened as we expect it will in three years' time?  By then it will be too late to unravel.  In proposing a change of this magnitude to its radio services the onus should be on CBC/SRC to deal with all of these matters now - before the change is made.  These are the precise questions that need to be addressed now in a reconsideration and hearing of these very issues.  It is not appropriate for the CRTC to permit CBC/SRC to embark on an experiment with its radio services when so many Canadians have expressed their disagreement at the outset, and when the consequences of getting it wrong are so significant.

79. Finally, we note that the CRTC has suggested in Broadcasting Decision CRTC 2013-263 that CBC/SRC will be required to apply to the Commission if it wishes to continue advertising in Radio 2 and Espace Musique after three years.14 This statement appears to be incorrect.  The relevant conditions of licence read as follows:

11. The licensee shall not broadcast any advertising (category 5) except:

a) paid national advertising; or

b) as required to fulfill the requirements of the legislation of the Parliament of Canada pertaining to elections.

For the purposes of this condition, the licensee may not broadcast more than four minutes of paid national advertising in any clock hour.

Programming may not be interrupted more than twice during any clock hour for paid national advertising.

12. In each broadcast month, the licensee shall broadcast no less than 3,000 distinct musical selections on Espace Musique and no less than 2,800 distinct musical selections on Radio 2.

For the purposes of this condition, "broadcast month" means the total number of hours devoted by the licensee to broadcasting during the aggregate of the broadcast days in a month.

In order to facilitate the verification of compliance with this condition, the licensee must provide the music lists requested by the Commission pursuant to section 9(3) of the Radio Regulations, 1986, in a popular spreadsheet format.

13. Conditions of licence 11 and 12 expire on 31 August 2016.  [emphasis added]

80. Notwithstanding the CRTC's statement that CBC/SRC must apply to extend the right to sell advertising, it is clear from the actual conditions of licence that CBC/SRC will obtain the right to sell advertising without any restriction at all, by default effective as of August 31, 2016.  This is because the conditions that restrict advertising sales, and also that require the broadcasting of distinct musical selections, will both expire in 2016.  The conditions of licence automatically disappear on August 31, 2016.  Without these conditions of licence, CBC/SRC will actually be subject to no restrictions at all.

81. This is a legal anomaly that, at the very least, requires a re-examination by the CRTC given the importance that the CRTC has placed on having a hearing in three years, and its apparent belief (though on what basis is not clear) that CBC/SRC is required to reapply to the CRTC to continue to sell advertising on Radio 2 and Espace Musique after this time.

CONCLUSION

82. For the reasons outlined in this Petition, Friends respectfully requests His Excellency the Governor in Council to refer the Decisions back to the CRTC for reconsideration and hearing.

83. The Decisions do not reflect the views of Canadians, undermine CBC/SRC's distinctive role as the national public broadcaster under the Broadcasting Act, will  encourage even greater commercialization of CBC/SRC's radio services going forward (including Radio One and Première Chaîne), and place CBC/SRC in direct and unfair competition with private radio broadcasters, especially those in small and medium sized markets and those offering specialized services in larger markets.

84. CBC/SRC's advertising plan was sprung on Canadians with no consultation, and the CRTC's process did not take into account this fundamental change through consultation with Canadians.  CBC/SRC seems to have withdrawn virtually all of the Parliamentary appropriation that should be used for Radio 2, and is now disproportionately funding its English and French language services contrary to long-standing practice.  The CRTC's three-year review plan should actually be taking place now. In any event, CBC/SRC will automatically be in the position to fully commercialize Radio 2 and Espace Music as of August 31, 2016 when its existing conditions of licence expire.

85. When these factors are considered, Friends submits that the Decisions are inconsistent with the achievement of broadcasting policy objectives set out in the Broadcasting Act

86. These policy objectives are inter-related and many of them are triggered by the Decisions.  We refer the Governor in Council, in particular, to section 3(1)(b)  (recognizing distinctive public, private and community elements of the broadcasting system, each with a role to play), section 3(1)(l) (recognizing CBC/SRC as the national public broadcaster with a mandate to offer a wide range of programming that informs, enlightens and entertains), and section 3(1)(m) (providing, among other things, that CBC/SRC's programming should actively contribute to the flow and exchange of cultural expression, be in English and French and in equivalent quality in those languages, and be made available throughout Canada by the most appropriate and efficient means as resources become available for that purpose).

87. The Decisions frustrate these and other policy objectives by increasing the commercialization of CBC/SRC's radio services and, as a consequence, diminishing their distinctive and public character and their contribution to Canadian cultural expression. 

88. The impact on private broadcasters must also be taken into account.  The Decisions will have a disproportionate impact on broadcasters in smaller broadcasters, and certain vulnerable independent services in larger markets.  The Decisions will undermine the contribution that these services make to broadcasting policy objectives.

89. Though often critical of the decisions and behavior of CBC's senior management, Friends supports the creative CBC/SRC personnel who actually make programs that Canadians continue to enjoy in large numbers. The Canadians we represent believe deeply in public broadcasting.  Friends also supports the CRTC and its processes and decisions, which are often not easy to make. 

90. However, it is appropriate for the Decisions to be referred back to the CRTC for reconsideration.  In this process, we express the expectation that the CRTC will give greater weight to the views of Canadians, who have spoken with virtual unanimity against advertising on CBC/SRC radio.

ALL OF WHICH IS RESPECTFULLY SUBMITTED THIS 11TH DAY OF JULY, 2013 BY FRIENDS OF CANADIAN BROADCASTING


1 Transcript of Proceeding, Volume 5, 23 November 2012.

2 CRTC Press Release dated August 31, 2012.

3 Broadcasting Act, section 3(1)(b).

4 Ibid. section 3(1)(l).

5 Decision CRTC 88-181.

6 Public Notice CRTC 2000-1.

7 See, for example, testimony of Deborah McLaughlin regarding "drop offs" at 1807-1813 and "drop-ups" (sic) at 1470-1473, Transcript of Proceeding, Volume 1, November 19, 2013.  Refer also to Appendix "B" to CBC/SRC undertaking dated November 20, 2012 (Summary of the Research on Audience Retention for Radio 2 and Espace musique in a Commercialized Environment).  The latter study contains the following statement:  "Almost one out of two state that they will tune much less if commercials are aired.  This drops to one out of four if the commercial content is somewhat less and to one out of five if the commercial content is notably less"  [at page 8].  In other words, even in the best case scenario, 20% of the respondents stated they would tune less.  This portion of the study related to Radio 2.

8 Broadcasting Decision CRTC 2013-263, Dissenting opinion from Vice-Chairman Tom Pentefountas.

9 Friends intervention dated October 5, 2012 in response to Broadcasting Notice of Consultation CRTC 2011-379.

10 Broadcasting Decision CRTC 2013-265 at paragraph 230.

11 CRTC, Commercial Radio Statistics and Financial Summaries, 2008 - 2012.

12 Medium sized markets showing an overall advertising decline are Halifax, Kitchener/Waterloo, Ste. Catharines/Niagara, Victoria, and Oshawa/Windsor (which are aggregated for reporting purposes).  Only London showed an increase.

13 Only Halifax showed an increase. 

14 Broadcasting Decision CRTC 2013-263, paragraph 242.

Related Documents:

Jul 23, 2013 — Letter: Correspondence from the Clerk of the Privy Council and Secretary to the Cabinet
Correspondence from the Clerk of the Privy Council and Secretary to the Cabinet acknowledging FRIENDS' petition that the Governor in Council refer the portion of the CRTC's recent licensing decision of CBC/SRC relating to advertising on Radio 2/Espace Musique back to the CRTC for reconsideration and hearing.