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Issues on the Canadian Media Landscape

Mar 14, 2004

Remarks by Ian Morrison, Spokesperson, Friends of Canadian Broadcasting, to the Prairie Region of the Canadian University Press, University Centre, University of Manitoba

Thanks for inviting me to speak about issues in the Canadian media landscape. There are a few. Most of you have leadership roles in print media. Friends of Canadian Broadcasting focuses on the audio-visual media. We are a watchdog for Canadian content. We work to defend and enhance the quality and quantity of Canadian programs in the English-language audio-visual system. We keep an eye on the public and private broadcasters -- radio and TV -- on the cable and satellite operators, on the CRTC and the federal government, which controls broadcasting policy. We're a bit like one of those radar antennas at the airport. We scan the audio-visual horizon.

So when Joel asked me to speak on issues in the Canadian media landscape, I took comfort from your agenda, noting that much of your time has been devoted to print media issues -- with some spill-over to radio and TV in the area of values. So I don't feel too badly walking in here at the end of your conference with a focus on broadcasting.

I would like to tell you a bit more about Friends before I move to the issues. We speak for 60,000 Canadian families who care sufficiently about our values that they support us with $2 million after-tax dollars each year. This works out to an average gift of $33. The largest single contribution last year was $1,000. So you can see that we have a broad base. This stands us in good stead when we clash with big media owners like the Aspers or Rogers at the CRTC. I remember a profile on the Friends some years ago in The Toronto Star. The lead was: "For a group that calls themselves the Friends, they sure have a lot of enemies…"

In a recent essay in Harper's magazine, John Ralston Saul wrote something rather interesting: "Grand economic theories rarely last more than a few decades. Some, if they are particularly in tune with technological or political events, may make it to half a century. Beyond that, little short of military force can keep them in place…. Globalization, with its technocratic and technological determinism and market idolatry, had thirty years. And now it, too, is dead."

If Saul were right, that would be interesting for issues on the Canadian media landscape. We Canadians have experienced the full force of the American audio-visual system for almost eight decades. Parliament created the CBC in 1936 as an east-west antidote to a spreading north-south influence of American radio. Graham Spry, a former editor of the Manitoban and a University of Manitoba graduate, who successfully lobbied parliament to create the CBC, said it was a choice between "the state or the United States".

Even today, English-speaking Canadians spend two-thirds of their television hours viewing American entertainment programs. I have circulated a chart which shows what was available over the air in Winnipeg at this time last year in prime-time over-the-air Canadian television. As you can see, other than on CBC, which offered predominantly Canadian content, the bulk of available programs were of foreign, American origin, most of them (indicated in grey) being simultaneous substitution shows, where Canadian broadcasters bought the rights to an American show, aired it simultaneously with the American version from Fargo, North Dakota, and the federal government, through the CRTC, forced the cable companies to switch signals around so that people here in Winnipeg who thought they were watching a station in Fargo, were actually seeing "ER" on CTV at 9h00 pm on Wednesdays or "Survivor" at 7h00 pm Thursday on Global. That's economically significant for the broadcasters, because their ads reach a larger audience than would otherwise be available.

Simultaneous substitution is one way that the Canadian government subsidizes Canadian broadcasters, maximizing their revenue from leased American shows. Another subsidy is an Income Tax provision that disallows a deduction as a business expense for a Winnipeg company that chooses to advertise on that Fargo station. This makes it almost twice as expensive for that company to place its ad on a Fargo station as on a Winnipeg station, effectively keeping the ad revenue in the hands of Canadian broadcasters.

Canadian private broadcasters would be dead in the water if they had to face the full force of competition from American broadcasters. They don't face that dim prospect largely because the federal government holds an economic regulatory umbrella over their heads, affording them on-going protection from the American competition.

And yet, those same private broadcasters, Global, CTV, Corus, CHUM and Craig have reduced their investment in Canadian drama TV programs in recent years after convincing the CRTC that it should reduce its regulatory requirements. In 2000 there were 12 drama series on English-language Canadian TV. This year, there are four.

In 2001, on the tenth anniversary of the current Broadcasting Act, the House of Commons Standing Committee on Canadian Heritage embarked on a two-year study of Canadian broadcasting. Last year that Committee reported in a 900 page, 97 recommendation report entitled "Our Cultural Sovereignty". One of the principal authors of this remarkable report is John Harvard, MP for Charleswood - St. James, right here in Winnipeg.

I can tell you that this report is both wide-ranging and hard-hitting. At a time when a new Prime Minister is calling for devolution of policy-making to parliamentary committees, which he calls the non-partisan best face of Canadian democracy, this Committee's comprehensive report stands out.
While Friends agrees with 95% of the Committee's recommendations, a few stand out as "issues on the Canadian media landscape":

1. Concentration of ownership and cross-ownership,
2. Reform of the appointment of Directors and the CEO of the CBC
3. Restoration of the grass-roots capacity of the CBC, and,
4. Maintaining Canadian ownership of broadcasting licensees.

A few words on each of the first three, then I'd like to focus on the fourth, because it has attained a certain urgency, as I'd like to explain.

As you know, our print media are concentrated in comparison with most industrial democracies. 40% of the circulation of English-language daily papers is controlled by one company in Canada. The equivalent British concentration is 20%; and in the US the biggest print media concentration is Gannett, at 10%. In some cities, Vancouver and English-speaking Montreal, for example, CanWest has a virtual monopoly on daily circulation.

When CanWest took over Southam and when BCE amalgamated CTV and The Globe and Mail under Bell GlobeMedia, Friends appeared before the CRTC and asked that the news-gathering at Global and CTV's newsrooms be required to operate independently from the newsrooms of the affiliated dailies in the same cities. The CRTC could have, but did not, back that prohibition.

This combination of concentration and cross-ownership has created unprecedented challenges for diversity of perspectives in Canadian media. A major issue.

Second, currently the Board of Directors and CEO of the CBC are appointed by Prime Ministerial patronage. The new Prime Minister has signaled an intention to devolve "command and control" from the Prime Minister's Office to Parliament in order to address the democratic deficit.

We have drawn to his attention that the Heritage Committee has recommended that "in the interests of fuller accountability and arm's-length from government, nominations to the CBC Board should be made by a number of sources, and the CBC President should be hired by and be responsible to the Board".

This recommendation has no fiscal implications and would ensure that only the best and brightest would sit in governance of the country's most important cultural institution. It would also give tangible expression to his intent to unravel the command-and-control culture, and place CBC governance on a par with the standards of the BBC and national public broadcasters in other leading OECD countries. In other words, make the governance structure of the CBC reflect a public broadcaster, rather than a state broadcaster model.

Third, Martin has stated that "the future of our country is going to be set in our communities" and that "a strong social base is essential to this development". One component of healthy cities, which is under exclusive federal jurisdiction, is local broadcasting, the most important way citizens learn and exchange information in modern urban communities. The Heritage Committee has determined that, "community, local and regional broadcasting services have become endangered species, and that many parts of Canada are being underserved".

The Committee reports that in many parts of Canada, the CBC "has the capacity to be one of the essential building blocks of community life". They recommended that CBC be asked to deliver a strategic plan to Parliament on how it would fulfill its public service mandate to "deliver local and regional programming".

Ottawa-based decisions in recent years which have hobbled the local capacity of CBC Radio and Television have certainly contributed to western alienation. Some have even come to call CBC the "Toronto Broadcasting Corporation". This message comes through loud and clear, both in Friends' own research, including polling we sponsor, and in the consultative work of the Heritage Committee. In essence, CBC radio and TV must re-grow their local roots in communities across the land. This will cost money, but the Heritage Committee has determined that this is a priority for the country, and we agree.

Finally, I want to tell you about a campaign Friends is organizing to pull back the veil of secrecy and draw public attention to a lobby by Canada's cable industry to sell out to American interests. But, if Canadian MPs know that their constituents care about Canadian control of media and communications, they have the clout to make sure viewers' voices are heard at the highest levels in Ottawa.

So, over the past week and during the coming week, we are holding public meetings right across western Canada in the ridings of Paul Martin's western Canadian cabinet ministers. Tomorrow we have such a meeting over the lunch hour at the Convention Centre here in Winnipeg.

I know from sources I trust on Parliament Hill, including more than one member of the Cabinet, that there is currently a very strong lobby by the four cable billionaires to open the rules for foreign control of the cable industry. There's also some pressure from other broadcasters, from telephone companies and foreign governments to gut Canada's foreign ownership laws for media and communications.

I have circulated a February 26th story by Ian Jack in The National Post. Let me read you the first paragraph: "The federal government will be ready to decide whether to abolish foreign ownership restrictions on cable companies as early as the end of next month, an internal government document says…."

That's March 2004: this month. That's where the biggest push is coming from, CABLE, not from MTS, or Telus or BCE, or even some of the new telecom entrants. And it's not about access to capital.

The Broadcasting Act states that "the Canadian Broadcasting system shall be effectively owned and controlled by Canadians." Our system consists not just of broadcasters, but cable monopolies such as Shaw, Rogers, Vidéotron and Cogeco. Since 1991, when Parliament passed the current Broadcasting Act, restrictions on foreign ownership have already been watered down in response to arguments by broadcasters and cable monopolies that they should enjoy a level playing field with telcos.

According to the most recent CRTC data, between them, Rogers, Cogeco, Shaw and Vidéotron control access to 90% of Canada's cable subscribers. Unlike most industries actively lobbying on Parliament Hill, each of these big cable companies began and remains family controlled.

As you know, Parliament decided many decades ago that Americans should not be allowed to own and operate transmitters in Canada. This gave the cable guys their initial opportunity. Cable's business niche, under territorial monopoly licences from the federal government, has been to bring high quality American signals into Canadian homes.

In the last few years, as you know, these big cable companies have entered a new business, delivering high-speed Internet access to the households they serve.

Over the past year, behind closed doors, as well as before two Commons Committees, they have argued that their Canadian ownership requirements should mirror those of the telephone companies. They argue that allowing more foreign investment in Canadian cable will close the gap between the market's valuation of a Canadian cable subscriber and that of an American subscriber.

A few comments.

First, why do we need to close the gap? How will that benefit the average Canadian? You may know that American cable companies have huge public relations problems and typically cost about 50% more than Canadian cable for the same range of services.

How do Bay Street financial analysts view the cable industry? The market's evaluation is "below investment grade". Why? The reasons include excess debt, some of it acquired through highly ambitious, over-priced acquisitions. For example, Québecor recently acquired Vidéotron for $5.6 billion dollars. Even Ted Rogers wouldn't, or couldn't, match that price.

Rogers chose to buy the Toronto Blue Jays - talking of synergies with SportsNet. Unfortunately, until recently the Blue Jays lost $50 million each year. Now that's down to $25 million, owing to the 20% decline of the US dollar. And of course, both Shaw and Rogers have each seen major investments in the Internet go sour.

If Parliament were to accede to the cable industry's demands and permit foreign takeovers, perhaps the valuation of Canadian subscribers on cable's books would indeed rise. Borrowing capacity might increase. But how does that benefit Canadians?

Not at all.

But it does benefit those who control the companies. Remember that the controlling shareholders are members of just four families: the Audets, the Péladeaus, the Rogers and the Shaws.

Here's how they benefit. There aren't that many potential buyers in Canada. A change in foreign ownership restrictions means that there will be more potential bidders for their shares. That drives up share values. If you raise foreign ownership levels, it ultimately will mean a major payday for those families. It's just that simple.

Here's what Gordon Pitts, a reporter with the Globe and Mail's Report on Business and author of Kings of Convergence wrote about Ted Rogers' failed $5.4 billion takeover bid for Vidéotron:

"Industry watchers suggest that… Rogers simply wanted to bulk up on (Vidéotron's) cable assets. Some suggest that when foreign ownership rules are relaxed, it could offer any buyer a huge volume of subscribers in a concentrated area. The possibility of foreign ownership is always a factor in the cable guys' estate planning, and Ted Rogers is not entirely immune to it."

And Pitts offers a parallel comment on the Shaws:

"Industry speculation is that if the rules are changed to allow higher foreign ownership of cable companies, an opportunistic U.S. player, perhaps John Malone, would take a much bigger stake in Shaw Communications, and possibly buy out the Shaws entirely. That suspicion is reinforced by the sense that JR, Jim and Heather Shaw are above all pragmatists. They love the business, but they aren't married to it. In the long run, the Shaws will likely be sellers, and they will do very well for themselves."

The point is that one effect of a relaxation of foreign ownership rules in this regulated industry would be to put billions of dollars into the pockets of the members of four families - at the stroke of Her Excellency's pen. (That's John Ralston's Saul's spouse.)

Those of us who try to discern the priorities of the Martin government have little to go on other than his speech at the Air Canada Centre last November, last month's Speech from the Throne, and gleanings from various scrums. On this issue, however, I noted an ominous report in the November 14th issue of the Globe and Mail in a piece by Gloria Galloway, who was covering the Liberal Leadership Convention:

"The concentration of the ownership of Canadian news media should be addressed. Mr. Martin said the government has a role to play in the content of media and ensuring that Canadian stories are told by Canadian voices. But he would agree with deregulating distribution, a policy that could open the door to increased foreign ownership."

As Linda McQuaig wrote in a remarkable column in the January 11th issue of The Toronto Star - I've distributed copies - and I'm going to quote extensively from her piece:

"Martin...appointed Francis Fox as his principal secretary. Until recently, Fox was an executive for Rogers AT&T, part of the empire of billionaire Ted Rogers…. While working for Rogers, Fox lobbied the government for an end to the foreign ownership restrictions.

"Presumably, Fox won't forget all his ideas on the subject, just because he's now working closely on a daily basis with the Prime Minister.

"With Fox in Martin's inner office and Copps gone from cabinet, the cable guys might soon find their estate planning much more enjoyable.

"If the cable guys get their way, the rest of the broadcasting industry will surely demand seats on the gravy train, too.

"In a speech last November, Leonard Asper, CEO of CanWest Global, which owns Global-TV, said that while he favoured the foreign ownership option, he was "bitterly opposed to opening it up for cable, satellite and telecom without opening it up for broadcasting."

"So, if Martin starts tampering with foreign ownership restrictions, it could be just a short hop-step-and-a-jump to Fox and AOL-Time-Warner buying up our TV networks as well as our cable companies.

"With Canada's close location and cultural similarity, our broadcasting industry would be uniquely suitable for integration into the U.S. media conglomerates.

"Rather than opening this door a bit and encouraging a rush to foreign ownership throughout the media, why not just keep the door closed?

"Even the U.S. has rules against foreign ownership in its broadcasting industry; a rich Saudi businessman can't simply buy up Fox News. The Americans understand the problem.

"So do some Canadian businesspeople.

"Michael MacMillan, CEO of movie distributor Alliance Atlantis Communications, argues that broadcasting "is not a commodity; it's a cultural influence ... Ownership has a great deal of influence, I believe, over what is produced and why."

"And William Linton, CEO of telecommunications firm Call-Net Enterprises, argues that it matters if the decisions are made in "New York boardrooms where the Canadian region will be just another shaded area on the map, waiting on the whims of executives with a dozen other regions to consider.

"I believe these decisions are much too important to our survival to be left to another country."

"That was a businessman talking. Imagine if our Prime Minister had that kind of commitment to the national culture."

Thank you, Linda McQuaig.

I'd like to nail down why, specifically, it matters to Canada's audio-visual system for the cable and satellite delivery systems to remain in Canadian hands.

Instead of explaining the stakes in my own words, I'd like to quote from a joint presentation by the CEOs of Alliance Atlantis Communications, Astral Media and CHUM to the House of Commons Industry Committee last year:

"Broadcast Distribution Undertakings (BDUs, that's "CRTC speak" for cable) are not really the analog of "common carriers" (that's CRTC-speak for telephone companies)…. There is an established legal concept that says that a common carrier cannot control the content or influence the meaning of the content of what is being carried.

"But, when a broadcast distributor offers television programming to its subscribers, it does something very different. Unlike a phone company, the BDU does have an active role in "controlling or influencing" the content it offers: it makes critical decisions about which services to market, promote and package as well as the appropriate level of resources that should be devoted to such marketing and promotion. It also negotiates vital wholesale prices and sets program packages, sets retail prices and program promotion channels. So BDUs make "programming decisions" every day: they play a fundamental role in the success or failure of Canadian programming services….

"If integrated foreign media companies were to gain control of a Canadian BDU, and remember, we're talking about strategic operating control, it would surely, and quite understandably, be driven by a different set of concerns. Such companies are not just cable companies or Internet portals. They are generally dominant distributors of a large volume of television and film programming. They would have a natural incentive to promote their own content, whether on non-Canadian services currently available to Canadian BDU subscribers or on programs that their other arms already sell to Canadian broadcasters. They have the means and the leverage to prefer their own properties."

Well said!

So, as you may have read in today's Winnipeg Free Press, Friends has joined forces with CEP, the largest media union in the country and with ACTRA and Council of Canadians to organize a campaign to bring this matter to the public's attention. For example, in Winnipeg tomorrow, we've invited constituents of Manitoba's federal cabinet ministers, Reg Alcock and Rey Pagtakhan to attend. John Harvard will join us as a speaker. We did the same thing in David Anderson's Victoria riding and Stephen Owen's Vancouver Quadra riding last week and we're moving on to Anne McLellan's Edmonton Centre riding Tuesday and Ralph Goodale's Regina Wascana riding on Wednesday. These are all members of Paul Martin's Cabinet. If they know that sizeable numbers of their constituents care deeply about this issue, they have the clout to be heard right at the top of the Canadian government.

I'm here today to urge each of you to draw this to the attention of your readers and invite them to get in touch with their MP to make sure he or she knows how important Canadian control of media and communications is. The government should know that an issue of this importance will affect votes in the forthcoming election. We are asking for an assurance that the Liberal government will not proceed with its rumoured plans, not just right now, but in the future if it wins the next election. Remember, all we want the government to do is … nothing!

And one last thing. Each year, Friends sponsors The Dalton Camp Award. It's up to three $5,000 prizes to the winners of an essay competition on how the media influence democracy. This year's deadline is March 31st. I've circulated a print out of camera-ready artwork and a web link to where it can be downloaded. I invite you to keep some of that money in your community by running one of those ads as a public service announcement.

That's it. Thanks for the invite!

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For information:

Jim Thompson, (613) 567-9592