Speech
Notes for an address
by Charles Dalfen
Chairman, Canadian Radio-television
and Telecommunications Commission
to a luncheon of the Broadcast Executives Society and the Ontario Association of Broadcasters
Toronto, Ontario
April 12th, 2005
(CHECK AGAINST DELIVERY)
Good afternoon, and thank you for inviting me to join you today. I'm pleased to be here.
There are two areas that I want to address this afternoon. I'd like to give you a quick overview of the state of the broadcasting industry in Ontario, based on the most recent data that we have compiled, and then I will describe some of the major items that are on our current agenda.
Let me say first, though, that I was particularly pleased to accept your invitation because it gives me an opportunity to acknowledge the special place occupied by local broadcasters in our broadcasting system. Local broadcasters are the foundation of the OAB, and the part that they play in furthering the objectives of the Broadcasting Act – which governs how we at the Commission regulate the industry – often goes unheralded. Let me expand on that for a moment.
As you know, the Broadcasting Act puts into law the expectation that our broadcasting system will reflect and respect Canadian values and will help maintain a strong Canadian identity. Section 3 of the Broadcasting Act, for example, says that our broadcasting system is “essential to the maintenance and enhancement of national identity and cultural sovereignty”. The same section of the Act also says that our broadcasting system should provide programming that “reflects Canadian attitudes, opinions, ideas, values and artistic creativity.”
These statements represent high ideals. They may even sound a little abstract when you read them in the legislation. It's you – local broadcasters – who help turn these abstract ideals into reality for television and radio audiences.
You do this in many ways. First and foremost, local broadcasters are able to connect with the communities they serve in ways that national operators cannot. The vital contribution that local broadcasters make to their communities is most evident in times of emergencies, be it during floods in Manitoba, fires in the BC interior, or during the electricity black-out here in Ontario in the summer of 2003. Local broadcasters are also front-and-centre in their communities through involvement in fund-raising and other kinds of support for local charities and causes.
The most vivid recent example of community involvement by broadcasters was your response to the tsunami that devastated so many coastal areas of South and Southeast Asia in December. Although the disaster occurred thousands of miles away from us here in Ontario, it struck a chord in local communities, and you responded. The generosity of Ontario broadcasters – your willingness to devote programming hours and staff time to fund-raising efforts – was unprecedented. As a result, Ontario radio and television programming helped raise millions of dollars for tsunami relief. I can't think of a better example of our broadcasting system responding to, and reflecting, Canadian values and attitudes.
The Broadcasting Act also says that our broadcasting system should provide programming that is “drawn from local, regional, national and international sources” and that it should “serve the needs and interests” of Canadian men, women and children. You do this, as local broadcasters, through the production of local news and other forms of local programming that help your audiences understand and connect with their own communities, and other communities as well.
The Broadcasting Act has something to say, as well, about the limits of what is acceptable to be broadcast on television and radio in Canada. Section 3 of the Act, as well as broadcasting regulations developed under the Act, do not allow our broadcasting system to be used as a platform for abusive commentary that violates the rights of individuals or exposes particular groups to hatred or contempt on the basis of race, sex, or other attributes.
This is always a delicate issue – as much for broadcasters as it is for the Commission. On the one hand, Canadians care deeply about freedom of expression. But, equally, they care about nurturing respect and civility, and sustaining a society where equal rights and tolerance predominate. The challenges involved in striking an appropriate balance between these values was highlighted over the past year, when, as you know, we made some decisions related to abusive comment on radio and television that generated a lot of public attention.
But in the heated public debate that followed those decisions, it wasn't mentioned that most complaints related to the content of radio and television broadcasts never have to be dealt with by the Commission at all. This, again, is to your credit as broadcasters, because you, together with the Canadian Broadcast Standards Council, operate an effective system of self-regulation with regard to content. I agree with Ronald Cohen, the National Chair of the CBSC, who has said that self-regulation works in Canada because broadcasters “live in and care about the communities to which they broadcast, [and] because they believe in the principles and standards that they themselves have created.” I commend you and the CBSC for continuing to ensure that self-regulation remains strong and credible in Ontario, as it is throughout Canada.
So whether it be through self-regulation, or production of local and community programming, or involvement in social issues linked to the communities you serve, local broadcasting exemplifies many of the strengths of our broadcasting system. With that in mind, I'm pleased to share with you now some of the Commission's most recent data on the state of the broadcasting business in Ontario. Earlier today, we released the "Commercial Private Radio Statistical Financial Summaries" for the period 2000-2004, and here are some highlights both from that report, and from television reports issued previously.
Radio broadcasting, which showed strong results in the 2003 broadcasting year, continued the trend in 2004. Radio revenues in Ontario grew by 5 percent in the year ended August 31, 2004. And publicly available results for 2005 show continued growth.
Profit margins in Ontario – calculated before interest and taxes – were 21 percent in 2004, the same level as the previous year.
Total radio revenue in Ontario – which was $457 million in 2004 – accounted for 37 percent of all private radio revenue in Canada.
In private conventional television in Ontario, the picture was not as strong as in radio. After posting strong growth in 2003, revenues in 2004 were down by 1.7%. On the other hand, publicly available results for the first quarter of this year do show improvement over 2004.
Profit margins – before interest and taxes – were 13 percent in Ontario in 2004, off from 20 percent the previous year.
Total Ontario private conventional television revenue – which was $913 million in 2004 – accounted for 43 percent of all Canadian conventional television revenue.
We recognize that in Ontario (as is the case across the country), broadcasters' financial results tend not to be as robust in smaller markets as they are in larger ones. This is an issue that we factor into our decision-making – a point to which I will return in a few moments.
Another angle on the question of how the television industry is performing relates to programming, and here I want to say a word about Canadian content in drama programs.
Supporting the production, broadcast and distribution of Canadian content is the cornerstone of broadcasting policy as laid out in the Broadcasting Act. One of the most significant ways in which the Commission fulfills this policy objective is through regulation aimed at promoting the production and viewership of Canadian television drama.
When it comes to French-language Canadian drama, domestic productions do very well, attracting over half of all viewers of drama on French-language services. But American programming predominates in English-language drama. Home-grown productions attract only small minority of Canadians watching drama on Canadian English-language television.
In November of last year, as you know, we announced incentives aimed at broadcasters of English-language drama. In a nutshell, the incentives allow broadcasters to sell extra minutes of advertising time, over and above what is normally permitted, if they:
- broadcast more original hours of Canadian drama,
- attract larger audiences to Canadian drama, or
- commit more expenditure to Canadian drama.
In January, we adopted similar measures in relation to French-language Canadian drama, to ensure that it remains a key component of peak-time viewing.
When we announced the English-language incentives last year, I pointed out that we had deliberately chosen a voluntary approach to supporting Canadian drama on television. We found it more appropriate than requiring licensees to broadcast a minimum number of hours of Canadian drama or to expend a minimum number of dollars. Regulatory minimums frequently result in minimum achievement.
Canadian drama will thrive on television if Canadian broadcasters are committed to supporting it. We believe, based on our experience that incentives offer the best way to enlist that support and to get more and better home-grown drama on television, and have more Canadians choose to watch it.
I'm pleased to report that broadcasters are rising to the challenge. Virtually all of the major television groups who broadcast drama have applied to amend their licences to take advantage of the drama incentives. Canadian drama will thrive on television if Canadian broadcasters are committed to supporting it. While I'm encouraged by the early response to the incentive program, the proof of the pudding will of course be in the drama productions that result from the incentives, and the response of viewers to the new programs. I would also note that the industry has made heavy use of the Canadian Television Fund, and that the new drama incentives program creates an alternative, non-CTF source of funding. Together, these two funding sources should create a stronger infrastructure for the production of more and better Canadian drama programs.
Let me turn now to some of the major issues that are on our current agenda.
Applications for new broadcasting licences are always an important item on our plate. In 2004 and 2005 we approved new Ontario FM radio services in Wingham, Port Elgin and Kincardine, as well as new AM services in Red Lake and Sioux Lookout. As well, we are now considering applications heard in December for new FM services in Ottawa. Looking ahead, on May 16, we will hold a public hearing to consider applications for new FM services in North Bay. As well, there will be a public hearing on June 6 in Niagara Falls to consider an application for a new television service in St. Catharines, as well as applications for new FM services in Woodstock, Haliburton, Pembroke and Wasaga Beach.
For established local broadcasters, particularly those operating in smaller markets, the granting of new licences can sometimes give rise to concerns about market fragmentation. Let me assure you that before awarding new licences, we undertake rigorous research in order to satisfy ourselves that the markets in question can absorb new commercial stations without causing an undue impact on existing licensees. Although we don't normally go out of our way to advertise cases where we deny licensing applications, I just want to reinforce the point about market capacity by citing a couple of recent decisions. Late last year we turned down an application for a new station in the City of Kawartha Lakes, precisely because our analysis raised concerns about possible significant negative financial impact on an established local radio operator. We also denied a proposal from a low-power undertaking in North Bay to significantly increase its power because we felt that the applicant had not made a compelling case for either the economic or technical grounds for the change in status.
This aspect of our decision-making is one piece of a larger principle that guides our work. Our overall approach recognizes that the public interest is well served when Canadian broadcasting enterprises are financially strong, because financial strength enables them to invest in a high quality of service, a wide range of service offerings tailored to the needs of our diverse population, and advanced technologies for producing and disseminating content.
The mention of advanced technology takes me to another item on our upcoming agenda. I'm referring to subscription radio, a subject which I'm sure is also on many of your minds. We held public hearings late last year, as you know. We heard from representatives of the broadcasting industry, of the performing and recording industries, and from potential subscribers to subscription radio. We gathered a wide range of views about how subscription radio should be rolled out in Canada.
Now, we are weighing the arguments, and we are moving toward a decision, which I expect we will issue no later than June 30. As always, our goal here is to serve the public interest by striking the best possible balance among the objectives of the Broadcasting Act.
When we have completed our work on subscription radio, we plan to turn our attention to the broader question of reviewing the Commercial Radio Policy.
The review will cover, as you might expect, the question of Canadian content requirements, as well as of other means by which licensees can contribute to the development of Canadian talent.
We will also evaluate the extent to which radio broadcasters have fulfilled commitments made at the time of the last policy review to promote and support the Canadian music industry, especially new and emerging Canadian talent.
Another issue that we want to examine is the licensing process for radio. The high volume of licensing applications – and the total amount of hearing time and administrative effort for the industry and the Commission that the high volume creates – has caused us to question whether our current process is the most efficient one possible. We want to explore the possibility of a more streamlined approach that will still allow us to satisfy the objectives of the Broadcasting Act.
Part of the backdrop for the Commercial Radio Policy review is a rapidly changing technological environment which includes, among other things, the evolution of internet-based systems for distributing music and other entertainment products. Our understanding of current technological trends will have a bearing on our deliberations.
Technological change is something that preoccupies us not only in radio, but also in television. Without doubt, there is a growing technological gap between television services in Canada and the US. South of our border, we have seen the rapid and widespread introduction of digital and high-definition (HD) television, as well as HD programming in prime time. The top 30 markets in the U.S. are now fully served with network affiliates transmitting digitally over the air. In addition, there are scores of so-called "cable channels" (akin to our pay and specialty services) that are fully digital, and where the availability of HD programming is growing.
Here at home, we have just 15 licensed over-the-air digital stations and 5 HD pay and specialty services. And the actual amount of HD programming on these services is very limited.
As you know, we have taken a market-based approach to the digital transition in television. Our view was that the transition to HD should not be impeded by unnecessary regulation. So far, the market-based approach has shown only mixed results. There is progress on the demand side – Canadians are buying HD-ready television sets. But the response on the supply side has been slow. There is simply too little home-grown HD product for Canadians to watch. As I have said before, I want to strongly encourage the industry to accelerate the transition to digital and to HD, so that Canadian broadcasters will continue to be strong competitors for television viewers.
In order to help facilitate an orderly and timely transition to HD, we issued last summer, as you know, a call for comments on a proposed framework for the licensing and distribution of HD pay and specialty services. Our goal, during the transition period, is to provide broadcasters, distributors and producers with a degree of guidance and regulatory certainty. As well, we want to encourage the production, broadcast and distribution of high-quality Canadian programs. The deadline for comments is less than two weeks from now, and we hope to finalize the framework as soon as possible.
In a closely related proceeding, we are working on the development of a framework for the migration of analog pay and specialty programming to digital distribution. The objective is to encourage the rollout of digital distribution technology in a way that maximizes its contribution to the objectives of the Broadcasting Act. In particular, digital technology will support more efficient delivery of programming services, provide increased flexibility for distributors, ease the development of new services and revenue sources for programmers and distributors, and expand the choice of services for subscribers. This is an obvious win-win, and the more smoothly and speedily the transition occurs, the better for all concerned.
Finally, we are placing special emphasis on streamlining our procedures in order to accelerate our decision-making. The effort has begun to pay off. Our data show that in 2004 we were able to work more quickly, compared to the year before, in a number of important areas.
We are also looking at how we can streamline our handling of competitive disputes. On the telecommunications side of our work, we have introduced expedited procedures that have produced quick decisions rendered by panels of Commissioners. In other cases, the prospect of appearing before such a panel has encouraged the disputing parties to work things out on their own – which is always a useful outcome. Encouraged by these successes, we have begun to do the same thing in broadcasting, and we very recently issued our first decision resulting from an expedited process for handling a broadcasting dispute.
As we explore these and other ways of speeding up our decision-making, your input and suggestions will be vital. We've already begun discussions with individual broadcasters, and with the Canadian Association of Broadcasters, to help us find ways to enhance the efficiency of our proceedings, to our mutual benefit.
Before closing, I want to note that the government's recent response to the Parliamentary report on broadcasting produced by the Standing Committee on Canadian Heritage – the “Lincoln Report”, as most of us know it – emphasized many of the same themes that I have addressed in my remarks today. I'm thinking in particular about the importance of local programming, the need for more and better Canadian-made drama productions on television, the desire to accelerate the broadcasting system's transition to high definition broadcasting, and the priority given to streamlining the Commission's regulatory procedures. It's a healthy sign, in my view, when the regulator and the broadcasting policy-makers in the government are focused on the same issues and share a similar orientation toward them. Both the industry and the country will benefit from this kind of convergence.
As you can see, the agenda ahead of us is challenging and full. Our ambitions – founded in objectives that are spelled out in the Broadcasting Act – are anything but modest. We want Canadians to enjoy a rich array of programming delivered by a broadcasting system that is at the leading edge of technology, is financially robust, nurtures Canadian talent, and reflects and respects the values, needs and interests of Canada 's diverse population. We look forward to addressing these issues with the collaboration of all of you in the broadcasting community, alongside our other key stakeholders.
Thank you very much.
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Date Modified: 2005-04-12
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