Speech
NEW REALITY, NEW RULES, NEW OPPORTUNITIES FOR CABLE INDUSTRY
Notes for an address by Françoise Bertrand, Chairperson,
Canadian Radio-television and Telecommunications Commission
to the 1997 Canadian Cable Television Association Convention
Toronto, Ontario
May 12, 1997
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Good morning, Ladies and Gentlemen,
Let me begin by thanking you for the invitation to be part of your industry
convention and for the opportunity to make my first public appearance before the
cable industry.
Today's convention is an important milestone for your industry, but also for
us all, Canadians, as this is your 40th anniversary. Your industry went through
deep changes during these last years. Moreover, the decisions and policy
frameworks that we have recently announced reflect the changes stemming from a
more competitive environment whose impact on the industry, the international
community, the consumers, or the regulators could be major.
The particular CRTC decisions that I wish to highlight and discuss with you
this morning are: the New Policy Framework for broadcasting distribution
undertakings released on March 11; the decisions on Local Telephone Competition
released May 1, and the decisions authorizing Bell and TELUS to conduct
broadcasting and telecommunication trials released last week on May 8, 1997.
In all these policies and decisions, there are common themes: continued
support for Canadian programming, increased and fair competition, greater
subscriber choice, and measures for consumer protection. In our view, the
combinations of these policy frameworks and decisions will signify that a new
competitive and converged world has emerged in Canada. We believe that this new
converged world is inevitable, and our regulatory frameworks must provide fertile
ground for Canadians to take full advantage of and be full participants in the
new electronic age, contributing to our economic, social and cultural prosperity.
Competition in broadcast distribution
The policy framework for competition in broadcast distribution that we
announced on March 11 is intended to achieve two fundamental objectives. One, to
support the objective of fair and sustainable competition in the distribution
marketplace, and enhance consumer choice. Two, to support and increase the
presence of high-quality Canadian programming in our broadcasting system.
With respect to fostering fair and sustainable competition, we believe that we
have achieved an appropriate balance between the interests of consumers, the
incumbent cable operators in each market, and the new competitive entrants into
those markets. In particular:
- we have established policies that will require new entrants to meet the
same rules with respect to signal carriage and program substitution as the
cable companies with whom they will directly compete;
- we have removed barriers to entry so that new players have a reasonable
opportunity to establish themselves in the market. For example, new entrants
will not be rate regulated, will not have an obligation to serve; on the other
hand they will have guaranteed access to programming. Once competitive market
forces have been established, local cable operators will be rate deregulated;
- we have, of course, kept in place certain safeguards, where needed, to
address concerns that may exist until there is effective competition with
cable. For example, we will put in place a regulation to prevent a distributor
from giving itself an undue preference in relation to the acquisition or
distribution of programming services; finally,
- we have designed a new policy framework that will permit increased
flexibility for distributors in packaging and distributing programming
services. This additional flexibility will certainly further the objective of
enhancing subscriber choice. For example, distributors can offer pay-per-view,
video-on-demand or video game services without requiring customers to purchase
the distributor's basic service. I must say that we will be vigilant in order
to ensure that consumers' interests are respected. We want consumers to have
the same quality of service that they enjoy now, plus all the benefits that
competition produces in terms of new service offerings, and packages.
Over the summer, we will issue for comment draft regulations to give effect to
these policies, with the intention that these new regulations will come into
force on or about 1 January 1998.
As for the second objective I mentioned, that of promoting the presence of
high-quality Canadian programming, this is of course part of the foundation of
the Canadian broadcasting system.
The Broadcasting Act says that "each element of the broadcasting system
shall contribute in an appropriate manner to the creation and presentation of
Canadian programming". And so, starting next January, all distributors, with the
exception of very small systems in rural and remote areas, will be required to
contribute 5% of revenues from their broadcasting activities to help meet this
central objective of the Act. A portion of this amount, and in the case of Class
2 systems the entire amount, can be credited towards the community channel; the
balance we have proposed should go to the Canada Television and Cable Production
Fund.
In arriving at this determination, the Commission was very mindful of the
potential impact that this might have on the role of the community channel in the
future. Although the community channel will no longer be a mandatory service that
you must distribute, we are confident that it will remain a vital service that
your customers will want you to continue providing.
Community programming has evolved over the years and will continue to do so. I
know that cable operators and programmers are looking at new ideas to revitalize
the community channel. I encourage you in this pursuit. I would like to take this
opportunity to recognize Manitoba's cable companies for providing their
communities with news services that were essential for their safety and
well-being. Their contribution was vital during the floods that swept their
province.
To the programmers, I invite you to explore new ways to attract viewers to new
concepts, to new services. The development of technology will undoubtedly allow
you to go forward through interactivity; perhaps the Internet could be used as a
forum for dialogue that could be joined by video programs that reflect the ideas
and opinions expressed by your viewers.
To the operators, I invite you to give community programming a "corporate"
priority so that programming staff and volunteers have your full support. We
sincerely believe that the community channel gives you a unique and strategic
advantage to reach a loyal audience in a more and more competitive world.
While I am on the topic of content, let me say a few words about the
importance of the new specialty services, some of which will be launched this
fall, many of which may not be launched until you roll out digital technology.
The cable industry has long understood that it needs digital technology in
order to compete by increasing capacity and offering greater choice in packaging
options. The new digital services are an important element in designing
attractive service offerings that will respond to consumer demands for more
choice and help stimulate interest and add value to digital boxes.
I know that we can count on your best efforts to successfully launch these
services and maximize subscriber acceptance and the revenue generating potential
of these new services for the industry.
We also plan to hold another specialty hearing within the next twelve months
to ensure that additional new services will be available to give Canadian
distributors a differentiated and attractive package to compete. Canadian
services are an essential element of your strategic advantage.
Local telephone competition
Now, I would like to turn briefly to the Mayday decisions as we called them,
which mark the culmination of the review process begun by our 1994 regulatory
framework decision. They set the rules to facilitate competitive entry into the
residential and business local service market.
First of all, let us look at the basic principles underlying these decisions:
- entrants would be treated as equals or co-carriers, not as customers of the
phone companies;
- disruption to the existing network structure that has served Canadians
would be minimized, without limiting opportunities for innovation;
- subscribers would have maximum freedom to choose amongst available local
service providers and all long distance companies; and
- the decisions would be technology neutral.
While we have encouraged early market entry by a resale regime, we are
focusing on facility-based competition in the mid-to-long term. Since the cable
industry already has facilities throughout the country, you are well positioned
to compete in this market.
With regard to subsidies, the Commission has decided that there will be only
one explicit subsidy source, namely the contribution to the local access
shortfall paid to the incumbents at present by the long distance providers. The
Commission has decided to freeze the amount of interexchange contribution at 2
cents for the initial 4 year period of price cap regulation. The rates themselves
will be determined during the proceeding to implement price cap regulation for
the Stentor telephone companies.
This subsidy will be made portable. This means that all local carriers may
receive a subsidy from interexchange carriers through a central fund that
will eventually be managed by a third neutral party.
As you know, we have mandated the provision of local number portability by all
exchange carriers and we are requiring such carriers to pay their own cost for
its implementation. I realize that the implementation schedule for local number
portability is crucial for the cable industry. In the headstart decision, we said
that we anticipate the collaboration of all parties, including telephone and
cable companies. In fact, the working groups have demonstrated the high degree of
cooperation among the parties that will be required to implement local
competition and we will make every effort so that this will continue.
Finally, while we approved a maximum price increase of $3 per month, on an
averaged basis, we decided against full rate rebalancing because of concerns
respecting accessibility. The additional revenues from this third round of rate
rebalancing will first be used to reduce toll contribution rates to a minimum of
2 cents per minute. The final amount of this increase will only be established
further, following a public proceeding to address the telephone companies' rate
of return going in the price caps. Consumers and all interested parties will have
the opportunity to comment during the proceedings. After the price cap period,
there will be no further rate rebalancing.
The Commission has concluded that these decisions as a whole remove all
barriers to true competition and promote convergence between the
telecommunications and broadcasting distribution industries. In this spirit, the
telephone companies will be able to submit broadcasting licence applications
beginning on June 16, 1997. Any broadcasting distribution licence granted to the
telephone companies will be effective no earlier than January 1, 1998.
On that note, I would like to thank you for participating in this long process
related to the Mayday decisions. Your contribution allowed us to arrive at these
decisions. According to our in-house statistics, this long and exacting 30 months
of work saw 24 days of public hearings requiring more than 129 binders, 4,000
copies of transcripts, and approximately 32,000 pages of documentation for the
Commission to absorb! I sincerely believe that, helped by all the contributions,
we have achieved a balanced decision that responds to the broad interests of all
parties. We invite you to maintain this spirit of cooperation and keep us up to
date on the implementation of these decisions. The work being done by various
committees clearly illustrates that cooperation benefits all involved, you as
much as the Commission, but more importantly the consumers who are our primary
clients.
Bell and TELUS decisions
The decisions authorizing Bell and TELUS to each conduct broadcasting and
telecommunication technical and marketing trials on an experimental basis also
represent a further step leading to convergence.
In the form of limited trials, these new licences represent a significant
effort to test and engage the potential of new Canadian multimedia content with
established genres and forms of programming. In the Commission's view, the
combination of technology, service offerings and applications proposed by these
applicants ensure that these proposals operate as true trials, and, by
contributing to the strengthening and innovation of Canadian content,
technological innovation and competition in the Canadian broadcasting, are in the
public interest.
The Commission has insisted that the licensees provide and share results of
the trials and advise all potential subscribers prior to commencing service that
the broadcasting services are being offered on an experimental basis for a
limited period of time.
With respect to the TELUS decision, many of you may be wondering why the
Commission has relieved TELUS of the existing Class 1 linkage rules. Here we have
stated that the policy objective of the existing linkage rules to strengthen and
promote access and subscribership to Canadian programming services has not
changed. The flexibility provided to TELUS firstly recognizes that the licences
are granted as limited trials, and thus that it is appropriate to allow them to
test new tools to achieve the important objectives for Canadian programming and
Canadian services in a digital and addressable environment. To ensure this, the
Commission has insisted that each subscriber receive a preponderance of Canadian
services which acts as de facto linkage, and that all subscribers be required to
purchase digital service offerings.
The new role of the CRTC in this environment
Finally, as a greater reliance on competition becomes the operating principle,
it is necessary too for the CRTC to adapt itself to this new environment. So what
is the CRTC doing?
First of all, let me say that the Commission needs to change. While we make
the transition in our regulatory frameworks to rely increasingly on market
forces, our role will shift more and more to a referee function. The transition
from regulated monopoly to a deregulated competition market cannot happen
overnight. So, at least for the next few years, the presence of the Commission,
with its technical expertise and experience, will be needed to foster the fair
and sustainable competitive environments we are seeking. In a more deregulated
environment, a referee will also be needed to ensure that the interests of
consumers and citizens are fully protected, as well as Canadian programming
objectives. However, in carrying out our regulatory responsibility, we will not
hesitate to get out of the way whenever we can.
I can also tell you that internally, we have been undertaking a "visioning"
exercise. Our objective is to identify the challenges related to the new
communications environment in order to review our strategies and to formulate our
new actions for the future. As you may think, it is a very stimulating exercise
that should help the Commission to adapt itself to the new realities, to better
interact with the industry and to better serve the consumers' interest.
Conclusion
In conclusion, we can ask ourselves: what is the new reality for the cable
industry? The decisions that I referred to earlier, and the underlying forces
that drive them, tell us that the old world of single distributors in a market is
over. They tell us that the world of telecommunications has been opened up to you
with regulatory rules that should provide you with an incentive to enter these
markets. They tell us that there will be new technologies, new forms of content,
and new players entering the market. And, they tell us that we now face a greater
need to serve our customers well, and to be innovative or risk losing market
share and profitability. Lots of new challenges, yes, but also clear and
intriguing opportunities.
In my view, the efforts and innovations of the cable industry to face
competition head-on, and to take part and strengthen the place and role of the
Information Highway in Canadian society should be applauded. For example, the
industry's collaborative effort to establish "vision.com" as a vehicle to pool
resources and ideas to develop new information and entertainment markets,
products and services is a significant initiative for the industry and the
consumers it will serve. With such initiative, the cable industry will be able to
take advantage of its technological planning and infrastructure investments,
subscriber base, creativity and knowledge of the communications business. We see
the results of your initiative with the broadband cable modems that will help
subscribers avoid the bandwidth bottleneck and allow higher speed access to the
Internet. Local telephony presents yet another opportunity for the cable
industry. Cable in the Classroom, the community channel, CPAC and the industry's
participation in the Action Group on Violence in Television (AGVOT) but more so,
the quality and fiability of your network are other examples of cable innovation
and responsibility to their subscribers. In a new communications environment, I
would encourage the cable industry to continue to be innovative and explore ways
to promote Canadian information services, for example in its navigators as it
rolls out digital technology, and in its activities related to providing gateways
to the Internet.
The cable industry has been a founding partner in the Canadian broadcasting
system. We know we can count on your continued participation, leadership,
entrepreneurship and strength in the converged and competitive markets and
landscapes forming around us. As I have said before, Canada is a leader in
communications. We have already demonstrated this leadership; we will rise to the
new challenges that globalization and competition present us; and, with your
help, we will remain at the forefront of this sector. As you say so well, cable
is taking us there! Bon anniversaire to all of you.
Thank you.
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Contact: CRTC Public Affairs, Ottawa, Ontario K1A 0N2
Tel.: (819) 997-5427, TDD: (819) 994-0423, Fax: (819) 994-0218
This document is available in alternative format upon request.
Date Modified: 1997-05-12 |
