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Canadian
Performance Report
For the
_____________________ Sheila Copps
Table of Contents *Chart of Key Results Commitments *Section I Messages ** * Section II Overview ** * * * * * Section III Performance ** * * Section IV Consolidated Reporting ** Section V Financial Performance *
Section VI Other Information *
Chart of Key Results Commitments
This report highlights the achievements of the Canadian Radio-television and Telecommunications Commission (CRTC) over the past year. The CRTC regulates telecommunications and broadcasting industries in Canada. It ensures that programming in the Canadian broadcasting system is affordable and available to all Canadians in both official languages, reflects Canadian creativity and talent and the extraordinary diversity of our nation. The CRTC helps promote strong and flourishing Canadian content across the ever-changing dynamic of news, entertainment and information services. The CRTC also performs an essential role in facilitating the development of a competitive, high-quality telecommunications system that is accessible and affordable to Canadians in all regions of Canada. My thanks go to the dedicated women and men who serve Canadians through the CRTC at this time of enormous and exciting change.
Sheila Copps
In 199899, the Canadian Radio-television and Telecommunications Commission (CRTC) has been driven by rapid, tremendous changes occurring in a complex environment of competing and converging technologies and players. I am proud to say that we have met these challenges and have fulfilled many of the objectives set out in our 1997 Vision and Action Plan. Despite the changing environment, there are a number of goals that remain constant. For example, we remain committed to promoting the delivery of a wide choice of high-quality Canadian programming to Canadians, which is a fundamental objective of the Broadcasting Act. We also continue to ensure the availability of reliable and affordable telephone and other telecommunications services to Canadians, which is fundamental to the Telecommunications Act. Given the dramatic and fundamental changes occurring in the communications industry, we have reviewed the entire broadcasting landscape as part of our Vision and Action Plan. Our policies are now better adapted to the new communications environment and allow citizens to have access to the widest possible range of high-quality choices that reflect our society and our cultural identity. In co-operation with the Canadian public and industry, the framework we developed for Canadian television builds on the success of this medium. Some key principles of the framework are to ensure more quality Canadian programs are broadcast at times when Canadians are watching, to reflect the diversity of Canadas regions and peoples and to support an economically successful broadcasting industry. We have initiated a review of all licences held by the Canadian Broadcasting Corporation-Société Radio-Canada (CBC-SRC) because it is important for us to look at the public broadcaster in view of the constantly changing and expanding communications environment. The Commission also made a series of decisions to strengthen the presence of French-language programming across the country, including its decision authorizing the nation-wide distribution of the TVA Network. This fall, Canadians will also have access to more programs by and about Aboriginal peoples. We have examined the implications and significance of new media such as the Internet for the creators, distributors and users of these services broadcasting and programming undertakings, telecommunications carriers, access providers and consumers. We have found that the Canadian new media industry is vibrant, highly competitive and successful. As a result, there is currently no need for a regulatory presence in this area. In telecommunications, we are implementing the changes to the Telecommunications Act that resulted from initiatives taken by the World Trade Organization. Canadas international telecommunications services market is now open to full competition, with the establishment of a framework for the new competitive market in Canada and a licensing regime for providers of basic international services. This year, we have also allowed competition in the pay telephone market and continue to facilitate the implementation of competition in the local telephone market. Finally, the CRTC has been able to meet its objectives thanks to its public process of dialogue, in the form of written communications, formal hearings and consultations. Input from everyone is required and valued. One of our roles as a Commission is to make certain that the free flow of ideas remains part of the process as we move toward a competitive marketplace. This sharing of critical information is vital to keep up with the breath-taking changes that are transforming the industries we regulate and the world we live in.
Françoise Bertrand
The Canadian Radio-television and Telecommunications Commission (CRTC) was established by Parliament in 1968. It is an independent public authority constituted under the Canadian Radio-television and Telecommunications Commission Act (R.S.C. 1985, c. C-22, as amended) and reports to Parliament through the Minister of Canadian Heritage. The CRTC is vested with the authority to regulate and supervise all aspects of the Canadian broadcasting system, as well as to regulate telecommunications service providers and common carriers that fall under federal jurisdiction. The CRTC derives its regulatory authority over broadcasting from the Broadcasting Act (S.C. 1991, c. 11, as amended). Its telecommunications regulatory powers are derived from the Telecommunications Act (S.C. 1993, c. 38, as amended) and various "special" acts of Parliament related to specific telecommunications companies.
The CRTC 1997 Vision articulates the mission, which stems directly from the objectives of the Broadcasting Act and the Telecommunications Act. The Vision also takes into account the changing communications environment, which is characterized by rapidly evolving technologies and an increasing rate of domestic and international competition. The Vision helps the CRTC focus on how it carries out its mandate, achieves objectives, improves operations and measures results in this increasingly competitive environment.
Further, the Commissions Vision anticipates the evolution of an integrated communications environment, applying to both broadcasting and telecommunications industries. The Vision supports both maximum choice and maximum access to Canadian content and services. The Vision has three components: Canadas Voices, Choices for Canadians and Good Governance. Canadas Voices and Choices for Canadians are business lines. Good Governance is a management strategy that applies to the business lines and to the organization as a whole. These components are an integral part of the mission. The actions of the CRTC have a significant impact on various dimensions of Canadian life. The CRTCs decisions benefit Canadians by making more available diverse programming that reflects Canadian society (Canadas Voices). The CRTCs decisions also benefit Canadians by promoting access to a broad range of communications services at reasonable prices (Choices for Canadians) through strong, competitive industries that can thrive in a global communications market.
The objectives of the CRTC are:
The CRTCs strategic program priorities are to:
Industry Trends The industries regulated by the CRTC operate in a global economy and carry out their functions within the context of an international communications marketplace. The fundamental drivers of change are new technologies, which are leading to an increasingly interconnected and interdependent world. As a result, the CRTC must deal with a convergence of telecommunications, broadcasting and information technologies, services and companies sectors that once operated as very separate businesses. The introduction of competition has meant an explosion of new competitors, both domestically and globally. In telecommunications, this means that there are roughly 1,000 carriers of telephony in the world, up several-fold in the past two decades as some companies have shed their monopoly status. We are also witnessing a growing trend toward mega-mergers as companies position themselves in this new environment. The Canadian landscape has shifted drastically as the Stentor group was dissolved and new alliances were formed. Telecommunications carriers are being affected by the dramatic increase in data traffic brought about by the growth of Internet use. New media are affecting the positioning and behaviour of telephone company mergers. Also, the broadcasting industry experienced further consolidations, in part as a result of the CRTCs new radio policy.
Socio-cultural Trends Broadcasting captures much of the leisure time of Canadians. According to Statistics Canada, Canadians rank listening to radio and watching television as their most important leisure activities. Recently, television viewership and radio listening have slightly declined, particularly among children and teenagers, groups most likely to use alternative media. There is some discussion as to whether new media such as the Internet will become in the long term a substitute for traditional media services. Before new media can substitute for traditional broadcasting, key technological developments such as the availability of broadcast-quality video and audio services will have to take place. Other factors, such as the cost of exhibition devices, the general appeal of service offerings and consumers willingness to pay, as well as PC and Internet access penetration rates, could also influence new media use. The consumer market comprises innumerable small segments that demand services and products tailored to their specific needs. This trend has been reinforced by technology that allows for the production of goods and services in small quantities, and that can be marketed internationally. These developments have affected broadcasting in a variety of ways. Pay and specialty services have become very popular. The proliferation of channels and services has transformed television by fragmenting audiences. The range of alternatives is making government regulation more difficult and is influencing existing networks and the public broadcaster (CBC-SRC) to re-examine their strategies. Finally, changes in demographic and immigration patterns mean that more and more Canadians have no single ethnic background and seek a sense of belonging in an increasingly fragmented and globalized environment. In the 1996 Census, 44% of the Canadian population reported at least one ethnic origin other than British, French or Canadian. Other aspects of identity, including socio-economic status, sexual orientation and gender, have begun to play a more profound role. This increasing fragmentation presents challenges for broadcasters trying to provide programming representative of Canadian society.
Competition and Convergence With the development of new technologies and the globalization of markets, the new communications environment is in a period of flux not only in Canada but also world-wide. Competition and convergence in Canada will continue to unfold as new media such as the Internet penetrate deeper into society. It is impossible to predict the future, as new services and innovations take place every day. The digitization of delivery systems for broadcasting services, which offers the prospect of greatly increased capacity and choice for subscribers, has been slow to penetrate the market. However, over the past few years, cable companies have faced direct competition with the licensing of new competitors using direct-to-home (DTH) satellite and multi-point distribution systems (MDS), all of which are digital. Access to Canadian production and programming under pressure of such new developments will continue to be a major concern for the Commission.
New Statutory Responsibilities With the World Trade Agreement on basic telecommunications, concluded on 15 February 1997, Canada agreed to end its remaining telecommunications monopolies and to liberalize the provision of international and satellite services. The Government of Canada amended the Telecommunications Act to give the CRTC new statutory authorities. An Act to Amend the Telecommunications Act and the Teleglobe Reorganization and Divestiture Act (S.C. 1998, c.8) received Royal Assent on 12 May 1998. In brief, the Act enlarges the statutory mandate of the Commission in the following ways:
The changes will also increase competition in Canada for the provision of international telecommunications services and offer new opportunities for Canadian companies to compete in foreign markets. At the CRTC, these new statutory responsibilities have imposed substantial additional workload on staff.
Market Impact on Regulatory Affairs The rapid evolution of the communications industry raises increasingly complex regulatory issues for the CRTC and other participants in the regulatory arena. At the same time, the need to consult industry, consumer groups and citizens remains essential. Competition in Canadian communications markets over the past years has considerably increased the choice of both communications services and service providers. The CRTC is currently addressing an increasing workload as it facilitates the transition to a more competitive marketplace and continues to streamline our processes to better respond to the rapid changes. Although the CRTC can actively promote fair competition, market forces alone will not necessarily achieve the public interest objectives of the Broadcasting Act and the Telecommunications Act. Therefore, the Commission will continue to regulate the market, to fulfil our public interest responsibilities, to safeguard consumers and to ensure that the all of the objectives of the Broadcasting Act and the Telecommunications Act are met.
Organization and Accountabilities This section can be found in Section VI page 61.
Performance Expectations Performance expectations that were presented in the Report on Plans and Priorities, 199899 Estimates, and key accomplishments to date are summarized in the annexed table (Performance Expectations A Report Card, page 57).
Under section 3 (d) (iii) of the Broadcasting Act, the Canadian broadcasting system should, "through its programming and the employment opportunities arising out of its operations, serve the needs and interests, and reflect the circumstances and aspirations, of Canadian men, women and children, including equal rights, the linguistic duality and multicultural and multiracial nature of Canadian society and the special place of aboriginal peoples within that society."
Greater Francophone Visibility in Canada The CRTC has made a number of decisions that strengthen the presence of French-language programming across Canada. More television viewers will have access to increased French-language programming with the nation-wide distribution of the French- language television service of the TVA Network. Licensing conditions include commitments to offer programming to French-language television viewers outside of Quebec that reflects the reality and experience of those viewers. Expanded access will help promote Canadas linguistic duality and cultural diversity, from coast to coast (Decision CRTC 98-488, 29 October 1998). The Commission has approved four new French-language specialty channel licences, which are expected to launch in January 2000. The new channels, Canal Z, Canal Histoire, Canal Évasion and Canal Fiction, will broadcast programs on science and technology; ancient and modern history; travel, tourism and adventure; and drama. Viewers will have the option of subscribing to the new all-French package alone or in combination with existing packages at a reasonable price. These four channels supplement the 11 other French-language specialty services the CRTC has approved since 1987, gradually rebalancing the line-up of French-language specialty services in relation to the English-language specialty services (Decisions CRTC 99-109, 99-110, 99-111, 99-112 and 99-113, 21 May 1999). Finally, the Commission is currently reviewing its access rules governing the carriage of Canadian pay and specialty services and is attempting to develop a definition for bilingual markets, to better respond to subscribers expectations in markets where Francophones or Anglophones form a significant, though not predominant, portion of the population (Public Notice CRTC 1999-74, 5 May 1999).
Aboriginal Peoples Television Network Following the public hearing and the report on additional national television networks, the Commission received an application from Television Northern Canada Incorporated (TVNC) to operate the Aboriginal Peoples Television Network (APTN). Following a public process that involved a large number of interested parties, the application was approved in February 1999. In April, the Commission released an order to all large and mid-sized distributors requiring them to carry APTN effective 1 September 1999 or whenever APTN launches. APTN will broadcast programming by and about Aboriginal peoples from all regions of Canada, in English, French and up to 15 Aboriginal languages. Aboriginal and non-Aboriginal communities will have access to programming with a high level of Canadian content that reflects the culture, history and concerns of Aboriginal peoples. To ensure maximum exposure, APTN will be distributed as part of the basic package offered by large and mid-size cable companies, DTH satellite broadcasting systems and MDS (Decision CRTC 99-42, 22 February 1999; Public Notice CRTC 1999-70, 21 April 1999).
Ethnic Programming In 1998, we reviewed our 1985 Ethnic Broadcasting Policy, taking into account Canadas evolving demographic profile as well as the views of participants in our regional consultations. The review revealed that the policy led to a substantial increase in the diversity of the Canadian broadcasting system through the emergence of many new ethnic broadcasting stations. Many participants in the review emphasized how valuable these stations were to them, their families, their cultural groups and to their successful integration into Canadian society. Building on the success of our ethnic policy, we have simplified and modernized the rules for ethnic programming by removing unnecessary regulatory distinctions while ensuring that the core objectives of the policy are still met. We have also made it easier for mainstream stations to produce ethnic programming in either French or English if they wish to do so (Public Notice CRTC 1999-117, 16 July 1999). For the 199798 broadcast year, conventional television aired a total of 7,062 hours of ethnic programming within the broadcast day which represents 0.87% of total programming.
Closed Captioning For the 199798 broadcast year, a total of 443,451 hours of programming with closed captions was provided in conventional television. This represents 54% of the programming aired within the broadcast day of this 69% was aired on English stations, while 31% was aired on French stations. This discrepancy reflects different regulatory requirements because of the higher cost of providing closed captioning for French-language programming. As part of its new policy framework for Canadian television, the CRTC considers that the time has now come for French-language broadcasters to provide more closed captioning (Public Notice CRTC 1999-97, 11 June 1999). Closed captioning requirements, similar to those applicable to English Canada, will be discussed with French-language broadcasters at the time of licence renewal.
Canadian Programming Attracting More Viewers Canadian programming has been steadily attracting a larger share of total viewing over the past several years, indicating that viewers are finding value in programming that reflects their values.
Canadian programs are also successful internationally. Canadian companies have become increasingly successful in selling Canadian productions abroad and Canada is now considered to be the worlds second largest exporter of television programming.
CRTC Policies and Regulations Promote Canadian Content Through its policies and regulations respecting Canadian content, the Commission has done much to ensure the availability of Canadian programs.
A Policy Framework for Canadian Television The CRTC has completed its first major review of Canadas television policy in 15 years. The process, which began in the spring of 1998, has resulted in a new television policy that builds on the success of the current television broadcasting system. The new policy offers more flexibility to broadcasters, more opportunities for independent producers and wider choices for viewers. It does so by simplifying existing requirements, introducing flexible guidelines designed to stimulate Canadian production, encouraging the development of a home-grown "star system" similar to the one existing in Quebec and promoting foreign sales (Public Notice CRTC 1999-97, 11 June 1999). A revitalized television policy was necessary partly because the structure of the industry has changed. There has been a clear shift in ownership patterns that has resulted in the creation of multi-station ownership groups. Some of the groups, such as CTV, Global and WIC, reach audiences throughout the country whereas others, such as Craig, CHUM and TQS, reach audiences on a regional basis. The Commission has recognized this new reality and will now consider the licence renewals of all stations owned by the same corporate entity at the same time, allowing the owner to submit a comprehensive strategic plan for all of its stations. To provide greater equity, conditions of licence will generally be the same for large broadcasters. The focus of the television policy is to provide "priority" Canadian programming in peak viewing periods, and to accomplish this, the Commission has extended the peak viewing period for Canadian programming. The evening prime time will run from 7 p.m. to 11 p.m. seven days a week instead of being limited to the periods from 8 p.m. to 11 p.m. on weekdays and from 7 p.m. to 11 p.m. on weekends. The new policy encourages greater diversity in programming and flexibility for broadcasters to determine what type of programming they will provide. For example, the definition of "priority" programming has been expanded to include long-form documentaries, Canadian entertainment magazine program, and regionally produced programs in all categories other than news and sports, in addition to existing categories (Canadian drama, music and dance and variety programs). The Commission will regulate only in the areas where the objectives of the Broadcasting Act cannot be met by other means. Local news is already a success and the Commission considers that it will continue to be aired without any special requirements. Also, English-language broadcasters will no longer be required to spend a minimum amount of money on programming. Instead, the Commission prefers to encourage broadcasters to place more effort on priority programming during prime time. Finally, as part of its review of the television policy, the Commission is undertaking a review of the appropriate definitions for Canadian programs (Public Notice CRTC 1998-59, 19 June 1998).
Licensing Framework for Pay and Specialty There is little or no analogue cable capacity left in the broadcasting system to distribute new pay and specialty services, while digital distribution is evolving. To ensure a continuing Canadian presence in programming, the Commission has issued a call for comments on the development of a possible new licensing framework for French and English pay and specialty services. This input will help the CRTC define appropriate criteria for licensing, if need be, during the transition to more widespread digital distribution.
New Media Internet After an extensive public process on the state of new media in Canada and their domestic and global potential, the CRTC concluded that the new media on the Internet are achieving the goals of the Broadcasting Act and are vibrant, highly competitive and successful without the need for regulation (Public Notice CRTC 1999-84, 17 May 1999; Telecom Notice CRTC 99-14, 17 May 1999, see also page 36). Among other things, the CRTC undertook the review to answer questions concerning how new media affect the regulation of radio, television and cable within the meanings of the Broadcasting Act. For instance, can new media services be considered broadcasting and if they can, should they be regulated? The CRTC concluded that:
The Commission also noted that both the Federal and Provincial governments have initiatives in place to support Canadian content on the Internet. Generally, applicable Canadian laws, industry self-regulations, content filtering software as well as increased media awareness are appropriate tools to deal with offensive and illegal content on the Internet. The Commission received more than 1,000 contributions, or approximately 6,500 pages, from Canadian individuals, public interest groups and multimedia companies, as well as from the broadcasting and telecommunications industries and their industry groups. The CRTC is one of the first regulators in the world to clarify its position on the Internet.
Renewal of CBC-SRC Licences The Commission has decided for the first time to hold the renewal of all CBC-SRC licences at the same time, to allow for a debate on the corporations strategies and on the role of public television in the new millennium. The CRTC held extensive consultations across the country and a three-week public hearing for the renewal of the CBC-SRC licences. The CRTC received 4,515 interventions. Ninety appearing witnesses participated in the public hearing and close to 700 individuals took part in public consultations. The CRTC intends to issue its decision in the fall of 1999.
Campus and Community Radio Reviews As part of a broader process initiated in 1997 to examine all of its policies related to the radio industry, the CRTC is currently reviewing its policies for campus radio and community radio. After a series of consultations with campus and other radio representatives across Canada in 1998, the CRTC drafted, for public comment, a proposed policy for campus radio. Some of the goals of this proposed policy are to reaffirm the primary role of campus stations in providing programming that differs from that provided by commercial radio stations and the CBC-SRC; to simplify the regulatory environment; and to encourage campus radio to promote local talent and avant-garde music aired less often by other stations (Public Notice CRTC 1999-30, 18 February 1999). Further to consultations with interested parties, the goals of the proposed policy for community radio stations are to simplify the regulatory process for these stations while ensuring that they continue to provide programming relevant to the communities they serve (Public Notice CRTC 1999-75, 5 May 1999).
Content Regulations Promote Canadian Talent Canadian content regulations have created a demand for Canadian programs that has further developed the skills and talent of the Canadian industry, for instance:
Television Programming Features Canadian Creative Talent A significant amount of Canadian-produced programming in the under-represented categories, particularly in drama, music and dance, and variety programs, was broadcast in the period 1 September 1997 to 31 August 1998. This gave Canadians ample opportunity to view programming that features creative Canadian talent.
Increased Spending on Canadian Programming Expenditures on Canadian programming by Canadian broadcasters increased by 19% between 1992 and 1998. Over this period, Canadian broadcasters devoted an average of approximately 78% of their programming expenditures to Canadian programs. Source: CRTC annual returns filed by broadcasting licensees, 1998 There was significant spending by Canadian broadcasters on Canadian programs during the broadcast year ending 31 August 1998. The extent of this investment is as follows [From CRTC annual returns filed by broadcasting licensees, 1998]:
The CRTCs broadcasting regulations for Canadian-produced programming have also indirectly brought about the emergence of strong, independent production houses and affected their activity. Total television production by independents went from $1.1 billion in 1997 to $1.3 billion in 1998, a 17% gain. Television animation budgets jumped 40%, from $132 million to $184 million, while drama budgets declined by 4%, from $771 million to $740 million [Source: Special Report on Independent Production, Playback, 17 May 1999].
Competitive Frameworks Result in Dynamic Communications Industry The competitive frameworks that the CRTC has introduced to date have resulted in many players entering the communications marketplace. There are a large number of players offering a wide variety of communications services and generating substantial levels of revenue. In the telecommunications market, the pace at which competition has emerged over the past several years has accelerated. As a result, almost all telecommunications services offered by major carriers are now subject to competition. Similarly, in the broadcasting market the Commission has put in place measures that encourage competition among different players. In developing its competitive frameworks, the Commission has sought to ensure that each framework is capable of supporting sustained competition. Moreover, where appropriate, the Commission now has processes to permit industry participants to resolve issues of common concern (see CISC on page 38 and ADR on page 41).
Diverse Players in the Communications Marketplace Broadcasting Canadians enjoy the benefits of a diverse communications marketplace. As of 31 March 1999, there were:
In an era of increasing competition, the total revenue earned by Canadian programming and distribution undertakings rose by 23% between 1993 and 1998, from approximately $6 billion to $7.4 billion. In addition, the industry enjoyed a 56% increase in profit before interest expenses and income taxes (PBIT), from $603 million in 1993 to $942 million in 1998. A more detailed breakdown by type of undertaking is provided in the following table.
Source: CRTC annual returns filed by broadcasting licensees.
Telecommunications The Canadian telecommunications services market generated an estimated $23.5 billion in revenue in 1997, an increase of 8.3% from 1996. According to an Industry Canada report based on Statistics Canada figures, 60% of the activity in the telecommunications services industry took place in fully competitive markets, that is, in long distance, wireless, equipment and Internet service markets [Industry Canada, The Canadian Telecommunications Service Industry, An Overview 1997-98, 1999].
There are also close to 30 companies that are in the process of fulfilling conditions to become competitive local exchange carriers, i.e., to provide competitive local telephone service. They include cable distributors, long distance telecommunication carriers and Internet service providers, as well as operators of totally unrelated businesses.
International Competition Licensing Regime Canadas international telecommunications services market is now open to full competition (Telecom Decision CRTC 98-17, 1 October 1998), with the establishment of a framework for competition in Canada in the market for international services. This decision responds to:
Among key components was a licensing regime for providers of basic international services, which came into effect 1 January 1999. To date, the Commission has issued approximately 150 licences for a term of 5 years. All licensees are subject to a condition that they not engage in anti-competitive conduct in relation to the provision of international telecommunications services. This regime will ensure foreign monopolies cannot use their dominance in their home markets to gain unfair advantage in the Canadian market, while keeping barriers to entry for new service providers to a minimum. The Commission has also eliminated all remaining routing restrictions for Canadian traffic, allowing carriers to route calls through the United States for Canada-Canada calls and Canada-overseas calls. This will provide more cost-effective routes for competitors, lower costs and widen availability of services for consumers.
Teleglobe Canada The Commission has partially deregulated Teleglobe Canada, which will no longer be required to obtain approval for rates charged for long distance services it might wish to offer within Canada and between locations in Canada and the United States. Although the Commission continues to require Teleglobe Canada to obtain prior approval for rates charged for overseas services, the Commission is considering further deregulation of Teleglobe Canada if it provides appropriate evidence of competition. The Commission is currently considering an application from Teleglobe Canada for substantial deregulation of its major wholesale overseas service. The Commission expects further applications from Teleglobe Canada for deregulation of other services. Furthermore, the CRTC approved an application by Telesat Canada that requested that the Commission forbear, in large part, from regulating its fixed satellite services from 1 March 2000 (Decision Telecom CRTC 99-6, 25 May 1999). The Commission has implemented a price ceiling to protect the interests of broadcasters and telecommunications providers that may not have access to adequate competitive choice.
Administration of Numbering Canada has historically played a significant role in defining the area code numbering scheme used for all circuit-switched origination and termination of voice, data and wireless cellular and PCS calls throughout Canada, the United States and Caribbean countries. Area codes are a finite resource and need to be efficiently managed to ensure the country will have the network and geographical flexibility to deal with the continued growth in telecommunications. Because of changes to the Telecommunications Act, the CRTC now has responsibilities for number administration, including issues dealing with area codes and number portability.
Central Fund Administration Finally, further to the decision on local competition (Telecom Decision CRTC 97-8, 1 May 1997) and the follow-up at the CRTC Interconnection Steering Committee (CISC), centrally administered funds were established to administer revenues from long distance services to ensure continued affordable local communication services.
Implementation of Local Telephone Competition Competition in Local Pay Telephones The CRTC issued a decision aimed at facilitating competition in the public pay telephone market (Telecom Decision CRTC 98-8, 30 June 1998). In the past, members of the former Stentor group held a monopoly in this market. Competition in this area should stimulate service innovation. The rates charged by new entrants will not be regulated as market forces should be sufficient to ensure they are reasonable. The Commission will continue to regulate the rates of incumbent pay telephone companies until competition is judged sufficient to protect the interests of consumers. The Commission requires new entrants to meet consumer safeguards prior to their access to the pay telephone market.
Unbundled Service Rates The CRTC has further facilitated entry of new local service providers into the local telephone market with its final decision on unbundled service rates. This decision sets the rates to be charged when incumbent local telephone companies make individual essential facilities available, for other local service providers to use, if they choose to, to provide a competitive service (Telecom Decision CRTC 98-22, 30 November 1998). This means that competitive local telephone service providers must pay to use the services offered by incumbent telephone companies local facilities, such as 911 and Message Relay. Access to these unbundled components will mean more choices for consumers.
Independent Telephone Companies in Ontario and Quebec Independent companies in Ontario and Quebec came under CRTC jurisdiction in 1994 and the Commission is now extending the benefits of the competitive framework to consumers in areas served by these companies. Telephone subscribers will now have the choices enjoyed by customers in the territories of the major telephone companies for long distance as the CRTC has reduced barriers to consumer choice in long distance in the areas served by the independent telephone companies of Ontario and Quebec. The Commission has implemented a regime that will establish financial conditions for competitors to enter the independents territories by lowering the amount competitors must pay the independents to provide long distance service in these markets. The CRTC has directed the majority of independents to bring local rates to levels that are comparable to communities served by telephone companies in the surrounding area. Local subscribers will see some service improvements, such as extended-area calling and elimination of mileage charges. Furthermore, the Commission made a series of decisions on the regulatory frameworks for some independent companies in Ontario and British Columbia.
Competition in Broadcasting Distribution Services The new Broadcasting Distribution Regulations, which took effect in January 1998, implemented a regulatory framework for broadcasting distribution undertakings (BDUs) designed to foster the development of effective competition in the distribution of broadcasting services to Canadians, while attaining the cultural goals of the Broadcasting Act. The Commission has been closely monitoring the transition to competition and has introduced different measures to address concerns that have arisen related to the market power of cable undertakings. For example, on 30 March 1999, after receipt and review of complaints filed by Look Communications Inc. and Torstar Corporation, the Commission concluded that Shaw Cablesystems violated, among others, the "no undue preference provision" in Section 9 of the BDU Regulations by deleting Look infomercials (a new entrant and competitor to Shaw) from the Torstar service distributed by Shaws Toronto cablesystem. The Commission directed that Shaw cease and desist from performing the deletions. Additionally, on 1 April 1999, the Commission imposed 90-day restrictions on incumbent cable companies preventing them from direct marketing to customers or offering discounts or other inducements not generally offered to the public. The former applies when customers have notified the company, through an agent, of their intention to cancel cable service, the latter when customers themselves contact the cable company for the purpose of cancelling cable service. The combination of the new BDU regulations and measures such as those outlined above are helping to bring choices and price benefits to Canadian subscribers that typically arise with a more competitive marketplace. Although the BDU marketplace is still dominated by the cable industry, significant inroads are being achieved by competing service providers.
The CRTC continues to regulate the monthly fee for basic service for BDUs serving 6,000 or more subscribers. Discretionary services are not rate-regulated by the Commission, nor are the rates for companies serving fewer than 6,000 customers. Under the new competitive framework, the CRTC has indicated that it will cease to regulate the basic service fee of a BDU when that company can demonstrate that it has lost at least 5% of its subscribers to competitors.
The CRTC competitive frameworks are designed to encourage industries to provide a broad range of communications services to Canadians. In broadcasting, the Commission has made several important decisions to increase the range of communications services available to Canadians.
Citizens and businesses should benefit from an increased number of services and technologies and further price reductions as a result of the recent initiatives under the World Trade Organization to increase global competition in telecommunications services. Canadian rates for international phone calls are already among the lowest of the countries that are members of the Organization for Economic Co-operation and Development (OECD)["OECD International Tariff Basket - August 1998", in OECD Communications Outlook, 1999, p. 175].
Improved Services for Visually Impaired and Persons with Other Disabilities The CRTC has ordered that all telephone companies, including wireless telephone companies, provide improved services to accommodate visually impaired persons (Telecom Order CRTC 98-626, 26 June 1998). The telephone companies must:
The existing telephone companies must report to the Commission the steps they have taken to comply with the order and the number of visually impaired customers who request billing information in alternative formats. The Commission has also asked the Canadian Standards Association (CSA) to establish standards for pay telephones to meet the needs of persons with various disabilities (Telecom Order CRTC 98-1186, 26 November 1998). The CSA has been chosen to develop these standards because it has the necessary expertise and is equipped to evaluate the needs of a wide range of interested parties, including persons with disabilities, other consumers and industry players. Once standards have been developed and are in place, pay telephone providers will be required to adhere to them.
Quality of Service The Commission oversees the quality of certain wireline telecommunications services. Incumbent telephone companies with 25,000 or more network access service lines must submit quality-of service-reports to the CRTC showing monthly performance[The reports can be found on the CRTC Web site at: http://www.crtc.gc.ca/ENG/PROC_REP/TELECOM/QoS_rpt/98qs_ixb.htm]. The reports include, for example, information on "out of service trouble reports cleared within 24 hours". The Commission relies on the marketplace to ensure that companies that compete with the incumbent telephone companies and alternative service providers of long distance services offer reliable, high-quality service.
After extensive public proceedings, the Commission released two years ago a series of major decisions establishing the regulatory framework to support the development of a competitive market in telecommunications while addressing the policy objective of affordable local telephone service. It also implemented an affordability monitoring plan consisting of annual and quarterly monitoring reports. The Commission determined that the national telephone penetration rate is the key indicator of overall affordability. According to Statistics Canada, 98.8% of Canadian households had telephone service in 1997. In 1997, out of 140,422 households that did not have telephone service in Canada, 79.4% had access to a telephone for emergency purposes. The Commission also monitors why Canadians dont subscribe to telephone service. While affordability is cited as a key reason for choosing not to have telephone service, it is not the only reason. In 1997, an estimated 53.4% of non-subscribers indicated that they could not afford service, compared with 66.8% in 1996. Other households said they did not need telephone service (26.4%) and others indicated moving as their reason for not subscribing (6.8%). A comparison of mainlines per 100 inhabitants for the OECD countries concluded that the telephone penetration rate in Canada remains the highest in the world. Furthermore, penetration rates among low-income households are substantially higher in Canada than in the United States [Reported in Bell Canada report to the CRTC, 1998, using Statistics Canada figures]. Also, a recent study by the Yankee Group, a Boston-based technology research organization, found that Canadian consumers benefit from the lowest long distance, local and Internet rates in North America [Reported in Canadian Communications Network Letter, 6 September 1999].
The Commission does not supervise or regulate all aspects of Canadas communication infrastructure. As discussed earlier, the Commission concluded in its review of new media (see page 23) that it will not regulate this sector because it is vibrant, highly competitive and successful without regulation. The new media process gave the CRTC the opportunity to explore whether there were any problems of access for producers and creators of content, for users or for citizens. Because decisions and policies in the area of telecommunications do influence access, the Commission continues to examine issues related to access that were raised at the new media hearing. Prior to that hearing, the CRTC had already required that incumbent cable carriers tariff higher-speed access to their facilities for the use of competitive providers of Internet services. A decision regarding the regulatory approach to such higher-speed access services, in which the Commission sets the rates, has been issued (Telecom Decision CRTC 99-8, 6 July 1999). The Commission is also looking into concerns related to access to the Internet by end-users, in a separate proceeding on telephone service in high-cost serving areas. Canada is well placed to participate in the information society. The proportion of Canadian households with telephone service is very high (98.8% in 1997) and close to 80% of Canadian households subscribe to cable, while others are increasingly being served by satellite and other distribution technologies. The penetration of computers has been increasing and access by Canadians to the Internet is facilitated by its relative affordability. Average rates for Internet access in Canada are among the lowest of OECD countries. It is estimated that by 2001, approximately 40% of households will have access to the Internet (5 million households), double the number from 1998. On average, Canadians spend more than 20 hours a month on-line, with 61% connecting at least seven times a week. The most common uses are e-mail (77%) and accessing information (71%).
Service to Canadians: Good Governance
Good Governance is a management tool that supports both of the business lines, Canadas Voices and Choices for Canadians, and permeates everything the CRTC does to ensure an effective decision-making process and improve service to Canadians. The Commission:
The Commission The Commission is made up of 13 members, including the Chairperson, and two Vice-Chairpersons, Broadcasting and Telecommunications. Among the 13 members, six are appointed by region (Atlantic, Quebec, Ontario, Manitoba/Saskatchewan, Alberta/Northwest Territories and B.C./Yukon), ensuring regional interests are represented. Decisions are reached by majority vote, each member having one vote. The CRTC follows established processes and procedures that ensure that the principles of natural justice and procedural fairness are respected. While a number of appeals of Commission decisions have been made over the past several years, it is notable that no decisions have been overturned by the courts on the basis of fairness.
Public Participation Participation by Canadian citizens in all of our public proceedings is essential. A high level of participation by the general public, public interest groups and industry representatives assists the Commission in ensuring that a wide scope of views is considered and that the public interest objectives of the Broadcasting Act and the Telecommunications Act are well served. The Commission actively encourages high levels of participation in its public processes, and was particularly successful in doing so in 199899. For instance, on the broadcasting side, during the 11 public hearings that were conducted and the 164 public notices that were issued during the fiscal year, the Commission received 7,509 interventions, which it considered in the process of rendering its decisions. On the telecommunications side, the CRTC issued 44 public notices and held two regional consultations at which members of the public appeared. It also received 11,945 comments from various parties regarding all types of applications. To complement the established processes of public hearings and public notices, the Commission has introduced innovative, flexible and less formal means of soliciting the views of the public it serves and the industries it regulates. Public consultations are aimed at gaining valuable information from the public on specific issues or topics that affect them. In some instances these consultations are held prior to public hearings. In 199899, we held seven sets of consultations related to the following matters: television policy, the CBC-SRC, ethnic policy, service to high-cost areas, MTS Communications Inc., community radio and campus radio. These public consultations were held in 36 locations across Canada. These consultations are often conducted during the evenings and weekends to encourage maximum participation. Feedback has been extremely favourable from both industry players and members of the public.
CRTC Interconnection Steering Committee (CISC) In 1996, the Commission established CISC to resolve certain contentious issues relating to the implementation of local telephone competition. CISC is an ongoing collaborative process involving industry players, the general public, and public interest and consumer groups in both telecommunications and broadcasting. CISC and its working groups have been successful in resolving many complex technical and administrative issues on a timely basis, by getting the parties together to discuss them in an open forum. The CISC process resulted in 15 decisions in 199899. Some of the decisions concern the establishment of rules for transfer of customers between carriers, and for setting up agreements between local exchange carriers for interconnection facilities.
Human Resources Strategy In 199798, the CRTC developed a Human Resources Strategy entitled Moving Together Toward the Future 19982000. During the past year, it has started to implement this strategy, and focused on four main areas:
CRTC International Recognition The Commissions ability to introduce and promote innovative practices in an increasingly complex and technologically advanced telecommunications environment has attracted the attention of many foreign countries. Delegations from all over the world have consulted the CRTC on the Canadian regulatory model in broadcasting and telecommunications. Having its regulatory model recognized internationally enhances the Canadian governments credibility. It is also beneficial in "opening doors" for Canadian businesses operating abroad and it is important in relation to promoting the Canadian policy perspective. In 199899, the CRTC participated in 35 international projects involving 27 countries. On 10 September 1998, the Bertelsmann Foundation named the CRTC as co-winner of the 1998 Carl Bertelsmann Award for "Innovation and Responsibility in the Information Society." The selection criteria were based on excellence in the supervision of communications and media markets, initiatives taken in the area of self-regulation and the promotion of learning in media technologies.
Different Approaches to Service Delivery The CRTC shares the governments commitment to improve the delivery of programs and services to Canadians by fostering quality management practices and processes that are results-oriented, cost-effective, timely and focused on client service. Some examples of initiatives that were conducted in 199899 are noted below:
Alternative Dispute Resolution In 199899, the Commission actively used an alternative dispute resolution (ADR) process to better resolve issues raised by various parties in a competitive marketplace. The ADR process is designed to provide an informally structured and efficient means to expeditiously identify the issues, clarify the pertinent facts required to resolve these issues and find appropriate solutions. The primary function of CRTC staff is to facilitate and encourage all parties to resolve their disputes through the formulation of a settlement acceptable to all parties, including the CRTC. In addition to being timely and more responsive, ADR and staff mediation techniques have the benefit of minimizing administrative burden on parties. The Commission foresees an increased use and role of ADR in light of increasing competition, convergence, mergers and vertical integration.
Application Processing Time The timeliness of CRTC decisions directly affects business decisions and the public. In the highly competitive communications environment, the CRTCs ability to respond quickly and effectively to applications and requests is a key component of a strong and healthy Canadian communications sector. Resource constraints, workload increases and the increasing complexity of the communications environment affected the timeliness of some types of CRTC decisions in 1998. As applications vary widely in complexity, so does the time spent in rendering decisions on them. In broadcasting, there was a decrease in the average processing time for the public hearing process. For appearing and non-appearing items, it took an average of 221 days in 199899 compared with 236 days in 199798. Although the processing time for public notices, excluding renewals, remained constant overall in the past two years, the application processing time for other routine processes climbed. For example, the average processing time for renewals went from 295 days in 199798 to 380 days in 199899, an increase of almost 30%. On the telecommunications side, for a number of the more routine application types, the CRTC has met the challenge to decrease application processing times through its streamlining initiatives. For instance, in 1998 the average processing time for tariff decisions decreased from 34.1 days in 1997 to 14.4 days. However, owing to the more complex issues surrounding the competitive framework that are now before the Commission, the time spent in processing Part VII applications, which include such items as competitive disputes, contribution issues and Internet service issues, increased from 130 days to 164 days, a 26% increase. Competitive disputes resolution time has doubled to 212.4 days.
Service to the Public In 199899 the Commission received more than 60,000 letters and telephone calls, of which telephone calls comprised 80%. Electronic correspondence increased more than 40% compared with last year. Of the total, approximately 38,000 were broadcasting related. Many calls and letters were generated by the cable industrys launch of new specialty services in September 1998; the cable industrys repackaging of discretionary services and the resulting fee increase for basic service; and the Commissions decision to include APTN and TVA on basic service. Issues related to telemarketing by fax and telephone remain high on the list of consumer concerns. Competitively priced packages of long distance services led to jammed networks on the east and west coasts, which generated a number of calls and letters to the Commission. Finally, the Commission continues to get requests to extend the local calling areas in a number of communities.
During the period from January to March 1998, the Commission sent more than 1,100 letters to broadcasting and telecommunications companies stressing the importance of being prepared for the Year 2000. The Commission encouraged them to take the necessary steps to review their operations and to take appropriate actions to address Year 2000 issues. As a follow-up, the Commission reminded all telecommunications companies, both regulated and unregulated, of the potential Year 2000 problems unless remedial action was taken. The Commission also required these companies to provide specific information on their Year 2000 planning, including significant milestones such as the expected date of Year 2000 compliance and when a contingency plan would be in place. The responses received from all telecommunications companies, both large and small, were encouraging. They indicate that virtually all of the roughly 100 companies expect to achieve Year 2000 compliance for all critical systems by June 1999 or earlier. Because Industry Canada was already canvassing broadcasters along with other Radiocommunication Act licensees, it was agreed that it would follow-up with companies in the broadcasting sector to obtain information regarding their Year 2000 compliance status. Internally, the CRTCs Year 2000 team has conducted an in-depth analysis and has concluded that the operational exposure to Year 2000 problems is relatively minimal. This conclusion was confirmed by an independent audit in March 1999. The audit found that the Commissions risk relative to the Year 2000 is low. In 1988, the Commission had adopted a fixed-format eight-digit date standard and all corporate systems had subsequently been designed based on this standard. The CRTC has completed an assessment of all of its technology-based products to ensure Year 2000 compliance. Any non-compliance issues are expected to be resolved by August 1999. Contingency plans have been prepared with the Department of Canadian Heritage, the National Contingency Planning Group and Treasury Board Secretariat. Moreover, an Informatics Year 2000 Crisis Management Plan, including an Emergency Response Team plan and procedures, has been developed for deployment by 1 January 2000, if required. The Commissions Year 2000 team continues to participate in the Treasury Board Secretariat Year 2000 Interdepartmental Working Group. The CRTCs team has established guidelines for hardware and software acquisitions to ensure compliance. All current purchases are made against these specifications and appropriate testing methods are in place to ensure compliance. The CRTC Year 2000 team is also providing assistance to staff who have developed small information systems and databases using a variety of tools. While these end user developed systems/databases are generally not operationally critical, the CRTC Year 2000 team is committed to ensuring that all of the Commission informatics-supported resources will be Year 2000 compliant. Accordingly, guidelines and testing procedures have been distributed to all end-users to assist them in assessing their stand-alone systems.
Financial Performance Overview The CRTCs resources have been stretched to the limit because of the substantial increase in its workload related to competition and public consultations. Despite the fact that the Commission has streamlined several processes, procedures and the organizational structure to reduce costs and to provide more timely and improved services, resource allocations have been fully utilized over the past three fiscal years. Also, increased demands from the public and industry have outpaced the amount of funds available. As noted earlier, CRTC decisions directly affect business decisions and the general public. Because of limited resources, there are some delays in application processing time and some files were postponed. Furthermore, in 199899, resource shortages were compounded by additional, unfunded, statutory responsibilities, which were conferred on the Commission as a result of changes to the Telecommunications Act. While the CRTC is fully funded from the fees it collects from the broadcasting and telecommunications industries, it is important to note that the Commission cannot unilaterally set its budget levels. Similar to other federal government departments, the Treasury Board approves the level of resources. In recognition of the increased workload and statutory responsibilities of the CRTC, the Treasury Board approved a one-year, $1.5 million non-recoverable appropriation for 19992000. While this amount will assist the CRTC in addressing some of its workload pressures, additional resources and stability in funding levels are required for at least the next two to three years in order to facilitate the effective implementation of the competitive frameworks. After this time, the CRTC anticipates that resource levels could start to decrease over a five-year period and may be even lower than the resource levels established in 199899.
Table 1 Summary of Voted Appropriations Table 2 Comparison of Total Planned to Actual Spending Table 3 Historical Comparison of Total Planned to Actual Spending Table 4 Comparison of 1998-99 Planned Spending, and Total Authorities to Actual Expenditures by Organization and Business Line Table 5 Respendable Revenues Table 6 Non-Respendable Revenues Table 7 Contingent Liabilities
Table 1 Summary of Voted Appropriations 1998-99
Table 2 Comparison of Total Planned to Actual Spending, 1998-99
Table 3 Historical Comparison of Total Planned to Actual Spending
Table 4 Comparison of 1998-99 Planned Spending and Total Authorities to Actual Expenditures by Organization and Business Line
Table 5 Respendable Revenues*
Table 6 Non-Respendable Revenues*
Table 7 Contingent Liabilities
Performance Expectations A Report Card [As per Performance Expectations in the Report on Plans and Priorities, 19981999 Estimates]Canadas Voices
Organization and Accountabilities Business Line Descriptions
Canadas Voices Presence and diversity of VALUES The CRTC continues to face the challenge of ensuring that attractive Canadian services are available, within the Canadian broadcasting system, so as to implement the objectives set out in the Broadcasting Act, while providing Canadians with access to an increasing volume of foreign information and entertainment. Key results must be considered in the context of the CRTCs need to balance legitimate demands for increased choice with cultural and economic objectives. The objective of Canadas Voices is to ensure that diverse Canadian content and an appropriate mix of foreign programs are made available to consumers. The Commission uses the following strategies:
This business line provides specific expertise in the evaluation and development of regulatory policies and associated regulations. Specifically, the CRTC:
This business line includes, for the most part, the Broadcasting Sector, and at this point, some activities in the Telecommunications Sector concerning the analysis of issues related to access and to delivery of content (see organization chart on p.64).
Choices for Canadians A wide array of choices for Canadians VALUES
The CRTC works to implement the policy objectives of the Telecommunications Act and the Broadcasting Act. In the area of telecommunications, the Commission works to foster competition in all regulated markets, while ensuring that high-quality services are reasonably priced and accessible. The objective of Choices for Canadians is to ensure that a broad range of communications services, and affordable communications services will be provided to Canadians, through competitive industries. The Commission uses the following strategies:
This business line provides specific expertise in the evaluation and development of regulatory policies and associated regulations. Specifically, the CRTC:
This business line includes the Telecommunications Sector, and in the Broadcasting Sector, some activities related to Broadcasting distribution.
CRTC Approach to Regulation Changes and challenges, such as facilitating increased competition, convergence, and technology development and adoption, have brought changes in the Commission's approach to regulation. As part of its Vision, the CRTC uses a full "tool box" of regulatory approaches. For example:
Accountabilities and Links to Organizational Structure Good Governance is not a business line. Rather it is a management strategy that supports the two business lines.
Contacts for further information
Internet address: http://www.crtc.gc.ca
E-mail: info@crtc.gc.ca
Legislation and Associated Regulations Administered by the CRTC Statutes
Regulations and Rules of Procedure CRTC Rules of Procedure Broadcasting Information Regulations, 1993 Broadcasting Licence Fee Regulations, 1997 Broadcasting Distribution Regulations Pay Television Regulations, 1990 Radio Regulations, 1986 Specialty Service Regulations, 1990 Television Broadcasting Regulations, 1987 CRTC Telecommunications Rules of Procedure Telecommunications Fee Regulations, 1995 Canada Telecommunications Common Carrier Ownership and Control Regulations |
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