Convergence Policy Statement

Introduction:

This Policy Statement brings to a close a process of public consultation on specific policies related to broadcasting and telecommunications put forward in October 1994, in Order in Council P.C. 1994-1689. The policies addressed three broad areas: interconnection and interoperability of network facilities, continued support for Canadian content, and competition in facilities, products and services. The Order in Council requested the Canadian Radio-television and Telecommunications Commission (CRTC) to hold public consultations and report on issues related to the implementation of these policies. As well, the Order indicated that the CRTC's report would be forwarded to the Information Highway Advisory Council (IHAC) for comment.

In response, the CRTC launched a public proceeding which called for written public submissions in two phases and included a month of public hearings in March 1995. Over 1,000 public submissions were received and 78 parties participated in the public hearings, which were broadcast live on cable-TV channels across Canada. The CRTC released its report, entitled "Competition and Culture on Canada's Information Highway: Managing the Realities of Transition" on May 19, 1995. The IHAC included its comments on the CRTC's report in its own final report entitled "Connection, Community, Content, The Challenge of the Information Highway", released on September 27, 1995. The Government appreciates and has carefully considered the submissions received from the public and the recommendations of the CRTC and the IHAC on these import ant issues. On May 23, 1996, the Government released its report entitled Building the Information Society: Moving Canada into the 21st Century. Part of the action plan in that report was a commitment to finalize the Government's policy on convergence. This Policy Statement responds to that commitment.

In this statement, the Government confirms the policies put forward in Order in Council P.C. 1994-1689 and sets out principles for the implementation of these policies. The policy statements originally set out in the Order in Council and the implementation principles are brought together in this document which constitutes the Government's policy framework.

Facilities:

It is Government Policy that: 

• cooperation or sharing between cable licensees and telecommunications carriers should be permitted;
• the facilities and capacity of telecommunications carriers under federal jurisdiction, including facilities of cable licensees beyond that used by the licensee for the carriage of broadcasting services to the extent practicable, be made available for lease, resale and sharing by service providers and other carriers on a non-discriminatory basis; and
• facilities and capacity, including support structures, should, to the extent practicable, be provided in a manner that allows users to use and to pay for only those parts of the network infrastructure that they require.

The foregoing policies apply except where: 

• cost or market conditions make this inappropriate;
• it would inhibit fair competition; or
• it would be inconsistent with the objectives of the Broadcasting Act and/or the Telecommunications Act.

Implementation Principles: 

With respect to cooperation and sharing, regulation should be consistent with Government policy and the public interest. Particular attention should be given to providing access to all Canadians to a wide range of communications services. In small markets, economic conditions may make the sharing of facilities desirable to achieve this objective. Industry players will determine when cooperation and sharing are desirable. The CRTC has the ability to exempt cable television licensees from regulations requiring that they own their head-end, amplifiers and drops, in circumstances to give effect to Government policy. The Government notes that the CRTC has proposed to eliminate this existing regulatory requirement.

Non-discriminatory third-party access to the facilities of all telecommunications carriers under federal jurisdiction, through lease, resale and sharing is mandatory where practicable and consistent with the conditions established in the Government's policy. This includes cable television facilities beyond that used for the carriage of broadcasting services.

Interconnection of cable television facilities used for the distribution of broadcasting services will not be mandatory since competition can be better achieved through the creation of alternative broadcasting distribution networks.

In dealing with the wiring inside a consumer's premises, the objective should be to ensure that consumer choice is not limited but rather gives the consumer the ability to obtain services from any combination of suppliers they choose, without unnecessary inconvenience. Regulation should aim to achieve this objective.

Standards:

In Building the Information Society, the Government stated that only open standards, universally adopted within Canada and around the world, will allow Canada's Information Highway to develop into an interconnected and interoperable network of networks, where access to one network means access to all. The acceptance of open international standards is also a necessary precondition for the emergence and growth of information based markets and services. Both the CRTC's report and the IHAC report recognized that, in the context of increased competition and international trade, market forces are crucial to determining common standards. Both reports, however, also recognized an important role for Government, in particular the Minister of Industry, in supporting open standards, cooperating with industry players to foster their participation in the development of standards, and promoting their adoption and use.

Policy:

The Government supports the development, distribution and implementation of open interconnection and interoperability standards for the Information Highway. The Government recognizes that, given an increasingly competitive and global market and the rapid pace of technological development, market forces, not governments, should, to the extent feasible, determine the most appropriate standards. Where required to meet specific needs such as security, safety or international obligations, the Government will use its legislative and regulatory powers to establish and enforce standards. As well, the Government may take appropriate action where competition or the interests of consumers may be adversely affected by standards-related considerations.

Implementation Principles:

In support of this policy, the Government will strengthen: 

1. its support for the removal of roadblocks to interoperability and openness through standards, and the use of open and interoperable standards;
2. its support for development of open and interoperable standards as a key strategy for removing unnecessary barriers to trade - by encouraging greater business participation in international standards development activities including standards development consortia, and in its role as an international negotiator;
3. its role as a facilitator of standardization and standards development in Canada and the use of open and interoperable standards, including its encouragement of the adoption and use of international standards by Canadian business, and increased consumer awareness of standards issues;
4. its resolve as an informed procurer of goods and services by encouraging the purchase of goods and services based on open and interoperable standards; and
5. its role as a facilitator and partner in the establishment of electronic standards information networks providing access to worldwide standards information.

Content:

It is Government Policy that: 

• participants in the Information Highway make equitable and appropriate contributions to the production and distribution of and access to Canadian-cultural-content products and services; and
• Government continue to have the tools and mechanisms necessary to promote Canadian content.

Implementation Principles:

Broadcasting Act Objectives:

Regulation and supervision of the Canadian broadcasting system by the CRTC will ensure adherence to the policy objectives of the Broadcasting Act from all competitive programming and distribution undertakings.

The Canadian broadcasting system will be owned and controlled by Canadians.

Broadcasting Distribution Undertakings:

All broadcasting distribution undertakings will be subject to essentially the same rules recognizing that the nature of the technology being used may require, in some cases, the application of flexible and adapted regulations. The obligations imposed on competitive systems will be equivalent in terms of the benefits to the Canadian broadcasting system and ensure fair and sustainable competition among players.

All broadcasting distribution undertakings will provide an affordable and attractive basic package of services including a predominant Canadian choice. To this end, the Minister of Canadian Heritage will explore the concept of a basic package of Canadian broadcasting services for broadcasting distribution undertakings on the Information Highway.

All broadcasting distribution undertakings will make maximum contribution to Canadian programming, including a significant financial contribution derived from a percentage of gross annual revenues to the production of Canadian programming. The percentage imposed on a distribution undertaking will be based on the principle that the obligations imposed on competitive systems should be equivalent.

The financial contributions will be administered independently of the undertakings and will be accessible, without discrimination, to all Canadian producers of qualifying programming, including private and public broadcasters.

New Programming Services:

New programming services within existing categories will contribute to the creation and presentation of Canadian programming to the same extent as existing services. New types of broadcasting programming services will make comparable contribution as existing services. For pay-per-view and similar services, this will include offering the maximum practicable number of Canadians titles, making direct contributions to the development and production of Canadian programs and, where appropriate, being prohibited from acquiring exclusive Canadian rights or other preferential rights to feature films and other programming.

Navigational Systems:

As navigational systems for programming and distribution undertakings are introduced, they must facilitate advantageous access to Canadian programming and access to French language services.

Social Values:

New broadcasting services will respect the social values of Canadians and their rights not to be exposed to inappropriate content such as violence, sexual stereotyping, intolerance or, in the case of children, programming and advertising not intended for them. Codes of ethics such as those developed by broadcasters will continue to be an effective means to implement this principle.

New Content Services:

The implementation of the Information Highway will give rise to numerous new information and programming services that will be offered to the public via telecommunications (as defined in the Telecommunications Act). The government, in seeking advice on implementing its policy to support Canadian content, asked the CRTC to report on the question as to whether the current definitions under the Broadcasting Act and the Telecommunications Act are sufficiently clear to enable new and emerging services to develop under a coherent regulatory approach or whether there is a need for review of definitions such as "broadcasting" and "telecommunications service".

The advice the Government received in the CRTC report suggests that there might be a need to exclude from the ambit of the Broadcasting Act certain new and emerging services that, while they fall within the definition of broadcasting, will not foreseeably contribute materially to the achievement of the Broadcasting Act's objectives. In its recommendations, the CRTC gave some examples of services that might be excluded.

The IHAC considered that this section of the CRTC report needed precision. The Council considered that greater clarity is required to determine the criteria which would define the services to be included or excluded from the definition, as well as the characteristics of those services. The Government agrees that there is a need for greater clarity with respect to the services to be included or excluded from the definition of broadcasting programs. The Government also considers that all broadcasting programming services that contribute to the objectives of the Broadcasting Act should continue to be subject to the Act.

With some exceptions specifically provided for in the Broadcasting Act, broadcasting means any transmission of "programs" by radio waves or other means of telecommunication for reception by the public. In the current environment, this includes programs offered on a pay per view basis at the specific request of an individual.

In practice, the present technology limits the choice of individuals to programming that is delivered on a scheduled basis. Future technologies, generally known as true video on demand, will make it possible for individuals to have access to programming to be delivered to them and only to them at a specific time.

The Government will continue to review the positions of the various stakeholders and to analyse the complex legal, regulatory and legislative aspects of this issue with a view to providing future policy implementation guidance.

Competition:

It is Government policy to: 

• foster fair competition and an increased reliance on market forces in the provision of facilities, products and services;
• encourage the regrouping and interconnection of cable licensees' systems on a national basis in order to maximize their efficiency as long as this does not impede access;
• update Canadian ownership rules for broadcasting licensees to encourage the investment required to accelerate the implementation of the advanced technologies and to increase Canadian content services by harmonizing the rules for the broadcasting industry with those of the telecommunications industry; and
• ensure that anyone acting as both a broadcasting undertaking as defined by the Broadcasting Act, and as a "Canadian carrier" as defined by the Telecommunications Act is subject to both Acts, for those activities to which they respectively apply.

Implementation Principles:

The Government has established a policy on Direct-to-Home satellite broadcasting policy that supports dynamic competition and has issued a policy and call for applications for Local Multipoint Communications Systems (LMCS) which will provide a platform for wireless delivery of competitive broadband services including broadcast distribution. These actions allow the CRTC to consider applications for competitive broadcasting distribution undertakings without delay.

Telephone Company Entry Into Broadcasting:

All telecommunications carriers that meet the Canadian ownership and control requirements will be eligible to hold broadcasting licences.

Amendments to the Bell Canada Act will be introduced to eliminate the prohibition from holding broadcasting licences.

The Order in Council which limits the ability of crown corporations to hold broadcasting undertakings will be modified to allow such corporations to hold broadcasting licences while recognizing the obligation for broadcasting licensees to operate at arm's length from governments, including programming independence.

Recognizing the special status of BC Tel and Québec-Téléphone as telephone companies grandfathered under the Canadian ownership requirements of the Telecommunications Act, the Government will amend the Order in Council which establishes the Canadian ownership requirements for broadcasting licensees so as to permit either of these two companies to be eligible to hold a broadcasting distribution licence through a structurally separate entity, which could be a wholly owned subsidiary. The licensee would have an all-Canadian board of directors and be subject to conditions designed to ensure that Canadians control all programming decisions arising from the operation of a broadcasting distribution undertaking.

Timeframe for Competition Between Telephone Companies and Cable Companies:

The timeframe to allow cable and telephone companies to compete in each other's core market has been the subject of much discussion. The Government supports the view that neither should have a head start over the other, but that competition should not be unduly delayed.

In its report to the Government, the CRTC estimated that it would complete its regulatory proceedings related to interconnection, co-location, unbundling, rate restructuring and interim number portability by November 1996. The Government urges the Commission to complete these proceedings as expeditiously as possible.

The CRTC should consider applications by telephone companies for broadcasting distribution undertaking licences and issue licences within the same timeframe as the regulatory proceedings for local telephone competition, and associated implementation processes.

To ensure fair competition and no head starts, the Commission should ensure that telephone companies cannot offer their broadcasting distribution services until regulatory barriers to competition in local telephone service have been removed and the Commission has approved tariffs to enable cable companies and others to launch competitive local telephone services. This may be done on a market by market basis.

Competitive Safeguards:

As telecommunications carriers become involved in providing broadcasting services and broadcasting undertakings become involved in providing telecommunications services, it is Government policy that the following principles should apply: 

• regulation should prevent cross subsidies from monopoly or utility services to competitive services, and between broadcasting and telecommunications services;
• regulation must ensure that the gross revenues from broadcasting activities are fully identified and accounted; and
• Canadian ownership rules applicable to broadcasting and telecommunications must be respected. Although the requirements for broadcasting have been substantially harmonized with those now in place for telecommunications, it is not government policy to ensure harmonization of ownership rules for broadcasters and Canadian carriers.

In keeping with these principles: Where a broadcasting distribution undertaking or a telecommunications carrier wishes to provide a broadcasting programming service, the programming licence must be held by a structurally separate entity.

The Government considers that structurally separate entities would also be an effective means to avoid anti-competitive behaviour arising from cross-subsidization and/or market dominance where anyone offers both telecommunications services and broadcasting distribution services. This could be done through separate subsidiaries using the same facilities. Any applicant who wishes to provide broadcasting distribution and telecommunications services through the same corporate entity would have to satisfy the CRTC that: through regulatory measures and licence conditions, sufficient safeguards would exist to avoid anti-competitive behaviour from a dominant player position and cross-subsidies; gross revenues from broadcasting are fully identified and accounted; and direct and demonstrable benefits to consumers would flow from the economies of scope resulting from such arrangements.

A telecommunications carrier that does not meet the ownership and control requirements for broadcasting may only participate in broadcasting activities through a structurally separate entity at the permitted ownership level. This would not prevent the broadcasting licensee from leasing any or all of its facilities from the Canadian telecommunications carrier, nor would it prevent the carrier and the broadcasting undertaking from marketing their services jointly or sharing administrative and technical operations where justified for reasons of economies of scope. In any case, the broadcasting licensee would have to satisfy the CRTC that is has control over all of its broadcasting activities.

While new technologies allow providers of telecommunications and broadcasting services to offer similar services, the distinction between telecommunications, broadcasting and their services will remain. Different policy objectives require distinct regulatory mechanisms.