Canada Supreme Court Rejects Broadcast TV Carriage Fees

In its split, 79-page decision, the Supreme Court said the CRTC lacks the authority to impose a value-for-signal regulatory regime on pay-TV providers. “No provision of the Broadcasting Act expressly grants jurisdiction to the CRTC to implement the proposed regime,” the majority opinion read. “None of the specific fields for regulation … pertain to the creation of exclusive rights of broadcasters to authorize or prohibit the distribution of signals or programs or the direct relationship between BDUs [broadcasting distribution undertakings] and broadcasters. Reading the Broadcasting Act in its entire context reveals that the creation of such rights is too far removed from the core purposes intended by Parliament and from the powers granted to the CRTC under that act."

The four dissenting justices dismissed those arguments. Their opinion said the “courts have consistently determined the validity of the CRTC’s exercises of power under the Broadcasting Act by asking whether the power was exercised in conjunction with a policy objective” spelled out in the act. “This broad jurisdiction,” they said, “flows from the fact that the Act contains generally worded powers for the CRTC to regulate and supervise all aspects of the Canadian broadcasting system, to impose licensing conditions, and to make regulations as the CRFTC deems appropriate to implement the objectives” set out in the law.

Rogers believes the ruling is a “step forward for consumers,” said Vice Chairman Phil Lind. “There have been dramatic changes to the industry in Canada since the CRTC first looked at the issue more than two years ago. We believe that value for signal has no place in today’s broadcasting landscape where the major players are enjoying significant profits.” BCE’s Bell Media said the ruling would jeopardize the financial ability of the country’s TV stations to survive in a sluggish ad market. “TV viewers across the country would have benefited from long-term stability for their local TV stations, which currently rely on an advertising market that has seen permanent structural change, and is no longer able to fund such a model on its own,” Bell Media said in a written statement. “With its reliance on an uncertain advertising market, the financial model for local television is broken.” Bell Media, which took over CTV Globemedia to become Canada’s largest private broadcaster, made the same threat in CRTC hearings in 2009. The CRTC declined comment on the court ruling.

Saying the dispute between broadcasters and distributors “threatens the overall integrity of the broadcasting system,” the CRTC had come out in favor of a broadcast carriage fee regime more than two years ago after holding a series of lengthy hearings on the issue. Stopping short of setting any carriage fees, it called for “a market-based solution” that would “allow private local television stations to negotiate with cable and satellite companies.” Under the planned system, TV stations could have opted to negotiate carriage fees every three years. To do so, stations would have had to give up the current regulatory protections that require cable and satellite providers to carry all the conventional networks, place them in favorable channel positions and substitute their signals for U.S. networks carrying the same programming. The CRTC had declined to order the feuding industries to start negotiations because of conflicting legal opinions about its authority to do so. It asked the Federal Court of Appeal for an “expedited” ruling that would clarify its jurisdiction under the Canadian Broadcasting Act. Although the appeals court upheld the CRTC’s power under both the Broadcasting Act and Copyright Act, the Supreme Court overruled that decision.

Canada’s two largest private, English-language TV broadcasters before the 2010 CRTC order, CTVglobemedia and Canwest Television, and allies had lobbied heavily for monthly carriage fees of at least C50 cents (51 U.S. cents) per subscriber for their respective national networks. The two companies said they needed dual revenue streams to make up for slumping ad receipts. Cable and satellite firms fiercely resisted the idea, contending they should not bear the burden for broadcasters’ heavy spending on U.S. TV programming rights. The cable and satellite firms warned that they would have to hike their customers’ monthly subscription fees by C$1 or more to cover the carriage fees.

The Supreme Court decision is the second big legal or regulatory setback for Canadian broadcasters this year. The CRTC had said it would phase out a temporary fund to subsidize local TV programming by broadcasters. Created during the recent recession, the fund took about C$100 million a year from cable and satellite-TV providers to support the stations’ local programming efforts. Support for that fund has cost pay TV subscribers as much as C$3 a month, as cable and satellite companies have passed the fees onto their subscribers.