How a simple change to NAFTA could dramatically change how Canadians view television

One of the consequences of Donald Trump becoming president of the United States is that now Canada, the U.S. and Mexico are meeting to discuss amendments to the North American Free Trade Agreement, which Trump has threatened to pull out of entirely if he doesn’t get his way.

Canada has made clear that it plans to keep cultural exceptions to the free trade agreement, allowing it to continue to protect its cultural institutions from its much larger neighbour. So it might be tempting to think there won’t be any change here.

But there is one change being proposed that could make a huge difference to the Canadian television industry, and its one that proponents on both sides of the border would argue strengthens rather than weakens cultural protection.

It’s called retransmission consent.

CUSFTA, NAFTA and copyright law

When it comes to broadcasting law, NAFTA defers to the earlier Canada-U.S. Free Trade Agreement, whose text is posted online in a PDF. Article 2006 of the CUSFTA lays out requirements and exceptions to copyright law when it comes to retransmission of distant television signals. Under its rules, each country must prohibit non-simultaneous retransmission, or altered retransmission, of signals that aren’t meant for over-the-air broadcast, without the consent of the copyright owner.

But the rules intentionally leave a big hole for simultaneous transmission of over-the-air stations without that consent. As a result, Canadian television distributors can distribute U.S. over-the-air stations (CBS, ABC, NBC, Fox and PBS) without those stations’ consent or compensation to them, following only the rules set by the CRTC.

This exception to copyright law dates back to the early days of cable TV, when providers picked up the cross-border stations over the air and distributed them to their customers. The rules have been codified since then (generally, providers can distribute two sets of what are called 4+1 stations — PBS is the +1 — and choose to take a group of Eastern time zone stations and a group in the Western time zone) but the essence remains in place to this day, enshrined as section 31 of the Copyright Act.

Some people want to change that, on both sides of the border.

Cross-border unity

On the Canadian side is Bell, which owns CTV stations. Appearing before a parliamentary committee hearing on Sept. 20, Rob Malcolmson, Senior Vice-President, Regulatory Affairs, suggested eliminating section 31 of the Copyright Act entirely, which would mean television providers would need to negotiate carriage of distant signals both Canadian and American. CTV and CTV Two stations being carried outside their markets would get some compensation as a result. (Current copyright law requires TV providers distributing distant stations to compensate rights holders, both Canadian and American, through a fund that taxes them at about $1 per subscriber per month, but that compensates the creators of the programming, not the stations broadcasting them, and it’s not optional.)

Requiring retransmission consent would change a lot for U.S. border stations. Giving them negotiation power would mean they too could get compensated, and just as important, they could set conditions on carriage, which could include things like blackouts for programs they don’t have the Canadian rights to. A content provider (like, say, the NFL) could make this a condition for being broadcast on border stations, and those border stations could make it a requirement for being rebroadcast in Canada.

Or the U.S. stations could simply decide not to be carried in Canada. And that’s exactly what some of them want.

Some U.S. border stations carried in Canada have formed the U.S. TV Coalition, a group that has been actively lobbying the Canadian government to change its laws so those stations have bargaining power or can take themselves out of Canada entirely. Its members include WXYZ-TV and WDIV-TV in Detroit, WIVB-TV and WNLO-TV in Buffalo, and KSTP-TV in Minneapolis.

KSTP in 2015 tried to ask the CRTC to remove its station from the list of those authorized for rebroadcast in Canada. The CRTC refused, saying their consent isn’t needed.

Making simsub moot

So what would happen if this simple but substantial change went through? It’s hard to say exactly, because the Canadian television system has been so reliant on the current scheme. But here are some things that could happen.

First, some U.S. stations could refuse to be carried in Canada, either because they don’t want to deal with getting Canadian rights to programming or because they don’t think they’re being compensated enough. Canadian TV providers would probably find others that would be game for replacing them, since for many U.S. markets (like Burlington/Plattsburgh or Buffalo), the Canadian market is a big source of their audience.

Then, U.S. rights-holders, probably starting with major sports leagues, could start demanding that signals be blacked out in Canada during their programming to protect the rights of their Canadian broadcast partners. The U.S. stations, which now have bargaining power, could impose this requirement on cable companies carrying their stations.

As new carriage agreements are signed with U.S. stations, they could demand direct fees for carriage (which would undoubtedly depend on whether their programming is subject to blackouts). Those fees would be passed on to the consumer, and the days of TV providers including U.S. stations for free in basic cable packages would be gone.

This doesn’t get much attention in Canada, but as points out, there are also U.S. border communities where Canadian stations are carried on cable TV. Canadian stations could start making similar demands of U.S. cable providers.

If blackouts take hold during primetime series and sporting events, Canada’s simultaneous substitution system becomes moot. (Though an alternative would be to expand simsub so Canadian ads are seen on U.S. stations regardless of when the program airs or where.) If simsub is no longer a major factor in Canadian TV stations’ revenue, they suddenly get a lot more programming flexibility. Rather than CTV, CTV Two, Global and City building their schedules around having as many simultaneously broadcast U.S. network shows as possible, they could schedule their shows whenever they want.

Original Canadian series would no longer get bounced around the schedule. Programs that follow live sports (like NFL games) would no longer have to be delayed so they sync up with the U.S. network’s delay. Sports programming carried on U.S. network stations (particularly NFL games) could be moved to TSN or Sportsnet so local stations could continue to carry local news. Conversely, Canadian sports like the CFL’s Grey Cup could be moved to local stations because the Canadian over-the-air networks would no longer be reserved for simsubbable programming.

It could be a seismic shift in how English Canadians watch television, giving a lot more power and flexibility to Canadian TV networks.

Don’t hold your breath

Or maybe it won’t. Neither government has indicated it wants to press this as an issue, and though the U.S. TV coalition is pushing it, there isn’t much public support.

The reality is that Canadians like being able to watch ABC, CBS, NBC, Fox and PBS, and any move that would risk taking those channels away (or subjecting them to blackouts) would be deeply unpopular, no matter how much it might benefit the Canadian system. And it’s not like Canadians are desperate to make the lives and bottom lines of Bell, Corus and Rogers any better.

So this is more of an academic exercise than anything else. Realistically, the system will mostly stay the same until the point where Internet-based video consumption takes over from regulated TV distribution as the main source for popular video content. And the Internet has a separate scheme for ensuring that video doesn’t cross the border when a producer or broadcaster wants to protect their rights.

UPDATE (Sept. 4, 2018): A report by the Globe and Mail suggests that U.S. NAFTA negotiators are indeed pushing for changes to simultaneous substitution. It’s not clear if they’re seeking to mandate consent or just allow the U.S. ads into Canada.

4 thoughts on “How a simple change to NAFTA could dramatically change how Canadians view television

  1. dilbert

    It’s all pretty much moot at this point.

    Somewhere between 70 and 90% of Canadians (depending on your source) live withing 150kms of the border. A similar percentage live within broadcast reception range of US OTA signals. We use cable because it’s easier, more convenient, and doesn’t require an outdoor antenna. As more of us live in condos and multi unit dwellings, cable is always an easier choice.

    That does not, however, stop us from moving to receive signals OTA. Since DTV came around, more people have moved to using antennas for reception because the picture quality is often much better (less compressed) and there are a number of bonus channels available that are not part of our cable systems.

    Cord cutting, like cancelling home newspaper delivery, is a sign of the times.

    If the US channels charge Canadian cable operators for their signals, then why would Canadian channels not be able to do the same? the CRTC would have to deal with unfair business environment that would be driving even more money to the US, which would not be acceptable. So would Canadian local channels be able to charge as well?

    Remember the idea of $25 skinny basic you have been saying is under attack because of a few pennies increase of much carry channels? Imagine what it looks like if every OTA channel is taking 10 or 20 cents per subscriber! Your $25 skinny just became a plump $30 to $35 for the basics.

    The better solution would be for the CRTC to mandate that the only US stations that can be carried are those which are not paid for (ie, willing to license for free). That would pretty much cut off every network channel worth mentioning. That in turn would drive people back to OTA signals, encouraging more cord cutting and in the end hurting Canadian pay channel through loss of subscribers and the loss of the way to get them back.

    It’s moot because cable as a business has turned into the dodo bird of entertainment. It’s the lowest hanging fruit, and every new streaming product available online is another nail in the coffin. At the point where people can get what they want, where they want, when they want from the online product, they will move over. It really is only a matter of time.

    Cable will survive for a very long time. Honestly, it’s just like newspapers – my parents won’t dump cable, but my nieces and nephews don’t even turn the TV on except to play video games or power up the YouTube app. They think of TV with “channels” is as quaint and out of date as a rotary dial phone (or any phone permanently wired to the wall, for that matter). Tell them about a hot new TV show, and they will show you where they download it from. They aren’t buying into the old system. So when they move out, they get a big internet connection and skip cable entirely.

    I could go on (and I know Steve is already grating his teeth reading this). Let’s just say that this is another “deck chairs on the Titanic” situation. By the time the dust settles, the ship will have already sunk.

  2. Marc

    I hope Trump scraps NAFTA (which seems more and more likely each passing day) and launches an all-out trade war with Canada. Then we’ll see what heartthrob Justin is made of. After all, there has to be some sort of punishment for his infuriating the USA with his $10.5 gift to a convicted terrorist. Bear in mind that Trump usually wins his wars. He’s not interested in a win-win deal. With him it’s win-lose; he wins, you lose.

  3. Daryl Lawson

    I couldn’t have said it better myself dilbert. So many alternatives here in Canada to avoid simsubs already, including an over-the-air antenna, backhaul feeds on C and Ku Band, IPTV, USTVNow, SlingTV (the latter using a VPN)… Take a hike CTV and Global!

  4. Pingback: No more U.S. Super Bowl ads, but access to U.S. stations remains under USMCA trade deal | Fagstein

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