Is the CRTC biased?

Is it captured by the telecom industry? Is it too inclined to bow to the demands of special interest groups? Is it too consumer-focused? Is it too liberal? Too conservative? Too bureaucratic? Too arbitrary? Too micromanaging?

The answer to all these questions is yes. Or at least very good arguments can be made for each of these, and some very good arguments can be made that on the whole, it tries its best to balance competing interests.

But one way the commission shows bias that really gets me is its deference to the status quo, how it will bend over backwards to keep things the way they are, to keep everyone happy, to resist changes in business models that might threaten industries.

That instinct isn’t all bad. The Canadian broadcasting system needs supports, and a well-regulated system is better than a chaotic one that can’t sustain itself or its many jobs.

But the desperation to prop up failing business models leads to some very inelegant policies that have glaring holes in them. And the way the CRTC subsidizes local television is a prime example of that.

The old model doesn’t work

Back in ye olden days, when cable TV was in its infancy, when programming from other parts of the world were flown in on reel-to-reel tapes, when most people watched the three channels they had access to using rabbit ears, local TV was funded by advertising. The captive audience had few choices so everyone tuned in to the 6pm news, followed by maybe a local lifestyle or current affairs show. Many local stations were locally owned and created their own programming in big studios that employed dozens or hundreds of people.

In the 21st century, that model began to break down. Digital cable television gave people dozens of channels to choose from, fracturing the audience. The internet gave people an alternative to television, with sites like YouTube and TikTok providing video that meets each person’s individual preferences. And it gave advertisers a way to hyper-target their audience in ways a local television station could never offer. The immediacy of online news, and growth in the number of news outlets, made the 6pm local newscast less important.

Now, while technological advances and corporate consolidation have made it possible to run a television station with a fraction of the number of people it used to, the revenue side has dropped even faster, and the industry is no longer profitable, either as a whole or within these corporate groups.

This problem isn’t exactly new. Local television and local news have been on the decline for decades. But the solution to keeping those aging business models viable has been a series of failed policies and actions either invented or endorsed by the CRTC.

Scheme #1: Consolidation (1990-2004)

For much of the latter half of the 20th century, Canadian private television stations operated largely independent of each other. CTV was a cooperative of television stations across the country, and CITY-TV was a single station in Toronto, and the Global television network wasn’t much of a network. Many of those stations struggled, with high production costs and insufficient advertising revenue. For a lot of those stations’ owners, the best (or only) move was to sell to one of the growing corporations of multi-station owners.

From 1987 to 1997, Baton Broadcasting took over the CTV network station by station through acquisitions, until it eventually controlled the network and renamed itself CTV Inc. The CRTC approved Baton’s 1997 takeover of CTV because of “its conviction that the expansion of Baton’s base within the Canadian television industry and, in particular, the stability that Baton’s control of CTV will bring to the network, will permit realization of CTV’s full potential as an essential component of, and contributor to, the Canadian broadcasting system.” CTV was eventually bought by Bell, becoming Bell Globemedia, then was sold by Bell to become CTVglobemedia and then bought back by Bell again to become Bell Media. Along the way it grew further by acquiring TV stations and specialty channels from companies like NetStar Communications (TSN, RDS, Discovery), CHUM Limited (MuchMusic, MusiquePlus, Space, CP24 and the stations now known as CTV2), and Astral Media (The Movie Network, Canal D, Canal Vie).

The Global TV network grew out of an independent station in Winnipeg, eventually expanding through acquisitions to the rest of the country forming the CanWest Global organization. The biggest boost in terms of TV stations came from the acquisition of Western International Communications, which owned several TV stations (including CTV stations in Montreal, Vancouver and Victoria — it’s complicated) in 2000. In its decision approving the sale, the CRTC said it was “convinced that the greater efficiencies and synergies that approval of this transaction brings to the Winnipeg-based CanWest Global organization gives it a strength that the commission can call upon to provide support for the Canadian broadcasting system.” CanWest also acquired Alliance Atlantis, which owned channels like Showcase, Food Network, HGTV, History and Slice, and the Southam newspaper chain, which includes the Montreal Gazette, Ottawa Citizen and National Post, but it became insolvent in 2009 after the Great Recession. Its print assets were sold to Postmedia (my current employer) and its broadcast assets, including the Global TV network, sold to Shaw.

Citytv started as the Toronto TV station using that callsign, which launched in 1972, and it remained that way until 2001, when a complicated realignment in Vancouver led to the company acquiring CKVU in Vancouver. It expanded further by acquiring Craig Media in 2004, with stations in Edmonton, Calgary and Winnipeg, who according to the CRTC had experienced a “financial crisis” that pushed them to sell. Citytv further expanded later by adding an educational cable-only service in Saskatchewan, and finally CJNT in Montreal, whose previous owner Channel Zero couldn’t really figure out what to do with an ethnic TV station it bought as a throw-in to its acquisition of CHCH.

TVA‘s history is similar to CTV’s. It started out as an association of stations in the 1960s (Montreal, Chicoutimi and Quebec City), eventually becoming one company when a larger owner (Videotron-owned Télé-Métropole) bought out a smaller one (Pathonic Communications). In its 1990 decision approving the takeover, the CRTC wrote “Quebec television undertakings have seen a recent levelling off in their advertising revenues. … authorizing Télé-Métropole to acquire full control of the Pathonic stations will enable the company to establish the base it needs to fully assume its responsibilities in competition with other French-language television networks, and to have access to sufficient resources to improve the programming of the TVA stations at the local and provincial level.” Videotron was later bought by Quebecor in 2001 and launched a series of digital cable channels, including LCN and TVA Sports.

The network now known as Noovo began as TQS in 1986, with a station in Montreal and a rebroadcaster in Quebec City. Its genesis came a decade after another attempt at a second private French-language TV network in Quebec failed to launch. The Quebec City transmitter became its own station within a few years and Cogeco launched affiliates for the network in Sherbrooke, Trois-Rivières and Saguenay. TQS Inc.’s parent company, which also owned CFCF and CF Cable, was sold to Videotron in 1995, but Videotron was forced to sell TQS because it already owned TVA. In 1997, it sold TQS to Quebecor, which was fine until Quebecor bought Videotron in 2001 and we had the same problem again. This time, Quebecor sold TQS to a partnership made up of 60% Cogeco and 40% Bell Globemedia. With five TQS stations now owned-and-operated, the network was on the “move towards profitability,” the CRTC wrote back then.

It made sense that economies of scale would give some stability, creating synergies by centralizing some functions. (Some took this to more of an extreme than others.)

Another big factor was tangible benefits. When a licensed broadcasting asset changes control, new owners are expected to put a percentage of the purchase price (usually 10% for television assets) into promises to improve the broadcasting system in some incremental way, which could mean giving money to production funds supporting Canadian content, promising new Canadian programming beyond what their licences would normally require, or some other assistance to something that benefits the broadcasting system as a whole. These benefits are usually paid out over a seven-year period, meaning a large part of the economic bump we see from these transactions disappears in less than a decade.

By the start of the 21st century, it was clear this solution wasn’t going to be enough.

Scheme #2: The Local Programming Improvement Fund (2008-2014)

The early 2000s were optimistic for television in Canada. New digital cable channels promised untold fortunes, and just about everyone in the country was subscribed to cable TV, giving broadcasters easy access to both subscription and ad revenue.

But this increased fracturing of television audiences weren’t great news for over-the-air TV stations, especially those in smaller markets who now had to compete with the Discovery Channel, CNN, HGTV, TSN and Space for audiences that used to be all tuned to the local news at 6pm.

Meanwhile, the cable TV providers were still making money hand over fist, and at the time they didn’t own the TV stations. Bell had a minority interest in CTV, and Quebecor owned both Videotron and TVA, but that was about it.

Sensing this problem, the CRTC came up with a solution in 2008: It would impose an additional tax, worth one per cent of people’s cable TV bills (later bumped up to 1.5%), on the cable companies to create a fund to support local programming at TV stations outside the largest markets (including those owned by the CBC).

“It is clear that the business case for local OTA [over-the-air] television has changed significantly through the expansion of Canadian and non-Canadian viewing choices offered by DTH [satellite] undertakings, digital terrestrial BDUs [cable TV companies] and other digital media,” the CRTC wrote in its decision establishing the fund. “This fragmentation of viewing and advertising revenues is a major reason for the increased consolidation of the industry over the past decade as the owners of OTA services have acquired more profitable specialty services and have explored ways to monetize viewing through the Internet and other new media platforms. However, one of the consequences of consolidation appears to have been that the larger ownership groups have achieved operating synergies through concentrating production resources in major centres, at the expense of smaller local markets.”

The CRTC proposing a solution that fixes a hole in a solution it had previously endorsed will be a recurring theme in this post.

The cable companies weren’t happy about the de facto new tax placed on them. And though the CRTC said in its decision it doesn’t believe that additional tax should be passed on to the consumer, many TV providers did exactly that, adding an LPIF line item to their bills so customers knew who to blame.

Though controversial, the LPIF was a lifeline to many stations, particularly independent stations like CHCH and CHEK, and the TQS network, which had just gone through a bankruptcy proceeding, laid off their entire news staff, and been sold to Remstar and renamed V.

Still, when it was reviewed three years later, the CRTC decided to phase the fund out, arguing it put too much of a burden on consumers. The decision was controversial, with three of the eight commissioners who heard the proceeding filing dissenting opinions. (The fact that all but one of those eight commissioners was appointed under the Harper government, while the CRTC still had many Martin and even Chrétien-era appointees when it discussed implementing the fund in 2008, may have had an impact, though it’s not as simplistic as that.)

In his concurring opinion in 2012, Commissioner Michel Morin wrote:

Like it or not, close to 36 months after the Fund’s implementation and without any of the specific criteria I proposed in 2008, no one can say today with certainty that this generous $300 million envelope has significantly increased the overall production of local news in these 80 markets (50 English-language and 30 French-language) with populations of less than one million, across Canada.

The majority also argued that advertising had seen a rebound since the 2008 financial crisis, and vaguely said the industry as a whole needs to “evolve and innovate” to keep funding high-quality programming.

Shockingly, conventional TV advertising didn’t keep growing indefinitely and there was not a magical evolution or innovation that fixed the business model. Instead, the broadcasters spent most of their resources cutting budgets, consolidating and going back to the CRTC.

Scheme #3: Value for signal (2009-2012)

In 2009, the financial crisis was reaching a breaking point. CTV, Canwest (my employer at the time, which also owned Global and E! networks) and CBC joined a “local TV matters” campaign to get the cable and satellite companies to contribute money to local television. They made it clear that without additional funding, they would have to make drastic cuts, shutting down stations in smaller markets.

The crisis reached the point of absurdity when Shaw, the major cable provider in western Canada, said it would agree to purchase three TV stations from CTV for $1 each. It did so not by contacting CTV and reaching an agreement, but by putting an ad in the Globe and Mail and arguing that TV broadcasters’ “poor performance” was to blame for their financial troubles and a “bailout” was unwarranted. CTV called Shaw’s bluff in their own Globe ad, but Shaw eventually backed out of the deal.

Canwest went bankrupt and TV stations started shutting down: CHCA-TV in Red Deer. CKX-TV in Brandon. CKNX-TV in Wingham. It would have been worse had CHCH in Hamilton and CHEK in Victoria not been saved from shutdown, the former by small broadcaster Channel Zero and the latter by its employees.

But the cable companies didn’t stop fighting, starting their own “Stop the TV Tax” campaign to convince the public, regulators and lawmakers that taxing the TV distributors was a bad idea.

The CRTC under chair Konrad von Finckenstein was sympathetic to the TV networks’ problem and studied the idea of implementing what it called a “value for signal” regime, perhaps similar to the one they use in the United States, where TV providers pay local stations for the right to redistribute their signal. There was a discussion paper in 2009, showing that charging $0.50 per subscriber per month would net $352 million a year, with $92 million going to the CBC, $56 million to CTV/A, $72 million to Canwest’s Global/E!, $57 million to Citytv, $26 million to TVA and $23 million to V, with the rest going to smaller broadcasters.

In September 2009 the federal government, under Conservative heritage minister James Moore, issued an order in council asking the CRTC to formally consider the idea. The CRTC was in the process of reviewing TV licenses and considering a group-based approach, and had already chosen to look at the value for signal idea at that hearing.

In March 2010, the commission came out with a decision that said it was unclear if the CRTC had the legal authority to implement such a regime, so it referred the matter to the federal court. It also produced a report on the consequences of such a regime. The value for signal process would have let TV stations decide to either (a) allow their signals to be distributed freely and maintain regulatory protections like guaranteed carriage, or (b) negotiate for carriage, imposing programming blackouts on cable providers, but in exchange losing regulatory protections.

In December 2012, the Supreme Court ruled in a 5-4 decision that the Broadcasting Act and Copyright Act do not give the CRTC the authority to implement value for signal.

From there, the next logical step would be for the federal government to amend the Broadcasting Act and Copyright Act to expressly allow the system the CRTC was proposing. But by then the issue had become moot, because…

Scheme #4: Vertical integration (2001-2011)

The bloodletting finally stopped when a series of transactions put telecom companies in control of those TV networks. The Stop the TV Tax people bought the Local TV Matters people, ending the feud.

In 2011, Bell bought CTV and Shaw bought Global. With Rogers’s previous acquisition of CItytv a few years earlier (CTV was forced to sell Citytv when it bought parent company CHUM) and Quebecor owning TVA (it was forced to sell TQS in 2001 when it bought TVA owner Videotron), four of the big telecom companies owned Canada’s four largest private TV networks. (Bell would later add Noovo in 2020 when Remstar threw in the towel on local TV.)

With deep-pocketed cable companies in control of most private local TV, the CRTC put in new policies that just kind of assumed this would be the way things would stay. We started seeing some new investments — Global hired a bunch of web journalists and started new morning shows (funded mainly through the tangible benefits from Shaw’s acquisition of Global from Canwest), CTV added more local newscasts and Canadian daytime talk shows, and Citytv expanded its network including adding a station in Montreal with its own morning show.

Vertical integration also gave TV stations access to money they needed to upgrade local stations to high definition and replace analog transmitters with digital ones by a government-mandated deadline of Aug. 31, 2011.

But vertical integration created new problems. It incentivized the TV providers to favour their own TV networks and specialty channels. This led to an explosion of complaints to the CRTC of undue preference, with Rogers, Quebecor, Bell and Shaw routinely accusing each other of acting in bad faith. (Bell and Quebecor in particular had a bunch of legal battles against each other.) And even where discrimination couldn’t be proven, it created de facto ecosystems where you’d see Bell ads all over CTV and Rogers ads all over Citytv.

It also led to a two-tiered system, one for the big vertically integrated companies and one for everyone else. Broadcasters not owned by the big telecom companies (NTV, CHCH, CHEK, Pattison, RNC Media, etc.) couldn’t benefit from the consolidation, while telecom companies that didn’t own broadcasters (notably Telus) found themselves in positions where to advertise their services on TV they would have to financially support a direct competitor.

The assumption that major broadcasters are owned by major cable companies, and a few tweaks could handle the exceptions, would lead to more failed policies in the future.

Scheme #5: Group licensing (2010-)

I mentioned above the CRTC looking into a group licensing scheme. In 2010, it approved that scheme, allowing major broadcasters who own multiple TV stations and specialty channels to pool their resources and redistribute their Canadian programming expenditure quotas between them. So, for example, Global (then owned by Canwest) could spend more money on Canadian lifestyle shows on Food Network and HGTV, and count that toward Global’s CanCon quota. Or CTV could spend more on Canadian shows and use funding that would normally go to CanCon on channels like Book Television, Fashion Television or MuchMusic. When the licences were renewed with those new powers in them in 2011, they applied to four groups: Bell Media (CTV/CTV2), Shaw Media (Global), Rogers Media (Citytv) and Corus Entertainment (CHEX, CKWS, YTV, W, CMT and others). Group-based licensing was eventually extended to Astral Media (Canal D, Canal Vie, Family Channel) and Quebecor Media (TVA, AddikTV, Casa).

Though (mainstream) news and sports channels were excluded from this calculation to avoid abusing the system by putting funding where demand for Canadian programming is actually high, the system still creates two tiers where the big groups can shift money around but the small broadcasters don’t have that flexibility.

Another consequence was that it encouraged the zombification of specialty channels like Book Television, Cosmo and G4. By the end of the decade those channels and several others would be shut down.

On the other hand, group licensing combined with vertical integration gave the CRTC leverage to help small-market TV stations. The commission structured the big broadcasters’ licences so they would be required to support their stations in small markets, and could not shut them down without CRTC permission. That wasn’t enough to save stations like CJBN-TV in Kenora, Ont., but it probably kept some CTV2 stations going.

Scheme #6: Robbing community TV (2016-)

In 2013, the CRTC launched yet another consultation on television policy, called “Let’s Talk TV.” Led by new chair Jean-Pierre Blais, it was a long, broad review of how the television industry works in this country, with a lot of debate from many interested parties.

Some key policies came out of this consultation: a new $25 limit on the price of basic cable packages; a requirement to offer à la carte options for subscribing to TV channels; standardized contracts for TV services; moving more toward regulating what broadcasters spend on local and Canadian programming rather than how much of it they should air; and removing simultaneous substitution for the Super Bowl (a decision that was later overturned by the government as part of a new trade agreement with the U.S.).

It also revamped the way local television was funded, by allowing the big telecom providers to take away money they had been forced to spend on non-profit community television and give it to their related for-profit TV stations instead.

For decades, cable TV companies were required to spend 5% of their income on Canadian programming, and could choose to spend some of that on community TV channels. Seeing the advantage of controlling money rather than hand it over to independent funds, and offer subscribers added value, most chose the community channel route, with services like Rogers TV, Bell’s TV1, Videotron’s MAtv, Shaw TV, Cogeco’s YourTV and more.

But in 2016, the commission left community TV stations gobsmacked when it decided to accept a recommendation from the vertically integrated giants to redirect tens of millions of dollars. For TV providers in the five largest metropolitan areas (Montreal, Toronto, Edmonton, Calgary and Vancouver), it could redirect 100% of that funding. In the rest of the country, it could redirect 50%.

This was seen as an elegant solution at the time. Bell could use its own money to support CTV, Shaw could use its own money to support Global, Rogers could use its own money to support Citytv, and Quebecor could use its own money to support TVA. And while millions of Canadians would lose community TV stations, it would only be in markets that already have multiple private TV stations broadcasting local news.

The big companies wasted little time taking advantage. Within a year, Rogers, Shaw and Bell all shut down their community TV channels in major cities. Quebecor resisted for a bit, but eventually pulled the plug on MAtv in Montreal in 2023.

But what about TV stations that aren’t owned by large TV providers? Well, the CRTC thought of that. Kinda.

Scheme #7: The Independent Local News Fund (2016-)

In the decision allowing redirecting of community TV funding, the CRTC also transformed an existing fund for small-market TV stations funded by satellite TV companies (who for technical reasons can’t have community channels) and created the Independent Local News Fund, a tax on TV providers that would fund the handful of independent stations across the country. It rejigged the numbers so the total burden on TV providers would be the same as before.

About $20 million a year would be collected through this fund and distributed to local stations. The formula had to be rejigged a couple of times, as some stations closed and particularly when Bell bought the V network, making those stations ineligible for the fund.

But then Rogers bought Shaw.

In 2021, I pointed out a problem with this transaction: Shaw was using its funds on Global TV stations. (It had sold Shaw Media to Corus, a transaction that looks a bit convenient in hindsight, but both companies were still controlled by the Shaw family.) If Rogers bought Shaw, it would redirect those funds — $12.9 million a year, or about 10% of Global News’s operating budget — to Citytv stations, and leave Global with nothing. The $20-million ILNF didn’t have the capacity to cover that $12.9 million in increased funding, an inflexibility problem that should have been painfully obvious when the fund was created.

The CRTC acknowledged this issue when it approved Rogers’s takeover of Shaw’s broadcasting assets in March 2022, and noted that Rogers confirmed it would redirect all that funding. The commission promised to look at the problem in a separate proceeding. Until then, Global wasn’t getting any cable TV money but also could not get access to the Independent Local News Fund (which, ironically, Rogers had promised to pour additional money into as part of the Shaw acquisition).

In part because of this, Corus has been in a financial crisis, with negative cash flow and millions of dollars in losses, and a stock that as I write this is worth 10 cents a share, reflecting investor worries that the company could go under.

In May 2023, a month after the Rogers-Shaw deal closed, Corus filed an application with the CRTC asking it to confirm that the Global stations were eligible for the ILNF. It underlined the urgency of the situation, saying that while it understands a policy review is coming, in the meantime “Global Television, among the largest spenders on local journalism in Canada, cannot be expected to operate the only private local television stations in the country without access to regulated local news funding.”

It took more than a year for the CRTC to issue a notice of consultation on the matter, and more than eight months after comments were filed to issue a decision confirming that Global is indeed eligible.

More than four years after the Rogers-Shaw deal was first announced, the CRTC finally was able to interpret its own policy and come to a rather obvious conclusion about it.

But what about the funding gap? How would the ILNF fund the Global stations without drastically cutting funding to other independent TV stations?

Simple:

Scheme #8: Get big tech to pay for it (2024-)

In 2023, the federal government passed the Online News Act and the Online Streaming Act, laws that require major online platforms to subsidize Canadian news and cultural multimedia content.

The former, which practically only applies to Alphabet (Google) and Meta (Facebook and Instagram) will help many Canadian news outlets, with $100 million from Google going to more than 250 news organizations based on their employment of journalists. Meta, meanwhile, decided if it had to pay to allow links to Canadian news, it would simply forbid links to Canadian news, and so news is now banned from Facebook and Instagram in Canada.

For the Online Streaming Act, the CRTC was given the power to tax online broadcasters, including Netflix, Amazon Prime Video, Spotify, Apple TV+, Disney+ and YouTube. For those making more than $25 million a year, it imposed a 5% tax, which would result in about $200 million annually in new funding. For video streaming services, 1.5% of that tax would go to the ILNF, meaning an infusion of $40 million a year, more than tripling its budget and more than making up for the cost of bringing Corus into the fold.

It’s a good solution, assuming (a) Corus doesn’t go bankrupt first, (b) the move survives a court challenge, and (c) the tech giants and American government don’t succeed in putting enough political pressure to force the Canadian government to reverse course.

Apple, Amazon and Spotify filed a lawsuit arguing the CRTC has no authority to demand they fund local news. In December, the Federal Court of Appeal issued an interim decision blocking payments to the ILNF until a decision on the appeal was made. Arguments were heard in court last month, and the first major payments are due in August, if the court finds by then that the CRTC’s policy is legal.

Meanwhile, the U.S. government under President Donald Trump isn’t happy with taxes on the mainly U.S.-based tech giants and are making them an issue in trade negotiations. They have already gotten the Canadian government to withdraw a digital services tax of 3% on revenue for digital services (separate from the 5% tax imposed by the CRTC under the Online Streaming Act). And U.S. trade representatives and members of Congress have already flagged the Online Streaming Act as an unfair trade measure.

If the courts or the government prevent these additional contributions to the ILNF, well it’s unclear if the CRTC has a backup plan. So Corus and other independent stations could be stuck sharing about $17 million a year, a number that has already dropped from $20 million as Canadians cut the cord with licensed cable and satellite TV providers.

Cord-cutting is also a problem affecting funding for the big vertically integrated TV stations, by the way, as those funds are also a percentage of TV service provider revenues.

So it’s just a matter of time before the commission might have to come up with another scheme to keep the industry afloat.