Those of you who have been following the TQS saga know that the CRTC has decided to reconsider whether over-the-air broadcasters should be able to request licensing payments from cable and satellite companies that retransmit their signals to Canadian homes.

But the hearings set to take place in April go far beyond that, and touch just about every regulatory aspect of cable and satellite distribution systems across the country.

It’s referenced as Notice of Public Hearing 2007-10, and is currently in the comment/reply phase. In it, the CRTC says it is considering changes to the following rules:

1. The rule that so-called “Category 1 specialty services” (a handful of digital TV specialty channels that are protected as to format) be immune from direct competition in terms of format from other channels. This ties into a larger debate about whether specialty channels in general should have government-imposed monopolies, when in practice they tend to compete. (For example, TSN and Rogers Sportsnet are licensed as national and regional channels, though they compete for coverage of hockey games; CBC NewsWorld and CTV NewsNet are similarly technically-different-but-realistically-competing channels)
2. Similarly, how distinctions between channels with high original Canadian content (like say Discovery Channel or TSN) and those with little original Canadian content (Spike TV, Mystery Television) should be measured, and what incentives should be given to those who have more CanCon (channel placement, mandatory availability, more advertising time, free cookies, etc.).
3. The rule that more than half of the channels available to any customer must be Canadian. (I can’t legally choose a package that includes more American channels than Canadian ones, though this is rarely a problem in practice because of the dozens of mandatory Canadian channels that are added as part of basic cable service)
4. Whether a rule should be added requiring distributors to have one minority-language channel for every 10 majority-language channels they add.
5. Rules that restrict distributors in terms of related channels owned by the same company. (Specifically, whether distributors should have to prove that related channels did not get undue preferential treatment instead of putting the onus on complainants who do not have access to internal documents)
6. Rules that set minimum requirements for third-language programming.
7. In general, how HD versions of standard-definition channels should be regulated.
8. The rule that requires distributors wanting to add a third-language non-Canadian service to make a Canadian service in the same language (if one exists) also available.
9. Rules that require some specialty channels to get 75% of their content from “independent producers” unaffiliated with the network.
10. Rules that prohibit on-demand and pay-per-view networks from including advertising
11. What rules, if any, should be added to prevent on-demand services from competing with regular specialty channels
12. The rule limiting specialty channels to 12 minutes of advertising an hour (this limit is already being phased out for over-the-air broadcasters)
13. What rules, if any, should be added to require more vigorous vetting of specialty channel applications (according to the CRTC’s calculations, only 14% of the networks they’ve approved have launched and are still in operation)
14. What rules the CRTC should not allow exemptions for on a case-by-case basis
15. The rule that requires community channels be distributed as part of the basic service
16. What basic service should mean for direct-to-home satellite providers Bell ExpressVu and StarChoice (who for technological reasons have to provide the same channels to the entire country)
17. Whether the CRTC should get involved with customer service complaints concerning cable and satellite companies
18. Rules that govern the ownership and use of cable infrastructure inside residential buildings (does your cable company own the physical cable coming into your home, and can they prevent others from using it for competing services?)

Basically, just about everything is up in the air here, as the CRTC looks to simplify and deregulate the industry.

The broadness of the hearing resulted in an overwhelming 213 comments from everyone involved on both sides. Most were positive about the idea of deregulation. The largest out cry came from small-market community stations who panicked at the idea their stations would no longer be required on basic cable. That should be sufficient to get the CRTC to drop discussion of changes in those regulations.

Many of the proposed changes are a result of the Dunbar/Leblanc report into broadcast regulations, which recommended sweeping changes to deregulate the broadcast industry. They include:

1. Easing of genre protections in specialty TV services and merging the different classes of channels
2. Removing limits on advertising (since most stations use much less than the maximum allowed, they argue that market forces are doing more to self-regulate this)
3. Encouraging more competition in over-the-air networks by putting less emphasis on how new broadcasters will affect existing broadcasters’ advertising revenue and bottom line
4. Eliminating many rules that restrict how distributors can offer non-Canadian channels (requirements that they must be packaged together with similar Canadian offerings, for example)
5. Fine-tuning “priority programming” rules so that broadcasters can’t save money by creating cheap reality shows and showing them during prime-time wastelands like Friday and Saturday nights during the summer
6. Radically changing or even eliminating simultaneous substitution requirements that give Canadian networks a huge economic incentive to simply rebroadcast American prime-time programming instead of developing their own
7. Reducing requirements for broadcasters to use programming from independent producers
8. Adding incentives for networks that have increased Canadian content in terms of mandatory carriage and other perks
9. Drop the idea that “channel placement” means anything anymore (seriously, are you less likely to view a programming because it’s on a higher-numbered channel?)
10. Allow the CRTC to impose administrative fines for violations of license, instead of brandishing the increasingly hollow threat of license revocation.
11. Give up trying to regulate the Internet
12. Delete the rule that requires all Category 1 channels to be distributed as a package
13. Eliminate “winback” rules that prohibit cable companies from marketing to customers who have just cancelled their service
14. Stop obsessing over format when licensing new FM radio stations since they can just go around and change their format without CRTC approval anyway
15. Easing restrictions on campus community radio stations, eliminating advertising caps and allowing more flexibility in terms of programming

The report, unsurprisingly was praised by potential newcomers to the market and condemned by existing broadcasters, who say it’s “far-reaching,” particularly in recommendations for simultaneous substitution, the golden goose for CTV and Global.

I’d like to focus on a few of these issues that affect television consumers:

Simultaneous substitution

Simultaneous substitution has been an important part of cable TV for over 30 years. Put simply, it’s the rule that when a Canadian and American channel are showing the same show, the cable company has to replace the American signal with the Canadian one, including all Canadian commercials. So when you’re watching House on Fox, you’re actually watching the Global feed instead of the Fox feed.

The reasoning behind this is so Canadian advertising gets preference over American advertising. Advertising revenue stays in Canada and supports our networks instead of American ones.

There are minor annoyances with this rule:

• Shows are not synchronized to the second, so you end up watching the beginning of an episode and then two minutes later have to re-watch it from the beginning.
• We don’t get to watch the way-cool Super Bowl commercials in Canada
• Though the CRTC requirement provides for replacement only when signals are of “equal or better quality,” in practice the quality is never better and in many cases worse, though not enough for the cable companies to want to fight over it.

But the big problem with simultaneous substitution is an economic one. Unlike CRTC rules that encourage the development of original Canadian programming, this does the opposite. It encourages CTV and Global to buy Canadian rights to American programming at a tenth of the price it would cost them to produce their own, and simply rebroadcast it with their own commercials. As a result, both networks try their best to max out on American simulcasts, to the detriment of Canadian programming.

Getting rid of simsub would force Canadian networks to compete with American ones. They could continue to simply simulcast the programming, and lose half their audience (assuming people just randomly select the Canadian or American channel), they could negotiate better deals with the American networks (whose border affiliates could charge more for advertising), air the shows at different times (so Canadians would have more choice of when to watch popular programs) or they could create their own programming.

Simultaneous substitution is nothing but easy money for Canadian broadcasters. It is a cancer on Canadian broadcasting and it needs to be stopped.

Unfortunately, the words “simultaneous substitution” appear nowhere in the notice of public hearing. Which probably means it’s off the table, and the CRTC is too chicken to seriously discuss eliminating it.

Specialty service competition

I still get confused about the different classes of licenses for specialty TV channels. Some are required on basic cable, others are discretionary. Some are analog, others digital. Some must be available on digital services but not necessarily as part of the basic package. It goes on.

The CRTC is looking to reduce the number of categories, which separate channels based more on when they began than what they offer. One of the goals would be to allow more competition between some channels which currently enjoy a government-regulated monopoly on their genre. Channels like MuchMusic, TSN, Comedy Network and others are prohibited from having direct competition.

In practice, these kinds of things are hard to enforce, and networks that are technically different are competing with each other. But this isn’t a loophole to be closed, it’s an evolution to be encouraged. The barrier to entry isn’t the same as it was in the 1980s when there were a dozen channels. With the exception of a few special-interest channels like CPAC (which aren’t likely to have competition anyway), these channels are profit-driven enterprises and shouldn’t enjoy special access to niche markets.

Commercial advertising

It’s interesting that not everyone is maxing out on their allowed advertising minutes. I remain a bit skeptical that some networks won’t increase advertising significantly if they get desperate for money, and I would recommend that programming minimums that are currently expressed in half-hour blocks that include advertising instead be converted to minimums that exclude advertising. That way networks can’t save costs on original programming by simply adding more commercials and making their length shorter.

The CRTC’s suggested approach, phasing the limits out and carefully monitoring the situation afterward, seems prudent and justified.

Regulation of the Internet

When news first came out in the fall that the CRTC was considering Internet regulation the response from the public was immediate and overwhelming. They have since backed down.

Besides the fact that there are no barriers to entry on the Internet, no finite public airwaves to distribute fairly, and (net neutrality notwithstanding) no undue commercial pressures that favour some content over others, the simple fact remains that Internet regulation is pointless because it’s impossible to enforce.

The CRTC has seen the light on this, so thankfully we can move on.

The hearing is scheduled for April 7, 2008 in Gatineau. Comments are accepted until Friday.