BROADCASTING NOTICE OF PUBLIC HEARING CRTC 2006-1 Review of the Commercial Radio Policy CRTC Release The Commission will hold a public hearing commencing on 15 May 2006 at 9:30 a.m., at the Conference Centre, Phase IV, 140 Promenade du Portage, Gatineau, Quebec, to consider the matters addressed in this notice as part of a review of its Commercial Radio Policy.
The Commission invites written comments on the matters for consideration set out below. The deadline for filing written comments is Wednesday, 15 March 2006.
Background
1. On 30 April 1998, the Commission issued Public Notice CRTC 1998-41, Commercial Radio Policy 1998 (the 1998 Policy), which had three major objectives:
2. In order to ensure the fulfillment of these objectives, the 1998 Policy introduced a number of new regulatory measures, including:
3. The 1998 Policy stated that,
4. In 2003, the Commission was in the process of launching a review of the 1998 Policy when it received an application for a licence to operate a satellite radio undertaking. The Commission decided that the radio policy review should be postponed until the subscription radio licensing process was complete. That process culminated in the licensing of three subscription radio undertakings on 16 June 2005 (Broadcasting Decisions CRTC 2005-246, 247, and 248), and the recent launch of two satellite subscription radio undertakings.
Introduction
5. Although rapid technological and societal changes have been constants for decades, never have these changes seemed more dramatic than they do now. The seven years since the 1998 Policy came into effect have seen the advent of new digital technologies and methods of distribution that are having a profound effect on the way in which people, particularly young people, obtain and listen to music. This is presenting the radio industry with new opportunities, but also new challenges: in addition to the satellite radio services now available, file-sharing, podcasting, downloading, and audio streaming, all facilitated through the increasing ubiquity of the Internet, offer new and often more flexible alternatives to the traditional practices of purchasing recorded music and listening to radio broadcasting.
6. These new distribution platforms, which provide a wide variety of audio programming, predominately in the English-language, present an added challenge for French-language radio broadcasters, who are charged with the responsibility of supporting the francophone recording industry in Canada, exposing francophones to music that reflects their culture, and contributing to the development of French-language expression.
7. In the meantime, all broadcasters must reflect and meet the needs of an increasingly diverse multicultural, multilingual and multiracial society, particularly in larger metropolitan centres, if they are to remain relevant and viable. Edmonton, Saskatoon, Regina, Winnipeg and Ottawa are home to growing Aboriginal communities and increasing ethnic and racial diversity. Ethnic and racial minorities, taken together now account for at least one-third of the population of Vancouver and Montréal, and these groups now compose more than 50% of the population of Toronto.
The objectives of this review
8. In addition to reviewing the effectiveness of the measures implemented in the 1998 Policy, this process has the objectives set out below.
Overview
9. This policy review provides an important opportunity for all interested parties to express their views as to what policy framework will be necessary for commercial radio stations to maintain healthy, successful businesses in the face of growing competition, while meeting the objectives of the Act. In particular, the Commission wishes to discuss appropriate strategic responses to broad challenges such as the following:
10. Broadcasters, music producers, and other interested parties are requested to place on the record of this proceeding detailed financial information and other related studies, tabulations, statistics, etc. concerning the economic models they envisage as most effectively contributing to the fulfillment of the objectives noted above, and consistent with the objectives of the Act.
11. In this review, the Commission wishes to examine its existing policies and regulatory mechanisms to determine how they can be most effectively implemented to contribute to the objectives of the Act, as the radio industry continues to move into an era of increased competition from alternative sources of programming.
12. To provide a context for this discussion, the following sections of this notice describe the mechanisms currently used to achieve the policy objectives set out above, highlight issues and concerns, and pose questions that may be addressed by interested parties in the public process. The questions raised in this notice are not intended to indicate that the Commission is predisposed to a particular policy direction, only to assist interveners in preparing their comments on the various issues. Nor are they meant to preclude discussion of other relevant issues that interested parties may wish to address.
Current regulatory framework
13. The current regulatory framework for radio is based on principles derived from the Act. The principles most relevant to this proceeding may be summarized as follows:
14. The Commission also makes its licensing decisions with the goal of ensuring that the introduction of additional radio stations will not unduly affect the ability of existing commercial stations to meet their obligations under the Act, the Radio Regulations, 1986 (the Regulations) and the commitments made in their licence applications. Objective A: A strong, well-financed commercial radio sector in both official languages, capable of contributing to the fulfillment of the policy objectives set out in the Act. 15. In the 1998 Policy, the Commission determined that one of the ways to ensure a strong, well-financed radio industry was by allowing station groups to cut high operating costs.
16. Accordingly, the Commission revised its policy on common ownership in a given market by allowing the following:
Radio revenues
17. All Canadian commercial AM and FM radio stations combined experienced an average annual growth in total revenues of 4.5% between the broadcasting years 2000 and 2004. English-language stations accounted for $998.5 million in total revenue or 81.5% of total radio revenue in 2004.
18. AM stations showed a continued gradual decline in total revenues, dropping from $315.1 million in 2000 to $302.4 million in 2004. However, total AM station revenues have rebounded since 2002 after reaching a low point of just over $297 million.
19. This increase in total revenue by AM stations between 2002 and 2004 is significant given that the number of AM stations declined by 23, or 11%, during this two-year period. Since 2002, total AM revenues have increased by 1.7% while total expenses have declined by 5.1%.
20. FM stations have seen revenues increase from $710.5 million in 2000 to $922 million in 2004, an average annual growth rate of 6.7%. The total number of FM stations grew by 102 or 39.7% between 2000 and 2004. Growth in the FM segment of the radio industry between 2000 and 2004 more than offset the contraction in the AM industry segment during this period.
Radio profits
21. Profit before interest and taxes (PBIT) for all Canadian AM and FM stations combined increased from $167 million (16.3% of total revenues) in 2000 to $224 million (18.3%) in 2004.
22. PBIT grew at an average annual rate of 8.8% for English-language stations, but declined by 1.3% for French-language stations, between 2000 and 2004. PBIT margins for English-language stations mirrored the growth seen overall in the radio industry. However, the average PBIT margin for French-language stations has gradually declined from 14.8% in 2000 to 11.9% in 2004.
23. The PBIT of all Canadian AM stations rose from a loss of $15 million in 2000 to $3.4 million in 2004.
24. FM stations remain the main contributor to profit in the commercial radio sector. FM profits grew at an average annual rate of 4.9%, from a total of just under $182 million (25.6%) in 2000 to $220.6 million (23.9%) in 2004.
25. While significant ownership consolidation has taken place since 1998, the commercial radio industry still has a significant "independently owned" sector. Independent owners can be defined as those other than the six largest ownership groups – Astral Media, CHUM, Corus Entertainment, NewCap, Rogers Communications, and Standard Broadcasting.
26. Of the 438 English-language commercial radio stations in Canada in 2004, 234 (53%) were owned by independents. In the French-language market, 55 of a total of 92 originating stations, or 60%, were independently-owned.
27. While a majority of stations are owned by independents, in 2004 they represented only 30% of total radio revenues in the English-language market, and 27% of total revenues in the French-language market.
28. Please note that more financial information regarding the commercial radio sector is available in the "Industries at a Glance" section of the Commission’s website (www.crtc.gc.ca) through the "Financial Data" and "Monitoring Reports" links. Note also that updated financial data for 2005 is scheduled to be posted during the course of this public process.
Questions for consideration
29. In light of the overall health of the commercial radio sector, there may be no need for major changes to the current ownership rules, however, the Commission considers that certain issues should be examined:
Profitability of French-language radio
Independent radio stations
Small market radio stations
Local management agreements (LMAs)
30. In the 1998 Policy, the Commission recognized that increased consolidation of ownership in a market involving stations that are party to an LMA could raise questions as to whether this would lead to market dominance by one broadcaster to the undue detriment of others in a market, or effectively create a monopoly in a market that would otherwise be competitive under the revised common ownership policy.
31. This led to the review of the Commission’s policy on LMAs. Initially, the LMA policy was intended to assist radio broadcasters in achieving cost savings and greater marketing parity with other media during periods of financial difficulty. Cost savings are normally realized under LMAs through the integration of several operational components of one radio station, often involving the technical, sales and promotion and general administrative activities, with similar operational components of a radio station operated by another licensee in the same market.
32. In Local Management Agreements, Public Notice CRTC 1999-176, 1 November 1999 (LMA Policy), the Commission announced its policy determinations with respect to LMAs and the adoption of an amendment to the Regulations to give effect to that policy. The amendment, which is contained in section 11.1 of the Regulations, prohibits any licensee from entering into, or operating its station pursuant to, an LMA unless it first obtains Commission approval and a condition of licence authorizing it to do so. Section 11.1 defines an LMA as follows:
33. Such arrangements are evaluated on a case-by-case basis, taking into account all relevant circumstances. At the same time, the Commission had set out what it described as "guiding principles" to assist radio broadcasters in evaluating which alternative business model the Commission would generally consider as being appropriate, and in what circumstances it might authorize an LMA by condition of licence. The Commission reminded broadcasters that an LMA cannot constitute a change in the effective control of an undertaking. The Commission added that it would also continue to expect the following:
34. Furthermore, the Commission indicated that it would be generally inclined to approve LMAs that include unprofitable stations:
35. The Commission indicated that, in exceptional circumstances, it may approve an LMA that includes the participation of a number of stations that exceeds the limit allowed under the common ownership policy. It emphasized, however, that licensees would be required to demonstrate clearly that the participation of radio stations in LMAs in excess of the threshold would be in the public interest and that it does not create a situation of inequity within the market.
Local sales agreements (LSAs)
36. In The Commission’s policy on local management agreements (LMAs) – Determinations concerning the appropriateness of various existing and proposed LMAs, including local sales agreements, between licensees of radio stations serving the same market, Broadcasting Public Notice CRTC 2005-10, 31 January 2005, the Commission determined that LSAs – combining the sales functions of radio stations, including the invoicing and collection of advertising revenues – fall within the definition of an LMA, as contained in section 11.1 of the Regulations. As a result, licensees of commercial radio stations serving the same market who wish to enter into an LSA, or any other similar business arrangement, whether formal or informal, must first apply for Commission approval to obtain conditions of licence authorizing them to do so.
37. As part of its determination, the Commission raised its concern about the possible negative consequences of LMAs, including LSAs, over time, such as the potential disadvantage to which they subject competitors who are not party to them, the chilling effect such agreements may have on the decisions of potential new entrants, and the extent to which they may reduce, ultimately to the detriment of the service provided to the public, the incentive for some or all parties to an LMA to manage their stations efficiently, compete effectively and improve their programming performance.
38. Therefore, although the Commission has made its decision regarding the application of the LMA Policy to LSAs in February 2005, it wishes to review various aspects of the LMA Policy, including the issues set out in the following questions.
Questions for consideration
Objective B: A commercial radio sector that makes effective contributions to Canadian artists through airplay of Canadian music and French-language vocal music, and contributions to CTD that are commensurate with the health of the sector. Canadian content regulations
39. Section 2.2 of the Regulations sets out the minimum levels of Canadian musical selections required of radio stations. The regulations generally require that at least 35% of popular music selections (category 2) broadcast each week must be Canadian selections, and at least 10% of traditional and special interest music selections (category 3) broadcast each week must be Canadian selections.
40. The lower level of Canadian content for category 3 selections has been established because of the more limited availability of Canadian recordings for more specialized types of music such as classical and jazz.
41. Where 7% or more of the musical selections broadcast during an ethnic programming period are Canadian selections, this programming will not be considered in determining whether or not a licensee is in compliance with the weekly 35% and 10% Canadian content requirements set out above.
42. To qualify as a Canadian selection, a musical selection must generally fulfil at least two of the following conditions set out below. This is usually referred to as the MAPL system.
43. There are also three special cases where a musical selection may qualify as Canadian, even if it does not satisfy at least two conditions of the MAPL system: an instrumental performance of a musical composition written or composed entirely by a Canadian; a performance of a musical composition that a Canadian has composed for instruments only; and a musical selection that has already qualified as a Canadian selection under previous regulations. All are deemed to be Canadian selections.
The 1998 Policy
44. In the 1998 Policy, the Commission stated that it considered playing Canadian music to be a vital contribution that radio makes toward fulfilling the cultural goals set out in the Act. It also stated that the regulations requiring minimum levels of Canadian music were important elements in bringing the Canadian music industry to its current level of success.
45. Moreover, the Commission was convinced that an adequate supply of Canadian recordings was available to support an increase in the required level of category 2 music on radio stations. The Commission also noted that Canadian content requirements do not generally involve large incremental direct expenses, since radio stations do not have to pay for the production of the recordings.
46. Based on those factors, and the maturity of the Canadian radio industry, the Commission considered that an immediate increase in the level of Canadian content from 30% to 35% was both manageable and appropriate. The Commission stated that such an increase would expand the exposure given to Canadian artists and provide increased support to the Canadian music industry as a whole.
47. The Regulations were amended, effective 3 January 1999, to require that at least 35% of category 2 musical selections broadcast by commercial AM and FM stations each broadcast week be Canadian selections.
48. The Commission also stated that it was confident that the cooperative initiatives and efforts of the broadcasting and music industries to promote and support Canadian music would succeed in bringing about a level of Canadian content that would reach 40% in five years.
Distribution of Canadian category 2 selections
49. To ensure that Canadian selections were not relegated to times of low listenership, the Commission also amended the Regulations to require that at least 35% of category 2 musical selections broadcast between 6:00 a.m. and 6:00 p.m., Monday through Friday, be Canadian selections. The Commission considered that this increased level, as well as the reduction of the daytime measurement period from 13 to 12 hours, would increase exposure of Canadian music during hours of higher listening, but still give licensees flexibility in adjusting their programming.
50. A review of the Commission’s records indicates that there has been no increase in the incidence of non-compliance by radio stations that must meet the higher Canadian content requirements. As noted above, the fulfillment of these increased Canadian content requirements has been achieved in concert with increases in annual industry revenues and profits.
51. It should also be noted that since the release of the 1998 Policy, the Commission has licensed some 20 new radio stations that play popular music where commitments were made to broadcast levels of Canadian content that exceed the standard 35% requirement.
52. In spite of the success in increasing the percentage of Canadian music that is broadcast by commercial radio stations, there is a concern that this has not increased the number of Canadian selections that are played – instead, the same songs are simply being played more often.
State of the Canadian music industry
53. In its 2004 Economic Profile of the Canadian Music Industry, which can be accessed at http://www.pch.gc.ca/pc-ch/sujets-subjects/arts-culture/sonore-sound/music_industry/music_industry_e.pdf, the Department of Canadian Heritage (Canadian Heritage) notes that the shift in music format and consumer behaviour to the online realm resulted in five years of declining music sales, both internationally and in Canada.
54. The Canadian Heritage study indicates that between 1999 and 2003, the value of music sold dropped 28%, from $1.3 billion to $946.4 million. However, it also notes that the last few years have been a period of incredible success for Canadian artists, both at home and abroad. Based on the strength of releases by musicians such as Céline Dion, Shania Twain, Avril Lavigne and Nickelback, Canadian artists’ share of the top 200 best selling albums in Canada increased from 15.1% in 2001 to 27.2% in 2003.
55. During the same period, while sales of albums by foreign artists in the top 200 continued to decline, albums by Canadian artists – led by Shania Twain, Avril Lavigne, Sarah McLachlan and Diana Krall – actually grew by 36.8%
56. The report also notes that 2002 and 2003 were the first years in the history of the Society of Composers, Authors and Music Publishers of Canada (SOCAN) that royalties paid to Canadian artists from international sources have exceeded royalties paid by SOCAN to foreign songwriters, composers and publishers.
Questions for consideration
Special interest music
57. In the 1998 policy, the Commission concluded that given the limited number of commercial stations involved, it would be best to deal with the issue of increasing Canadian content levels for category 3 (special interest) music on a case-by-case basis.
58. At licence renewal time, FM stations operating in the specialty format, as well as AM stations that offer high levels of category 3 music, are expected to propose an increase in the current level of Canadian music they play.
59. Since 2001, the Commission has licensed a classical music station with a minimum Category 3 Canadian content requirement of 15%, and four jazz radio stations with a minimum Category 3 Canadian content level of 35%.
Questions for consideration
French-language vocal music
60. Currently, in order to ensure that French-language radio stations reflect the needs and interests of their audiences, at least 65% of the vocal popular (category 2) music selections broadcast each week must be in the French-language.
61. The Commission’s 65% requirement was based on two related goals. On one hand, it wished to support a francophone recording industry in Canada and to allow francophones to have access to music reflecting their culture. On the other hand, the Commission has always considered it to be the responsibility of French-language broadcasters to continue their efforts to support French-language expression.
62. The Commission also requires that a minimum of 55% of the vocal category 2 musical selections broadcast between 6:00 a.m. and 6:00 p.m., Monday through Friday, be in the French language.
63. During the 1998 policy review, it came to light that some stations were shortening French-language selections on a systematic basis. This practice allowed the stations to fulfil requirements for French-language vocal music by playing a large number of shortened selections in periods of lower listening. In the 1998 Policy, the Commission stated that shortening selections to meet content requirements was inconsistent with the objectives of the Act and the Regulations. Accordingly, the Regulations were amended to require that category 2 Canadian selections and category 2 French-language selections be played in their entirety for the purpose of meeting Canadian content and French-language vocal music requirements.
64. In Regulations Amending the Radio Regulations, 1986 – Commercial Radio Programming, Public Notice CRTC 1998-132, 17 December 1998, which announced the adoption of those amendments to the regulations, the Commission made an exception for montages, compilations containing excerpts from several musical selections, noting that montages can allow audiences to discover new artists or to sample selections that would not otherwise be broadcast.
Questions for consideration
Canadian talent development
65. The Commission has long held the view that the Canadian broadcasting system has an important role to play in the development of Canadian artists, primarily through airplay. It has also pointed to the importance of CTD as a way to ensure that an adequate supply of Canadian material is available to offer Canadian listeners a diversity of high quality Canadian content. While broadcasters are not solely responsible for seeking out and developing Canadian creative talent, it is clearly in their interest to take an active role in this process to ensure that there is a sufficiently large pool of Canadian recorded music as well as other types of Canadian creative material available for broadcast.
66. To achieve these goals, the Commission has expected Canadian broadcasters to encourage and promote the development of new Canadian talent, especially through financial contributions.
67. Radio licensees make commitments to contribute to CTD in three contexts:
CTD commitments made when applying for a new radio licence
68. The Commission has no set policy governing the amount parties applying for a new radio licence should be required to contribute to CTD over their first license term. Nor are there guidelines that dictate what types of contributions are eligible expenditures. CTD commitments proposed are at the discretion of the applicant and are often for initiatives that are connected to the genre of music the applicant is proposing for its station. The Commission generally uses benchmarks and guidelines established in the past to determine what should be considered as an eligible CTD contribution, for example, third parties associated with the development of Canadian talent.
69. Most parties applying for new radio licences generally propose CTD commitments in order to gain an advantage over other applicants. Given that the radio licensing process is a competitive one, some of the larger broadcasters could be seen to have an advantage over smaller broadcasters or new entrants, who do not have the same financial resources at their disposal and usually cannot make CTD commitments of the same proportion and value.
Questions for consideration
CTD commitments made in transfers of control or ownership
70. In the 1998 Policy, the Commission modified its policy for benefits proposed in transfers of ownership or control. Until 1998, the Commission assessed the benefits proposed in each such application on a case-by case basis. Although there were no set guidelines or benchmarks concerning what would constitute an acceptable level of tangible benefits in such transactions, these generally represented approximately 10% of the value of a transaction.
71. The Commission determined that in the absence of a competitive process to consider applications involving the transfer of ownership and control of radio broadcasting undertakings (which, by definition, make use of frequencies that are scarce public resources), the benefits test would continue to be an appropriate mechanism for ensuring that the public interest is served in the case of transfers of ownership and control.
72. However, in response to calls for a reduction in the level of tangible benefits associated with ownership transactions, the Commission modified its benefits policy for radio transactions. As noted in the 1998 Policy, in the case of applications for transfers of ownership and control of radio undertakings, the Commission expects applicants to make commitments to implement clear and unequivocal benefits representing a minimum direct financial contribution to CTD of 6% of the value of the transaction.
73. Financial contributions derived from such ownership transactions are to be distributed as follows:
74. These contributions to Canadian talent are to remain separate and apart from CTD commitments derived from previous ownership transactions, CTD commitments made at licence renewal, or commitments made when applying for the undertaking’s original licence (if within its first license term).
75. The Commission granted its approval for the new marketing and promotion funds, the Radio Starmaker Fund and the Fonds RadioStar in 2000. From the date of the revised Commercial Radio Policy until the end of the 2003/2004 broadcast year, more than $46 million has gone to these two organizations to help advance the careers of Canadian recording artists.
Questions for consideration
CTD commitments made at licence renewal
76. As part of their licence renewal applications, all licensees of private commercial radio stations are asked to make an annual financial commitment to CTD. The Commission has considered that such contributions are important to help ensure that there is a sufficiently large pool of Canadian music and other Canadian creative material available for broadcast.
77. In April 1995, the Commission reviewed its CTD policy. At that time, annual direct cost contributions by private radio broadcasters at licence renewal to CTD projects totalled approximately $7 million. Approximately $1.8 million of the $7 million offered as commitments in license renewal applications consisted of payments to third parties, such as FACTOR and MusicAction, as well as national and provincial musical organizations, cultural organizations, performing arts groups, schools and scholarship recipients.
78. The balance of commitments ($5.2 million) was related to initiatives carried out by stations at a local level, which showcased and promoted local and regional artists. These local initiatives included sponsorship of talent contests, production of programming featuring live performances, local production of recordings or videos and the sponsorship of concerts.
79. The Commission determined that a more streamlined approach to CTD was necessary. In addition, the Canadian radio industry as a whole was experiencing financial difficulties and was requesting a reduction in financial contributions to CTD initiatives.
80. In response to the Commission’s request for a new license renewal CTD proposal, the Canadian Association of Broadcasters (CAB) presented its "CAB Plan" which set out a distribution schedule for Canadian talent funds based on a market-by-market approach in which a common fee schedule would be set for stations in similar markets. Under the plan, licensees would send their contributions directly to eligible third parties – FACTOR, MusicAction, national and provincial music organizations, performing arts groups, schools and scholarship recipients – and annual CTD payments by individual stations would be as follows:
81. The Commission accepted the CAB’s proposal and announced the new CTD policy in Contributions by radio stations to Canadian talent development – A new approach, Public Notice CRTC 1995-196, 17 November 1995. In the Notice, the Commission stated:
82. The vast majority of radio licensees adopted the CAB Plan and submitted applications to have their conditions of licence amended so as to be relieved of their existing CTD commitments and have, instead, requirements for contributing to CTD under the CAB Plan.
83. There are still, however, a small number (although this number has increased over the past few years) of radio licensees who have chosen not to adopt the CAB Plan and who continue to direct their license renewal CTD financial contributions to local initiatives.
Questions for consideration
Objective C: A commercial radio sector that provides listeners with a greater diversity of musical genres and airplay for a greater variety of Canadian artists in both official languages. New music and emerging artists
84. In the 1998 Policy, the Commission agreed with the broadcasting industry that it would be very difficult to develop across-the-board requirements for the broadcast of recordings by new Canadian artists that could be fairly applied to all formats. It also agreed that a bonus system would eliminate some of these difficulties, but shared the concerns of the music industry that this could decrease the overall level of Canadian music that stations play.
85. The Commission considered that the promotion and development of new Canadian artists was an area that would benefit greatly from increased co-operation between the music and broadcasting industries. It noted that the various commitments by the CAB to promote Canadian music, and benefits contributions resulting from transfers of ownership and control, would provide additional support for new talent.
86. The Commission considered that it would be appropriate to allow these initiatives to develop, and to evaluate their success before deciding if any new regulatory initiatives related to new music by emerging Canadian artists were necessary.
87. In the subscription radio licensing process, a number of Canadian musicians and a representative of independent Canadian musicians submitted that there are scores of highly talented and emerging Canadian who are underserved by conventional radio stations, and were therefore supporting the licensing of subscription radio services in Canada. In response to these concerns, the Commission imposed a condition of licence requiring the satellite subscription radio undertakings to devote at least 25% of the Canadian musical selections they broadcast to songs by emerging Canadian artists.
88. In 1997, the Commission conducted a study of the use and scheduling of various types of musical selections by commercial radio stations operating in category 2 (popular) music formats in Toronto, Calgary, Montréal, and Quebec City. In that study, the Commission reviewed the stations’ play-lists to determine, among other things, the percentage of musical selections that were recordings by new Canadian artists. For the purposes of this study, a recording by a new Canadian artist was defined as a) a recording released within 2 years of the date that the programming was broadcast; and b) the artist had no entries in the Commission’s database of Canadian music earlier than 2 years before the programming was broadcast.
89. The 1997 study indicated that new Canadian artists received 5.0% of the airplay on English-language stations in Toronto, Calgary and Montréal, and accounted for 7% of the music played on French-language stations in Montréal and Quebec City.
90. In April 2005, the Commission conducted a similar study of English- and French-language popular music stations in these four cities, using the same definition of a new Canadian artist, to gauge the exposure that emerging artists now receive on commercial radio stations.
91. The 2005 study indicates that new Canadian artists received 6.7% of the airplay on English-language stations in Toronto, Calgary and Montréal, and accounted for 16.4% of the music played on French-language stations in Montréal and Quebec City.
92. A copy of the 2005 study will soon be available on the Commission’s website at www.crtc.gc.ca. Hard copies of both the 1997 and 2005 studies are available on request, and will be placed on the public record of this proceeding.
Questions for consideration
Diversity of musical formats
93. In the 1998 Policy review process, a number of broadcasters stated that an increase in the number of stations a person is permitted to own in a market would lead to an increase in the diversity of formats offered. The Commission agreed that one of the benefits of consolidation could be some increase in the diversity of formats offered in some individual markets. However, it did not consider that the extent of any such increase overall would be as great as that forecast by the broadcasting industry.
94. The Commission accepted the argument that one owner with several stations in a market will likely offer different formats on each of these stations, but it was not convinced that this owner would maintain formats that differ from those employed by stations that are owned by other broadcasters in that market.
95. Within the commercial sector, the Commission has increasingly relied on competition and market forces to encourage programming diversity. The licensing of additional radio stations has increased the choice of services available to listeners, however concern has been expressed that the range of programming provided by commercial radio stations is still relatively limited, because these stations tend to concentrate on providing programming to only those age brackets and social demographic groups that are most attractive to advertisers.
Questions for consideration
Objective D: A commercial radio sector that reflects the multicultural and multiracial nature of Canadian society and the special place of Aboriginal peoples within society. 96. Since the late 1990s, the Commission has made cultural diversity one of its key priorities. When the Commission refers to cultural diversity, it is referring to the inclusion of groups that have been traditionally under-represented in broadcasting: ethnocultural minorities, Aboriginal peoples, as well as persons with disabilities. Such under-representation includes these groups’ presence and portrayal on the air and their participation in the industry. It expects broadcasters to share the responsibility for assisting in the development of a broadcasting system that reflects Canada’s ethnocultural minorities, Aboriginal peoples as well as persons with disabilities.
97. This is in accordance with section 3(d)(iii) of the Act, which states that the broadcasting system should "through its programming and the employment opportunities arising out of its operations, serve the needs and interests, and reflect the circumstances and aspirations, of Canadian men, women and children, including equal rights, the linguistic duality and multicultural and multiracial nature of Canadian society and the special place of aboriginal peoples within that society."
98. In response to this goal, the 1998 Policy encourages broadcasters to "reflect the cultural diversity of Canada in their programming and employment practices, especially with respect to news, music and the promotion of Canadian artists."
99. In the case of television, the Commission’s strategy to date has been two-fold: (a) requiring all broadcast groups to file corporate plans at licence renewal as well as annual progress reports, and (b) the creation of an industry/community Task Force for Cultural Diversity on Television to undertake research and develop best practices and industry initiatives. This strategy has recently come to include persons with disabilities as well (Introduction to Broadcasting Decisions CRTC 2004-6 to 2004-27 renewing the licences of 22 specialty services, Broadcasting Public Notice CRTC 2004-2, 21 January 2004 (paragraphs 51-53). While there may be some parallels that can be drawn from the experience of implementing this strategy for television thus far, the Commission considers it essential that the industry and public have an opportunity to share their views on the unique challenges of making radio more reflective of Canada’s cultural diversity.
Questions for consideration
Objective E: A commercial radio sector that provides listeners with an appropriate amount of regularly-scheduled, locally-produced news and information. 100. The Commission’s local programming policy for radio was set out in Policies for local programming on commercial radio stations and advertising on campus stations, Public Notice CRTC 1993-38, 19 April 1993. Under this policy, licensees of commercial FM stations in markets served by more than one private commercial radio station are required to devote at least one-third of the broadcast week to local programming if they wish to solicit or accept local advertising. This requirement is imposed as a condition of licence.
101. Local programming is defined as:
102. It is noted that no minimum quantities of local information are specified in the policy.
103. A more flexible approach for AM stations was chosen by the Commission to allow syndicated or network programming formats to develop. Such formats provide a complete music or spoken-word service for stations, while providing opportunities in each hour for the insertion of local information. These services have allowed some financially-troubled AM stations to stay on the air. The Commission was concerned that imposing an overall local programming requirement on AM stations could have a negative impact on stations that are in financial difficulty.
104. Although the one-third guideline does not apply to AM stations, the policy makes provision for AM stations to indicate, at the time of licence renewal, the amount of local programming they propose to broadcast and to indicate how they will provide information of direct and particular relevance to the communities they serve.
105. In the 1998 Policy, the Commission decided to maintain the one-third local programming requirement with respect to FM stations in competitive markets, and its case-by-case approach for AM stations. The standard renewal form requires AM stations to make commitments to a minimum level of local programming, and to describe how they will provide sufficient service to their local communities.
106. The Commission noted the concerns raised by several parties about the impact that consolidation of ownership could have on news programming. It emphasized the important role that radio plays in the dissemination of local news and information, and expressed the view that local news coverage had declined in Quebec as a consequence of the consolidation of ownership that had occurred in that province in the period prior to the 1998 policy review. These interveners were concerned that this trend could continue if ownership requirements were loosened further. The Commission concluded, however, that setting across-the-board requirements for levels of news and spoken word would not take into account the particular needs of different communities or the differing resources of licensees.
107. Therefore, it decided to use a case-by-case approach in assessing programming commitments. Applicants seeking to acquire ownership or control of more than one AM and one FM station in a given language and market are required to outline how their proposed programming will benefit the community and further the objectives of the Act. The Commission retains the option of requiring adherence, by condition of licence, to particular commitments made by applicants.
108. In Canadian Heritage’s second response to the 2003 Report of the Standing Committee on Canadian Heritage, the government stated that in the current broadcasting system, a "pressing issue is maintaining the diversity of voices at the local and regional level in a changing communications environment" (Reinforcing Our Cultural Sovereignty – Setting Priorities for the Canadian Broadcasting System), and announced its intention to issue a direction under section 7 of the Act in this regard.
Questions for consideration
Objective F: A commercial radio sector capable of making the transition to digital transmission, and of exploiting new and emerging distribution platforms in a manner that furthers the objectives of the Act. Transition to digital transmission
109. On 29 October 1995, the Commission issued A Policy to Govern the Introduction of Digital Radio, Public Notice CRTC 1995-184 (Transitional Digital Radio Policy). Because digital radio in Canada was in the early experimental stage, the Commission set out a two-stage approach for digital radio: this short term and long term approach involved establishing a process for licensing digital radio services on a transitional basis and then, later, undertaking a public process to consider all aspects of digital radio broadcasting in the longer term.
110. The development of a long term digital radio policy has not yet taken place largely because the adoption of the new digital radio technology by consumers and the switch-over by the radio industry to digital has taken longer than was expected. In fact, it is now effectively stalled.
111. The Commission stated in the Transitional Digital Radio Policy that it considered digital radio to be a replacement technology for existing AM and FM radio services. It noted, however, that digital radio has the potential to increase diversity of programming services available to the public. For this reason, the Commission decided that existing radio services would have priority access, but not exclusive access, to the digital band.
112. Since licensing Canada’s first digital radio stations in 1998, the Commission has granted transitional digital radio licences to existing AM and FM licensees in Toronto, Windsor, Montréal, Vancouver, Victoria and Ottawa. In addition, a digital radio licence was granted to a new entrant in Toronto. Currently, there are 76 radio stations licensed to provide digital radio broadcasting (DAB) service in Canada, including 42 English and 9 French-language commercial stations, 18 CBC stations, and 7 ethnic stations. Of these, approximately 50 are operational. Unlike the countries where the introduction of DAB has been a success, Canadian DAB radio stations are primarily rebroadcasting the programming of existing analog radio stations.
113. In spite of the availability of DAB signals, very few people are listening to these services due to the limited take-up of DAB receivers in Canada. This has been due, in large part, to the limited availability and cost of the DAB receivers that have entered the Canadian market.
114. Although many other countries, notably in Europe, have also adopted the Eureka 147 standard for digital radio broadcasting, a number of differences mean that all of the receivers sold in Canada must be adapted to the Canadian market. The decision by the United States to adopt a different technology, In Band On Channel (IBOC), for the conversion of American radio stations from analog to digital, has also prevented economies of scale to allow for the sale of DAB receivers at prices comparable to those of AM and FM radios in Canada. It has been suggested that it is not realistic for Canada to establish a different digital radio broadcast platform than the US.
115. It has also been argued that the slow roll-out of DAB may be due to the lack of distinctive programming on the digital band: better quality sound through digital radio may not be enough to drive the roll-out and widespread take-up of DAB receivers. New and innovative programming may be needed, particularly programming for ethnic audiences, who would have a strong incentive to purchase DAB receivers.
116. Any major changes to Canada’s Transitional Digital Radio Policy will have to be closely coordinated with the Department of Industry and all participants in the radio sector. Nevertheless, the Commission considers that this is an appropriate time to seek the views of the commercial radio sector and other interested parties, such as the CBC, with respect to the necessary conditions and regulatory approach to ensure a successful transition from analog to digital transmission and reception.
Questions for consideration
New and emerging distribution platforms
117. As noted in the Overview, the advent of new digital technologies and distribution platforms is having a profound effect on the way in which people are and will be able to listen to music and other audio programming. In addition to the Canadian satellite radio services that are now available, there are several Internet-based methods of delivering audio content – file-sharing, podcasting, downloading, and audio streaming – which offer listeners a multitude of programming choices on a variety of devices, and the ability to tailor those choices according to their personal tastes and preferences.
118. And while access to these Internet-based services was initially limited to fixed locations, the rapid development of cellphone distribution and other wireless systems such as Wi-Fi and WiMAX will increasingly allow for their reception on a mobile basis. The ability of Internet-based services to be received in cars, where a significant amount of listening to conventional radio stations takes place, will provide another competitive challenge for conventional broadcasters.
119. A number of conventional radio broadcasters have established a presence on the Internet as a means of extending their brand and providing value added services to their listeners. However, there is no doubt that the new audio programming alternatives pose an unprecedented challenge for the conventional radio sector that will require astute business decisions and a judicious regulatory approach.
Questions for consideration
Other Issues Streamlining the licensing process
Calls for applications
120. On 8 July 1999, the Commission released The Issuance of calls for radio applications, Public Notice CRTC 1999-111 in order to clarify the types of applications that would normally generate calls for applications.
121. The policy conveys the Commission’s intention to assess each application for either a new licence or an AM to FM conversion on the merits of the individual application.
122. The policy frames this approach within the broader Commission objective of encouraging competition and choice, with calls for applications issued where it is determined that a call is warranted.
123. The policy also lists the type of applications which generally do not result in a call for applications. These include:
124. As was anticipated, the increased flexibility for multiple station ownership in a market provided by the 1998 Policy resulted in an increase in applications for new radio stations. The Commission issued 34 calls for radio applications between July 1999 and May 2005.
125. The large number of calls for radio applications issued since July of 1999, and specifically the competitive processes resulting from these calls, has contributed significantly to delays in the consideration of licence applications.
126. As part of this review, the Commission wishes to provide interested parties with an opportunity to discuss potential modifications to its policy for issuing calls and other elements of its consideration of applications for radio licences in support of its goals related to streamlining the processing of applications.
Questions for consideration
Streamlined approach to radio licence renewals
127. The Commission outlined its streamlined radio renewal process in Broadcasting Circular CRTC 2002-448 dated 7 June 2002.
128. The circular sets out the process which allows licensees whose performance in the past licence term raises no concern to file short licence renewal applications. The purpose is to reduce the administrative burden faced by the Commission and by licensees, since each year the Commission considers between 125 and 150 radio licence renewals.
Questions for consideration
Low-power radio stations
129. Low-power FM radio services are those with a maximum Effective Radiated Power of 50 watts and a maximum transmitting antenna height of 60 meters. As defined in Parts III and IV of Industry Canada’s Broadcasting Procedures and Rules, low-power radio frequencies are not protected against interference from regular high-power (over 50 watts) radio stations.
130. This means that, in case of a frequency conflict between a low-power and an existing or newly approved regular high-power station, the low-power service would either have to change frequency or cease operation.
131. Many low-power radio services are exempt from licensing. These exempt services consist of non-mainstream radio services such as those providing tourist and traffic information in parks and historical trails; services providing local weather information and information concerning local road and marine conditions, ferry schedules, traffic advisories; as well as limited duration special event facilitating programming. |