Submission to the Canadian Radio-television and
Telecommunications Commission

with Respect to Call for Comments on

A Proposed Exemption Order for New Media Broadcasting Undertakings -
Public Notice CRTC 1999-118

The Canadian Association of Broadcasters (“CAB”), as representative of the vast majority of Canadian programming services – including private television and radio stations, and networks, and specialty television services – is pleased to provide its comments with respect to Public Notice CRTC 1999-118, the Commission's call for comments on a proposed exemption order for new media broadcasting undertakings.

Introduction:

On May 17, 1999, following an extensive hearing process, the Commission determined that it “will not regulate new media activities on the Internet under the Broadcasting Act.” The Commission made this determination because:

• A majority of the services now available on the Internet do not fall within the scope of “broadcasting” as defined in the Broadcasting Act, and are, therefore, outside the Commission's jurisdiction;
• Without regulation, Canadian content has flourished on the Internet;
• New media services are not having a detrimental impact on conventional radio and television audiences; and
• Existing Canadian laws and industry self-regulation are the most appropriate ways of dealing with illegal and offensive new media content.

In addition, the Commission noted that those new media services that do fall within the definition of “broadcasting” would be exempted from regulation through the issuance of an exemption order without terms or conditions.

The CAB believes that it is imperative that the Commission's new media exemption order be structured so that it is responsive to technological change and the evolving new media environment.

The CAB's submission will deal specifically with:

1. The proposed exemption order for new media broadcasting undertakings; and
   
   
2. The potential impact new media broadcasting undertakings may have on conventional radio and television broadcasting undertakings.

The Proposed New Media Exemption Order:

As mentioned earlier, in the New Media decision (Public Notice CRTC 1999-84) the Commission indicated that those new media services that fall within the definition of “broadcasting” would be exempted from regulation through the issuance of an exemption order without terms or conditions. Accordingly, the Commission has suggested the following wording in its proposed exemption order:

The Commission is satisfied that compliance with Part II of the Broadcasting Act (the Act) and applicable regulations made thereunder by the class of broadcasting undertakings described below will not contribute in a material manner to the implementation of the broadcasting policy set out in subsection 3(1) of the Act.

Therefore, pursuant to subsection 9(4) of the Act, the Commission exempts from the requirements of Part II of the Act and any regulations made thereunder, those persons carrying on in whole or in part in Canada, broadcasting undertakings of the class consisting of new media broadcasting undertakings. New media broadcasting undertakings provide broadcasting services over the Internet, in accordance with the interpretation of broadcasting set out in Broadcasting Public Notice CRTC 1999-84 / Telecom Public Notice CRTC 99-14, Report on New Media, 17 May 1999.

The CAB believes that the Commission's proposed exemption order requires further clarification. In particular, the only definition the Commission has ever provided for the “Internet”, in the glossary appended to the New Media decision, is extremely technical and, in the CAB's view, will create many interpretational difficulties.

The CAB is concerned that if the Internet is not properly defined, the proposed exemption order could be construed either too broadly or too narrowly. This could result in existing licensed undertakings being unsure of whether their activities are regulated under the Broadcasting Act in certain circumstances. For example, would a VOD service using Internet Protocol (IP) be exempted or would it require a licence?

The Commission was clear in its New Media decision that it was only exempting those services that were being offered in a global networked environment, like the World Wide Web (WWW). The CAB believes that it would be inappropriate for programming services, such as VOD, to be able to avoid regulation just because IP technology is used during some part of a program's transmission. As a result, new media broadcasting undertakings should only be exempt when accessed through a web site.

In addition, certain references in Public Notice CRTC 1999-118 add to this confusion. Specifically, the example used by the Commission in the Summary stating:

The Commission wishes to emphasize that the proposed exemption order does not apply to other broadcasting activities in which a new media broadcasting may be involved, e.g. over-the-air radio and television broadcasting.

The CAB recognizes that the Commission's exemption order would not apply to the conventional over-the-air radio and television broadcasting activities of a new media broadcasting undertaking (e.g., if AOL Canada were to acquire an over-the-air radio or television undertaking.) However, the situation is significantly more vague as it relates to conventional broadcasters who stream their over-the-air radio and television signals over the Internet. Are these broadcasters operating pursuant to the terms of their licences or the Commission's proposed exemption order? The CAB believes that the Commission was clear in its New Media decision that new media services, regardless of whether or not they are operated in whole or in part by conventional licensees, should be exempted from regulation under the Broadcasting Act.

The CAB suggests that, to avoid confusion, the Commission should adopt a simple, workable definition for the Internet. In the book Cyberlaw, David Johnston, the former chair of the national Information Highway Advisory Council, used the following definition for the Internet:

A vast network of networks that enable computers of all kinds to share services and communicate directly.

The CAB suggests building on this definition and, accordingly, proposes the following definition for the term “Internet”:

For the purposes of this exemption order, the Internet is defined as a vast network of computer networks that enable computers of all kinds, once connected through either wired or wireless means, to share services and communicate directly. The use of Internet Protocol (IP) does not necessarily make a new media or conventional broadcasting service exempt under this order. In other words, new media broadcasting undertakings, as defined in this order, must be offered in a global networked environment, similar to the World Wide Web (WWW).

The Potential Impact of New Media on Conventional Broad-casters:

The CAB stated in its New Media final argument, that the regulation of conventional media must respond to increasing competition from new media. In Public Notice CRTC 1999-118, the Commission made the following statement:

. . . the Commission considers that new media broadcasting undertakings have not had any detrimental impact on conventional radio and television audiences or on the advertising revenues of traditional broadcasters.

The CAB agrees with the Commission's assessment of the current impact of new media services on conventional broadcasters. However, the CAB believes that the Commission must be very vigilant in assessing how the rapidly evolving new media environment will impact the activities of conventional broadcasters.

During the new media proceeding, several parties analogized the introduction of new media to the introduction of radio and television. It was their conclusion that because radio didn't result in the end of newspapers and that because television didn't supersede radio, services on the Internet can readily co-exist with newspapers, radio and television.

The CAB believes that the introduction of the Internet cannot be compared to the introduction of either radio or television. When television was introduced, radio essentially stopped broadcasting radio dramas. Instead, radio found a new niche by mainly airing music.

The Internet is an entirely different type of medium, which has the capability to replace conventional radio and television. This is because the Internet is more a distribution medium than an entertainment medium. The Internet can be both radio and television, but with no boundary or capacity limits, and with the added advantage of interactivity.

At the new media hearing, the general consensus amongst participants was that broadcast quality video will be available over the Internet within five to 10 years. For those users with high-speed access, broadcast quality streaming audio is already available.

The CAB believes that radio and television will continue to be available in a fully evolved new media environment. However, the manner in which radio and television services are received will likely change dramatically.

It is possible that Canadian audiences will still turn on a television to watch their favourite shows. The difference, however, will be three-fold:

1. There will be no limits on how many channels they can watch. The Internet has, potentially, unlimited capacity.
   
   
2. Consumers will tailor their consumption of broadcast product. Programs will become available at a set time and date, in a number of formats, and will be accessible when and as often as the viewer likes.
   
   
3. There will be no borders to entry. The Internet is a distribution medium without geographic borders. As a result, the concept of a distinct market for Canadian rights will likely disappear.

Given the future dynamics of broadcast products available on the Internet, the CAB believes that the Commission's regulatory policies must enable conventional broadcasters to compete in a fully evolved new media world. However, the CAB recognizes that a complete re-assessment of regulatory obligations under the Broadcasting Act is not necessary at this time.

New media will develop at a rapid pace, though. To respond appropriately to the competitive impact new media will have on conventional media, the Commission should adopt a non-exhaustive list of triggers for regulatory re-evaluation, as the CAB recommended in its New Media final argument. Re-evaluation should occur once one of the following triggers is activated:

1. Internet advertising revenues equal 10 per cent of total advertising revenues of traditional broadcast media in Canada and the United States combined;
   
   
2. The occurrence of a rapid decline in either television viewing or radio listening within a defined period, for example a decline of one hour per week in a three-year period;
   
   
3. Further evidence of the breakdown of the exclusive rights market;
   
   
4. 10 per cent penetration of high speed access in all Canadian households; and
   
   
5. Widespread availability on the Internet of U.S. programming services, of broadcast quality, that are not on the Eligible Satellite Services List.

A system that incorporates triggers to regulatory re-evaluation is, in the CAB's view, the best way for the Commission to be proactive and encourage competition in the rapidly developing world of new media.

Conclusion:

The CAB acknowledges the Commission's foresightedness as the first regulatory agency to recognize the importance of new media and the Internet now and in the future. However, in determining how to deal with new media services, the Commission must remember the impact these new services could have on conventional licensees. Regulatory clarity is required, not only for those services that will be exempt under this exemption order, but for regulated services that have to compete with those unregulated new media services.

The CAB supports the adoption of the proposed exemption order as long as the exemption order incorporates the CAB's proposed definition of the Internet, which is required to provide regulatory certainty for the new media activities of both licensed and exempt broadcasting undertakings.