by W.T. Stanbury
Policy Options, Oct. 1996
Republished with permission

Canadian content requirements for television and radio broadcasting have become intolerable. They restrict the choices of viewers/listeners and raise the price of cable TV services. Worst of all, the Cancon policy involves the coercion of the many (including taxation) to provide benefits to a few, notably the producers of Cancon and the few people who enjoy consuming it. For example, the Juneau Committee reported in early 1996 that "the English CBC television network captures only 12.9% of the overall viewing audience. CBC Radio, which to hear people on the CBC is what holds the country together, accounts for only 7.8% of radio listening, 11.4% if you add in CBC Stereo...."

In summary terms, the Cancon requirements consist of:

(1) regulations that define a "Canadian program";
(2) regulations that specify quotas in terms of the minimum fraction of all television or radio broadcast time which must consist of "Canadian" content;
(3) taxes imposed on program distributors such as cable TV operators, but that are largely borne by the customers of such services;
(4) limits on the number of foreign specialty channels supplied by cable TV distributors relative to Canadian channels; and
(5) general tax revenues used to pay for subsidies (direct and indirect) whose primary purpose is to increase the supply of "Canadian" programs on television or radio. This includes the almost $1 billion going to the CBC.

The "Logic" of Cancon

The complete rationale of Canadian content requirements in the Broadcasting Act and related statutes and regulations is nowhere made clear in public documents. However, the rationale appears to be something like the following:

(1) Broadcasting, particularly television, is a very powerful medium of communications in the sense of its potential impact on people.
(2) It was technically and legally easy for the federal government to regulate broadcasting compared to other methods of communication and distribution of cultural products.
(3) Regulation itself seems to be part of the Canadian identity—it is part of our penchant for orderliness, according to Robert Fulford.
(4) The communication establishment believe that, left to their own devices, too many Canadians would not choose programs made/broadcast by Canadians. Thus they will not acquire the appropriate sense of identity that the cultural and political elite in Canada believe they should have. If Canadians are not imbued with the appropriate (i.e., government-sanctioned) sense of identity, the uniqueness and distinctiveness of Canada as a nation will be threatened (as will the power of the elites which support the policy). The greatest threat is that said to be emanating from the US in the form of "cultural imperialism."
(5) It is not possible (nor is it deemed necessary) to define in thematic or substantive terms what constitutes Canadian content for radio or television programs. It is simply taken for granted that whatever is produced by Canadians and broadcast over outlets owned by Canadians touches the heart of Canadian identity. Conversely, whatever is broadcast over outlets owned by foreigners— particularly Americans—and produced by foreigners is inimicable to Canadian identity.
(6) Canadians, for the purpose of the legal definition of "Canadian programs," are persons who are citizens of Canada. Anything which a group of such citizens produce and distribute by means of broadcast outlets is deemed to constitute Canadian content.
(7) It is now argued very forcefully that the distinctive values of Canadians are largely attributable to the federal government's (CRTC's) requirements relating to Canadian content in broadcasting.
(8) The broadcasting system is supposed to reflect certain official "aspirations": equal rights, linguistic duality, multi-culturalism, multi-racial nature of Canada and the special place of Aboriginal peoples. (This political potponwi is not seen as inconsistent with creating a shared or common national identity.)
(9) The true costs of Canadian content requirements must be disguised lest support for them be called into question.

Culture, identity, sovereignty

The Liberal Party has generally advocated government policies in the name of creating and/or protecting national identity by means of government intervention aimed at cultural activities. Its policy platform ("red book") for the 1993 election stated that "Canadian culture embraces our shared perceptions and beliefs, common experiences and values, and diverse linguistic and cultural identities."

The first sentence appears to contain a wonderful contradiction. We are told that Canadian culture is based on certain shared (or common) things. But we are also told that our culture is based on diverse linguistic and cultural identities.

But what values do Canadians share? In a mid-1994 national poll, when Canadians were asked to say what "most ties us together as a nation," the top response (by only seven percent of the sample) was "our system of government." When specific suggestions were offered by respondents there was substantial agreement on health care and hockey! The Canadian identity may be like the Holy Grail. It can never be found, but the nerve-wracking journey of indeterminate length will have to substitute for the real thing.

Differentiation of Canada in various ways is in the interests of the political and cultural elite. These elites would be far less powerful earn lower incomes and have poorer outlets for their products if Canada as a nation disappears, i.e., were to become part of the US.

The whole point of the differentiation messages is to:

(1) stress the uniqueness of being Canadian (largely in terms of not being American),
(2) increase east-west psychological ties (in defiance of the natural north-south economic relations),
(3) provide support for the idea of Canada as a distinct(ive) nation-state
(4) persuade people that being different in some sense is good—no matter how much it costs (although considerable effort is made to disguise the costs of differentiation) and
(5) reinforce the positions of the present elites.

Linkage?

The advocates and defenders of Canadian content requirements assume that these requirements result in a desirable form of cultural identity for Canadians and that they contribute to national sovereignty. But no evidence is ever provided as to the existence or strength of such a linkage between the policies and their putative objectives. As Professor Steven Globerman has pointed out, "cultural nationalists, as a rule, do not address the issue of why cultural intervention is required to create a national consciousness."

The soul of Canadians is not deemed to be much threatened by exposure to foreign books/periodicals, records/tapes/CDs, newspapers, video tapes (obtained from a rental outlet), motion pictures and live entertainment in theatres, clubs etc. But television is another matter. As Vancouver Sun Columnist Jamie Lamb has put it, "US television [is] deemed too influential, too potent, too overwhelming for Canadians. Let us watch too much US television—and not enough Front Page Challenge and Hinterland Who's Who— and our soul would be washed away in a deluge of US bilgewater."

Defining Cancon

The cynicism, symbolism and "jobs-for-the-boys-and-girls" character of the present Canadian content requirements can be seen when we examine the legal definition of a "Canadian program." The current legal definition of a "Canadian program" for television broadcasting is based on a point system devised in 1976. Points are given where the director, screenwriter, actors, art directors and others involved are Canadian. A production must achieve six out of 10 possible points to be deemed a Canadian production and be eligible for assistance from Telefilm Canada.

In summary terms "Canadian" programs for television are those produced by Canadian citizens in the sense that certain positions must be held by Canadians and 75 percent of the total remuneration for post-production work must go to Canadians. In other words, "Cancon" is not—legally speaking—about thematic content at all. It is about the citizenship of the persons involved. Anything produced by Canadian citizens is "Cancon" regardless of its substance.

If a group of Canadians made a television program about iguanas, the history of the Albanian labour movement, Pathet Lao folk songs, medieval Spanish poetry, the importance of cricket to old Etonians, the military campaigns of Alexander the Great, the voting laws of South Australia—all would be classified as "Canadian" in terms of the regulatory requirements. On the other hand, if former Canadian citizens made a television program dealing with the ranching culture of southern Alberta, the spiritual life of Mackenzie King, the rise of the Parti Quebecois, the growth of minor league hockey on the Prairies—none would qualify as "Canadian programs."

In summary, it is not Canadian themes, history, institutions or values that are being subsidized, it is those Canadian persons who choose to make their living producing (using the term broadly) material which is broadcast on radio and TV stations or distributed by cable TV operations in Canada. Is this really what Canadians want?

Coercion/Choice

Canadian content rules embody a wide variety of direct and indirect restrictions on citizens as viewers of TV programs and listeners to radio, including: 30 percent of all the music played by radio stations in Canada must meet the Cancon requirements; during prime time on Canadian television stations 50 percent of the programs must be "Canadian programs" as legally defined; overall, 60 percent of the programs broadcast by Canadian TV stations must be "Canadian" as defined in the regulations; for cable TV distributors, the ratio of foreign specialty channels to Canadian ones cannot exceed one to one.

The federal government repeatedly claims that Canadian content requirements increase the programs made available to Canadians. And according to the IHAC Working Group on Canadian Content and Culture, it is a "misperception that Canadian content legislation limits consumer choice..." "This it has never done. The purpose and effect of Canadian content is, and always has been, to increase the range for everyone and to ensure that Canadian choices are prominent in the mix."

The general claim that Canadian content requirements increase a viewer's choices is simply incorrect. The core objectives of Cancon requirements cannot be achieved unless the set of broadcast programs available to Canadians is modified. Even if the total number of programs available to each person in Canada is not reduced, the composition of the set of such programs is necessarily altered. If it was not, there would be no point in having a Cancon policy which is designed to increase the number of Canadian programs available to Canadians. The composition of the choice set is altered because any increase in Canadian programs must at present come at the expense of fewer foreign programs, ceteris paribus. Why? Because of three key facts:

(1) The number of over-the-air broadcasting licences is limited by the Department of Industry because of limits on the amount of space on the electro-magnetic spectrum so as to avoid conflicting signals.
(2) The number of channels provided by cable TV distributors is also limited (although in larger cities up to 60 channels are available). We are not yet in the "500-channel universe."
(3) The CRTC licences only one wireline cable TV distributor in each local area, i.e., each is a monopolist.

Better ways to signal preferences

The advocates of Canadian content requirements feel compelled to argue that the regulations that restrict the choice set of Canadians are the result of clear political signals from the majority. For example, according to the DTH Policy Review Panel in its 1995 report, "Canadians insist on being able to hear uniquely Canadian voices that resonate with their own distinct national experience." If they "insist," why is it necessary to both subsidize the supply of such programs and, in effect, provide guaranteed air time for the programs so that Canadians can hear "uniquely Canadian voices"? If such strong preferences really did exist for more than a tiny minority, governments would not have to intervene. Market demand would call forth sufficient supply —as it does for virtually all goods and services —even for small numbers of people with very specialized tastes.

The new technologies associated with convergence—including the I-Way—are about to make it possible and convenient to charge viewers individually for the TV shows they watch, i.e., to price cable TV-type services on a pay-per-view basis. Cancon should and can be sold to those who really want it.

What's to be done?

The present Canadian content requirements fail on all of the plausible criteria which reflect the viewer (and listener) interest in this policy. The entire panoply of such requirements should be scrapped immediately. There seems little doubt that, overall, the welfare of Canadians would rise as a result.

If the present requirements cannot be eliminated, the federal government should make a number of changes designed to make the Canadian content policies better understood by Canadians, to provide new methods for citizens to signal their preferences and thus make those politicians responsible for the requirements more accountable. I recommend that the federal government:

• Move quickly to put Cancon on a program-specific, user-pay basis so that those who most enjoy Cancon can pay for it.
• Make all the now hidden taxes and subsidies involved in Canadian content requirements overt and subject to an annual report to Parliament.
• Require that all bills sent to consumers by cable TV and other distributors of television programs indicate the amount and percentage of the total that is attributable to Cancon requirements.
• Require all subsidized television programs to run a "trailer" at the top/bottom of the screen indicating the estimated amount of the subsidy for a few minutes each time it is broadcast.
• Require that all television programs which meet the legal definition of a Canadian program have a trailer on the screen indicating that they meet those criteria.
• Require that all elements of the Cancon regulatory regime be approved by Parliament every five years by means of a sunset clause like that which applies to the Bank Act and some other regulatory statutes (e.g., Lobbyist's Registration Act). To assist MPs in evaluating the effects of the regulatory regime, the government would be required to commission an independent report on the effects of the policy which would be published several months before the policies are up for renewal.
• Relocate the broadcasting part of the CRTC to Calgary, Vancouver, Winnipeg or Halifax. This will make it easier for commissioners and staff to hear the voice of people in the regions.
• Require that all appointees to the CRTC be subject to the approval of a joint HouseSenate committee after public hearings.
• Permit individuals on their tax return to direct the estimated amount of taxes they pay to support Canadian content requirements to one or more authorized program funds— some of which will be authorized to import foreign programs.

W.T. Stanbury is UPS Foundation Professor of Regulation and Competition Policy, Faculty of Commerce and Business Administration, UBC and T.D. MacDonald Chair in Industrial Economics (1996/97) in the Competition Bureau, Industry Canada, Ottawa. The views expressed here are solely those of the author and should not be imputed to his current employer.