by Richard Schultz
Policy Options, Oct. 1996
Republished with permission

Except for the CRTC itself and the private sector broadcasters, there are few defenders of the CRTC's Canadian content rules for private television. Even John Meisel, former Chairman of the CRTC and hardly an apostate in the cultural nationalist garden, has not been impressed with the record of accomplishment. After reviewing what he described as "the quintessentially Canadian ritual of repeatedly conducting major inquiries into the health and prospects of the country's broadcasting system," he concluded that there was "a gaping hole ... between aspiration and fulfilment" in the provision of Canadian programs. He pointedly noted that in this "perpetual charade of inquiries, recommendations, failure, more inquiries, more recommendations, more failures, and so on and on ...," governments, regardless of party, "have failed effectively to apply the recommendations proposed in one way or another by all the inquiries they commissioned."

It is déja vu all over again. The Canadian government has found the most current threat to the "health" of the Canadian broadcasting system and its "Canadianness," namely the information highway. It has commissioned studies and issued its policy response. And as Canadians begin to travel the I-Way, this government, just like all of its predecessors, is committed to "Canadianizing" that highway, all in the name of fostering Canadian content. I propose to review the government's instructions to the two inquiries it ordered, their all too predictable responses and the resulting government "policy statement" announced in August of this year.

The Government requests: Please Sir: May we have more?

The most recent episode of what Meisel called the "perpetual charade" began with the government's creation of the I-Way Advisory Council (IHAC) and the subsequent directive to the CRTC to aid the government's efforts to develop a strategy for the I-Way. To guide both the Council and the Commission, the government indicated that its strategy would be built on three policy objectives, one of which was "to reinforce Canadian sovereignty and cultural identity."

The government "fleshed out" this objective in its mandate to the Council found in a discussion paper entitled The Canadian Information Highway: Building Canada's Information and Communications Infrastructure. Notwithstanding the evidence in the series of public reports that Meisel considered, the government assumed any problem away by taking for granted "the effectiveness of existing content support mechanisms in building our broadcasting and cultural industries...." The only concession it would make was "the challenge of adjusting these mechanisms to an environment where competitive delivery of services brings unprecedented consumer choice." Neither IHAC nor the CRTC was asked to examine the appropriateness, efficacy or indeed the relevance of such mechanisms and objectives in the new environment.

Chretien's government, continuing the tradition established when King replaced Bennett, simply but fully, embraced the objectives of the legislation introduced by its predecessor. The Canadian broadcasting system would continue "to safeguard, enrich and strengthen the cultural, political, social and economic fabric of Canada." Consequently government policy would require that "participants in the Information Highway make equitable and appropriate contributions to the production and distribution of and access to Canadian cultural-content products and services...."

The task for both IHAC and the CRTC was to aid the government in finding means to meet the challenge "...to modify the existing support mechanisms, if necessary, and to develop new ones, which together will ensure that existing level of support for the Canadian cultural industries and the availability of Canadian content is, at a minimum, maintained." In short, neither the objectives underlying Canadian content regulation nor the specific regulations calling on "each broadcasting undertaking [to] make maximum use, and no less than predominant use, of Canadian creative and other resources in the creation and presentation of programming, to the greatest extent practicable" were to be questioned. Adjustments to traditional definitions, old tools and their extension to new services and service providers were the marching orders for the two inquiries.

The CRTC responds: The predictable lightness of being

Aside from a deeply entrenched faith in the efficacy of its own creation and a "tried and true" policy instrument, namely Canadian content regulation, the CRTC had additional reasons to respond supportively and enthusiastically to the government's directive. Relationships between both Andre Bureau and his successor as CRTC Chair, Keith Spicer, and the government had not been particularly harmonious as a result of a number of public disputes. Consequently, showing that it was "on side" in its understanding of the threat posed to traditional broadcasting objectives by the I-Way came easily to the CRTC.

At the outset of its report the CRTC enthusiastically noted that "virtually all parties" to its public process supported the government's statement quoted above regarding Canadian content regulation. For naively or disingenuousness this comment matches the observation from the Caplan-Sauvageau Task Force that "in our many meetings with broadcasters, we heard little or no desire that the 60-percent overall or the 50-percent prime-time requirement be watered down." Not surprisingly the CRTC concluded that traditional command and control regulation of content was inescapable because "exclusive reliance on market forces to shape the development of cultural products could well jeopardize the continued availability of Canadian voices and ideas on our communications systems."

In adopting this position the CRTC ignored opposing arguments, such as that of Telus Corporation, about the limited effectiveness of the "traffic cop" or that "...the availability of virtually infinite choices of information, entertainment and interactive communications will allow every Canadian to define for themselves what will satisfy their cultural requirements." Furthermore the CRTC dogmatically assumed that its options were manichean: content regulation or chaos. It was unwilling to consider other, less intrusive approaches such as incentive schemes. The latter stance was in line with the position of the previous Chairman of the CRTC, Andre Bureau, who was dismissive in 1987 of a proposal from a previous Minister of Communications for a "Performance Incentive Program" that would in any event only supplement not displace content regulation.

Although the CRTC was willing to recommend that some leeway be allowed in both the definition of particular new se˜ vices and their exemption from licensing if they could not be expected to contribute "in a material manner" to the objectives of the Broadcasting Act, the overall thrust of the CRTC's response to the government was "if it ain't broke, don't fix it." Its tools and instruments were sufficient and their ambit should be extended to all new programming services on the I-Way. Furthermore when video-on-demand services develop, they too should be subject to both content and contribution. The Commission also supported the development of Canadian navigation and menu systems in order to "give prominence to Canadian material."

IHAC Report: On the Yellow Brick Road

The members of IHAC were not prepared to let anyone suggest that they were any less committed than the CRTC to the government's Canadian content objectives and instruments. This is not surprising inasmuch as the Council, especially its Working Group on Canadian Content and Culture was dominated by representatives from the traditional broadcasting sectors and would-be entrants who recognized the importance of tithing. The Council appeared to deny the history of Canadian broadcasting regulation when it maintained that "Canadian broadcasting and cultural policies have never limited consumer choice." This demonstrates an abysmal ignorance of prior policies such as limitations on US channels on cable systems, denial or withdrawal of access to non-Canadian specialty channels or the initial and long-standing prohibition on individual ownership of satellite receiving dishes long before countries such as China followed the Canadian example.

The Council contended that since the "Information Highway is a natural extension of the current broadcasting and telecommunications environments," a claim in itself that is highly debatable, then naturally traditional responses are called for. Consequently, the Council endorsed the government's proposal to impose "equitable and appropriate contributions to the production and distribution of an access to Canadian-cultural-content products and services." The Council also urged the need for "strong broadcasting and cultural policies and programs" and the concomitant need for the government to "confirm the important role of the CRTC to ensure the implementation of long-standing cultural policy objectives for the Information Highway." Notwithstanding this recommendation, the IHAC was brutally critical of the CRTC, without explaining or justifying its comment however, when it commented that "the regulatory regime must achieve greater efficiency, flexibility, transparency and consistency."

The Council's report noted that some of its members urged caution in exempting services from licensing if they could be brought under the net of the Broadcasting Act and made to contribute to the broadcasting system. In fact, the Council went so far as to urge the government to impose cultural policy goals for the Internet if it evolved into a medium for commercial broadcast provision. Its overriding commitment to content control is demonstrated by the following recommendation:

Formal, enforceable access rules should be developed to strengthen the principle of˜p˜iority carriage for all licensed Canadian programming services on all distribution systems, ensuring access to capacity, channel placement menus, navigational systems and ancillary capabilities in accordance with their contribution to Canadian broadcasting.

The only significant difference between the IHAC and the CRTC was the former's almost begrudging concession that the "success of Canadian content will ultimately depend more upon its commercial viability and less upon regulatory obligations." The Council also noted that Canadian cultural products should "strive to achieve maximum quality and marketability and not simply take up obligatory shelf space." Consequently it recognized that in addition to regulatory controls there was a place for incentives in ensuring that Canadian content was effectively carried on the I-way. The Council did not, however, provide any details on its preferred incentive system nor how it would operate.

The Government's policy statement: Once more with feeling

In August 1996, the government released its policy statement (Ministers of Industry and Canadian Heritage, "Convergence Policy Statement," August 13, 1996) on convergence to "bring to a close" the public consultation process that it had opened two years earlier. The statement makes little reference to the CRTC and IHAC reports, nor does it significantly diverge from the original Order in Council and Discussion Paper. Indeed, the Policy Statement explicitly states that it "confirms the policies put forward" in the Directive to the CRTC.

Canada's communications regulatory regime has atrophied. While there are some changes to the original policies, for the most part the policy on Canadian content and the centrality of regulation are unaltered. The objective of promoting Canadian content remains a primary objective, as does the principle that "participants in the Information Highway make equitable and appropriate contributions to the production and distribution of and access to Canadian-cultural-content products and services." It is undoubtedly instructive of the government's ambitions that it uses the term "participants" in order to have the widest net possible for control and not simply "broadcast distribution undertakings." This requirement will extend to new programming services and while the government accepts that there is need for greater clarity in defining those services eligible for exemption, it does not attempt to provide it. In terms of CRTC-Government relations, it is worth noting that it assigns to itself responsibility for monitoring the issue. Overall it simply states that "all broadcast programming services that contribute to the objectives of the Broadcasting Act should continue to be subject to the Act."

Furthermore, emphasizing continued centrality of content regulation, all broadcasting distribution undertakings will be required to "provide an affordable and attractive basic package of services including a predominant Canadian choice." Neither "affordable" nor "attractive" are defined, nor are the mechanisms to assure the former specified. It is noteworthy again that it is the Minister of Canadian Heritage who will have the responsibility and not the CRTC which traditionally has this role, to develop "the concept of a basic package of Canadian broadcasting services for broadcasting distribution undertakings on the Information Highway."

The only potentially significant break from the traditional emphasis on content regulation is the stipulation that all broadcast distribution undertakings "will make maximum contribution to Canadian programming, including a significant financial contribution derived from a percentage of gross annual revenues to the production of Canadian programming." Also of some importance is the requirement that such contributions "will be administered independently of the undertakings, and will be accessible, without discrimination, to all Canadian producers of qualifying programming, including private and public broadcasters." This provision suggests that Ottawa is considering going beyond traditional content regulation, which may entail specifying programming percentages or, as the CRTC has attempted more recently, the actual amount that individual licensees must spend, and for which programming category. The statement does not indicate who will determine the contribution levels or administer the contribution fund that will accrue.

Conclusion

As the four policy statements reviewed in this essay demonstrate, Canada's communications regulatory regime—its values, policies, instruments and institutions—has atrophied. It is incapable of change except at the margin and certainly not on the core issue of imposing Canadian content rules. The decades-old policy of regulating content is to be the central pillar of the Canadian response to the challenges of the I-Way. This should not come as a surprise. It was a Conservative (sic) Minister of Communications, Perrin Beatty, who vowed in 1993 that "Canada's approach to the information revolution will be 10% technology and 90% government policy and regulation."

None of the official studies over the last two years has acknowledged the "performance deficit" that has characterized almost 50 years of Canadian content regulation. Neither the CRTC, nor IHAC, nor the government has acknowledged what Gordon Cullingham has described as the "dismal record" of the CRTC in regulating content to date. All blithely assume that communications convergence and constructing a Canadian I-Way simply entail business as usual. They are wrong.

Canadian content regulation represents the most traditional form of command and control regulation. Such regulation is predicated on a hierarchical, co-ordinated, rule-driven, effective regulatory system. Ignoring the historical and current reality of the "gaping hole ...between aspiration and fulfilment," public policy formation for the I-Way calls for non-traditional, radically new approaches. The Highway is more anarchic than hierarchical, dispersed rather than co-ordinated, value rather than rule driven. Customers and users, not service providers and producers and their protectors, governments and regulators, will determine the most fundamental features of the I-Way.

If the failure of the traditional approach to content regulation that has been endorsed by Canadian policy-makers is so predictable, why should we be concerned? We should care because such an approach in the short run can cause serious harm for both Canadian users and the companies that the government seeks to protect. While the government is hobbling the horses who want to run on the I-Way, to egregiously mix my metaphors, and seeking to restrict artificially and unnecessarily Canadian choices, the only beneficiaries will be regulators and increasingly their competitors, departmental bureaucrats and selected private interests seeking short-term advantages while wrapping themselves in the flag of public purpose.

Cancon, as Canadian content policy and regulation is known, has hitherto been exactly that: a con game for Canadians. Rather than embark on another excursion along this road again, it is time to reject command and control policies. If we do not, we will be committing ourselves to what I have described elsewhere as "yet another dispirited and disappointing cycle: a cycle driven by the proud wearers of mouldy and moth-eaten Team Canada uniforms, a cycle of platitude and promise, a cycle of promise and disappointment, a cycle that is little more than the exploitation of an undefined, probably undefinable, public interest to aid and abet private interests." Canada does not need and cannot afford another dose of the 90 percent solution of government policy and regulation. We need a policy built on incentives and 100 percent consumer freedom of choice.

Richard Schultz is a Professor in the Department of Political Science and Centre for the Study of Regulated Industries, McGill University.