A POLICY FOR THE CABLE INDUSTRY IN CANADA

DISCUSSION NOTES FOR THE HON. DAVID MACDONALD,
SECRETARY OF STATE AND MINISTER OF COMMUNICATIONS,
GOVERNMENT OF CANADA. SEPTEMBER, 1979.

OVERVIEW:

A simple approach may solve a complex problem. The regulatory system for the cable industry in Canada has become increasingly complex. Of more concern, it is becoming ever further removed from reality. The current situation is unresponsive to public desires and unfair to cable operators.

In an era of growing deregulation in North America, and re-privatization in the United Kingdom and in Canada, the communications industry seems headed for more Government inquiries and more regulation. If the policy of the present Government is to re-privatize and deregulate, then this approach should apply to the cable industry.

A POINT OF VIEW ON REGULATION:

We acknowledge that some regulation of the free market process is required to protect basic interests of the public.

However, the aim should be to obtain a reasonable consensus on what the basic public interest really is and then implement the minimum regulation to protect this interest. If the need for regulation of an area of an industry cannot be clearly demonstrated, the default option should always be no regulation.

OBSERVATIONS ON THE CURRENT CABLE SITUATION:

It was noted above that the current regulatory approach is causing the cable industry to be unresponsive to the desires of the public at large. The industry acknowledges its responsibility in return for its licenses to provide basic services to all its clients, including the carriage of Canadian broadcast signals and reasonable public access to a community channel. Beyond this, however, we believe that user selective services should be left to the free market process.

The unreality of the current regulatory situation is that it is unenforceable. For example, shortly some Canadians, e.g. those living along the U.S. border, will be able to receive the pay television signals they desire off air. Further, those in Northern communities are already receiving such signals via their own earth stations. Meanwhile, the majority of Canadians will be denied similar rights because the cable companies are not allowed to provide similar services to their subscribers.

The unfairness comes about because of the inequitable regulatory situation. Although cable companies are required to provide many social services such as community programming, organisations such as All-View can cream-skim the heart of our major cabled areas by providing pay television, while returning nothing in the way of social dividends.

A SUGGESTED NEW POLICY:

1. Assuming that one aim of the Government is to protect the broadcasting industry in Canada while ensuring the consumer receives good signals for Canadian broadcasts, we acknowledge that the Government should continue to regulate the channel allocations, quality and cost to the public of this basic service.

However, we believe there is no reason to go beyond this. We recommend the Government remove any restrictions for a three-year minimum period on other services that might be offered by the cable companies on a ‘pay for use’ basis. This would include:

• pay television

• security services

• information services

If at the end of the three-year period it appears that the public interest is not being served by this approach, then regulations could be introduced selectively.

2. We assume that a second aim of the Government is to promote a Canadian identity through improved Canadian film production. When this is attempted by regulations on Canadian content the results are often artificial and are certainly resented by the viewing public. A better approach would be to encourage companies in the communications field to buy Canadian productions from whatever sources are available or could be encouraged to start up.

We recommend that in return for deregulating pay television and other new cable services, the cable industry be required to buy and present Canadian programming content at a rate of 25cents per subscriber per month. However, this should not be viewed as a tax to fund Government film production. Rather it should be left to the cable industry to buy from commercial Canadian sources. This would be a positive approach rather than the negative approach of regulation.

3. The Government appears to have the aim of promoting the use of the Canadian satellite system. This is forcing an artificial solution on an industry which really does not need satellite time other than in select circumstances, e.g. transmission to the North, or coverage in real time of certain national or international events.

With the differences in time zones across the country, forcing satellite usage on cable companies for pay television or other uses is economically unrealistic.

We recommend that the Government free Telesat from the rate setting entanglements with TCTS. If Canadian channels are priced more along the lines of those in the United States, then industry would have an economic incentive to use them. As long as TCTS dictates that satellite channels must be priced so they will not impact their existing microwave networks, usage will be minimal.

CONCLUSION:

The Department of Communications has a significant opportunity to solve several lingering problems in the cable/ communications industry with the relatively simple solution outlined above.

The DOC has an opportunity to support the Government’s position on deregulation and re-privatization.

Such a policy, with the possible exception of recommendation (3), would not require any extended examination by committees or commissions, as it could be viewed as experimental

We recommend that DOC implement such a policy as soon as possible.