ICLE Comments to CRTC on a Sustainable Canadian Broadcasting System
Introduction
We thank the Canadian Radio-television and Telecommunications Commission (“CRTC” or “the commission”) for the opportunity to offer comments in response to this notice of consultation, as the commission examines the market dynamics among small, medium, and large programming, distribution, and online services, as well as the tools needed available to ensure the sustainability and growth of Canada’s broadcasting system.[1] Further, we request that you consider allowing Kristian Stout, a co-author of these comments, to appear at the public hearing for this proceeding.
This consultation raises important questions about how best to define and support Canadian content, while avoiding unintended consequences that could harm the Canadian creative sector. This requires an examination of the incentives for both production and commercialization, as well as their impact on consumer welfare. Accordingly, we address several issues below where we believe a law & economics framework that emphasizes market efficiency, competition, and regulatory proportionality supports the need for deregulation and light-touch solutions.
I. Access to the Broadcasting System (Q1-Q8)
The consultation questions whether structural, financial, or regulatory barriers disproportionately affect traditional versus online undertakings, or smaller versus larger players. Writing on the current state of video competition, Eric Fruits notes that the internet has fundamentally changed both the means and economics of content delivery.[2] In the past, content was available only via broadcast, cable, and direct-broadcast satellite (“DBS”), all of which required substantial upfront investment.[3] This created significant barriers to entry and limited competition—so much so that providers were seen (and regulated) as monopolies.
Streaming, on the other hand, has leveraged the existing internet infrastructure to drastically reduce the cost of entry for new market players. According to the Media Technology Monitor, nearly three in 10 Canadian households rely solely on online-content sources, including subscription video on-demand (“SVOD”) and free advertising-supported streaming television (“FAST”).[4] Today’s consumers face seemingly endless options for video programming. Nearly every channel that is available in a traditional cable bundle is now also available “a la carte” via streaming, with more than 200 available streaming platforms.[5]
Heavy-handed access rules (e.g., mandatory carriage or distribution quotas) can risk distorting market incentives and entrenching incumbents. For example, the 1:1 Rule requires broadcast-distribution undertakings (“BDUs”) to distribute one independent programming service for every affiliated (vertically integrated) service they carry.[6] While intended to foster diversity and competition, this regulatory mechanism would likely inflate the supply of niche programming, perhaps in hopes of fulfilling Say’s Law that “supply creates its own demand.” The rule serves as a supply-side mandate that compels BDUs to allocate distribution capacity to independent services regardless of consumer demand. Independent services gain automatic access to distribution networks, bypassing competitive pressures to prove audience appeal or cost-effectiveness.
With near-guaranteed carriage, independent services have less incentive to invest in marketing, production quality, or audience analytics—factors critical to organic growth. Furthermore, BDUs often pass the costs of mandatory carriage on to consumers through bundled pricing.[7] This results in cross-subsidization, whereby popular services indirectly fund niche offerings that might otherwise fail in a competitive market. Consumers pay for this cross-subsidization by paying higher effective prices for popular services to underwrite this distribution of less-popular services.[8] The phenomenon is so well known that the following comic (Figure 1) made its way into a 2007 CRTC report.[9]
FIGURE 1: Cross-Subsidization of Bundled Channels
Nordicity notes that the 1:1 Rule treats all independent services equally, when they are not all equal:
While certainly useful, the trouble with the rule is two-fold. It applies to all independent services regardless of genre or language—and all independents are not equal. Some specialty niche ethnic services can survive on a pay TV model of high subscriber fee and as little as 20K subscribers. That will not work for former Category A independents that have more of a public interest niche and a need for more substantial revenues.[10]
Nordicity’s key observation is that, in a competitive market, even small niche services can thrive if consumers are willing to pay for them. Geoffrey Manne made a similar point in testimony before the U.S. House of Representatives:
Generally, allowing distributors to make channel placement choices in their best interests will coincide with the interests of consumers; if it did not, the consumers would switch providers or access content in an alternative way. This is the essential point about the structural nature of today’s video market: consumers have a variety of MVPD choices and, critically, can get most of the content they want from [online video distributors], either instead of an MVPD subscription (cord-cutting) or in addition to it (cord-trimming).[11]
Current CRTC regulations are heavily reliant on supply-side policies, with little acknowledgment of demand-side constraints. While the availability of content is a necessary condition for consumption, it is no guarantee of sustainable demand for that content. In a world of unprecedented competition for video content, with nearly every genre available to nearly everyone via a multiplicity of sources, consumers are best positioned to identify and discover the content they want to consume.
The CRTC should consider replacing prescriptive access mandates with a framework that fosters market-driven negotiations, supported by ex-post antitrust scrutiny to address any alleged anticompetitive conduct. Such an approach would encourage investments in production, marketing, and audience analytics in service of generating organic growth. Light-touch regulations would reduce cross-subsidization through bundling, thereby reducing the price paid by consumers.
II. What Counts as Canadian Content (Q10-Q12)
The CRTC inquires about the discoverability of Canadian content and how best to ensure its production. Implicit in the question is a shared notion of what counts as “Canadian content,” but that concept may need further refinement. The current approach to defining Canadian content—particularly the emphasis on Canadian intellectual-property (“IP”) ownership as a necessary precondition, rather than one factor among many—risks undermining, rather than supporting, the Canadian creative sector.[12]
Under current CRTC requirements, Canadian-content qualification depends heavily on IP ownership and control at the time of production. A Canadian entity must retain primary control over the production’s financing, creative direction, and distribution rights throughout the production phase.[13] While post-production sales of IP rights to foreign entities does not affect a work’s Canadian status, foreign ownership of IP rights at a production’s outset typically disqualifies it from Canadian-content certification, regardless of its other Canadian elements.[14]
The rigid IP-ownership requirement can lead to paradoxical outcomes, whereby even productions deeply rooted in Canadian culture, and/or created predominantly with Canadian talent and resources, may nonetheless fail to qualify as Canadian content. Conversely, content with minimal connection to Canadian cultural experiences may qualify based purely on their Canadian IP-ownership structure.
This absolutist approach to IP ownership fundamentally misaligns incentives in content production and distribution. International commercialization partnerships, which often require IP sharing or transfer arrangements, play a crucial role in helping Canadian content to reach global audiences.[15] Research published by the Motion Picture Association—Canada finds that global studios and streamers are the second-largest source of financing for Canadian-owned content production.[16] The current framework effectively forces Canadian producers to choose between maintaining domestic-content qualification and accessing international distribution networks that could maximize their content’s reach and impact.
Moreover, the IP-ownership requirement creates significant barriers to investment in Canadian productions. In effect, well-capitalized international firms that could provide valuable production resources and expertise are discouraged from partnering with Canadian creative talent, as such partnerships would require complex ownership structures to maintain Canadian-content status. This artificial constraint on investment sources and partnership structures potentially reduces both the quantity and quality of Canadian content production. As The National Post reported recently:
Amazon argued that an “inflexible framework” where financial or creative control, IP ownership or specific creative positions must be held by Canadians would disincentivize foreign streamers to spend on Canadian productions, and that would in turn “deprive Canadians of the high-quality, large-scale programs made possible only by the scale and reach offered by foreign online undertakings.”[17]
The European Union’s (“EU”) experience with its Audiovisual Media Services Directive (AVMSD) offers important lessons about the unintended consequences of overly prescriptive local-content requirements.[18] While IP ownership can reasonably serve as one factor in evaluating a production’s Canadian character, making it a necessary precondition undermines the very cultural production the system aims to support. As the EU case demonstrates, such rigid requirements can lead to market distortions that ultimately reduce, rather than enhance, domestic cultural output.
III. Discoverability of Content (Q9-Q11) and Connected Devices (Q14-Q17)
The CRTC seeks information on challenges faced by broadcast undertakings in having their services and content promoted and discovered, and whether broadcasters face challenges in accessing connected-device interfaces (e.g., smart TVs). Nielsen’s Gracenote unit reports that Canadian viewers have roughly a half-million unique video titles available to them, with the vast majority provided over streaming services.[19] As a result of the growing abundance of content and content sources, the average viewer spends an average of 10.5 minutes searching for something to watch—up from 7.5 minutes in 2019.[20]
Program distributors have an incentive to reduce search times for the simple reason that time spent searching for content is time that not spent consuming content. Time spent consuming content is a key metric used by many services to determine pricing, advertising, and investments in programming and marketing. Toward that end, many services invest in developing curation algorithms customized for each user to promote the content the service thinks that individual user would want to view. Even FAST services that offer linear programming (e.g., Tubi, Pluto TV, and Roku TV) are developing approaches to personalize their content recommendations.[21]
Mandated-discoverability regulations, such as algorithmic quotas, risk creating inefficiencies by overriding consumer preferences. To the extent that Canadian consumers demand more Canadian, First Nations, or French-language content, the existing algorithms employed by providers and platforms already provide opportunities to discover that content. Heavy-handed regulation would not only reject these consumer preferences, but in many cases, may also produce redundant recommendations. If the CRTC believes any regulation of discoverability is necessary, it should be limited to transparency requirements, such as disclosure of curation practices, rather than prescriptive placement or assigning higher “weights” on the CRTC’s preferred content.
The market for connected devices is vibrant and competitive. The notice of consultation notes that more Canadians own connected devices than ever before. Numeris reports the average Canadian uses two to three different devices to consume video content, including smart TVs, set-top streaming devices, smartphones, tablets, and laptops.[22] In such a competitive environment, any sort of must-carry rules regarding interfaces or the display of services or content would be ineffective or harmful.
As with mandated-discoverability regulations, such mandates would override consumer preferences. If imposed and enforced in a heavy-handed way, they could erode distinctions among the competing platforms—effectively turning the devices into commodities with little discernible difference, thereby reducing choices available to consumers and diminishing their ability to choose those devices that best suit their own idiosyncratic preferences.
IV. Strategic Recommendations for the CRTC
The CRTC should exercise caution in considering new or expanded access mandates and should be skeptical of the need to continue existing access mandates. The history of video-market regulation suggests that static regulatory frameworks often struggle to keep pace with dynamic markets, leading to unintended consequences. Regulations that might be appropriate given current technology and market conditions can quickly become obsolete or counterproductive as markets evolve.
Moreover, video services and platforms often compete through business-model innovation (e.g., marketing, production quality, and audience analytics), rather than solely on the traditional dimensions of price and quality. Regulatory frameworks designed for traditional industries may struggle to account for these dynamic competitive effects. The risk of deterring beneficial innovation through overly restrictive regulation is particularly acute in video markets, where the next competitive threat can often arise from unexpected sources.
Thus, the CRTC’s strategic considerations should extend beyond the current focus on production-side stakeholders to encompass broader market dynamics and consumer-welfare effects. While creative talent and other industry participants have been well-represented in the consultations, the demonstrated preferences of Canadian consumers for diverse content offerings have received insufficient attention in policy deliberations. This imbalance risks creating a regulatory framework that prioritizes industry structure over consumer welfare.
The commission should also carefully consider how regulatory choices affect investment incentives in the Canadian production sector. Current evidence suggests that overly restrictive regulations can discourage, rather than encourage, international investment in Canadian production. The experience with similar regulations in the EU demonstrates how aggressive local-content requirements can create inflationary pressures that reduce production capacity and market efficiency.[23]
Furthermore, the regulatory framework must acknowledge the complex reality of content commercialization in global markets. Successful content production and distribution increasingly requires a combination of local creative talent and international commercialization expertise. Regulatory structures that artificially separate these elements or create barriers to their integration risk undermining the very cultural production they aim to support. The commission should therefore seek to craft regulations that facilitate, rather than impede, productive partnerships between Canadian creative talent and international distribution networks.
These considerations suggest that a more nuanced approach to regulation may better serve the CRTC’s objectives than rigid requirements around ownership and content quotas. Such an approach would recognize that cultural production flourishes not through isolation, but through dynamic interaction with global markets and distribution networks, while still maintaining appropriate safeguards for Canadian cultural interests.
A strong case can be made that access regulation is only appropriate in highly concentrated markets that demonstrate substantial and persistent barriers to entry. The market for video services is not such a market. Traditional access regulation assumes that market power derives primarily from control over physical infrastructure, which competitors cannot feasibly replicate. In contrast, streaming services and platforms derive their influence from network effects, superior use of data, and technological innovation. These sources of power are often transient, as market leadership in the digital economy can shift rapidly due to innovation, changes in consumer preferences, or the emergence of new competitors and modes of consumption. Regulatory approaches premised on static assessments of market power risk imposing obligations on providers that may no longer dominate their respective markets, thereby creating market distortions rather than promoting competition.
Access regulation should only be considered after clear empirical evidence shows that private market solutions have systematically failed to emerge. This requires more than theoretical market-failure arguments or isolated instances of access disputes. Regulators must demonstrate a pattern of access denials that create substantial economic harm and cannot be resolved through private negotiation or existing legal frameworks. The mere existence of pricing disputes or unsuccessful negotiations does not inherently justify regulatory intervention.
Traditional industries regulated under access obligations typically involve standardized physical products or services that can be shared with minimal disruption. Video services and platforms, however, operate via complex (often proprietary) algorithms, infrastructure (both software and hardware), and interfaces. Mandating access to these elements introduces significant technical and operational challenges. For instance, discoverability requirements may necessitate costly reengineering of systems and may generate results at-odds with consumer preferences.
These challenges are compounded by the rapid pace of technological change, which makes it difficult for regulators to craft and enforce rules that remain relevant over time. Writing about the difficulty of applying antitrust to the “new economy” (i.e., internet-based businesses, computer software, and communications services and equipment), the U.S. jurist Richard Posner concluded:
The real problem lies on the institutional side: the enforcement agencies and the courts do not have adequate technical resources, and do not move fast enough, to cope effectively with a very complex business sector that changes very rapidly.[24]
As the CRTC works toward a sustainable Canadian broadcasting system, it should take a light-touch and modest approach that acknowledges the existing dynamic and competitive video-distribution environment, and the nearly impossible task of predicting and responding to ongoing rapid technological and market advancements.
[1] The Path Forward—Working Towards a Sustainable Canadian Broadcasting System, Broadcasting Notice of Consultation CRTC 2025-2, Can. Radio-telev. Telecommun. Comm. (Jan. 9, 2025), https://crtc.gc.ca/eng/archive/2025/2025-2.htm.
[2] Eric Fruits, Video Competition in 2025: It’s Literally on Heebee, Truth Mark. (Feb. 14, 2025), https://truthonthemarket.com/2025/02/14/video-competition-in-2025-its-literally-on-heebee.
[3] Id.
[4] Press Release, Canadians Shift Streaming Habits and Embrace Short-Form Video, Media Technol. Monit. (Feb. 20, 2025), https://www.newswire.ca/news-releases/canadians-shift-streaming-habits-and-embrace-short-form-video-891821546.html.
[5] Fruits, supra note 2.
[6] CRTC, supra note 1.
[7] See Opinion and Order, FuboTV Inc. v. The Walt Disney Co., 24-CV-01363 (MMG) (S.D.N.Y. Nov. 20, 2024), available at https://nysd.uscourts.gov/sites/default/files/2024-08/Fubo%20Opinion.pdf (“[I]t is indisputable that the JV Defendants have long used the combination of bundling and minimum penetration requirements to make live pay TV distributors carry content they otherwise would reject, or would only offer based on express customer preferences, and therefore, those distributors are forced to pass those superfluous costs on to consumers who, in many cases, also do not want that content, or would not pay for the content if they had the choice.”)
[8] Further Report on the Packaging and Sale of Video Programming Services to the Public, Fed. Commun. Comm. (Feb. 9, 2006), available at https://docs.fcc.gov/public/attachments/DOC-263740A1.pdf (“the primary role of bundling… is to extract surplus to enhance profits, and… may allow MVPDs to extract so much surplus that they have an incentive to carry programming that is so costly to produce that its cost is greater than the total value to consumers of that programming.”)
[9] Laurence J. E. Dunbar & Christian Leblanc, Review of the Regulatory Framework for Broadcasting Services in Canada, Can. Radio-telev. Telecommun. Comm. (Aug. 31, 2007), available at https://publications.gc.ca/collections/collection_2008/crtc/BC92-62-2007E.pdf.
[10] Peter Miller, Canadian Television 2020: Technological and Regulatory Impacts, Nordicity (Dec. 2015), available at https://www.nordicity.com/de/cache/work/32/Canadian%20Television%202020_%20Technological%20and%20Regulatory%20Impacts%202015.pdf.
[11] Written Statement of Geoffrey A. Manne, The Satellite Television Law: Repeal, Reauthorize, or Revise? (Hearing of the House Energy Commer. Subcomm. Commun. Technol., 113th Cong. 113-52, 2013), available at https://laweconcenter.org/wp-content/uploads/2013/06/HHRG-113-IF16-Wstate-ManneG-20130612-U1.pdf.
[12] Canadian Program Certification Guide, Can. Radio-telev. Telecommun. Comm., https://crtc.gc.ca/canrec/eng/guide1.htm#2.1 (last visited Feb. 24, 2025).
[13] Id.
[14] Id.
[15] Charles H. Davis & Janice Kaye, International Film and Television Production Outsourcing and the Development of Indigenous Capabilities: The Case of Canada, in Locating Migrating Media (Greg Elmer, Charles H. Davis, Janine Marchessault & John McCullough eds., 2010).
[16] Maria De Rosa & Marilyn Burgess, Defining Canadian Content: Approaches Taken in Other Jurisdictions and Lessons Learned for Canada, Communications MDR (Feb. 23, 2022), available at https://www.mpa-canada.org/wp-content/uploads/2023/05/MDR-Report-ENG-3.pdf.
[17] Anja Karadeglija, CRTC’s CanCon Rules Could Worsen Trade Conflict, U.S. Business Groups Warn, National Post (Jan. 21, 2025), https://nationalpost.com/news/canada/crtcs-cancon-rules-could-worsen-trade-conflict-u-s-business-groups-warn.
[18] Kristian Stout & Giuseppe Colangelo, Cultural Levies and the EU Audiovisual Market, Int’l Ctr. L. Econ. (Jul. 11, 2023), https://laweconcenter.org/resources/cultural-levies-and-the-eu-audiovisual-market.
[19] State of Play, Gracenote (Aug. 2023), available at https://www.nielsen.com/wp-content/uploads/sites/2/2023/08/2023-SOP-ENG-final.pdf.
[20] Id.
[21] Id.
[22] Fall Video Overview, Numeris (Feb. 2025), available at https://numeris.ca/wp-content/uploads/2025/PDFs/VAM-Insights/EN/Fall%20Video%20Overview.pdf.
[23] Stout & Colangelo, supra note 18.
[24] Richard A. Posner, Antitrust in the New Economy, 68 Antitrust L. J. 925 (2001).