DAILY NEWS Dec 13, 2012 10:22 AM - 0 comments

Supreme Court Rules in Favour of Cable and Satellite Providers in Value of Signal Dispute

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The Supreme Court of Canada has ruled in favour of cable companies and satellite providers in the on-going battle with television networks over their right to charge for the transmission of their signals.  

The Canadian Radio-television and Telecommunications Commission had previously ruled that local television stations should be able to charge cable companies and satellite providers for their signals.  Cable and satellite companies had said they would increase the price, which they charged their subscribers, to compensate for any payments having to be made to television stations.

The CRTC decision was appealed to the Supreme Court of Canada by Rogers Communications, Shaw Communications, Telus corporation and Cogeco Inc.  

The following is the decision released, this morning, by the Supreme Court: 

Canadian Radiotelevision and Telecommunications Commission (“CRTC”) adopting policy establishing marketbased, value for signal regulatory regime — Policy empowering private local television stations (“broadcasters”) to negotiate direct compensation for retransmission of signals by cable and satellite companies (“broadcasting distribution undertakings” or “BDUs”), as well as right to prohibit BDUs from retransmitting those signals if negotiations unsuccessful — Whether CRTC having jurisdiction under Broadcasting Act, to implement proposed regime — Broadcasting Act, S.C. 1991, c. 11, ss. 2, 3, 5, 9, 10.

Legislation — Conflicting legislation — CRTC adopting policy establishing marketbased, value for signal regulatory regime — Policy empowering broadcasters to negotiate direct compensation for retransmission of signals by BDUs, as well as right to prohibit BDUs from retransmitting those signals if negotiations unsuccessful — Whether proposed regime conflicting with Copyright Act — Whether Copyright Act limiting discretion of CRTC in exercising regulatory and licensing powers under Broadcasting Act — Broadcasting Act, S.C. 1991, c. 11, ss. 2, 3, 5, 9, 10 — Copyright Act, R.S.C. 1985, c. C42, ss. 2, 21, 31, 89.

Responding to recent changes to the broadcasting business environment, in 2010 the CRTC sought to introduce a marketbased value for signal regulatory regime, whereby private local television stations could choose to negotiate direct compensation for the retransmission of their signals by BDUs, such as cable and satellite companies. The new regime would empower broadcasters to authorize or prohibit BDUs from retransmitting their programming services. The BDUs disputed the jurisdiction of the CRTC to implement such a regime on the basis that it conflicts with specific provisions in the Copyright Act. As a result, the CRTC referred the question of its jurisdiction to the Federal Court of Appeal, which held the proposed regime was within the statutory authority of the CRTC pursuant to its broad mandate under the Broadcasting Act to regulate and supervise all aspects of the Canadian broadcasting system, and that no conflict existed between the regime and the Copyright Act.

Held (Abella, Deschamps, Cromwell and Karakatsanis JJ. dissenting): The appeal should be allowed. The proposed regulatory regime is ultra vires the CRTC.

Per McLachlin C.J. and LeBel, Fish, Rothstein and Moldaver JJ.: The provisions of the Broadcasting Act, considered in their entire context, may not be interpreted as authorizing the CRTC to implement the proposed value for signal regime.

No provision of the Broadcasting Act expressly grants jurisdiction to the CRTC to implement the proposed regime, and it was not sufficient for the CRTC to find jurisdiction by referring in isolation to policy objectives in s. 3 and deem that the proposed value for signal regime would be beneficial for the achievement of those objectives. Establishing any link, however tenuous, between a proposed regulation and a policy objective in s. 3 of the Act cannot be a sufficient test for conferring jurisdiction on the CRTC. Policy statements are not jurisdictionconferring provisions and cannot serve to extend the powers of the subordinate body to spheres not granted by Parliament. Similarly, a broadly drafted basket clause in respect of regulation making authority (s. 10(1)(k)), or an openended power to insert “such terms and conditions as the regulatory body deems appropriate” when issuing licences (s. 9(1)(h)) cannot be read in isolation, but rather must be taken in context with the rest of the section in which it is found. Here, none of the specific fields for regulation set out in s. 10(1) pertain to the creation of exclusive rights for broadcasters to authorize or prohibit the distribution of signals or programs or the direct economic relationship between BDUs and broadcasters. Reading the Broadcasting Act in its entire context reveals that the creation of such rights is too far removed from the core purposes intended by Parliament and from the powers granted to the CRTC under that Act.

Even if jurisdiction for the proposed value for signal regime could be found within the text of the Broadcasting Act, the proposed regime would conflict with specific provisions enacted by Parliament in the Copyright Act. First, the value for signal regime conflicts with s. 21(1) because it would grant broadcasters a retransmission authorization right against BDUs that was withheld by the scheme of the Copyright Act. A broadcaster’s s. 21(1)(c) exclusive right to authorize, or not authorize, another broadcaster to simultaneously retransmit its signals does not include a right to authorize or prohibit a BDU from retransmitting those communication signals. It would be incoherent for Parliament to set up a carefully tailored signals retransmission right in s. 21(1), specifically excluding BDUs from the scope of the broadcasters’ exclusive rights over the simultaneous retransmission of their signals, only to enable a subordinate legislative body to enact a functionally equivalent right through a related regime. The value for signal regime would upset the aim of the Copyright Act to effect an appropriate balance between authors’ and users’ rights as expressed by Parliament in s. 21(1).

Second, further conflict arises between the value for signal regime and the retransmission rights in s. 31, which creates an exception to copyright infringement for the simultaneous retransmission by a BDU of a “work” carried in local signals. The value for signal regime envisions giving broadcasters deletion rights, whereby the broadcaster unable to agree with a BDU about the compensation for the distribution of its programming services would be entitled to require any program to which it has exclusive exhibition rights to be deleted from the signals of any broadcaster distributed by the BDU. The value for signal regime would effectively overturn the s. 31 exception, entitling broadcasters to control the simultaneous retransmission of works while the Copyright Act specifically excludes retransmission from the control of copyright owners, including broadcasters. In doing so, it would rewrite the balance between the owners’ and users’ interests as set out by Parliament in the Copyright Act. Because the CRTC’s value for signal regime is inconsistent with the purpose of the Copyright Act, it falls outside of the scope of the CRTC’s licensing and regulatory jurisdiction under the Broadcasting Act.

Section 31(2)(b), which provides that in order for the exception to copyright to apply the retransmission must be “lawful under the Broadcasting Act”, is also not sufficient to ground the CRTC’s jurisdiction to implement the value for signal regulatory regime. A general reference to “lawful under the Broadcasting Act” cannot authorize the CRTC, acting under openended jurisdictionconferring provisions, to displace the specific direction of Parliament in the Copyright Act. Finally, the value for signal regime would create a new right to authorize and prevent retransmission, in effect, amending the copyright conferred by s. 21. Thus the value for signal regime would create a new type of copyright and would do so without the required Act of Parliament, contrary to s. 89.

Per Abella, Deschamps, Cromwell and Karakatsanis JJ. (dissenting): The CRTC determined that the proposed regime was necessary to preserve the viability of local television stations and ensure the fulfillment of the broadcasting policy objectives set out in s. 3(1) of the Broadcasting Act. Courts have consistently determined the validity of the CRTC’s exercises of power under the Broadcasting Act by asking whether the power was exercised in connection with a policy objective in s. 3(1). This broad jurisdiction flows from the fact that the Act contains generallyworded powers for the CRTC to regulate and supervise all aspects of the Canadian broadcasting system, to impose licensing conditions, and to make regulations as the CRTC deems appropriate to implement the objects set out in s. 3(1).

The proposed regime is within the CRTC’s regulatory jurisdiction since it is demonstrably linked to several of the basic operative broadcasting policies in s. 3. The regime is merely an extension of the current regime, which places conditions, including financial ones, on BDUs for the licence to retransmit local stations’ signals. This broad mandate to set licensing conditions in furtherance of Canada’s broadcasting policy is analogous to the CRTC’s broad mandate to set rates, recently upheld by this Court in Bell Canada v. Bell Aliant Regional Communications, 2009 SCC 40, [2009] 2 S.C.R. 764.

The proposed regime does not create a conflict with the Copyright Act. It does not give local stations a copyright in the retransmission of their television signals. BDUs derive their right to retransmit signals only from licences granted pursuant to s. 9 of the Broadcasting Act, and must meet the conditions imposed by the CRTC on their retransmission licences, including those set out in the proposed regime. Nothing in either the definition of “broadcaster” or in s. 21(1)(c) of the Copyright Act immunizes BDUs from licensing requirements put in place by the CRTC in accordance with its broadcasting mandate.

The BDUs’ argument that the proposed regime creates royalties for local signals contrary to s. 31(2)(d) of the Copyright Act, turns s. 31(2)(d) on its head. Section 31(2)(d) simply requires that BDUs pay a royalty to copyright owners for retransmitting “distant signals”. This provision has nothing to do with whether the BDUs can be required to compensate local stations for a different purpose, namely, to fulfill the conditions of their retransmission license under the Broadcasting Act

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