2011 FCA 64, 2011 FCA 64

[2012] 4 F.C.R. 231 A-113-10 2011 FCA 64 IN THE MATTER OF the Broadcasting Act , S.C. 1991, c. 11; AND IN THE MATTER OF the Canadian Radio-television and Telecommunications Commission’s Broadcasting Regulatory Policy CRTC 2010-167 and Broadcasting Order CRTC 2010-168; AND IN THE MATTER OF an application by way of a reference to the Federal Court of Appeal pursuant to sections 18.3(1) and 28(2) of the Federal Courts Act , R.S.C., 1985, c. F-7. Indexed as: Reference re Broadcasting Act Federal Court of Appeal, Nadon, Sharlow and Layden-Stevenson JJ.A.—Toronto, September 13 and 14, 2010; Ottawa, February 28, 2011.

Broadcasting –– Reference by Canadian Radio-television and Telecommunications Commission (CRTC) to determine whether CRTC empowered, pursuant to mandate under Broadcasting Act , to establish regime enabling private local television stations to negotiate with broadcasting distribution undertakings (BDUs) fair value in exchange for distribution of programming services broadcast thereby — Regime would allow private local television stations to charge BDUs for right to retransmit television stations’ signals — Per Sharlow J.A. (Laydon-Stevenson J.A. concurring): Implementation of proposed regime within CRTC’s statutory authority, subject to Copyright Act , legislative history thereof — Under Copyright Act, s. 31(2), BDU having statutory right to retransmit local signal of private local television station without paying royalty provided retransmission meeting conditions stated therein — However, conditions under Copyright Act, s. 31(2) significant, requiring that retransmission be lawful under Broadcasting Act — Therefore, open to CRTC to adopt proposed regime if CRTC determining regime required to meet objectives of Canada’s broadcasting policy under Broadcasting Act, s. 3(1) — Question answered affirmatively — Per Nadon J.A. (dissenting): Proposed regime ultra vires powers of CRTC since regime conflicting with clear statement in Copyright Act, s. 31(2)(

d) that royalties must be paid only for retransmission of distant signals, not local signals — While Parliament delegating power to CRTC when passing Broadcasting Act, delegation of power not absolute.

Copyright — Infringement — Reference to determine whether Canadian Radio-television and Telecommunications Commission (CRTC) empowered, pursuant to mandate under Broadcasting Act , to establish value for signal regime allowing private local television stations to demand royalty from cable television service providers (broadcast distribution undertakings or BDUs) for retransmission of local signals — Per Sharlow J.A. (Layden-Stevenson J.A. concurring): While BDUs having statutory right to retransmit signal of private local television station without paying royalty pursuant to Copyright Act , s. 31(2) , CRTC not precluded from implementing value for signal regime since proposed regime complying with CRTC’s statutory mandate — Per Nadon J.A. (dissenting): Value for signal regime ultra vires powers of CRTC because regime conflicting with Parliament’s clear statement in Copyright Act, s. 31(2)(

d) that royalties must be paid only for retransmission of distant signals, not for retransmission of local signals — This statement clear limit on CRTC’s power to impose conditions under Broadcasting Act. This was a reference by the Canadian Radio-television and Telecommunications Commission (CRTC) in Broadcasting Order CRTC 2010-168 made in accordance with subsections 18.3(1) and 28(2) of the Federal Courts Act .

The question referred was whether the CRTC is empowered, pursuant to its mandate under the Broadcasting Act , to establish a regime to enable private local television stations to choose to negotiate with broadcasting distribution undertakings a fair value in exchange for the distribution of the programming services broadcast by those local television stations.

The regime referred to in the question is sometimes called the “value for signal” regime and would permit a private local television station to negotiate with cable television service providers (broadcast distribution undertakings or BDUs) for an arrangement under which the BDUs provide consideration to the television station for the right to retransmit its signals. The operators of private local television stations generally favour the proposed value for signal regime while the BDUs do not.

The CRTC concluded that the existing regulatory model does not adequately deal with recent changes to the broadcasting business environment. In 2010, it adopted a policy determining that a value for signal regime is necessary to ensure the fulfillment of the policy objectives set out in subsection 3(1) of the Broadcasting Act . Held (Nadon J.A. dissenting), the question should be answered in the affirmative.

Per Sharlow J.A. (Layden-Stevenson J.A. concurring): The implementation of the proposed value for signal regime is within the statutory authority of the CRTC subject to the Copyright Act and its legislative history. Under subsection 31(2) of the Copyright Act , a BDU has a statutory right to retransmit the local signal of a private local television station without paying a royalty provided the retransmission meets the conditions stated in subsection 31(2). However, the subsection 31(2) conditions are significant, requiring in particular in paragraph 31(2)(

b) that any retransmission of a local signal be lawful under the Broadcasting Act . That paragraph permits the CRTC to limit the transmission rights under subsection 31(2) by imposing any regulatory or licensing condition consistent with the CRTC’s statutory mandate as stated in the Broadcasting Act . In other words, by allowing the CRTC to do this, the objectives of Canada’s broadcasting policy have been ranked ahead of the BDUs’ statutory retransmission rights under subsection 31(2) of the Copyright Act.

Therefore, it is open to the CRTC to adopt a regulation or a licensing condition that would oblige a BDU to pay money to a private local television station for the right to retransmit its signals provided the CRTC determines that the imposition of such an obligation is required to meet the objectives of Canada’s broadcasting policy as stated in subsection 3(1) of the Broadcasting Act . Moreover, the proposed regime would not undermine Canada’s stated position regarding recent proceedings of the 2001 World Intellectual Property Organization Standing Committee on Copyright and Related Rights.

Per Nadon J.A. (dissenting): The value for signal regime proposed in Broadcasting Order CRTC 2010-168 is ultra vires the powers of the Canadian Radio-television and Telecommunications Commission (CRTC) because the value for signal regime conflicts with Parliament’s clear statement in paragraph 31(2) (

d) of the Copyright Act that royalties must be paid only for the retransmission of distant signals and not for the retransmission of local signals. While Parliament delegated power to the CRTC when it passed the Broadcasting

Act, this delegation of power is not absolute. Parliament’s intention, as expressly stated in paragraph 31(2)(

d) of the Copyright Act, is aclear limit on the CRTC’s power to impose conditions under the Broadcasting Act. STATUTES AND REGULATIONS CITED Broadcasting Act, S.C. 1991, c. 11, ss. 2(1) “broadcasting”, “distribution undertaking”, “network”, “program”, “programmingundertaking”, “radio waves”, (2) (as am. by S.C. 1993, c. 38, s. 81), 3(1),(2), 5(1),(2),(3), 9 (as am. by S.C. 1994, c. 26, s. 10(F)), 10. Copyright Act, R.S.C., 1985, c.

C-42, ss. 21 (as enacted by S.C. 1997, c. 24, s. 14), 31 (formerly s. 28.01 as enacted by S.C. 1988, c. 65,s. 63; renumbered as s. 31 by S.C. 1997, c. 24, ss. 16, 52(F); 2002, c. 26, s. 2), 70.1(c) (as enacted by R.S.C., 1985 (4th Supp.), c. 10, s.16; 1997, c. 24, s. 46), 70.12 (as enacted idem), 70.13 (as enacted idem), 70.191 (as enacted idem), 89 (as enacted idem, s. 50). Definition of Local Signal and Distant Signal Regulations, SOR/89-254 (as am. by SOR/2004-33, s. 2), s. 3(a) “local signal” (as am.idem), (b) “distant signal” (as am. idem). Federal Courts Act, R.S.C., 1985, c.

F-7, ss. 1 (as am. by S.C. 2002, c. 8, s. 14), 18.3(1) (as enacted by S.C. 1990, c. 8, s. 5; 2002, c. 8, s.28), 28(2) (as am. idem, s. 35). Radiocommunication Act, R.S.C., 1985, c. R-2, ss. 1 (as am. by S.C. 1989, c. 17, s. 1), 2 “lawful distributor” (as enacted by S.C. 1991, c.11, s. 81). CASES CITED considered: Bell ExpressVu Limited Partnership v. Rex, 2002 SCC 42, [2002] 2 S.C.R. 559, 212 D.L.R. (4th) 1, [2002] 5 W.W.R. 1; ExpressVu Inc.v. Nii Norsat International Inc., , 81 C.P.R. (3d) 345, 222 N.R. 213 (F.C.A.) ; Théberge v.

Galerie d’Art du PetitChamplain inc., 2002 SCC 34, [2002] 2 S.C.R. 336, 210 D.L.R. (4th) 385, 23 B.L.R. (3d) 1. referred to: CCH Canadian Ltd. v. Law Society of Upper Canada, 2004 SCC 13, [2004] 1 S.C.R. 339, 236 D.L.R. (4th) 395, 30 C.P.R. (4th) 1; R. v.Furtney, (SCC), [1991] 3 S.C.R. 89, (1991), 66 C.C.C. (3d) 498, 8 C.R. (4th) 121; Sam Lévy & Associés Inc. v. AzcoMining Inc., 2001 SCC 92, [2001] 3 S.C.R. 978, 207 D.L.R. (4th) 385, 30 C.B.R. (4th) 105; Mobil Oil Canada, Ltd. v. Canada, 2001FCA 333, [2002] 1 C.T.C. 55, 2001 DTC 5668.

AUTHORS CITED A Group-Based Approach to the Licensing of Private Television Services, Brodcasting Regulatory Policy CRTC 2010-167, March 22,2010.

REFERENCE by the Canadian Radio-television and Telecommunications Commission (CRTC) (Reference to the Federal Court ofAppeal – Commission's jurisdiction under the Broadcasting Act to implement a negotiated solution for the compensation for the fairvalue of private local conventional television signals, Broadcasting Order CRTC 2010-168) to determine whether the CRTC wasempowered, pursuant to its mandate under the Broadcasting Act, to establish a regime to enable private local television stations to chooseto negotiate with broadcasting distribution undertakings a fair value in exchange for the distribution of the programming servicesbroadcast by those local television stations.

The question was answered in the affirmative, Nadon J.A. dissenting. APPEARANCES Valérie Dionne and Crystal Hulley for Canadian Radio-television and Telecommunications Commission. Frederick B. Woyiwada for Department of Justice Canada. Neil Finkelstein, Steven Mason and Daniel Glover for Bell Aliant Regional Communications, LP. Benjamin Zarnett, Robert Malcolmson and Peter Ruby for CTV Globemedia Gerald (Jay) Kerr-Wilson for Rogers Communications Inc. Chris G. Paliare and Andrew Lokan for Canwest Television Limited Partnership. Kent E. Thomson and James W. E. Doris for Shaw Communications Inc.

SOLICITORS OF RECORD Canadian Radio-television and Telecommunications Commission, Gatineau, for Canadian Radio-television and TelecommunicationsCommission. Deputy Attorney General of Canada for Department of Justice Canada. McCarthy Tétrault LLP, Toronto, for Bell Aliant Regional Communications, LP. Goodmans LLP, Toronto, for CTVglobemedia.

Fasken Martineau Dumoulin LLP , Ottawa, for Rogers Communications Inc. Paliare Roland Rosenberg Rothstein LLP , Toronto, for Canwest Television Limited Partnership. Davies Ward Phillips & Vineberg LLP , Toronto, for Shaw Communications Inc.

The following are the reasons for judgment rendered in English by [ 1 ] Sharlow J.A.: In Broadcasting Order CRTC 2010-168 [Reference to the Federal Court of Appeal – Commission’s jurisdiction under the Broadcasting Act to implement a negotiated solution for the compensation for the fair value of private local conventional television signals], the Canadian Radio-television and Telecommunications Commission referred the following question to this Court pursuant to subsections 18.3(1) [as enacted by S.C. 1990, c. 8, s. 5; 2002, c. 8, s. 28 ] and 28(2) [as am. idem , s. 35 ] of the Federal Courts Act [R.S.C., 1985, c.

F-7, s. 1 (as am. idem , s. 14 )]: Is the Commission empowered, pursuant to its mandate under the Broadcasting Act , to establish a regime to enable private local television stations to choose to negotiate with broadcasting distribution undertakings a fair value in exchange for the distribution of the programming services broadcast by those local television stations? Background [ 2 ] The regime to which this question refers is sometimes called the “value for signal” regime.

In general terms, a value for signal regime would permit a private local television station to negotiate with cable television service providers (referred to as “broadcast distribution undertakings” or “BDUs”) for an arrangement under which the BDUs provide consideration to the television station for the right to retransmit its signals. [ 3 ] The operators of private local television stations generally favour the proposed value for signal regime.

A number of them, namely CTVglobemedia Inc., V Interactions Inc., Newfoundland Broadcasting Company Limited and Canwest Television Limited Partnership, submitted at the hearing of this reference that the Commission has the statutory authority to implement such a regime. [ 4 ] BDUs generally do not favour the proposed value for signal regime.

A number of BDUs, namely Bell Canada, Bell Aliant Regional Communications, LP, Cogeco Cable Inc., Rogers Communications Inc., Shaw Communications Inc. and TELUS Communications Co., submitted at the hearing of this reference that the Commission does not have the statutory authority to implement a value for signal regime. [ 5 ] Under the current regime, BDUs pick up the over-the-air signals of private local television stations and retransmit them to their subscribers for a fee. The Commission requires BDUs to provide the following benefits to private local television stations for those signals: (

a) Mandatory carriage : A BDU must distribute a local station’s signals to the BDU’s subscribers in that station’s local market. (

b) Preferential channel placement : A BDU must put the local station’s signal on a channel more likely to be selected by subscribers. (

c) Simultaneous distribution : If a BDU is retransmitting a program from a local station at the same time as it is retransmitting the same program from an American station on a different channel, the BDU must substitute the local station’s advertisements in place of those appearing on the American station. (

d) Local programming improvement fund : Pursuant to a 2008 initiative of the Commission, a BDU must contribute 1.5 percent of its gross revenues to a local programming improvement fund accessible by local stations in non-metropolitan markets. (

e) Payments for carriage of distant signals : Pursuant to another 2008 initiative of the Commission, effective August 31, 2011, a BDU wishing to distribute a local television station’s signal outside of that station’s local market must obtain, through a free market negotiation that may involve the payment of compensation, the consent of the station.

For example, a BDU would require the consent of a Toronto local station to transmit that station’s signal to BDU subscribers in Halifax. [ 6 ] The Commission has concluded that the existing regulatory model does not adequately deal with recent changes to the broadcasting business environment. Among the changes noted by the Commission are the development of direct-to-home satellite television services, the development of speciality television channels that are permitted to receive fees directly from BDUs that carry them, and the widespread adoption of alternative media platforms.

These changes have caused advertising revenues for private local television stations to fall while the revenues of BDUs have increased, resulting in a significant shift in their relative market positions and a financial crisis for the private local television stations.

The Commission has concluded that this financial crisis may be averted by adopting a value for signal regime that invokes market forces. [ 7 ] The proposed value for signal regime is fully described in Broadcasting Regulatory Policy CRTC 2010-167 entitled A Group- Based Approach to the Licensing of Private Television Services, issued on March 22, 2010 (which I refer to for convenience as the “2010 Policy” or la “politique de 2010” [in the French reasons]). [ 8 ] The relevant portions of the 2010 Policy are quoted below, but at this point it is useful to summarize the main features of the proposed value for signal regime: • A private local television station would have the right to choose to negotiate with BDUs for compensation for the right to retransmit the station’s signals.

If no agreement is reached, the station could prevent the BDUs from retransmitting its signals. • A private local television station that chooses to participate in the value for signal regime would forego all existing regulatory protections, including mandatory distribution, priority channel placement and simultaneous substitution.

• The regulatory protections (as in place from time to time) would continue to benefit any private local television station that chooses not to participate in the value for signal regime. • The Commission would be involved in the negotiation of agreements under the value for signal regime only if the parties do not negotiate in good faith or if the parties ask the Commission to arbitrate. [ 9 ] Simply stated, the BDUs’ legal objection to the proposed value for signal regime is based on the following reasoning. The Copyright Act [R.S.C., 1985, c.

C-42] is the only statute that can govern the right of a broadcaster to control the retransmission of its signals. The Copyright Act precludes a private local television station from demanding that a BDU pay a royalty for the right to retransmit the station’s signals. Therefore, BDUs have a statutory user right to retransmit the signals of a private local television station without paying a royalty.

It necessarily follows that the statutory authority of the Commission under the Broadcasting Act [S.C. 1991, c. 11] should not be interpreted in a manner that would permit a private local television station to block retransmission by a BDU that refuses to pay compensation for a retransmission right. [ 10 ] The private local television stations argue that this legal argument has no merit and that the Copyright Act does not preclude the Commission from implementing a value for signal regime.

Procedural history [ 11 ] The legal debate now before this Court arose in the context of proceedings before the Commission that resulted in its adoption of the 2010 Policy. In the 2010 Policy, the Commission makes a number of policy decisions relating to the licensing of private local television services. [ 12 ] In the 2010 Policy, the Commission determined among other things that a value for signal regime is necessary to ensure the fulfilment of the policy objectives set out in subsection 3(1) of the Broadcasting Act .

The 2010 Policy also states the main elements of the value for signal regime that the Commission proposes to implement if it is found to have the statutory authority to do so. [ 13 ] Paragraphs 151 to 168 of the 2010 Policy contain the analysis and conclusions of the Commission that are relevant to the value for signal issue. Those paragraphs read as follows (footnotes omitted): 151. In Broadcasting Public Notice 2008-100, the Commission considered whether or not to grant a fee for carriage to conventional television broadcasters, and elected not to do so.

However, the question considered in the current proceeding is a substantially different one. In exploring the issue of a negotiated fair value for signals, the Commission is considering whether market forces can be invoked to resolve what has now become a long standing area of tension between conventional television broadcasters and BDUs. 152. In approaching the issue, the Commission has been guided by specific provisions of the Act . Section 3(1) (

e) states that “each element of the Canadian broadcasting system shall contribute in an appropriate manner to the creation and presentation of Canadian programming,” while section 3(1) (

f) states that “each broadcasting undertaking shall make maximum use, and in no case less than predominant use, of Canadian […] resources […].” 153.

With respect to the public broadcaster, the Commission notes that section 3(1) ( m )(vii) of the Act states that the programming provided by the CBC should “be made available throughout Canada by the most appropriate and efficient means and as resources become available for the purpose.” As explained further below, the regime foreseen by the Commission would allow broadcasters to require program deletion when negotiating for a fair value for the distribution of their programming services.

In light of the objective above, the Commission considers that it would be inconsistent to permit the CBC to require deletion of its programming from a BDU and hence prevent the public from receiving its programming.

Moreover, during its appearance at the hearing, the CBC indicated that it fully understands the importance of its mandate and clearly agrees with the Commission's position in that regard, as it spontaneously stated that it would not “play with threatening to pull our signal or having our signal not negotiated or not carried by the BDU.” Accordingly, the Commission has determined that the market-based regime set out below will apply only to private local television stations. The distinctive situation and needs of the CBC will be addressed in the context of the public broadcaster's next licence renewal. 154.

The Commission reiterated in Broadcasting Public Notice 2008-100 that where regulation is necessary it should be as targeted as possible and impose the least burdensome constraints; that industry solutions should be preferred to regulatory intervention; and that the broadcasting system, as a whole, should be calibrated such that no single player or group of players can exercise undue influence. 155.

The portion of this regulatory policy that has dealt with group-based licensing has focused on the effective continuation of vibrant and effective Canadian programming in the context of the larger groups that now make up the Canadian broadcasting landscape. It now remains to determine whether each element of the broadcasting system is contributing in an appropriate way, and whether, in light of the enormous and accelerating changes in the system, it is appropriate to view the relationship between BDUs and broadcasters in a way that differs from that which has become established. 156.

In 1971 the Commission published its Policy Statement on Cable Television, entitled, appropriately, “Canadian broadcasting – ‘A single system’.” A key policy principle set out in that report was that “television stations are the suppliers, and cable television systems are the users. Thus the basic principle involved is: one should pay for what he uses to operate his business.” While this policy was not implemented for conventional television in 1971 or in the years following, the principle remains valid today. 157.

The other policies adopted in the 1971 report and implemented in the context of the technology and industrial structure that then existed have formed the basis of the relationship between BDUs and broadcasters from that time forward. Forty years is a very long time in the broadcasting world. The concepts of mandatory carriage, preferential channel placement, community access, and simultaneous substitution were articulated in that statement and have been developed and modified thereafter. 158. But while some features have remained, enormous changes have also occurred, and continue to occur.

Direct-to-home (DTH) satellite services were licensed in 1995 and 1996, with operations beginning in 1997. Specialty services were first licensed in 1984 and digital Category 1 specialty services in 2000. To protect and promote the growth of these nascent specialty services, they were licensed

with "genre protection," which ensured that they had their own space, essentially free of direct competition, in which to grow. They were also given guaranteed carriage by BDUs. Very significantly, they were granted the right to receive wholesale fees from the BDUs that carried them. The system thus moved into the multi-channel universe with different rules applying to different programming services depending, to a considerable degree, on when they had begun broadcasting.

Category 2 specialty services, it is to be noted, were provided limited genre protection and were not given guaranteed carriage by BDUs, but were given the right to receive wholesale fees. 159. Many specialty services have enjoyed large popularity with Canadian audiences. As noted above, increasing fragmentation has had the obvious negative effect of reducing the profitability of conventional television broadcasters. Further, very large fragmentation continues as alternative new media platforms become widely adopted.

Consequently, there has been a reduction in the ability of conventional television broadcasters to meet their obligations effectively, under the Act , to contribute to the creation and presentation of Canadian programming of a high standard. 160. While the recent economic climate, in which advertising revenues have suffered, has not been favourable for private conventional television broadcasters, BDU revenues have, since 1971, continued to grow at a far greater rate than those of television stations.

In that year, private television revenues were $115.8 million, which compared very favourably with cable revenues of $66.6 million. In 2009, the positions had become reversed. Cable BDU basic and non-basic revenues were $5.1 billion, and DTH and multipoint distribution system basic and non-basic revenues were a further $2.2 billion, for a total of $7.3 billion. Private television revenues trailed far behind at $2.2 billion. Revenue figures do not tell the complete story, but the dramatic change in proportions indicates a significant shift in market positions. 161.

A large piece of the puzzle is that private conventional television broadcasters, unlike specialties, are not paid for their signals by the BDUs that carry those signals. At the hearing, a frequently repeated position by BDUs was that, since they could now receive and disseminate those services for free, they had no intention of negotiating a fair value or paying for those services, notwithstanding that they constitute part of the single Canadian broadcasting system, as provided in section 3(2) of the Act .

And, as noted earlier, private conventional television broadcasters pay large amounts, not just for Canadian programs, but for foreign programs as well. The Commission has repeatedly been told that broadcasting such foreign programs is essential to the financial viability of conventional television broadcasters, and has accepted that position. 162. When broadcasters acquire program rights, those rights are, almost invariably, territorial. That is, a broadcaster pays for the exclusive right to broadcast a specific program in a defined territory for a defined period of time.

Of course, the terms of such agreements are the focus of strong commercial attention, and there is no uniformity of result. But whatever the terms negotiated by the broadcaster, BDUs are currently permitted to carry the broadcasters' programming services without paying for the right to distribute them. BDUs, however, are obligated to provide broadcasters with benefits such as priority carriage and simultaneous substitution. Nevertheless, the system is not working well in 2010 in ensuring that conventional television broadcasters have the means to continue to meet their obligations under the Act . 163.

As noted above, as set out in Broadcasting Public Notice 2008-100, the Commission was not prepared to impose a fee for carriage. However, the Commission finds that, in order to fulfil the policy objectives set out in section 3(1) of the Act , the system needs revision so as to permit privately-owned television broadcasters to negotiate with BDUs to establish the fair value of the product provided by those broadcasters to BDUs.

The system should be such that privately-owned broadcasters that own programs or have paid for the exclusive right to disseminate programs can negotiate for payment with BDUs, which, in turn, further disseminate those programs. By establishing a regime in which market forces can function effectively, the broadcasting system will benefit through the recognition of the fair value of programming services. This approach is consistent with the market-based negotiations that increasingly prevail on all other platforms, including discretionary services, VOD, and online and mobile platforms. 164.

The regime that the Commission would propose to implement is set out below. 1. Licensees of private local television stations would choose whether

i) they will negotiate with BDUs for the value of the distribution of their programming services, failing which they will be able to require deletion of the programming they own, or for which they have the exhibition rights, from all signals distributed in their market, or ii) they will continue to benefit from existing regulatory protections. 2. Licensees of private local television stations would make their choice by a date set by the Commission, and this choice would be valid for a fixed term of three years. 3. If a licensee of a private local television station chose option i):

a) It would forego all existing regulatory protections related to the distribution of local television signals by BDUs, whether imposed by regulation or by condition of licence, including mandatory distribution and priority channel placement on analog basic, and simultaneous substitution.

b) BDUs would be required, at the request of private local television stations, to delete any program owned by the licensee of that local television station or for which it has acquired exclusive contractual exhibition rights.

c) Deletions would be exercised against the signal of any programming undertaking distributed by the BDU, whether foreign or domestic, affiliated or not, including that of the private local television station making the request.

d) It could negotiate with a BDU for a fair value in exchange for the distribution of its programming service in lieu of the deletion rights set out in

b) and c). This compensation could be monetary, non-monetary (e.g., simultaneous or non-simultaneous substitution, carriage arrangements, marketing and promotion), or both, and could be negotiated on an individual station basis or as part of a broader negotiation with entire ownership groups.

e) Parties to the negotiation would be given a fixed period after the date on which the licensee of a private local television station chose option

i) to conclude negotiations, during which the existing regulatory protections would continue to apply. This period could be shortened or extended by agreement between the parties.

f) The Commission would minimize its involvement in the terms and conditions of the resulting agreements, intervening only in cases where there is evidence parties are not negotiating in good faith, and would consider acting as arbitrator only where both parties make a request. 4. If the licensee of a private local television station chose option ii), all regulatory protections for private local television stations in force at the time the choice is made, and as amended during the term in which that choice is valid, would remain in force.

These would include, where provided by regulation or by condition of licence: mandatory carriage, priority channel placement on analog basic, program deletion, simultaneous or non-simultaneous substitution, and any payments to individual stations or funds approved by the Commission in lieu of these obligations, including payments for carriage of distant signals as provided for in Broadcasting Public Notice 2008-100. 165. There is, however, a significant potential impediment to the implementation by the Commission of this market-based resolution.

In response to Broadcasting Notice of Consultation 2009-411, the Commission was presented with two legal opinions, both worthy of consideration. One submitted that the Commission had the requisite authority to introduce a regime of broadcast regulation that would have the effect of requiring appropriate negotiation, such as those described above, between broadcasters and BDUs; the other took the position that BDUs have a continuing right to disseminate the broadcaster's over-the-air signal without negotiation or remuneration by virtue of the provisions of the Copyright Act . 166.

While the Commission has found that it is necessary to provide the licensees of private local television stations with the right to negotiate a fair value for the distribution of their programming services by BDUs, it recognizes that there is a valid dispute between parties over the Commission’s legal authority to impose such a regime.

Therefore, given the importance of the question to the ability of the Commission to ensure that the objectives of the Act are met, and given the continuing need for certainty in dealing with the approaching group licensing renewals, the Commission has decided to refer the question of its jurisdiction to the Federal Court of Appeal (the Court). The Commission will request disposition of the issue on an expedited basis. 167.

The question to be put to the Court, in general terms, will be the following: Is the Commission empowered, pursuant to its mandate under the Broadcasting Act , to establish a regime to enable private local television stations to choose to negotiate with broadcasting distribution undertakings a fair value in exchange for the distribution of the programming services broadcast by those local television stations? 168.

In Broadcasting Order 2010-168, also issued today, the Commission refers this question to the Court for expedited hearing and determination. [ 14 ] Broadcasting Order CRTC 2010-168, referred to in paragraph 168 of the 2010 Policy, provides the following additional information [at paragraphs 1–6, 8]: Introduction 1. Section 3(2) of the Broadcasting Act (the Act) states that the Canadian broadcasting system constitutes a single system that is to be regulated by a single independent public authority, the Canadian Radio-television and Telecommunications Commission.

Section 5(1) of the Act requires the Commission to “regulate and supervise all aspects of the Canadian broadcasting system with a view to implementing the broadcasting policy set out in subsection 3(1) of the Act.” 2.

The Commission is given broad powers under the Act to fulfill its mandate, including the power to issue broadcasting licences on such conditions as it deems appropriate for the implementation of the broadcasting policy set out in section 3(1) of the Act and to require broadcasting distribution undertakings (BDUs) to carry, on such terms and conditions as it deems appropriate, programming services specified by the Commission. The Commission is also given the power by

section 10 of the Act to make regulations respecting a number of subjects including: the carriage of any foreign or other programming services by distribution undertakings; the resolution, by way of mediation or otherwise, of any disputes arising between programming undertakings and distribution undertakings concerning the carriage of programming originated by the programming undertaking; and such other matters as it deems necessary for the furtherance of its objects. 3.

In fulfilling this mandate, the Commission has created a comprehensive regulatory regime to ensure that each part of the broadcasting industry contributes to the fulfillment of the policy objectives in the Act .

For example, the Commission has: imposed a series of obligations on programming undertakings, including quotas for the exhibition of, or expenditure on, Canadian programming; constructed rules regarding what programming services BDUs are required or permitted to distribute, including a requirement that certain BDUs distribute local television stations and other services as part of the basic package provided to all customers (i.e., mandatory carriage); mandated wholesale fees for the distribution of particular specialty services, with a rate that is, in some cases, set by the Commission or, in other cases, negotiated between the parties; and created a system to protect the exclusive broadcast rights of local television stations in their markets by requiring a BDU to delete a programming service it distributes that is comparable to that of the local television station (i.e., program deletion) and, in some circumstances, substitute the comparable programming of the local television station being broadcast simultaneously over the deleted signal (i.e., simultaneous substitution). 4.

The Commission applies these existing regulatory obligations to a different extent in different circumstances in a manner that is fluid and continues to adapt to changing circumstances. For example, the Commission has permitted parties, by conditions of licence, to negotiate alternative solutions to the program deletion obligations, which have been incorporated into the regulatory regime.

The Proceeding 5. In Policy proceeding on a group-based approach to the licensing of television services and on certain issues relating to conventional television , Broadcasting Notice of Consultation CRTC 2009-411, 6 July 2009 (as revised by Broadcasting Notice of Consultation CRTC 2009-411-3, 11 August 2009), the Commission initiated a proceeding to examine a group-based approach to the licensing of television services, including an examination of whether or not a negotiated solution for the compensation for the fair value of local conventional television signals is appropriate.

In the course of the proceeding, the Commission received 289 comments addressing these issues. The Commission also received approximately 12,000 comments as part of a campaign organized by Rogers Communications Inc. 6. Among the issues raised during the proceeding was whether the Commission has the jurisdiction under the Act to implement a negotiated solution for compensation for the fair value of private local conventional television signals.

BDUs presented a legal opinion that such a regime would establish a new copyright in the signals of private local television stations and is therefore ultra vires the powers of the Commission. Local television stations presented legal opinions that such a regime falls within the Commission's jurisdiction under the Act to supervise and regulate the broadcasting system. [ Paragraph 7 omitted; it repeats paragraph 164 of the 2010 Policy. ] 8.

In Broadcasting Regulatory Policy 2010-167, the Commission did not determine the legal issue as to whether or not it has the jurisdiction under the Act to implement such a regime. Rather, the Commission stated that it would refer the matter to the Federal Court of Appeal for determination. Consequently, the decision to implement the regime will only be concluded after the Court has ruled on this reference. Statutory mandate of the Commission [ 15 ] Parliament has given the Commission the mandate to regulate and supervise all aspects of the Canadian broadcasting system.

That mandate is set out in subsection 5(1) of the Broadcasting Act , which reads as follows: Objects 5.

(1) Subject to this Act and the Radiocommunication Act and to any directions to the Commission issued by the Governor in Council under this Act , the Commission shall regulate and supervise all aspects of the Canadian broadcasting system with a view to implementing the broadcasting policy set out in subsection 3(1) and, in so doing, shall have regard to the regulatory policy set out in subsection (2). [ 16 ] The phrase “Canadian broadcasting system” is not defined in the Broadcasting Act , but its meaning can be inferred from terms that are given a statutory definition. “Broadcasting” and “program” are defined in subsection 2(1) of the Broadcasting Act as follows:

Definitions 2. (1) … “broadcasting” « radiodiffusion » “broadcasting” means any transmission of programs, whether or not encrypted, by radio waves or other means of telecommunication for reception by the public by means of broadcasting receiving apparatus, but does not include any such transmission of programs that is made solely for performance or display in a public place; … “program” « émission » “program” means sounds or visual images, or a combination of sounds and visual images, that are intended to inform, enlighten or entertain, but does not include visual images, whether or not combined with sounds, that consist predominantly of alphanumeric text; [ 17 ] “Radio waves” and “other means of telecommunication” are defined in subsections 2(1) and (2) [as am. by S.C. 1993, c. 38 , s. 81] of the Broadcasting Act as follows:

Definitions 2. (1) … “radio waves” « ondes radioélectriques » “radio waves” means electromagnetic waves of frequencies lower than 3 000 GHz that are propagated in space without artificial guide. … Meaning of “other means of telecommunications”

(2) For the purposes of this Act , “other means of telecommunication” means any wire, cable, radio, optical or other electromagnetic system, or any similar technical system. [ 18 ] Programs are broadcast in Canada by “broadcasting undertakings”. According to subsection 2(1) of the Broadcasting Act , a broadcasting undertaking may be a “distribution undertaking”, a “programming undertaking”, or a “network”. Those terms are defined in subsection 2(1) of the Broadcasting Act as follows:

Definitions 2. (1) … “distribution undertaking” « entreprise de distribution » “distribution undertaking” means an undertaking for the reception of broadcasting and the retransmission thereof by radio waves or other means of telecommunication to more than one permanent or temporary residence or dwelling unit or to another such undertaking; … “network” « réseau » “network” includes any operation where control over all or any part of the programs or program schedules of one or more broadcasting undertakings is delegated to another undertaking or person; …

“programming undertaking” « entreprise de programmation » “programming undertaking” means an undertaking for the transmission of programs, either directly by radio waves or other means of telecommunication or indirectly through a distribution undertaking, for reception by the public by means of broadcasting receiving apparatus; [ 19 ] Reading these statutory

definitions together, I infer that any broadcasting activity in Canada by a distribution undertaking, a programming undertaking, or a network is part of the Canadian broadcasting system and therefore is subject to the regulation and supervision of the Commission pursuant to subsection 5(1) of the Broadcasting Act .

There is no doubt that this would include the broadcasting activities in Canada of any private local television station (programming undertaking) and any BDU (distribution undertaking) that would be subject to the proposed value for signal regime if it is adopted. [ 20 ] Although the statutory mandate of the Commission as stated in subsection 5(1) of the Broadcasting Act is broad and comprehensive, it is expressly limited in a number of respects. First, subsection 5(1) requires the Commission to act in accordance with the Broadcasting Act , the Radiocommunication Act [R.S.C., 1985, c.

R-2, s. 1 (as am. by S.C. 1989, c. 17, s. 1)], and any directions to the Commission issued by the Governor in Council under the Broadcasting Act . (There are no provisions of the Radiocommunication Act and no Governor in Council directions that are relevant to this reference.) [ 21 ] Second, subsection 5(1) requires the Commission to act with a view to implementing the broadcasting policy set out in subsection 3(1) of the Broadcasting Act , which reads as follows: Declaration 3.

(1) It is hereby declared as the broadcasting policy for Canada that (

a) the Canadian broadcasting system shall be effectively owned and controlled by Canadians; (

b) the Canadian broadcasting system, operating primarily in the English and French languages and comprising public, private and community elements, makes use of radio frequencies that are public property and provides, through its programming, a public service essential to the maintenance and enhancement of national identity and cultural sovereignty; (

c) English and French language broadcasting, while sharing common aspects, operate under different conditions and may have different requirements; (

d) the Canadian broadcasting system should (

i) serve to safeguard, enrich and strengthen the cultural, political, social and economic fabric of Canada, (ii) encourage the development of Canadian expression by providing a wide range of programming that reflects Canadian attitudes, opinions, ideas, values and artistic creativity, by displaying Canadian talent in entertainment programming and by offering information and analysis concerning Canada and other countries from a Canadian point of view, (iii) through its programming and the employment opportunities arising out of its operations, serve the needs and interests, and reflect the circumstances and aspirations, of Canadian men, women and children, including equal rights, the linguistic duality and multicultural and multiracial nature of Canadian society and the special place of aboriginal peoples within that society, and (iv) be readily adaptable to scientific and technological change; (

e) each element of the Canadian broadcasting system shall contribute in an appropriate manner to the creation and presentation of Canadian programming; (

f) each broadcasting undertaking shall make maximum use, and in no case less than predominant use, of Canadian creative and other resources in the creation and presentation of programming, unless the nature of the service provided by the undertaking, such as specialized content or format or the use of languages other than French and English, renders that use impracticable, in which case the undertaking shall make the greatest practicable use of those resources; (

g) the programming originated by broadcasting undertakings should be of high standard; (

h) all persons who are licensed to carry on broadcasting undertakings have a responsibility for the programs they broadcast; (

i) the programming provided by the Canadian broadcasting system should (

i) be varied and comprehensive, providing a balance of information, enlightenment and entertainment for men, women and children of all ages, interests and tastes, (ii) be drawn from local, regional, national and international sources, (iii) include educational and community programs, (iv) provide a reasonable opportunity for the public to be exposed to the expression of differing views on matters of public concern, and (

v) include a significant contribution from the Canadian independent production sector;

(

j) educational programming, particularly where provided through the facilities of an independent educational authority, is an integral part of the Canadian broadcasting system; (

k) a range of broadcasting services in English and in French shall be extended to all Canadians as resources become available; (

l) the Canadian Broadcasting Corporation, as the national public broadcaster, should provide radio and television services incorporating a wide range of programming that informs, enlightens and entertains; (

m) the programming provided by the Corporation should (

i) be predominantly and distinctively Canadian, (ii) reflect Canada and its regions to national and regional audiences, while serving the special needs of those regions, (iii) actively contribute to the flow and exchange of cultural expression, (iv) be in English and in French, reflecting the different needs and circumstances of each official language community, including the particular needs and circumstances of English and French linguistic minorities, (

v) strive to be of equivalent quality in English and in French, (vi) contribute to shared national consciousness and identity, (vii) be made available throughout Canada by the most appropriate and efficient means and as resources become available for the purpose, and (viii) reflect the multicultural and multiracial nature of Canada; (

n) where any conflict arises between the objectives of the Corporation set out in paragraphs (

l) and (

m) and the interests of any other broadcasting undertaking of the Canadian broadcasting system, it shall be resolved in the public interest, and where the public interest would be equally served by resolving the conflict in favour of either, it shall be resolved in favour of the objectives set out in paragraphs (

l) and ( m ); (

o) programming that reflects the aboriginal cultures of Canada should be provided within the Canadian broadcasting system as resources become available for the purpose; (

p) programming accessible by disabled persons should be provided within the Canadian broadcasting system as resources become available for the purpose; (

q) without limiting any obligation of a broadcasting undertaking to provide the programming contemplated by paragraph ( i ), alternative television programming services in English and in French should be provided where necessary to ensure that the full range of programming contemplated by that paragraph is made available through the Canadian broadcasting system; (

r) the programming provided by alternative television programming services should (

i) be innovative and be complementary to the programming provided for mass audiences, (ii) cater to tastes and interests not adequately provided for by the programming provided for mass audiences, and include programming devoted to culture and the arts, (iii) reflect Canada’s regions and multicultural nature, (iv) as far as possible, be acquired rather than produced by those services, and (

v) be made available throughout Canada by the most cost-efficient means; (

s) private networks and programming undertakings should, to an extent consistent with the financial and other resources available to them, (

i) contribute significantly to the creation and presentation of Canadian programming, and (ii) be responsive to the evolving demands of the public; and (

t) distribution undertakings (

i) should give priority to the carriage of Canadian programming services and, in particular, to the carriage of local Canadian stations, (ii) should provide efficient delivery of programming at affordable rates, using the most effective technologies available at reasonable cost, (iii) should, where programming services are supplied to them by broadcasting undertakings pursuant to contractual arrangements, provide reasonable terms for the carriage, packaging and retailing of those programming services, and

(iv) may, where the Commission considers it appropriate, originate programming, including local programming, on such terms as are conducive to the achievement of the objectives of the broadcasting policy set out in this subsection, and in particular provide access for underserved linguistic and cultural minority communities. [ 22 ] The statement of Canadian broadcasting policy set out in subsection 3(1) of the Broadcasting Act must be read with subsection 3(2) which reads as follows: 3. … Further declaration

(2) It is further declared that the Canadian broadcasting system constitutes a single system and that the objectives of the broadcasting policy set out in subsection (1) can best be achieved by providing for the regulation and supervision of the Canadian broadcasting system by a single independent public authority. [ 23 ] Subsection 5(1) of the Broadcasting Act also requires the Commission to have regard to the regulatory policy set out in subsection 5(2) of the Broadcasting Act , which reads as follows: 5. … Regulatory policy

(2) The Canadian broadcasting system should be regulated and supervised in a flexible manner that (

a) is readily adaptable to the different characteristics of English and French language broadcasting and to the different conditions under which broadcasting undertakings that provide English or French language programming operate; (

b) takes into account regional needs and concerns; (

c) is readily adaptable to scientific and technological change; (

d) facilitates the provision of broadcasting to Canadians; (

e) facilitates the provision of Canadian programs to Canadians; (

f) does not inhibit the development of information technologies and their application or the delivery of resultant services to Canadians; and (

g) is sensitive to the administrative burden that, as a consequence of such regulation and supervision, may be imposed on persons carrying on broadcasting undertakings. [ 24 ] In the event of a conflict between the broadcasting policy in subsection 3(1) of the Broadcasting Act and the regulatory policy in subsection 5(2) , the broadcasting policy prevails. That is the result of subsection 5(3) which reads as follows: 5. … Conflict

(3) The Commission shall give primary consideration to the objectives of the broadcasting policy set out in subsection 3(1) if, in any particular matter before the Commission, a conflict arises between those objectives and the objectives of the regulatory policy set out in subsection (2). [ 25 ] Generally, the Commission exercises its statutory authority by enacting regulations pursuant to

section 10 of the Broadcasting Act , and by imposing conditions on broadcasting licences it issues pursuant to

section 9 [s. 9(4) (as am. by S.C. 1994, c. 26, s. 10(F))] of the Broadcasting Act . According to paragraph 9(1) (

b) of the Broadcasting Act , a condition imposed on a licence must be one that is deemed by the Commission to be appropriate for the implementation of the broadcasting policy stated in subsection 3(1) of the Broadcasting Act . [ 26 ] As stated above, the Commission determined in the 2010 Policy that a value for signal regime is necessary to fulfil the objectives of the broadcasting policy stated in subsection 3(1) of the Broadcasting Act . According to paragraph 152 of the 2010 Policy, that determination relies specifically on paragraphs 3(1)(

e) and 3(1)(

f) of the Broadcasting Act . Those paragraphs are reproduced here for ease of reference, with the specific portions quoted by the Commission italicized: Declaration 3.

(1) It is hereby declared as the broadcasting policy for Canada that … (

e) each element of the Canadian broadcasting system shall contribute in an appropriate manner to the creation and presentation of Canadian programming ; (

f) each broadcasting undertaking shall make maximum use, and in no case less than predominant use, of Canadian creative and other resources in the creation and presentation of programming, unless the nature of the service provided by the undertaking, such as specialized content or format or the use of languages other than French and English, renders that use impracticable, in which case the undertaking shall make the greatest practicable use of those resources; [ 27 ] The BDUs have not challenged the soundness of the Commission’s policy analysis, its understanding of the relevant facts, its conclusion that a value for signal regime is justified on the basis of the policy objectives set out in subsection 3(1) of the Broadcasting Act , or the reasonableness of the proposed value for signal regime (assuming the Commission has the statutory authority to implement it). [ 28 ] Based on the Commission’s analysis in the 2010 Policy and the statutory provisions referred to above, I conclude that the

implementation of the proposed value for signal regime is within the statutory authority of the Commission, subject only to the legal objections raised by the BDUs in this reference based on the Copyright Act and its legislative history. I turn now to those arguments. The copyright objection [ 29 ] Both the Copyright Act and the Broadcasting Act are components of Canadian cultural policy.

They may be viewed as sharing some territory, in the sense that both deal to some extent with the interest of the originators of television signals in benefiting economically from their work, and the interest of the public in having television signals made available to them. Both statutes are intended to ensure these competing interests are properly balanced.

The two statutes now operate together harmoniously, but I am prepared to assume without deciding that there may be a theoretical possibility of a conflict in their operation. [ 30 ] The question raised in this reference is whether, as the BDUs argue, the proposed value for signal regime necessarily conflicts with the Copyright Act in such a way that this Court should conclude that even if the Broadcasting Act on its face authorizes the Commission to adopt the proposed value for signal regime, it should be interpreted in a way that precludes that possibility. [ 31 ] Part of the BDUs’ legal argument is not controversial.

I agree with them that the principles of statutory

interpretation require a harmonious, coherent and consistent

interpretation of all statutes dealing with the legal rights and obligations relating to the retransmission of television signals. [ 32 ] The question, however, is whether there is merit to the argument of the BDUs that the implementation of the proposed value for signal regime necessarily conflicts with the rights of the BDUs under the Copyright Act , in so far as it would give each private local television station the right to block a BDU from retransmitting that station’s signals in the absence of a concluded contract for compensation flowing from the BDU to the station. [ 33 ] The BDUs rely principally on subsection 21(1) [as enacted by S.C. 1997, c. 24, s. 14] and

section 31 [formerly s. 28.01 which was enacted by S.C. 1988, c. 65 , s. 63; renumbered as s. 31 by S.C. 1997, c. 24, ss. 16, 52(F); 2002, c. 26, s. 2 ] of the Copyright Act . It is common ground that subsection 21(1), and in particular paragraph 21(1)( c ), gives a private local television station a copyright in the signals it broadcasts, and that this copyright includes the sole right to authorize a BDU to retransmit those signals to the public simultaneously with its broadcast. Subsection 21(1) reads as follows: Copyright in communication signals 21.

(1) Subject to subsection (2), a broadcaster has a copyright in the communication signals that it broadcasts, consisting of the sole right to do the following in relation to the communication signal or any substantial part thereof: (

a) to fix it, (

b) to reproduce any fixation of it that was made without the broadcaster’s consent, (

c) to authorize another broadcaster to retransmit it to the public simultaneously with its broadcast, and (

d) in the case of a television communication signal, to perform it in a place open to the public on payment of an entrance fee, and to authorize any act described in paragraph ( a ), (

b) or ( d ). [ 34 ] The

section 21 rights of broadcasters are significantly affected by

section 31 of the Copyright Act , which reads in relevant part as follows: 31. … Retransmission of local and distant signals

(2) It is not an infringement of copyright for a retransmitter to communicate to the public by telecommunication any literary, dramatic, musical or artistic work if (

a) the communication is a retransmission of a local or distant signal; (

b) the retransmission is lawful under the Broadcasting Act ; (

c) the signal is retransmitted simultaneously and without alteration, except as otherwise required or permitted by or under the laws of Canada; (

d) in the case of the retransmission of a distant signal, the retransmitter has paid any royalties, and complied with any terms and conditions, fixed under this Act ; and (

e) the retransmitter complies with the applicable conditions, if any, referred to in paragraph (3)( b ). Regulations

(3) The Governor in Council may make regulations (

a) defining “local signal” and “distant signal” for the purposes of subsection (2); and (

b) prescribing conditions for the purposes of paragraph (2)( e ), and specifying whether any such condition applies to all retransmitters or only to a class of retransmitter. [ 35 ] Regulations have been made under paragraph 31(3) (

a) of the Copyright Act to define “local signal” and “distant signal” (see Definition of Local Signal and Distant Signal Regulations , SOR/89-254 [as am. by SOR/2004-33, s. 2]), but no conditions have been prescribed under paragraph 31(3)( b ). Generally, the signals of a private local television station are “local signal[s]” [s. 3( a ) (as am. idem )] and not “distant signal[s]” [s. 3( b ) (as am. idem )] under the Definition of Local Signal and Distant Signal Regulations .

[ 36 ] The BDUs that would be affected by the proposed value for signal regime are “retransmitters” and thus entitled to the benefit of subsection 31(2) of the Copyright Act . The effect of subsection 31(2) is that a BDU does not infringe the

section 21 copyright of a private local television station when it retransmits the station’s local signals, if the retransmission is lawful under the Broadcasting Act and complies with any regulations made pursuant to paragraph 31(3) (

b) of the Copyright Act , and the signal is retransmitted simultaneously and without alteration except as required or permitted by law. [ 37 ] Because subsection 31(2) contemplates a royalty only for the retransmission of distant signals (which by definition would not include the signal of a private local television station), a private local television station has no right under the Copyright Act to demand a royalty from a BDU for retransmitting its signals.

On that basis, the BDUs argue that subsection 31(2) gives them a statutory right, akin to the user right under the fair dealing provision of the Copyright Act (see CCH Canadian Ltd. v. Law Society of Upper Canada , 2004 SCC 13 , [2004] 1 S.C.R. 339, at paragraph 48 ), to retransmit the local signal of a private local television station without paying a royalty. I agree, provided the retransmission meets the conditions stated in subsection 31(2). [ 38 ] However, the subsection 31(2) conditions are significant. In particular, paragraph 31(2)(

b) requires any retransmission of a local signal to be lawful under the Broadcasting Act . That necessarily means that a BDU wishing to take advantage of the user right in subsection 31(2) of the Copyright Act must do so in compliance with the Broadcasting Act , any regulations made under the Broadcasting Act , and any conditions the Commission has attached to the retransmitter’s broadcasting licence. [ 39 ] Paragraph 31(2) (

b) of the Copyright Act marks an intersection of the two statutory schemes—one implementing Canada’s broadcasting policy and the other implementing Canada’s copyright policy. In paragraph 31(2)(

b) of the Copyright Act , Parliament has permitted the Commission to limit the transmission rights under subsection 31(2) by imposing any regulatory or licensing condition consistent with the Commission’s statutory mandate as stated in the Broadcasting Act . [ 40 ] Put another way, by making the BDUs’ statutory retransmission rights in subsection 31(2) of the Copyright Act subject to paragraph 31(2)( b ), Parliament has ranked the objectives of Canada’s broadcasting policy ahead of those statutory retransmission rights.

I see nothing in the Copyright Act that would justify a reversal of that ranking if the Commission determines that the objectives of Canada’s broadcasting policy require the imposition of a regulation or licensing condition that would permit a private local television station to demand cash or other consideration from a BDU for the right to retransmit its signals. [ 41 ] For substantially the same reasons, I conclude that it is open to the Commission to adopt a regulation or a licensing condition that would oblige a BDU to pay money to a private local television station for the right to retransmit its signals, provided the Commission determines that the imposition of such an obligation is required to meet the objectives of Canada’s broadcasting policy as stated in subsection 3(1) of the Broadcasting Act . [ 42 ] In my view, it is irrelevant that such an obligation might be characterized as an obligation to pay a royalty.

Even now, the Commission requires BDUs to compensate private local television stations in respect of the retransmission of their signals, and it is not suggested that those requirements are not properly imposed. Some of the required compensation is not monetary (mandatory carriage, preferential channel placement, and simultaneous distribution), but it nevertheless represents something of value passing from a BDU to a television station.

Some of the required compensation is monetary (the contribution of 1.5 percent of gross revenues to the local programming improvement fund and potentially (starting in August of 2011), contractual consideration for any retransmission of a local television signal outside of that station’s local market).

It seems to me that the proposed value for signal regime is different only in degree, not in kind, substance or function. [ 43 ] The BDUs present a further argument based on the lengthy and complex history of various proposals made and rejected to amend the Copyright Act to grant television stations a statutory right to a royalty or similar retransmission fee. The argument is that this history should be understood to have resulted in a deliberate legislative policy adopted by Parliament that would be defeated by the proposed value for signal regime.

I do not accept this argument. [ 44 ] It may well be that Parliament has determined for any number of reasons relating to Canada’s copyright policy that the Copyright Act should not be amended to provide private local television stations with a right to a royalty for the retransmission of local signals. However, it does not follow that the same determination necessarily indicates any intention on the part of Parliament to preclude the Commission from adopting the proposed value for signal regime in the interests of Canada’s broadcasting policy.

Indeed, the possibility that the Commission might adopt a value for signal regime has been under consideration for some time, but the record discloses no hint that Parliament or the Government of Canada would consider such a regime to be an improper or undesirable intrusion into copyright policy. [ 45 ] Nor am I persuaded that there is merit to the suggestion of the BDUs that the proposed value for signal regime would undermine Canada’s stated position in relation to recent proceedings of the 2001 World Intellectual Property Organization (WIPO) Standing Committee on Copyright and Related Rights.

Certainly Canada has taken no such position before the Commission or in this reference. Indeed, Canada has chosen not to participate in this reference at all. [ 46 ] Finally, I note that the BDUs rely on past statements of the Commission (in 1993, 1999, 2001 and 2003) to the effect that the matter of compensation for local retransmission rights should be a matter of copyright policy, not broadcasting policy.

I place no weight on those statements, particularly since the Commission has brought this reference to have the scope of its statutory authority determined as a matter of law. [ 47 ] I conclude that nothing in the Copyright Act or its legislative history precludes the Commission from adopting the proposed value for signal regime. Conclusion [ 48 ] I would answer the reference question as follows: The Broadcasting Act empowers the Canadian Radio-television and Telecommunications Commission to establish a regime to enable

private local television stations to choose to negotiate with broadcasting distribution undertakings a fair value in exchange for the distribution of the programming services broadcast by those local television stations. Layden-Stevenson J.A.: I agree. * * * The following are the reasons for judgment rendered in English by [ 49 ] Nadon J.A. (dissenting ): I have had the benefit of reading the reasons of my colleague Sharlow J.A., but I must respectfully disagree with her disposition of this matter.

In my opinion, the value for signal regime (the VFS regime) proposed in Broadcasting Order CRTC 2010-168 (the order) is ultra vires the powers of the Canadian Radio-television and Telecommunications Commission (the CRTC). I so conclude because the VFS regime conflicts with Parliament’s clear statement in paragraph 31(2) (

d) of the Copyright Act that royalties must be paid only for the retransmission of distant signals and not for the retransmission of local signals. [ 50 ] I need not repeat the facts or submissions of the parties which Sharlow J.A. has thoroughly reviewed in her reasons. [ 51 ] It is first necessary to note, as Sharlow J.A. does at paragraph 35 of her reasons, that the signals at issue in this reference are “local signal[s]” as defined in paragraph 2(1)(

a) of the Regulations Amending the Local and Distant Signal Regulations , SOR/2004-33 (the Regulations). Local broadcasters, such as CTVglobemedia Inc. and Canwest Television Limited Partnership, want broadcasting distribution undertakings (BDUs), such as Bell Canada and Rogers Communications Inc., to pay them a fee for the right to collect and retransmit their local broadcast signals to BDUs subscribers. [ 52 ] The BDUs’ main claim is that subsection 31(2) of the Act prevents the CRTC from enacting the VFS regime. Under subsection 31(2), a retransmitter does not infringe copyright if it meets five conditions.

The BDUs need this protection because the local signals they retransmit contain copyrighted material. It is likely that the local broadcasters have copyright in or a license to use the works they broadcast, due to agreements they have with the original creators of the works. Such agreements are typical in the industry ( Bell ExpressVu Limited Partnership v. Rex , 2002 SCC 42 , [2002] 2 S.C.R. 559 ( Bell ExpressVu ), at paragraph 51 ). [ 53 ] The conditions set out at subsection 31(2) of the Copyright Act are as follows: 31. … Retransmission of local and distant signals (2) … (

a) the communication is a retransmission of a local or distant signal; (

b) the retransmission is lawful under the Broadcasting Act ; (

c) the signal is retransmitted simultaneously and without alteration, except as otherwise required or permitted by or under the laws of Canada; (

d) in the case of the retransmission of a distant signal, the retransmitter has paid any royalties, and complied with any terms and conditions, fixed under this Act ; and (

e) the retransmitter complies with the applicable conditions, if any [imposed by the Governor in Council] …. [ 54 ] The BDUs do not, in their memorandum of fact and law, directly address the meaning of the word “lawful” found in paragraph 31(2) (

b) of the Copyright Act . However, the local broadcasters provide a cogent analysis of the BDUs’ regulatory situation at paragraph 69 of their joint memorandum.

Therein, the local broadcasters describe how BDUs operate subject to two different statutory schemes that apply to two different aspects of the same activity. [ 55 ] First, there is the copyright regime wherein compulsory licenses are granted under subsection 31(2) of the Copyright Act , allowing the BDUs to use the copyrighted works carried in the local broadcasters’ signals without the permission of the copyright holders. [ 56 ] Second, there is the broadcasting licensing and regulation regime wherein the CRTC determines the conditions the BDUs must satisfy before they have lawful access to the local broadcasters’ signals which contain the copyrighted works. [ 57 ] In short, to have lawful access to retransmit the local broadcasters’ programming, the BDUs must have both a license to access the airwaves that carry that programming and a license to access the copyrighted works contained in that programming. [ 58 ] What does it mean to have “lawful” access to local signals under the Broadcasting Act ?

The term “lawful” is not defined in either the Copyright Act or the Broadcasting Act . The Supreme Court of Canada’s decision in Bell ExpressVu helps to define this term. There, the Court considered the term “lawful right” in the context of

section 2 [of the definition of the term “lawful distribution” (as enacted by S.C. 1991, c. 11, s. 81)] of the Radiocommunication Act which reads as follows:

Definitions 2. …

“lawfuldistributor” «distributeurlégitime » “lawful distributor”, in relation to an encrypted subscription programming signal or encrypted network feed, means aperson who has the lawful right in Canada to transmit it and authorize its decoding; [Emphasis added.] [59] The Court was asked to determine whether a company which sold decoding systems that read encrypted satellite signals was a“lawful distributor”. To make this determination, the Court had to interpret the words “lawful right”. At paragraph 42, the Court affirmedthe

interpretation of Létourneau J.A. of this Court [in ExpressVu Inc. v.

Nii Norsat International Inc., , 81 C.P.R. (3d)345, at paragraph 4], who wrote as follows: The concept of “lawful right” refers to the person who possesses the regulatory rights through proper licensing under the Act, theauthorization of the Canadian Radio-television and Telecommunications Commission as well as the contractual and copyrightsnecessarily pertaining to the content involved in the transmission of the encrypted subscription programming signal or encrypted networkfeed. [60] That is, to have a “lawful right” in a particular piece of broadcast property, a person must have four things: proper licensing underthe relevant Act, proper authorization by the relevant agency, a contractual right of some kind to use the property and sufficient copyrightto use the property. [61] In my view, the language and the context in the two cases are sufficiently analogous to allow an application of the SupremeCourt’s

interpretation of the word “lawful” in Bell ExpressVu to paragraph 31(2)(

b) of the Copyright Act. [62] Applying Bell ExpressVu’s

interpretation of the word “lawful” to paragraph 31(2)(

b) of the Copyright Act suggests that theBDUs must comply with CRTC regulations or conditions imposed under the Broadcasting Act to be able to assert a subsection 31(2)exception to copyright infringement. [63] At this point, I believe it helpful to note several features of the Copyright Act. Parliament expressly says in paragraph 31(2)(a)that an exception to copyright infringement can apply to a “local or distant signal”. Paragraph 31(3)(

a) gives Cabinet the power of“defining ‘local signal’ and ‘distant signal’ for the purposes of subsection (2)”. The two types of signals are, as noted above, givendifferent

definitions in the Regulations. [64] Moreover, in paragraph 31(2)(d), Parliament has specified that “in the case of the retransmission of a distant signal”, theretransmitter must pay the royalties fixed under the Copyright Act and must comply with any terms and conditions fixed under theCopyright Act. The Act does not impose any such obligations on persons retransmitting local signals. [65] From these features I infer two things.

First, Parliament intended that local signals and distant signals be treated differently.Second, one aspect of this different treatment is that royalties can be imposed on persons retransmitting distant signals but cannot beimposed on persons retransmitting local signals. [66] In my view, this is a correct

interpretation of the Act for four reasons. First, the Supreme Court said in Bell ExpressVu, atparagraph 52, that subsection 31(2) comprises two different regimes. There, the Court said that

section 21 of the Copyright Act giveslocal broadcasters copyright in their signals “subject to the exceptions in s. 31(2)” (emphasis added). The French version of the judgmentalso uses the plural: “des exceptions” [underlining added]. [67] All elements in subsection 31(2) of the Copyright Act must be met before an exception to copyright infringement is availablebecause a conjunctive “and” is used to link the paragraphs. Thus, the only way the Supreme Court could have concluded that there wasmore than one exception in subsection 31(2) was if it thought local and distant signals were to be treated differently. [68] Second, failing to interpret paragraph (

d) as applying to distant signals only would render the disjunctive “or” used in paragraph(

a) redundant. Paragraphs (a), (b), (c), and (

e) do not distinguish between local and distant signals. The only difference between the twotypes of signals in subsection 31(2) is expressed in paragraph (d). Thus, it must be that Parliament distinguished between the types ofsignals in paragraph (

a) because the signals receive different treatment in paragraph (d). [69] Third, the statutory

interpretation maxim expressio unius est exclusio alterius suggests that since Parliament expressly said thatroyalties had to be paid for distant signals, it also meant that royalties did not have to be paid for local signals. [70] Fourth, the Copyright Act uses the term “royalty” (or “royalties”) liberally—more than 60 times. If Parliament had intended thatroyalties be paid for the retransmission of local signals, it could easily have said so. It did not. [71] I conclude, then, that Parliament intended paragraph 31(2)(

d) of the Copyright Act to mean that royalties be paid only for distantsignals and not for local signals. [72] Given this conclusion, it follows, in my view, that the CRTC’s order is ultra vires. Parliament delegated power to the CRTCwhen it passed the Broadcasting Act. However, this delegation of power is not absolute: “The delegate is, of course, always subordinatein that the delegation can be circumscribed and withdrawn” (R. v. Furtney, (SCC), [1991] 3 S.C.R. 89, at page 104; seealso Sam Lévy & Associés Inc. v. Azco Mining Inc., 2001 SCC 92, [2001] 3 S.C.R. 978, at paragraph 17). [73] Parliament’s intention, as expressly stated in paragraph 31(2)(

d) of the Copyright Act, that royalties be paid for the retransmissionof distant signals and implicitly that no royalties be paid for the retransmission of local signals is a clear limit on the CRTC’s power toimpose conditions under the Broadcasting Act. Thus, since the order conflicts with Parliament’s intention, it is ultra vires the CRTC. [74] I will now address two of my colleague’s statements. First, she finds that in paragraph 31(2)(

b) of the Copyright Act, Parliament

gave the CRTC the power to limit transmission rights under subsection 31(2) by stating that such transmissions must be “lawful under the Broadcasting Act ”. If the BDUs fail to comply with any conditions imposed by the CRTC, including the VFS regime, then they cease to have lawful access to the airwaves. The

section also suggests, in her view, that Parliament has ranked the objectives of Canada’s broadcasting policy ahead of the retransmission rights created under the Copyright Act . [ 75 ] I respectfully disagree. Paragraphs (

b) and (

d) of subsection 31(2) are linked by the conjunctive “and”. This language and structure suggests, in my view, they are co-equal conditions that must both be met before an exception to copyright infringement is recognized. It does not suggest, however, that paragraph (

b) can be read to rank ahead of and to overwhelm paragraph ( d ). Both provisions a

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