Bill C-11:

An Act to amend the Broadcasting Act and to make related and consequential amendments to other Acts Written Brief of TELUS Communications Inc. submitted to the Standing Senate Committee on Transport and Communications 22 September 2022

1 Introduction 1. TELUS Communications Inc. (“TELUS”) thanks the Standing Senate Committee on Transport and Communications for the opportunity to provide these comments and recommendations regarding Bill C -11:

An Act to amend the Broadcasting Act and to make related and consequential amendments to other Acts (“Bill C-11”). 2. While Bill C -11 makes important progress in updating the CRTC’s powers under the Broadcasting Act (“Act”), it fails to address two key issues: ● It does not address the market power held by Rogers, Bell, Quebecor, and Shaw.

Even today, the CRTC struggles to effectively regulate the anti-competitive incentives and behaviour of these vertically integrated entities (“VIs”) that own both television distribution services, and the television channels that they distribute; and ● It does not ensure that the CRTC will continue to be able to resolve disputes involving services that operate online . The power to resolve disputes involving online streaming services is essential to the CRTC’s ability to properly supervise and regulate the broadcasting industry in Canada.

The Act currently allows the CRTC to intervene in such disputes, but Bill C -11 inadvertently removes that power. 3. Bill C-11 can mitigate these issues by clarifying that the CRTC’s dispute resolution power applies to disputes between all broadcasting undertakings, instead of only to disputes between broadcasting distribution undertakings (“distributors”, or “BDUs”) and programming undertakings (“broadcasters”). TELUS recommends that the Senate amend

section 10(1)(

h) of the Act as follows: 10(1) The Commission may, in furtherance of its objects, make regulation (

h) for resolving, by way of mediation or otherwise, any disputes arising between programming undertakings and distribution undertakings broadcasting undertakings concerning the carriage of programming originated by any of the programming broadcasting undertakings;

2 Issue 1: The CRTC should be empowered to protect Canadians from higher prices and reduced access due to anti-competitive behaviour by vertically integrated companies What is vertical integration? 4. Vertical integration occurs when the supplier and the purchaser are the same entity. In the case of the broadcasting industry, this is most commonly seen when a broadcasting distribution undertaking (“BDU”) that owns cable or satellite services acquires a programming undertaking (“broadcaster”) that owns conventional TV stations or pay and specialty services.

Bell, Rogers, Quebecor, and Corus (owned by Shaw) are examples of suppliers. They produce and/or acquire exclusive rights to media content including news broadcasts, sports coverage, and TV shows. The “purchaser” of the content is also Bell, Rogers, Quebecor, and Shaw, as they distribute t he content to their customers through their cable/satellite/IPTV distribution services. Why is vertical integration harmful to Canadians? 5. Consolidation from vertical integration harms competition because BDUs and broadcasters are no longer on opposite sides of the negotiating table.

Typically, a broadcaster would seek distribution from as many distributors as possible to reach the maximum number of subscribers. Vertically integrated broadcasters are not incentivized to do the same. 6. Companies that are vertically integrated can make more profit by denying competing distributors and their customers access to the content they control in order to drive those customers to subscribe to their own distribution service.

VIs have no incentive to provide that programming to their competitors at a lower price that reflects the decline in viewership, and in fact are incentivized to demand higher prices since it would be more financially advantageous if they were the only ones offering access to that programming. 7. The CRTC has tried to mitigate these anti -competitive effects through regulations and policies, which are typically enforced through its dispute resolution process. However, in the past few years VIs have challenged several of the CRTC’s safeguards in the courts.

VIs have also challenged the CRTC’s jurisdiction to resolve disputes involving video -on-demand services, based on a textual

interpretation of the Act, 1 arguing that the Act only allows the CRTC to resolve disputes between broadcasters and distributors. 8. The legal uncertainty created by these challenges impacts the ability of Canadians to access, view, and enjoy content, since VIs can withhold the video -on-demand content they control from competitors during a dispute to gain leverage to demand higher prices or more restrictive terms. In 2017, the CRTC was asked to confirm that its dispute resolution process applies to video-on-demand services, and, as of writing, it has not issued a decision.

It is therefore clear that the current language of the Act does not provide sufficient certainty for the CRTC to protect Canadians’ interests against the negative impacts of vertical integration. 1 A VOD operator is a unique player within the broadcasting system. While it is classified as a type of broadcaster, the VOD operator acts similarly to a distributor, often acquiring programming from other broadcasters.

3 Issue 2: The CRTC should continue to be able to resolve disputes involving online undertakings so that Canadians are not deprived of access to programming What is an online undertaking? 9. An online undertaking is any broadcasting service offered over the internet, like Netflix, Amazon Prime, AppleTV+, or Disney+. Most online undertakings today are very large foreign- owned companies that have significant market power compared to most Canadian broadcasters and distributors. Bill C-11 excludes online undertakings from dispute resolution 10.

Currently, the CRTC exempts online services from regulation through an exempt ion order known as the Digital Media Exemption Order (“DMEO”). The DMEO requires that online services comply with certain criteria to qualify for exemption. One of those criteria is that the online service is subject to the CRTC’s dispute resolution process. This provides the CRTC with a way to ensure, for example, that when an online service is involved in a dispute it cannot cut off access to its programming to the other party’s customers. 11.

Bill C-11 will remove the CRTC’s ability to apply dispute resolut ion to online undertakings because it introduces “online undertaking” as a new defined term in the Act. Today, Netflix or Amazon Prime are captured by the CRTC’s power to resolve disputes. However, when those companies are classified as online undertakings,

section 10(1)(

h) arguably will not allow the CRTC to resolve disputes in which they are a party. Why is it important that online undertakings be subject to dispute resolution? 12. As Bill C -11 recognizes, online undertakings have become de facto stakeholders in the broadcasting system. They have even started to compete with Canadian broadcasters for the right to exclusively broadcast popular U.S. programming in Canada. For example, Sportsnet is a Canadian broadcaster that has traditionally aired Blue Jays regular season and playoff games.

However, as of this year, AppleTV+ has bought the right to exclusively broadcast several games every year on its online service. Those games are no longer available on any Sportsnet television channels, or on the online service Sportsnet NOW. 13. When a Canadian broadcaster is the only source for certain programming, the CRTC is able to intervene if there is a carriage dispute between that broadcaster and a distributor, to ensure that Canadians are not negatively impacted (for example, by having the broadcaster cut off access to its programming for the distributor’s customers).

The CRTC needs to be able to act similarly when the entity that controls the programming is an online undertaking. 14. The CRTC also needs to be able to intervene in disputes to fulfill its mandate under Bill C-11. Bill C-11 creates a new

section 9.1(1)(

i) of the Act that empowers the CRTC to require online undertakings to carry any programming services that the CRTC deems important for the public to access. This includes access to cultural media such as the Indigenous programs produced by APTN, the Weather Network (which acts as aggregator of emergency alerts), accessible media services which fosters inclusivity for Canadians who are visually or hearing impaired, and programming services like CPAC that cover public and government affairs.

4 This principle is called “mandatory carriage”, and it is meant to protect certain programming services that are essential to the public good. The CRTC mandates carriage of programming services that would not exist in Canada if left to market forces alone. 15. The CRTC enforces mandatory carriage for traditional distributors. The new

section 9.1(1)(

i) will empower it to do the same with online undertakings. However,

section 9.1(1)(

i) will not permit the CRTC to impose terms and conditions when it requires mandatory carriage of a programming service by online undertakings. Effectively, this means that an online service can insist on rates and/or terms that fail to ensure the viability of the program ming service (which, by definition, would not survive if left to market forces alone). Without the ability to resolve disputes between such programming services and online undertakings, the CRTC will not be able to ensure that Canadians have access to programming of national importance on online services, and

section 9.1(1)(

i) will fail to benefit the broadcasting system. Conclusion 16. TELUS believes that the reasonable and focused amendment it has proposed in this brief is important to ensuring the continued health of the Canadian broadcasting system. 17. As the broadcasting market evolves, the CRTC must have the authority to regulate relationships, including disputes, between all of its stakeholders if the need arises. This is essential to ensuring that Canadian broadcasting undertakings are able to survive and adapt to the online distribution environment. 18.

Addressing such imbalances is the best way to ensure that Canada’s domestic broadcasting sector remains healthy and competitive, to the benefit of consumers, and that Canada’s domestic broadcasting sector is capable of supporting Canada’s cultural policy and objectives well into the future.