A brief review of sections 2.1 and 2.5 will show that Canadian content is not—legally speaking—about content at all. It is about the citizenship of certain persons who make TV programs (or create certain musical selections broadcast on radio). Anything produced by a group of Canadian citizens is CanCon, regardless of its substance or thematic content.

The CRTC (1991b, p. 16) itself has noted that the point system is based on "objective measurements" and does not allow it to "consider more subjective elements which are reflected in the new Broadcasting Act. No points are awarded, for example, for the theme of a program, even if it were to be authentically Canadian in nature." Of course that begs the question—what themes are "authentically Canadian in nature"? The Group of Seven? Hockey? Canadian content regulations? Separatism in Quebec? The importance of unemployment compensation in the Maritimes? Official bilingualism?

The significance of the legal definition of "Canadian" television programs can best be seen by considering two sets of examples. If a group of Canadian citizens made a television program about iguanas, the history of the Albanian labour movement, Pathet Lao folk songs, the weapons of Teutonic knights, medieval Spanish poetry, moon rocks, the works of a 14th-century Chinese author, the importance of cricket to old Etonians, the military campaigns of Alexander the Great, the voting laws of Australia, or Pol Pot's political philosophy—all would be classified as Canadian content in terms of the regulatory requirements. On the other hand, if a group of foreigners (even former Canadian citizens) made a television program dealing with the political philosophy of Sir John A. Macdonald, the ranching culture of southern Alberta, the spiritual life of Mackenzie King, the rise of the Parti Québecois, any of Pierre Berton's books about Canada, the history of the CBC and CRTC, the growth of minor league hockey on the Prairies, the League for Social Reconstruction, the hobbies of John Diefenbaker, or even Canadian content regulations—none would qualify as Canadian content.<$FOne does not want to overemphasize the importance of theme as a possible substitute or extension of the present troubling definition of Canadian content. A reviewer suggested that Canadian content should include (1) the published childhood memories of an immigrant to Canada, (2) performances of classical music by Canadians, even if recorded abroad. But it should give far less weight to post-production outlays on accountants, lawyers and technicians, even if they are Canadians, as it smacks too much of industrial policy (recall section 7).>

Acheson and Maule (1990, p. 286) provide another interesting example related to a television program:

Consider an imaginary program which provides a sensitive account of the mistreatment of a Canadian minority. The program is written, created, and distributed by Canadian citizens, but is produced by a philanthropic group based in another country. The program fails to qualify as Canadian under the present system because of the nationality of the producer.

The Ottawa Citizen in a recent editorial discussed the legal definition of a "Canadian recording" as follows:

Rhapsodic odes to Vimy Ridge, Foster Hewitt and P.E.I. have nothing to do with it. CanCon declares as "Canadian" any recording that scores sufficient points, which are earned by having a Canadian artist, producer or lyricist involved, or by being recorded in Canada. Jobs, not content, count.<R><R>So when Canadian singer Alannah Miles crooned about Mississippi and that "slow Southern style" in "Black Velvet," CanCon gave it the Maple Leaf seal of approval. Ditto for Amanda Marshall's "Birmingham" (that's in Alabama, for anyone who hasn't been south of Windsor). All sorts of country artists singing in fake Nashville drawls score, too, because they have Canuck passports tucked into their cowboy boots.<R><R>In fact, very few Canadian recording artists actually make clear references to things Canadian because they know the real prize, the American market, won't know what to make of them. That's not an unintelligent or unpatriotic decision. But it does mean Canadian recording has precious little to do with Canadian culture. (December 7, 1997)

Prof. Tom Henighan (1996, p. 50) calls the Canadian content criteria used by the CRTC for TV programs "bizarre." Agreed. But how many Canadians understand what Canadian content really means?

Therefore, it is not Canadian themes, history, institutions, or values that are being directly or indirectly subsidized, it is those Canadian persons who choose to make their living producing (using the term broadly) TV programs or creating musical recordings (very largely pop music). If there is no substantive content that is recognizably Canadian in what is legally defined as "Canadian content," how can these regulations be expected to "strengthen Canadian identity and enhance cultural sovereignty"?

⁷⁴ The effect on social welfare depends upon whether the benefits of the change in distribution offsets the losses due to the reduction in efficiency.

Anderson (1992, p. 166) argues that Canadian content laws with respect to television, "inadvertently or otherwise," promote the policy objective of "increasing program diversity." While they may not be a welfare-increasing policy instrument, "quotas ... may produce a Pareto superior mix⁷⁵ of programming" (Anderson, 1992, p. 166). Program diversity "can refer to program categories (drama versus sports), or cultural distinctions (domestic versus imported)" (Anderson, 1992, p. 167). The former address the policy objective in the Broadcasting Act that programming be "varied and comprehensive, providing a balance of information, enlightenment and entertainment."

After reviewing the relevant economic theory, Anderson (1992, p. 168) concludes that it holds that "without regulation ... less than the optimal diversity is expected since minority groups [preferences] are underrepresented." The main reason is that with advertiser-supported television, the set of programs available reflect an all-or-nothing type of voting. However, with a subscription system, particularly if each program can be purchased separately, a type of "proportional representation" occurs.⁷⁶

The simulation by Anderson indicated that CanCon regulations resulted in more diverse programming than would occur with unregulated profit-maximizing programming. However, "there is no strong support ... for the view that these regulations result in a broad shift from entertainment information [programs] because broadcasters substitute variety for drama, both being in the entertainment category" (Anderson, 1992, p. 173). The content constraint, Anderson said (1992, p. 172), is "most likely to be binding ... between 7:00 and 11:00 [pm]."

These results are interesting, but two things should be noted. The viewing data for the simulation were collected from April 1987. Second, as the number of specialty channels, bundles of channels (tiers), and diffusion of pay-per-view channels increases (and it has done so greatly since 1987), the diversity effect due to the CanCon regulations is likely to be less. In the long-awaited future of the "500 channel universe," which may be delivered over the Internet with broadband capacity to the home, the CRTC will not be able to claim that it increases the variety of programs available to Canadians.

Poschmann (1998) helps to clarify the debate over the proposition that CanCon rules limit the choice of programs available to TV viewers. First, he argues that everyone agrees that if the broadcast spectrum is limited (i.e., when only over-the-air TV is available), the CRTC "must carry" rules "unambiguously reduce choice." This, he suggests, is the same thing as reducing broadcast content diversity. ⁷⁷

Second, Poschmann (1998) reminds us that between 1994 (when US DTH satellite services were first available) and September 1997 (when <%-2>the first Canadian DTH broadcaster began service)<%0>, the federal government made a considerable effort to prevent Canadians from receiving signals from US DTH broadcasters (the so-called "grey market"). Indeed, Industry Canada said it was illegal to receive such signals (Globe and Mail, June 24, 1996, p. A18). A judge later held that it was not (Vancouver Sun, November 14, 1996, p. D12). At its peak, an estimated 300,000 households ignored the fulminations of the federal government. In general, Poschmann states that the CRTC "has been intentionally and explicitly limiting access to ... new technologies." These technologies, beginning with terrestrial cable TV, then DTH and other wireless cable systems, deliver more channels than over-the-air broadcasting and so restrict viewers' choices less.

It must be emphasized that the core objectives of CanCon requirements cannot be achieved unless the set of TV programs (or musical selections on radio) available to Canadians is modified. The objective of the CanCon rules is (1) to increase the supply of Canadian programs broadcast on TV, and (2) to increase the consumption of Canadian programs by Canadians. Otherwise, the CanCon policy is symbolism for nationalists and job creation for the people who make Canadian programs. Even if the total number of different programs available to each person in Canada is not reduced, the composition of the set of such programs is necessarily altered, i.e., the relative number of Canadian programs is increased. If this were not the case, there would be no point in having a CanCon policy that is designed to increase the number of Canadian programs available to Canadians in the expectation that they will consume more CanCon and less foreign programming.

In practice, CanCon requirements restrict viewers' choices because any increase in Canadian programs has had to come at the expense of fewer foreign programs, ceteris paribus. Why? Because of these key facts: (1) The number of over-the-air TV broadcasting licences in most urban areas is limited by the Department of Industry because of spectrum limitations, i.e., so as to avoid conflicting signals. (2) The number of channels which can be provided by cable TV distributors is also limited although it has increased significantly.⁷⁸ We are not yet in the "500-channel universe," although DTH satellite broadcasters can offer two or three times the number of channels as cable companies, depending on the equipment they use. (3) For decades, the CRTC licensed only one wireline cable TV distributor in each local area, so that each was a monopolist. (This is changing with competition from DTH, and terrestrial "wireless cable" in some areas.) (4) The CRTC requires that all broadcast distributors provide exactly the same set of channels in the "basic" package, and this set is chosen by the CRTC.⁷⁹ (5) All BDUs are limited to one foreign specialty channel for each Canadian one. This rule thus limits both the ratio and absolute number of non-Canadian specialty channels where the cable TV distributor has no excess capacity.

It is useful to compare the constraints imposed on TV viewers in the name of CanCon to those imposed on radio listeners. TV viewers (if they pay for all the extra tiers) have, on average, access to over 70 channels. Over half of these are owned and controlled by Canadians. If CBC-TV, with its very high levels of CanCon, is not to your taste, you can switch to any one of the others and you are likely to find more foreign programs (most likely made in the US). Of course, there are fewer foreign programs than there would be in the absence of the elaborate web of CanCon regulations.

With radio, the situation is rather different. All the stations licensed in Canada must be owned and controlled by Canadians. All have to meet the 30 percent quota of "Canadian" musical selections (35 percent effective January 1, 1999). There are no US-owned radio stations in Canada. ⁸⁰ While there are US-owned specialty channels in Canada and the major US networks are available in the basic and first optional tier (bundle) of TV channels, there is no analog in the case of radio. If you live near the US border, then the AM signals from nearby US cities are available. But US FM signals are not available since they have a much shorter range. There is another option. DTH satellite broadcasters also offer packages of audio channels. So you can get the music, but not the news, sports, and other elements of radio.

I conclude that Canadian TV viewers have a wider set of opportunities to avoid Canadian content than do radio listeners. But the CanCon quota for TV is 60 percent while it is 30 percent for radio (in terms of musical selections). In both cases, new technologies may allow viewers and listeners to get beyond the reach of the CanCon nannies in Ottawa (see below).

To summarize, there is no question that the CRTC's Canadian content requirements have increased the supply of programs (or musical selections on radio) which meet the legal definition of a "Canadian program" (or "Canadian" musical selection). Supply has been increased in the sense that the total number of hours of "Canadian programs" being broadcast (or distributed over BDUs) is larger than it would be in the absence of such legal requirements. (In the next section I examine the issue of whether the consumption of Canadian programs has increased.) But to increase the supply of CanCon, it has been necessary to reduce the supply of foreign programs. This has not been the result of the decisions of TV viewers voting with their channel selector. This restriction on foreign programs has been made by a handful of CRTC commissioners under the broad discretion granted to them by the cabinet.

Is there any link?

The advocates and defenders of Canadian content requirements simply assume that these requirements contribute importantly to a desirable form of national identity for Canadians and that they contribute to cultural sovereignty (an evocative, but undefined term). They do not refer to any evidence as to the existence of such a link between the policies and their putative objectives. ⁸¹

What kind of research results would be useful in establishing the link between CanCon requirements and Canadian identity? First, we would need to know whether mandated increases in the percentage of TV programming time which must be devoted to Canadian programs (overall and/or during prime time) and/or the reduction in the ratio of foreign to Canadian channels provided by cable TV and other distribution undertakings have resulted in the average viewer actually watching more hours of Canadian programming. This is a critically important relationship because if the average consumption of CanCon does not increase, ⁸² how can the alleged beneficial impact on national identity be achieved?

The average consumption of Canadian programs depends upon two factors: (a) trends in the average total number of hours Canadians spend watching TV, and (b) the fraction of total viewing time spent watching Canadian programs. The average total number of viewing hours per week declined somewhat between 1979 and 1996, but the percentage of time spent viewing CanCon increased slightly for both anglophones and francophones.⁸³ (See tables 2, 3, and 4.)

Second, if the regulations result in more viewing of CanCon programs, how is this fact associated with people's attitudes, values, and beliefs that make up what is called "national identity" in the Broadcasting Act? There are obvious problems here. A key one is specifying what constitutes a greater or lesser degree of "national identity." There is bound to be substantial disagreement over what cluster of values, attitudes, etc., represent national identity. Also, it has been suggested that the Broadcasting Act is not aimed at fostering a single Canadian identity. Rather it acknowledges that there can be a multiplicity of such identities and even encourages this diverse expression of Canadianism. If we accept this reading, we still have to determine which identities are deemed to be authentically Canadian and which are not. One cannot tell from reading the Act. It is all left up to the CRTC and it has provided very little guidance. The problem appears to be less severe when Canadian programs are defined only in terms of the citizenship of the people who make them. Further, if the CRTC promotes multiple national identities, would that be consistent with Ottawa's desire for greater national unity?

At a conference in Toronto in mid-October 1997, answers by David Colville, the vice-chair of the CRTC, to several questions posed by the author indicates a very serious problem with Canadian content regulation. Colville was first asked if he knew of any studies showing a link between Canadian content requirements and any measure of national identity or cultural sovereignty. He said that he did not. He was then asked if he was embarrassed by the fact that the CRTC's "Vision <%2>Statement" of September 1997 suggested that<%0> CanCon requirements might be expanded, yet the agency had no evidence that the policy had strengthened national identity although it had been in place for several decades. He said, simply, "no." In other words, the absence of any link between the CanCon regulations and their intended effects does not matter to the CRTC. If it doesn't, what is the objective of the CanCon regulations?

Third, even if "Canadian identity" can be defined and measured in a valid and reliable (and acceptable) way, it may be very difficult to measure the incremental effect of changes in viewing "Canadian" programs on television from many other variables which are likely to affect the index of national identity. This would require an elaborate, multi-variate statistical model, and such models in practice have their own methodological problems. Further, what if the coefficient is statistically significant, but very small? Then it is proper to ask if the substantial costs are worth the tiny beneficial result in terms of national identity.

Fourth, ideally, the model should distinguish among types of Canadian programming in determining the influence of viewing more Canadian programs on an individual's sense of identity. ⁸⁴ This greatly complicates the statistical modelling and estimation—not to mention the collection of the primary data on TV viewing (usually done by means of a self-reported diary, not an electronic monitor on what programs were about and who was watching them).

Fifth, suppose a higher percentage of CanCon on TV alienates a significant fraction of the population ⁸⁵ —to the extent that they oppose government regulation of the content of broadcast programs. Would this be evidence of a low or negative score <%2>on the Canadian identity index? How would <%0>researchers "add up" across individuals the increases and decreases in the identity index associ<%-2>ated with viewing more CanCon? Would the scores<%0> of Quebeckers (given the federal government's concern about separatism) be weighted differently than those of persons living in other provinces?

There are obvious difficulties in conducting and interpreting such research. But a critical question remains—why has the federal government expanded Canadian content requirements over the years, and extended them to new methods of distributing TV programs apparently without such research? Is this just an expensive federal policy being conducted on the basis of the "gut feel" of cabinet ministers? Or is it a useful policy to deliver economic benefits to well organized and vocal groups whose members are the suppliers of CanCon?

As described in section 3, the mandated supply Canadian musical selections on radio is to be increased on January 1, 1999 (see CRTC (1998b)). What is the evidence that almost three-and-a-half decades of a 30 percent quota has strengthened the Canadian identity? As the recent hearings on the radio industry indicated, the content quotas for Canadian recordings seem to have had very little impact on the sale of "Canadian" recordings (Graham, 1997). Further, polling done for the Canadian Association of Broadcasters indicates that Canadians do not want to hear more than 25 percent CanCon on radio (Scoffield and Brehl, 1998 p. A3). At the same time, Canadian singers (e.g., Celine Dion, Alanis Morissette, Shania Twain, and k.d. lang) are huge stars in the US and in other countries. Their success has not been built on CanCon requirements for Canadian radio stations. Finally, the CRTC didn't cite any research indicating that Canadians' sense of identity had increased or decreased when it increased the CanCon quotas in its recent radio decision (CRTC, 1998b).

Higher cable rates; higher costs; higher taxes

Canadian content regulations increase the price of television services to Canadians in several ways:

First, cable TV rates ⁸⁶ for the basic tier (which are set by the CRTC) are increased by the fact that the CRTC specifies the channels in the basic package and includes several specialty channels which attract a small number of viewers. ⁸⁷ The price which the cable companies pay for specialty channels is also set by the CRTC, but it is set independently of the estimated number of viewers. Further, the CRTC's method of regulating cable TV rates has resulted in the cable companies earning supra-competitive rates of return at the expense of their customers for many years.

Second, for over-the-air broadcasters, on average, CanCon costs more per hour than do imported programs, and the advertising revenues from CanCon programs are generally smaller than from imported ones because the audience they generate is usually smaller. ⁸⁸ Thus, overall advertising rates may be above what they would be in the absence of CanCon. Consumers pay for this advertising in the prices of the products they buy.

Third, there is a 5 percent tax on the gross revenues of all broadcasting distribution undertakings to help finance the Canada Television and Cable Production Fund (recall section 2). It is passed along in the subscription rates paid by consumers, although the tax component is not identified in the monthly cable fee. David Ellis, a prominent media consultant and author on media issues, stated that a similar tax for the predecessor fund was akin to taxation without representation since it was paid for by consumers who may not have realized where their cable dollars were going.<%8>

Fourth, there are the subsidies. The extent of government (really taxpayer) subsidies for Canadian TV programs is illustrated by the 13-episode drama "Flesh and Blood" to debut in January 1999. The cost per episode is $1,089,614 (Saunders, 1998a, p. A8). Public money accounted for 50.1 percent; the rest was private money. The public sources included the licence fee program of the CTCPF ($153,846), Telefilm Canada ($230,769), federal tax credit ($84,615), and provincial tax credit ($76,923). The producer's investment was only $6,154 per episode. For a TV series for CBC produced outside Toronto or Montreal and costing about $800,000 per episode, public money would cover 83.5 percent of the total cost (see Saunders, 1998a, p. A8).

Telefilm Canada indicates that in 1996/1997, for all genres of English and French TV programs that qualified as CanCon, Telefilm provided 30 percent of the total cost (through its part of the CTCP Fund), the licence fee program of CTCP Fund provided 13 percent, and tax credits provided 16 percent (Globe and Mail, May 2, 1998, p. D6). This 59 percent of the total understates the taxpayers' share because payments by CBC were not broken out of the Broadcasters component (20%).

The economic costs of "broadcast nationalism" are also reflected in higher taxes Canadians pay in order to finance the CBC because of its special responsibilities to showcase Canadian programs and because CBC Radio does not sell advertising time ⁸⁹ while CBC-TV's ad revenues cover only a modest part of its costs. The CBC's share of total radio and television audiences has declined significantly over the past decade. Finally, the CanCon rules impose an "inconvenience tax" on Canadians because of the prime time quota for Canadian programs. As a result of the rule, more preferred programs are broadcast at times less preferred by Canadians. ⁹⁰

Regressive tax

The cultural elite and nationalists have imposed what amounts to a regressive tax on TV viewers. Television appears to represent a more important leisure activity for low-income households than <%-2>high-income ones. Canadian content requirements <%0>raise cable (and other BDU) rates (and they alter the set of programs available to viewers to increase the proportion of Canadian ones). These higher rates mean that some poor households will not be able to afford cable TV at all (see below). For those who do subscribe, expenditures on cable TV amounts to a larger fraction of the income of poorer households. Further, the restrictions related to CanCon quotas are likely to be felt more by such households as they have less access to other forms of entertainment. ⁹¹ Thus the poor bear a disproportionate part of the burden for Canadian content. Is this fair?

The Canadian Cable Television Association (CCTA) indicates that in 1997 some 11.3 million homes in Canada had one or more TV sets. Cable TV wires passed in front of or behind 10.3 million of these homes, and 8.2 million were subscribers. Thus, the overall penetration rate is 72.6 percent. ⁹² This is lower than the commonly cited rate of 80 percent because in 1995 Statistics Canada changed the number of TV homes to include 0.7 million seasonal homes and other non-permanent homes.

Statistics Canada indicates that, overall, 74.0 percent of households in Canada had cable TV in <%2>1996 (up from 48.9 percent in 1977) (Sarlo, 1998, <%0>p. 16). The penetration rate varied by income level: 64.0 percent of households in the lowest income quintile versus 83.6 percent for the top quintile (Sarlo, 1998, p. 34). By comparison, there was very little difference in the percentage owning a colour TV set: 96.8 percent and 99.3 percent respectively. For VCRs, the difference was much greater: 62.2 percent for the bottom quintile and 95.9 percent for the top quintile.

Each year the CCTA surveys 1000 households with (terrestrial) cable TV. It has found that the take-up rate for the three discretionary packages of cable channels (excluding pay and pay-per-view) is somewhat higher among low-income households than among high-income households. The latter are more likely to take only <%-2>the basic tier. Moreover, lower-income households<%0> are good customers—they exhibit less "churn" than do higher-income households.

Since both rich and poor customers pay the same price for the same package(s) of cable or other BDU services, the impact of such these tariffs (which include part of the costs of CanCon) is <%-2>regressive. For example, suppose a poor household<%0> has an income of $17,300 (the average for the bottom quintile in 1994—see Sarlo, 1998, p. 15) and a rich household has an income of $107,300 (average for the top quintile families in 1994). A monthly cable bill of $34 ($408 per year) amounts to 2.36 percent of the poor family's income, but only 0.38 percent of the rich family's income.

Some 22 percent of all households in Canada do not have cable TV or any other BDU. ⁹³ It appears that a high percentage of these households are low-income. Poschmann (1998) notes that for the households who do not have cable TV and receive only over-the-air signals via channels 2-13 VHF tuners, "CanCon rules obviously limit choice." In fact, he says, the CRTC intentionally exploited this fact by mandating that a certain number of Canadian channels be slotted by the BDUs at the low end of the dial. "This is an unambiguous and intentional income reduction imposed by the agency in pursuit of its goals" (Poschmann, 1998). He notes that as changing technology widens the spectrum it is necessary for consumers to invest in new equipment if they want to minimize the restrictions on their choice of TV programs created by CanCon regulations. But low-income house-holds are least able to make the capital investment necessary to reduce the restrictiveness of CanCon regulations.

More coercion than incentives

Canadian content regulations rely heavily on coercion to achieve their objectives. Coercion exists in several forms: (1) the 50 percent quota for CanCon on TV during prime time for private broadcasters and 60 percent for the CBC, (2) the overall 60 percent Canadian programs quota for television, (3) the one-to-one ratio for Canadian-to-foreign specialty channels, (4) the set of channels which must be included in the basic tier, which is specified by the CRTC, and (5) the definition of "Canadian programs" which requires that—regardless of thematic content—the people mainly responsible for the production be Canadian citizens. ⁹⁴ In general, command and control regulation is the predominant tool dictating that people produce and distribute Canadian content, rather than financial incentives inducing them to do so. It should be noted, however, that the CRTC has recently moved to make greater use of overt taxes and subsidies to finance CanCon, specifically, the Cable Production Fund created in 1994. This fund was expanded by taking money out of general revenues when the Canada Television and Cable Production Fund was announced in September 1996 and extended to 2002 in 1998.

John Haslett Cuff, then the Globe and Mail's television critic, points to the CRTC's role in restricting choice with respect to specialty TV channels. He asks,

how exactly did the Women's Television Network acquire the special status that allows it to appear on "basic cable" while its competitors are only on extended cable? Still, the only important issue here is choice, and Canadian viewers are not being given much. The licences are arbitrarily granted by the CRTC, and the viewers have to carry the freight whether they like it or not. And licensing more make-work projects (new channels) to keep the cast-offs and refugees from other networks employed does not sit well with many consumers. (Globe and Mail, December 31, 1994, p. C6)

Columnist Terence Corcoran (1994, p. B2) described the CRTC's decision to add 10 new specialty channels (seven in English; three in French) as "pay-or-else TV" which, he said, "is a monopoly system of television licensing that allows a broadcaster to collect a tax from all cable subscribers, regardless of the subscribers' viewing preferences, or their ability or willingness to pay." In his view, the CRTC's decision on the batch of specialty channels which officially began service in January 1995 was "another large-scale expansion of the system of cross-subsidization that takes money from one group and shifts it over to another group using regulations and monopoly structures." The decision provides only "the illusion of choice"; in fact people are being "forced to pay more for programs they may not want" (Corcoran, 1994, p. B2) The problem is partly due to the limitations of the present technology—it does not permit consumers to purchase each channel on an individual basis and so assemble exactly the set of channels they want. This problem is expected to be solved soon. But even if it is solved, the CRTC may continue to dictate the composition of the basic package of channels which every subscriber receives.

One way to appreciate the command and control nature of CanCon regulations is to consider them from the perspective of a non-Canadian player. For example, here are a few of the rules to which US-owned specialty channels are subject: (1) US services which are directly competitive with a Canadian service will not be licensed by the CRTC; (2) US services are only available on a discretionary tier, i.e., they can't be included in the basic tier received by all cable TV customers in Canada; (3) US service can be de-licensed (bumped off) if a directly competitive Canadian service is licensed; and (4) the number of US specialty services offered by any cable company cannot exceed the number of Canadian services (Grant, 1996, p. 29).

A study of TV broadcasting policies in other countries found that Canada had the highest domestic content quotas. New Zealand has no content requirements. Even France requires only 40 percent French content (and 60 percent European content). The EU has a "continental" requirement of 50 percent (i.e., each country must reserve 50 percent of the schedule for EU content regardless of which member country). Australia has a 55 percent domestic content quota (CAB, 1998d, p. 37).

An opaque policy

Canadian content regulations are vastly more complex and obscure to all but the cognoscenti than, say, economic regulation (price and entry controls) of the airlines was in its hey-day. ⁹⁵ This has several effects: the regulations amount to a full-employment program for lawyers and lobbyists who specialize in broadcasting regulation. Second, complexity reduces the set of active, knowledgeable observers, commentators, and even intervenors. It makes the regime unintelligible to the average citizen. Third, the very term used to describe the regulations, "Canadian content," is misleading. As has been emphasized earlier, the content of "Canadian" TV programs is irrelevant in the legal definition. The definition is based entirely on the citizenship of certain persons who help to make the program. It is hard to imagine that the average citizen understands this fact. Fourth, in the face of complexity, "ordinary folk" are reduced to symbolic utterances based only on intuition and feelings. Complexity engenders frustration for those who disagree (or are likely to disagree) with the policy's observable consequences. Fifth, complexity also creates a fertile field for "games" by the direct participants—thus making the decisions of the regulators very important. As will be discussed later in this section, this confers more discretion on individual CRTC commissioners (and staff as advisors). Finally, obscure and complex policies enable even important consequences to be hidden, for instance, elaborate tax and transfers regimes can be effected by a welter of regulations, and those taxed may be unaware that they are being taxed.

CanCon as industrial policy is neo-mercantalism

It is evident that Industry Canada and Heritage Canada take a neo-mercantilist approach to justifying Canadian content regulations (recall section 6). This approach emphasizes the interests of producers rather than consumers. Presumably neither department has read Adam Smith's 1776 injunction to the effect that the purpose of an economy is to deliver benefits to consumers. Hence, government should attend to the interests of producers only to the extent that by doing so, the interests of consumers will be advanced. The federal government has turned this intelligent approach on its head. In effect, it has put in place (and continues to expand) policies which systematically exploit consumers so as to benefit producer interests.

The key point is that the federal government has used a variety of policy instruments, such as taxes, subsidies, tax expenditures, regulations, and direct expenditures, to expand the output of cultural industries in Canada and to try to get citizens to consume more Canadian content. It certainly appears that the supply of the legally defined product has increased, but at the cost of higher taxes, restricted viewing and listening choices, and higher prices paid by citizens as consumers and taxpayers. In short, the policy has succeeded in the same way that robbing Peter to pay Paul succeeds from Paul's point of view.

Relying more heavily on the industrial strategy approach may be more dicey than the federal government realizes. First, this approach treats cultural products as commodities, which is how <%-2>the US, in pressing Canada to end CanCon regu<%0>lations, is said to view culture. Second, the industrial strategy approach exposes the rent-seeking behaviour of the suppliers of CanCon. The industrial strategy approach is not endorsed in the Broadcasting Act's set of objectives. In any event, it appears that the biggest pop music stars are not the product of CanCon quotas on radio.

There has been a lot of hype about the new Canadians divas who have zoomed to the top of the charts, giving the impression that there's a bustling indigenous pop scene in this country. In fact, the singers you hear so much about are Canadian only in their birth location. Sarah McLachlan, the newest darling, appeals not to a nation but to a generation. Shania Twain is not so much Canadian as US country. Alanis Morissette wasted no time leapfrogging Canada for the bigtime in the US. Pop music is now controlled by six multinationals, and their Canadian branch plants spend 24 hours a day talent spotting. The globalization of pop music (can you really tell that Bryan Adams is Canadian?) has created one big homogeneous sound. (Mallet, 1998, p. D3)

Recently, an editorial in the Ottawa Citizen pointed out that the cultural policy machine in Ottawa confuses efforts to tell "our stories" with subsidies and other forms of government assistance to profit-focused cultural industries.

Oddly, that's why it's critical to make a sharp distinction between industrial development and the telling of Canadian stories. The [television production and] film industry understandably wraps itself in the maple leaf and tries to portray its corporate interests as synonymous with those of Canadian culture. That self-serving myth is also promoted by [Heritage Minister] Ms. Copps, who persists in referring to Canadian-produced film and television as "our stories." In fact, if Canadian production always meant Canadian stories, our culture would not only be secure at home, it would be washing over the rest of the planet: we are the world's second largest exporter of television programming and our film and television industries together are worth $2.8 billion a year.<R><R>But the vast majority of that production is <%-3>just ersatz Americana, with Toronto tricked out<%0> as Chicago or New York. It's a legitimate and welcome industry, but it has nothing to do with telling Canadian stories to Canadians....<R>Our television and film industry is just a private, for-profit business like any other. And as such, film and television is no more entitled to protective tariffs, quotas, dedicated taxes, or tax breaks than is the widget industry. (Ottawa Citizen, February 14, 1998)

Canada: the newest cultural imperialist

Cultural nationalists strongly condemn the export (and voluntary import) of American TV programs and musical recordings to Canada as a form of "cultural imperialism." Yet they are strong supporters of government efforts to increase the export of Canadian TV programs and musical recordings. Surely the export of Canadian cultural products amount to cultural imperialism by Canada.

Canada's Minister of Heritage, Sheila Copps, has said, "The Hollywood juggernaut is trying to take over the world. It's ... American imperialism and I think that it's not just Canada that is at risk, it's other countries around the world" (Eggertson, 1997, p. A12).

The latest ex post facto justification for various policies related to culture is that they promote the export of Canadian cultural products. For example, Statistics Canada (1995, p. 34) states that increasingly policies are being developed to promote Canadian culture abroad; in fact, this is now an important dimension of Canadian foreign policy. Future growth of the sector is thought to be dependent upon gaining acceptance in foreign markets.

A 1997 newspaper story reported that "the export boom [for Canadian productions] has made Canadian film and television production a hugely successful industry. Our largest independent producers, such as Alliance and Atlantis, have offices around the world and impressive reputations in the global market. However, this expansion has led to criticisms that they all make their decisions from Los Angeles and are losing interest in their own country's stories" (Saunders, 1997, p. C3). According to the Canadian Association of Broadcasters, the sale of Canadian TV programs around the world increased by 287 percent from 1992 to 1996. One of the biggest exports is children's programming (Brehl, 1998c, p. B4).

Ron Waters, president of CHUM Ltd., recently described the TV program exports in his company as follows:

we export a large volume of Canadian programming, including a significant number we produce ourselves. From Fashion TV to New Music, CHUM television has successfully syndicated hundreds of hours of Canadian shows around the world. (CRTC, Group License Consultation, March 4, 1998)

Growing exports of any product made in Canada appeals to many Canadians' "industrial virility complex"—proof of the quality and importance of any output made in Canada is that it finds a market abroad. The fact that the output is subsidized is ignored. Canadians, it seems, desperately need the approval of foreigners (particularly Americans, and there's the rub) to overcome their primal insecurities.

The standard argument is that the CanCon regulations have created a larger domestic market for the suppliers of CanCon. This larger market, in turn, it is argued, has made it easier for Canadians to sell cultural products, notably recorded music and TV programs abroad. For example, Chater and Robertson (1996, p. 27) state:

This success in Canada has a resulting "springboard effect" on the international market for Canadian music, so that Canadian composers, lyricists, songwriters, and their publishers earn more royalties from outside Canada than they do within their own country ($18.5 million in 1995).

In April 1997, the federal cabinet said that one of the "priority objectives of the government" was to "encourage the availability of Canadian creative productions in the international marketplace" (quoted in Bertrand, 1997c, p. 2). Although there is nothing in the Broadcasting Act about this policy objective, the export of CanCon now has official recognition. Is cultural imperialism now federal policy? Perhaps the current government believes that by their nature Canadians cannot be cultural imperialists. Certainly, Canadians do not think of themselves as imperialists. That is a role they see occupied by Americans, whether by means of military or economic power, or more recently by the diffusion of mass entertainment products (movies, TV shows, books, magazines, music videos, tapes/CDs). Much of what cultural nationalists call the Americanization of Canada is attributed to the high level of consumption of US-made cultural products in Canada. At the same time, the same nationalists are extremely proud of any evidence that Canadian cultural products are finding a market abroad. ⁹⁶

One irony of the new crowing about exports ⁹⁷ (e.g., "Canada is now the world's second largest <%4>exporter of TV programs"—see Heinzl, 1997, <%0>p. D1) is that it is based largely on producing products that mimic American-made ones. It is important to distinguish programs which are Canadian in origin from those whose substantive content is indistinguishable from the typical American product. As Henighan (1996, p. 26) notes, CanCon regulations have helped Canadian producers to enter foreign markets, but, with few exceptions, the shows look and feel like American productions. Why? Because that's where the money is! Thus, the entertainment culture overshadows aesthetic culture, Canada's or any other nation's, including the US.

CanCon regulations are inconsistent with globalization

Many Canadians have long thought of themselves as outward-looking and willing participants in international diplomacy and international trade. Canada has long supported multi-lateral trade liberalization. The Free Trade Agreement (FTA) with the US came into effect in 1989 and NAFTA followed in 1994.

Cultural industries, however, are a notable exception. Canada's desire to protect those industries is reflected in the "exemption" for cultural industries in the FTA and NAFTA. ⁹⁸ But as Schultz and Audet (1995, p. 26) state, "the insistence that measures be taken to reassert Canada's cultural sovereignty advocated by [the CRTC and Information Highway Advisory Committee] flies in the face of the diminished economic sovereignty which Canada has endorsed through its ratification of the three trade treaties."

The FTA provides for the almost complete exemption of cultural industries from most of that Agreement's obligations, except Articles 401 (Tariff Elimination), 1607 (divestiture of an indirect acquisition), 2006 and 2007 (re: retransmission rights and print-in-Canada publishing requirements). But Article 2005 of the FTA provides that Canada or the US may retaliate against the use of the cultural exemption by the country by taking actions of "equivalent commercial effect." Note that this is a rather unusual provision and that the retaliation could well occur outside cultural industries. However, the US right to retaliate is limited to measures inconsistent with the FTA, not NAFTA, and so cannot be exercised with respect to new areas covered by NAFTA such as intellectual property. In addition to the cultural industries exemption, Canada also maintained the ability to review all foreign investments in those industries (Appleton, 1994, p. 191).

Appleton (1994, p. 191) concludes that the cultural industries exemption is "more diplomatic in nature than legal" since it does not protect Canada from retaliation if it relies on the exemption. Given the power of cultural nationalists in shaping Canada's policies, it seems reasonable to expect them to persist in protectionism for cultural industries. The result may be to sacrifice other interests to keep such protectionism in place.

The federal Minister of International Trade, the Hon. Art Eggleton, in a speech a few days after the initial World Trade Organization decision on Canada's policies to protect magazine publishers from the Sports Illustrated split-run edition, suggested that it was time for Canadian culture to "come of age" (Morton, 1997b, p. 8). He noted that Canada's cultural protection rules from the 1960s are being challenged by satellite television, the Internet, and by the US under international trade laws. The instruments of limits on foreign investment and content controls are "blunt instruments: which are being exposed to pressure from liberalized trade." Further, Mr. Eggleton said that "the trend to open markets and communications is global and irreversible." Eggleton cited the work of Christopher Maule and Keith Acheson of Carleton University who argue that Canadian policies "are no longer achieving their purpose...[and] in fact, they are often inconsistent and counter-productive" (in other words, they can stimulate trade retaliation which may hurt the export of cultural products.)

Mr. Eggleton stated that the "communications revolution ... respects neither borders nor regulations." He said that the US government is "looking at all areas—film, television. There's always something that they will find fault with [in] our system of cultural protection.... I think they're on the attack and I think we can't allow ourselves to be piecemealed [sic] one at a time by these attacks." (Eggleton, 1997). ⁹⁹ The Minister argued that one way to guarantee the survival of Canadian culture is to find international markets for our cultural products.

The Minister of International Trade's "dose of reality" in regard to the international implications of Canada's protectionist policies for cultural industries was an anomaly for the Chretien government. ¹⁰⁰

Constraint on freedom of expression

The Canadian constitution guarantees a number of rights and freedoms. Section 2 of the Charter of Rights and Freedoms states that one of the "fundamental freedoms" is <%-2>"freedom of thought, belief, opinion and expression, i<%0>ncluding freedom of the press and other media communications." However, section 1 of the Charter qualifies the freedoms: they are "subject only to such reasonable limits prescribed by law as can reasonably be justified in a free and democratic society." Do Canadian content regulations meet this test?

Section 3 of the Broadcasting Act seems to have been put in place to try to justify the constraints on freedom of expression inherent in some of the CanCon regulations. It states that the act "shall be considered and applied in a manner that is consistent with the freedom of expression and journalistic, creative, and programming independence enjoyed by broadcasting undertakings." With respect, this appears to be pious nonsense. To begin with, the statement is almost circular. It says that broadcasting undertakings are entitled to as much freedom of expression as is consistent with the programming independence normally enjoyed by broadcasting undertakings. Since CanCon regulations circumscribe the programming independence of broadcasters (e.g., they must air over 60 percent CanCon), the Broadcasting Act only guarantees broadcasters the "fundamental" freedom of expression within that limited domain.

Further, how can a broadcaster have "programming independence" if he or she is subject to scores of rules regarding Canadian content. To be sure, a radio station is free to choose among "Canadian" musical selections to be broadcast—provided that 30 percent of all its selections meet the legal definition (35 percent effective January 1, 1999).

Freedom of expression has two sides. The first side is the right of the speaker, author, publisher, TV station, radio broadcaster, producer of TV shows, and creator of musical recordings to say what they want to say, subject to very, very few constraints. ¹⁰¹ These constraints must be justified and be consistent with the values of a free and democratic society. The second side is the right of people on the other side of the exchange: listeners, readers, viewers, and "consumers" of what is expressed—that is, the freedom to be informed, entertained, enlightened, or even to "veg out" in front of the television screen. If the Canadian government is allowed to constrain the nationality of programs on TV and musical recordings on radio, we can ask if it will stop there. There is a difference between the imposition of CanCon regulations and government censorship of books, magazines, and newspapers. But that difference is not one of principle; it is of degree of restraint on freedom of expression and its corollary, freedom to read, listen, watch TV, and imbibe other media.

It seems clear that Canadian content regulations violate the spirit, if not the letter, of the constitutional guarantee of freedom of expression. Indeed, it is hard to see how the regulations could stand if applied to booksellers (who are analogous to BDUs) (see Box 1), magazines, or newspapers. If so, why are CanCon regulations constitutional for broadcasting? Is it because no one has challenged them in court? A newspaper recently pointed the way, as follows:

If this absurdity is ever to end, broadcasters will have to stop kissing the government's ring. The Charter of Rights guarantees the "freedom of the press and other media communication." A medium [radio] that is told that at least 30 percent of its communication must be of a certain type and that certain shows are forbidden is not free. The broadcast industry should drag Canada's entire broadcast legislation scheme into court and make its sponsors justify it.<R> To print the newspaper you hold in your hands we did not have to beg, plead, or wheedle before a government tribunal. Neither should Canada's radio and television broadcasters. (Ottawa Citizen, December 8, 1997)

The chair of the CRTC was recently moved to say, "The commission is not a censor." Andrew Coyne (1998b, p. A23) asks, "what else do you call a government body that regulates every second of what is broadcast every day on every station in the country?" Further, Coyne notes that "it's only a short hop from CanCon for songs to CanCon for talk, and after that CanCon for news, I suppose." Can we believe that the owners of newspapers and their readers would tolerate a law which said that at least 60 percent of the weekly total column-inches of news stories must consist of "Canadian content?"

Power, discretion and sycophancy

Parliament has a delegated great deal of authority to the CRTC under the Broadcasting Act. Moreover, it has also given the CRTC extraordinary discretion in creating the complex web of regulations, rules, and less formal mechanisms pursuant to the governing statute. At the same time, the cabinet has a number of tools by which to hold the agency accountable (see Priest and Stanbury, 1998). In practice, the cabinet has been content to let the CRTC do pretty much what it has wanted to do with respect to Canadian content regulations. The cultural nationalists in the CRTC and elsewhere have a forceful cheerleader with the Hon. Sheila Copps as Minister of Canadian Heritage.¹⁰²

Great discretion linked to an extensively regulated industry tends to have several predictable consequences. The first is arrogance. Recall Lord Acton's point that "Power corrupts, and absolute power corrupts absolutely." The corruption of power includes the unwillingness to tolerate criticism or even principled dissent. Second, great discretion and a broad mandate often result in the extension of the regulatory regime by informal means. Because the use of formal powers might be called into question, hints, nudges, and even body language are used to try to produce the desired changes in behaviour.

<%-2>George Jonas (1998, p. A17) has described Canada's<%0> cultural bureaucrats as "clerks with perks" who "have been impersonating show people for the past twenty years" (referred to the distribution of money from the Canada Television and Cable Production Fund) ¹⁰³. He goes on to say that

The atmosphere surrounding cultural bureaucracies is reminiscent of the old Kremlin. The air is redolent with the threat of administrative vengeance. Say nice about us or your projects won't get funded in your lifetime. (Jonas, 1998, p. A17)

Exactly the same point applies to the CRTC. Another result is a high level of sycophancy. This can be seen in the extensive efforts of private TV broadcasters to introduce their fall schedule to "senior government representatives and policy makers" in light of the upcoming review of television policy by the CRTC (see Winsor, 1998b, p. A8).

The power of the CRTC as regulator (and the policy mavens in Heritage Canada) is such that it inhibits dissent among those it regulates. The agency's tacit censorship was on display at the recent Banff Television Festival. A TV columnist described the situation as follows:

Such is the power of the Canadian Radio-television and Telecommunications Commission in making policy that only the most courageous or deranged TV producers and executives would dare speak out against its representatives. There were no such brave hearts in evidence at Banff, unless you count a few producers who complained about the complicated forms they had to fill out and a provocative American who tried to challenge Canadian-content regulations (and was met with a stream of bureaucratic bafflegab). Most of the other comments from the audience were couched in the kind of worshipful language that omnipotent regulators expect of their underlings.<R> These meetings are more a display of power on the part of the CRTC than they are a forum <%4>for expressing new and necessary idea. <%0>(Allemang, 1998a, p. A19)

The Festival was one stop on the CRTC's road show which is part of the review of its television policy. For John Allemang (1998a, p. A19), the road show "is more a process than a result." He continued,

It is about consolidating power in a cultural bureaucracy through an endless series of reviews and hearings, with occasional prizes being offered to the more patient Canadian companies who learn how to play along. It's a cosy arrangement for both sides, which benefit equally from this never-ending quest for that elusive national identity.

The CRTC, senior officials of Heritage Canada, and even the Heritage Minister use their power over TV producers and program distributors to send hints, nudges, and other informal signals to these regulatees. The point is to induce "voluntary" behaviour, and so avoid yet more detailed and coercive regulation. Here is a superb example of the art.

What is the best way to discourage creativity in Canadian television? Is it to have Heritage Minister Sheila Copps stand up in front of the leading members of the broadcast industry and tell them to make socially responsible shows that her preteen daughter can enjoy? Or for federal regulators to enforce Canadian-content quotas that make nationality a more important test than originality? Or invite young independent producers into a room, as CBC's executives did at the Banff Television Festival last week, and tell them that the only way they'll get work is if they adhere to network requirements on equity portrayal and avoid all gratuitous violence, <%-2>sex, and language? (Allemang, 1998b, p. A14)<%0>

The record of the CRTC with respect to Canadian content regulations suggests that its ambitions are nearly boundless. They are frightening to those who believe in freedom of expression and abhor the intrusive state. Canadian content regulations go far beyond what Margaret Thatcher called "the nanny state." CanCon and similar cultural protectionist policies are burdensome and restrictive. Furthermore, the vice chair of the CRTC admits that there is no evidence that they have achieved their stated goal of enhancing national identity and cultural sovereignty. The last result may be attributable to the idea that "cultural nationalism is empty because it cannot possibly accomplish what it seeks" (Bercuson and Cooper, 1998, p. D2). But this does not make the efforts of the cultural nationalists harmless, as I have explained in this study. The political supporters of CanCon need to be confronted with the bad news.

Beyond the nanny state

Whose preferences are to be given priority in determining the supply of TV programs in Canada? There appear to be two main alternatives: (1) individual citizens signalling in a competitive market with their purchase decisions,¹⁰⁴ or (2) a group of regulators (the CRTC) to whom politicians have delegated considerable authority to exercise their discretion in the name of Canadian nationalism. Some help with this issue can be gained from a small anecdote.

When I was about seven years old I lived with my uncle and aunt on a farm about 40 miles west of Winnipeg. The winters were (and are!) long and cold. The trip to school consisted of a walk of over two miles across the snowy fields. Every winter morning I, and several cousins, were required to swallow a large spoonful of cod liver oil. It had a foul taste which was not entirely washed away by the subsequent glasses of orange juice and milk at breakfast. We all complained—loudly. My aunt's unvarying response was: "The cod liver oil is good for you. You will appreciate it in the spring because it prevents colds." So no matter how bad it tasted, it was "good for us." And she decided what was good for us.

Canadian content quotas are based on essentially the same premise. Canadian TV programs are said by the political elite to be "good" for us while unrestricted access to US (or other foreign) programs is "bad" for us. The only people who are fit to play the role of wise mother are regulators who reflect the wishes of cultural nationalists. The preferences of others—no matter how many people object—are to be overridden. There are two key differences between CanCon requirements and my cod liver oil anecdote: first, the people whose viewing choices are being restricted are adults, not children; and second, they are also being made to pay for something they do not want. The slogan of the advocates of Canadian content requirements appears to be, "Protect everyone else from what they want." This is obviously a condescending approach by those who really don't trust their fellow citizens to act in their own best interests. Why is it that ordinary Canadians can marry whomever they want, and have as many children as they want, but can't be trusted to choose the TV programs they want? Is this not ridiculous?

In his pioneering book Cultural Regulation in Canada, Steven Globerman (1983, p. 98) expressed the hope that "a growing antagonism towards restrictions on freedom of choice in broadcast television" might force "Canada's `culture vultures' ... to accept the challenge of justifying their actions." This has not occurred in the 15 years since his book was published. While the antagonism appears to have increased, ¹⁰⁵ the advocates of Canadian content requirements remain firmly in the saddle.

But the power of the elite, cultural nationalists, and rent-seeking suppliers of Canadian content may be constrained and possibly overcome by changes in technology. A Financial Post editorial described the threats to broadcasting regulation as follows:

If we think we can continue to protect our "culture" using traditional border measures, we're sticking our collective heads in the sand. Whether it's in the form of the insidious Internet, or the so-called 500-channel universe, technology for one will be easily clear of any such barriers. (September 17, 1996, p. 20)

Perrin Beatty, president of the CBC since April 1995, has noted that technology and a growing number of means of delivering broadcasting content have eroded the powers of Canadian regulators to shape viewing habits: "There is not a wall so high or so thick that it can't be leapt by a satellite or pierced by a fibre-optic thread." (Globe and Mail, October 30, 1996, p. A4)

The best example, so far, of the possibility that a new technology will permit an "end run" around the multitudinous regulations of the federal government is the "grey market" in DTH satellite broadcasting. I refer to the estimated 200,000 (300,000 according to some reports) Canadian households who have purchased an 18-inch receiving dish and a decoder box and then subscribed to an American DTH satellite broadcaster's services. To do so, they have to make payments from a US mailing address in US dollars. They also have to put up with threats from the federal government.

To protect Canadian DTH satellite broadcasters (who were not yet offering services), ¹⁰⁶ the federal government indicated in June 1996 that it would move to stop the sale of DTH receivers decoders in Canada and which can only be used to receive signals from US DTH broadcasters (Globe and Mail, June 24, 1996, p. A18). On November 13, 1996, Industry Canada published a pamphlet warning consumers, retailers, and distributors against buying and selling unauthorized satellite TV devices. It said they could face criminal charges. The issue was said to concern the rights of Canadian DTH broadcasters to distribute US programs in Canada (Vancouver Sun, November 14, 1996, p. D12). Columnist Terence Corcoran (1996) described the government's action as "the last pathetic wheezes of a government clinging to rules that are obsolete and unenforceable in the face of new technology and market faces." He said the grey market customers were not committing a criminal offence, and so the pressure was being put on the retailers of the hardware to stop the growth of the grey market.

In May 1997, a Saskatchewan Court of Queen's Bench judge ruled that it was not illegal for Canadians to receive DTH signals from US satellite broadcasters (Brehl, 1997d, p. B1).

The significance of the grey market may be far greater than the fraction of Canadian households that received, or continued to receive, their TV programs from a US DTH satellite broadcaster. First, participants in the grey market experienced TV broadcasting free of the heavy hand of CRTC regulations—most notably, Canadian content requirements. The experience of better alternatives causes people to question the regime which prevents them from gaining access to those alternatives. Second, despite the huffing and puffing of government officials, including thinly veiled threats, consenting adults found a way around the regulatory wall. This experience is likely to make them more sceptical of such regulation and the people who advocate it. Third, the success of the grey marketeers provides encouragement to the vastly larger number of citizens who resent the constraints imposed on them by CanCon regulations, but are not willing or able to switch to the grey market.

In the longer term—the next decade, say—the greater threat to Canadian content regulations appear to lie in the World Wide Web and the Internet (see Heinrich, 1998). These vehicles will permit citizens to receive a huge variety of TV programs, and programs from other media, from servers beyond the reach of Ottawa. ¹⁰⁷ Of course, it will still be possible to tax already overburdened Canadians ¹⁰⁸ to finance the production and distribution of CanCon. But it will not—without the intrusiveness of a police state—be possible to get Canadians to consume more CanCon.

Computer columnist Steve Dotto (1998, pp. D9, D11) notes that "the only license you need to start a radio station [on the Internet] is for your software. Your transmitters are servers and you purchase the amount of bandwidth you need from your Internet [service] provider." Listeners can get the software for free at www.real.com provided they have a PC connected to the Net and it has an audio card and speakers. The other side of this possibility is that existing radio seek new listeners anywhere in the world by going on the Net. Indeed, CBC was the first Canadian radio station on the Net.

The extent of competition from foreign stations and from new ones created solely for the Net is likely to loosen the bowels of Canadian radio station executives. Dotto (1998, p. D11) suggests that "the last bastion of traditional radio will be the car ... [as it] makes commuting more bearable."

Summary

Canadian content regulations do not amount to an attractive public policy. The policy fails on a wide variety of criteria: it is allocatively inefficient; there is no evidence that it achieves its stated objectives; it redistributes increasing amounts of income to individuals, few of whom are below the median income; it amounts to a regressive tax; and CanCon creates important restrictions on a fundamental freedom—freedom of expression. This apparent violation of the constitution has never been challenged in the courts. The policy is also an administrative nightmare—it is both opaque except to specialists, and established under a very broad grant of discretion to a regulatory agency which can make subordinate legislation without reference to the cabinet.

It is, however, far easier to criticize CanCon than it is to undermine its political support (recall section 6). Indeed, the persistence and expansion of the regulations (appendix A) strongly suggest that CanCon meets the needs of the party in power. In fact, these regulations have not been the focus of much criticism by any political party.

If the politicians are seemingly satisfied with Canadian content regulations, then the only redress lies with the people. This study is an attempt to tell them that, not only is the Emperor naked, but his body is hardly a thing of beauty.