Introduction

The
Economic Freedom
Network

1. Introduction

Everything about the Canadian content regulations-"CanCon"-reeks of the 1970s ...
the era of bad clothes, bad music and bad government.... CanCon is to left nationalists what Lourdes is to Catholics, and facts cannot dim its aura..."
Ottawa Citizen editorial, December 8, 1997.

Canada has had "Canadian content" regulations for television programs since 1961 and quotas for "Canadian" musical selections played on radio stations since 1972 (see appendix A). These regulations and other requirements that relate to the broadcasting of Canadian content (such as limits on the number of foreign specialty channels) have grown more extensive, restrictive, and costly over the years. For example, effective January 1, 1999, the quota for "Canadian" musical selections on radio stations will be increased substantially (see section 3). The same may soon happen to television programs. Beginning September 23, 1998, the Canadian Radio-television and Telecommunications Commission (CRTC) will hold extensive hearings in Hull on what it calls the "Canadian Television Policy Review." The public notice indicates that the agency is interested in finding ways to increase financial support for and distribution of "Canadian programming" (see CRTC, 1998d).

This study is a modest response to an observation made by the editor of the Globe and Mail, William Thorsell, as follows: "We Canadians are surrounded by emperors who have no clothes, but whose outfits we remark upon constantly in a group conspiracy of hypocritical niceness." (Globe and Mail, March 15, 1997, p. D6). Privately, many Canadians will be quite critical of national institutions and various public policies. Publicly they are much more inhibited. The result is that too few senior public officials, regulators, and cabinet ministers are called to account for the authority delegated to them.¹The purpose of this study is to ascertain the cut, colour, quality, and seemliness of the emperor's wardrobe in the form of Canadian content regulations.

Asking questions

As we shall see, the ambitions of the CRTC and the Department of Canadian Heritage (Heritage Canada) for Canadian content regulations are almost boundless.² For these and other reasons, it is desirable to ask why Canadian content (CanCon) regulations are necessary and/or desirable. What problem(s) do they remedy? What benefits do these regulations confer on Canadians? Which Canadians benefit most from these elaborate requirements imposed by the federal government? Which people or groups of people are made worse off by CanCon requirements? If CanCon requirements are such a "good thing," why does the federal government limit them to broadcasting media? Since our "national identity" and "cultural sovereignty"-key terms in the Broadcasting Act-are also shaped by other media such as newspapers, magazines, books, and films, why doesn't the federal government impose Canadian content requirements on these media?³ For example, why not require that at least one-half the stock in all book stores in Canada be by Canadian authors and/or published by firms owned and controlled by Canadians?

Do Canadian content requirements achieve their officially stated goals? If not, why have they been expanded and made more restrictive over time? Then there are more basic questions: do the CanCon rules actually regulate the content of TV programs? The list of possible questions could be much longer.

Summary of key findings and conclusions

The set of regulations relating to Canadian content in broadcasting is large, complex, and has become more extensive and costly to comply with over time (see section 2).

Effective January 1, 1999, the overall quota of "Canadian" musical selections on radio will increase from 30 to 35 percent (see section 3), but during the period when the stations have larger audiences, the quota will increase from 25 to 35 percent. In making this decision, the CRTC did not refer to any evidence indicating that the CanCon quotas since 1972 had maintained or enhanced national identity and cultural sovereignty per the Broadcasting Act.

The legal base for CanCon is the Broadcasting Act. Its policy objectives are many, undefined, and unweighted (see section 4). Thus a great deal of discretion is conferred on the regulatory agency, the CRTC. The Act provides a long list of attributes that the CBC's programming is to have. (CBC is the largest spender on CanCon-see table 1.)

The term "culture" has several meanings. The concept of the culture of a nation is problematic. There are a wide variety of views as to the nature of, and extent to which, Canada has a national identity. There is disagreement about the values Canadians share. One cogent argument is that English Canadians have a weak national identity, while French-Canadians are believed to have a very clear understanding of who they are as a people (see section 5). Because of the island effect of the French language, a much higher proportion of the time that Francophones spend watching TV is devoted to Canadian programs (about 69 percent) than is the case for Anglophones (about 32 percent in 1996/97, table 6).

Public opinion polls indicate majority or near majority support for Canadian content. The regulations seem firmly rooted in political terms (see section 6).

CanCon appears to tap a number of pools of political support based on different motivations. The bases of political support for CanCon appear to include the following: (1) CanCon regulations provide an evocative symbol for "soft nationalists" (as well as hard-core nationalists who are far fewer in number); (2) The political and cultural elites find that CanCon is a very useful tool with which to differentiate Canada from the US; (3) The cultural and other elites support CanCon because it fits their values and provides a means by which to redirect the masses away from US programs toward high culture; (4) The policy is strongly reinforced by the successful rent seekers who for the most part are the people who supply Canadian content for TV and radio and have a direct pecuniary stake in CanCon regulations; and (5) CanCon is aimed primarily at restricting the volume of American-made programs and pop songs on television and on radio respectively. Thus it provides an expression of latent anti-Americanism which is more common among Canadians than is admitted-see section 6.

Much is claimed by CanCon's proponents (see section 7). Recently, CanCon subsidies have been justified as an "industrial development policy." The claims on behalf of the policy are so great as to be unbelievable. However, there is a case for subsidies for Canadian drama programs on TV (see section 7).

The present Canadian content regulations have almost no redeeming social value. They are based on citizenship, not on the substantive content of TV programs or musical recordings. They alter the set of choices available to TV viewers and radio listeners by limiting the availability of foreign programs and musical recordings. After several decades, there is no evidence of any link between CanCon regulations, national identity, and cultural sovereignty-the key stated objectives in the Broadcasting Act. These regulations have raised broadcasters' costs and cable TV rates. They also amount to a regressive tax and so harm the poor proportionately more than the rich. CanCon as an industrial policy amounts to neomercantalism, an idea discredited long ago. The emphasis on supporting the export of Canadian cultural products turns Canada into what cultural nationalists loathe about the US, a "cultural imperialist." Most importantly, Canadian content regulations are arguably a violation of the constitutional right to freedom of expression. It is hard to overemphasize the importance of freedom of expression in a democracy (see section 8).

I recommend that the federal government should immediately abolish all restrictions on foreign programs on TV and foreign musical recordings on radio. This will eliminate the current constraints on the constitutional right of freedom of expression (see section 9).

Definition

In this study, the phrase "Canadian content regulations" refer to the following:

1.Regulations that define what is a "Canadian" television program or "Canadian" musical selection on the radio;

2. Regulations that specify quotas in terms of the minimum fraction of all television broadcast time (and during prime time) which must consist of "Canadian" programs;

3. Quotas for "Canadian" musical selections on AM and FM radio;

4. Terms in the licences of TV broadcasters or broadcast distribution undertakings (BDUs)⁴or programming undertakings specifying the minimum amount of "Canadian" programming and/or expenditures on such programming;

5. Taxes imposed on all BDUs to finance the Canada Television and Cable Production Fund;

6. Limits on the number of foreign specialty channels to the same number of Canadian ones on each BDU; and

7. Taxes used to finance government subsidies (direct or indirect) whose primary purpose is to increase the supply of "Canadian" programs on television or radio. The largest of these subsidies goes to the CBC for its English and French-language radio and television networks (see table 1).

Importance of CanCon

Canadian content regulations are important for several reasons. First, Canadians spend a relatively large amount of time watching TV and listening to the radio compared to using other communication media (e.g., reading a newspaper, magazine, or book; listening to recordings, going to the theatre or concerts, etc.). Statistics Canada's latest survey found that, in the fall of 1996, Canadians over age 2 watched TV an average of 22.8 hours per week, down 30 minutes from the fall of 1995. The range by province was 20.3 hours for Albertans to 26 hours for Quebeckers. Overall, Francophones watched an average of 26.6 hours versus 22.5 hours for Anglophones (Canadian Press, 1998).⁵ Radio listening in 1996 was down for the third year in a row to an average of 20.2 hours per week (versus 21.6 in 1993). PEI was the province with the highest average, at 22.8 hours. This was the first time since 1986 that Quebec had not had the highest average of radio listening time (Canadian Press, 1998).

Second, expenditures on Canadian content by TV broadcasters and distributors are substantial and growing. Expenditures by TV broadcasters on "Canadian" programming in 1997 totalled $1569 million⁶ and consisted of the following categories: (1) Private conventional broadcasters, $475 million⁷; (2) CBC (English and French networks), $767 million; (3) Pay and specialty channels, $263 million; and (4) Provincial educational TV, $64 million (see table 1). These data from the CRTC do not include cable TV for which Statistics Canada reported $127 million in 1995. Of course, all of these expenditures were not attributable to Canadian content regulations.

Third, so much is claimed by the proponents of Canadian content requirements that it is natural to question whether they could possibly deliver so much.

Fourth, new methods of distributing TV and audio signals have been licensed by the CRTC.⁸ But in each case, the regulators have imposed Canadian content regulations on the new method.

Fifth, and perhaps the most important reason to carefully examine Canadian content regulations is that they go far beyond the degree of coerciveness usually associated with taxation-transfer schemes or direct expenditures on various public programs. They go beyond the restrictions in almost all regulatory programs. CanCon requirements impose notable restrictions related to freedom of expression. Section 2 of the 1982 Charter of Rights and Freedoms states that "Everyone has the following fundamental freedoms... (b) freedom of thought, belief, opinion and expression, including freedom of the press and other media of communication." ⁹ Yet CanCon requirements obviously constrain what TV and radio stations can broadcast. Therefore, they also impose constraints on the set of TV programs and musical recordings available to citizens. Canadian content regulations have been described as "the government's desire to Canadianize the imagination of its citizens" (Collins, 1990, p. 80). Freedom of expression is vital if citizens are to have the greatest opportunity to inform and enlighten themselves. This includes TV programs and recordings broadcast by radio stations-even if most of the content in question consists of expressions of popular culture (see Rutherford, 1993).

Some facts about Canadian content on television

The purpose of this section is to highlight some key facts about the broadcasting and viewing of Canadian content on television.

Between 1991 and 1996, the viewing of Canadian content by all Canadians (age 2 and over) increased from 37.0 to 39.2 percent (table 2). (I address this issue in more detail in section 6 below.)

The level of viewing of CanCon is much higher among Francophones than Anglophones. For example, those watching private French-language conventional stations watched 72.7 percent CanCon in 1996. CanCon accounted for 89.5 percent of the viewing of public French-language stations (table 2).

Viewers of English-language CBC-TV stations watched more CanCon (71.0% in 1996) than viewers of private English-language conventional stations (36.3%) (See table 2). There are some notable differences between the amount of English-language Canadian content that is broadcast (scheduled) and what is viewed (table 3) on conventional TV stations. In the Fall of 1996, the schedule for drama/comedy consisted of 23.9 percent CanCon, but viewing of CanCon in this category was only 8.8 percent. In the "Other Entertainment" category, the schedule was 71.3 percent CanCon, but viewing was half that, 35.5 percent. Notice that in the "Variety" category, CanCon accounted for only 2.5 percent of the schedule. In contrast, 100 percent of the schedule in the "News" category was CanCon (table 3).

The gap between the amount of CanCon viewed and what is scheduled in various categories is smaller for French-language Canadian content than for English (table 3).

Expenditures on programming by private television stations in Canada in 1977 were concentrated in two categories: 54.0 percent of outlays on Canadian programs were for "News"; and 78.5 percent of outlays on foreign programs were in the "Drama" category (which includes situation comedies such as "Seinfeld") (see table 4).

Over 90 percent of the expenditure on "News" programs by private TV stations in 1997 was for locally-produced programs (table 4).

For private TV stations in 1997, expenditures on Canadian programs were 37.6 percent more than those on foreign programs (imported largely from the US) (table 4).

The CRTC did a detailed study of all Canadian TV programs broadcast (not necessarily viewed) each day from 6 a.m. to midnight between September 1996 and August 1997. For English-language TV outlets, the fraction of program time which was "Canadian" ranged from 61.7 percent (for private conventional stations) to 74.1 percent (for CBC owned and operated stations) (table 5). The CRTC requires that all stations meet a 60 percent CanCon quota-see section 2 below.

The percentage of the broadcast year devoted to CanCon was higher among French-language stations, ranging from 71.3 percent for private conventional stations to 82.3 percent for CBC owned and operated stations (table 5).

CanCon is concentrated in a few major program categories. Canadian content accounts for virtually 100 percent of TV "News" broadcasts in Canada in both official languages. In the "Other Information" category, CanCon accounts for 95 to 98 percent for French-language stations, and 88 to 95 percent for English-language stations (table 5). For French-language stations, the "Sports" category is 100 percent CanCon. For English-language ones, it ranges from 86 to 97 percent (table 5).

As we shall see, "Drama" is of particular concern to the CRTC, TV program producers and many cultural nationalists. Of the major program categories, it has the lowest ratio of CanCon broadcast to Canadians. For example, during 1996/97, only about 27 percent of the "Drama" program hours on private conventional television (in both English and French) was legally defined as Canadian content (table 5). Even for English-language CBC stations, Canadian drama accounted for 33.8 percent, and 26.2 percent of the total "Drama" category in 1996/97. For French-language CBC, however,the figure was just over 50 percent (table 5).

The availability of what the CRTC considers to be "underrepresented" categories of CanCon (drama, children's and other entertainment programs) increased by 55.3 percent between 1992/93 and 1996/97 on English language TV (5.8 percent on French TV) (CAB, 1998d, pp. 42-43). Viewing of Canadian content on English TV did not change between 1991/92 and 1996/97 (about 32 percent). The same was true for French TV but the percentage was much higher (table 6). Viewing of "underrepre-sented" categories of programming (Canadian drama, etc) increased from 6.1 to 7.5 percent of the total English TV between 1991/92 and 1996/97, but fell on French TV from 24.9 to 20.8 percent (table 6).

The period 7:00 to 11:00 p.m. accounts for 42 percent of the total viewing of private conventional TV broadcasts. It is 32 percent from 8:00 to 11:00 p.m. (CAB, 1998d, p. 76). CanCon accounts for 21 percent of the 8:00 to 11:00 p.m. period and 13 percent of the 7:00 to 8:00 p.m. period, for English language programs. By comparison, for French TV, 75 percent of viewing between 7:00 and 8:00 p.m. and 60 percent of the period 8:00 to 11:00 p.m. consists of Canadian content (CAB, 1998d, pp. 76, 77).

Problems in conducting a policy analysis of Canadian content regulations

Applying the general tools of policy analysis to the issue of Canadian content regulations is fraught with problems. First, for some Canadians, the issue is highly emotional because it is tied to their (almost entirely inchoate) concept of Canada as a nation. Denton et al. (1995, p. 16) noted that, "Attacking [even criticizing] the regulatory scheme created by the Broadcasting Act is a dangerous business [for] many in English Canada are ... attached to it ... [because] it provides psychic stability in a changing world. It is a touchstone of national identity for those who seek to define themselves in those terms."¹⁰

Second, the link between what Globerman (1983) calls "cultural regulation" (largely of electronic media) and the stated objectives of "national identity" and "cultural sovereignty" (the key goals of programming regulation in the Broadcasting Act) is taken as obvious by the supporters (and unthinking fellow travellers) of the policies. However, no evidence has been provided of the link.

Third, the primary economic beneficiaries of Canadian content regulations (a) have a substantial direct pecuniary interest in preserving them, and (b) are articulate and have easy access to the electronic (and print) media to make their case (for example, see Austen, 1996). Thus the creators/suppliers of Canadian content are likely to respond in a hostile fashion to any suggestion that the policy should be discontinued.

Fourth, for the cultural elite, a careful policy analysis of the economic and other characteristics of cultural policies is pure Philistinian behaviour and should be shunned as such.¹¹ Hence, the critic can expect personal attacks implying that he (or she) is "uncultured." The irony here is that CanCon regulations have their greatest impact on the supply of popular culture (see Rutherford, 1993).

Fifth, the set of Canadian content requirements is strongly shaped by the fact of Canada's location vis-a-vis US with which it shares a common language (except in Quebec) and by the federal government's policy to be officially a bilingual/bicultural nation. As we shall see in section 6, CanCon regulations are very important to nationalists obsessed with differentiating Canada from its powerful southern neighbour.

Structure of the study

The body of this study is organized as follows. Section 2 provides an overview of the current Canadian content regulations. Section 3 examines the CRTC's recent decision to increase the quota for "Canadian" musical selections on radio effective January 1, 1999. That decision may be a harbinger of the one following the review of television policy announced by the CRTC (1998d) on May 6, 1998.

Section 4 summarizes the legal bases for the regulations, and the policy objectives in the Broadcasting Act. Section 5 examines the concepts of culture and national identity that underline debates about Canadian content requirements. Section 6 examines the politics of CanCon and offers a number of explanations why Canadian content regulations seem to be firmly anchored and it examines what appears to be the best case for direct subsidies for certain types of Canadian content. Section 7 considers some of the most important claims made on behalf of CanCon. Section 8 provides a fairly extensive critique of various aspects of CanCon regulations.

Finally, in section 9, I set out my recommendations.

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Last Modified: Wednesday, October 20, 1999.