Should the CRTC regulate the $309 million AM radio sector?

On November 19, 2010, The Wire Report published an article about the CRTC’s proposal to the House of Commons Standing Committee on Heritage Committee this past Thursday, about exempting AM radio stations from the need to hold broadcasting licences. You can find the CRTC’s speech here.

Specifically, the CRTC told the Committee that

… we cannot stand still. The rules for common ownership of radio stations are defined in terms of both FM and AM. But as you know, AM is losing market share, and it has been a long time since we had a single application for a new AM licence. The question arises: Should we still be regulating the AM market? Is there a case to be made for letting it go by way of exemption?

In 1991, when Parliament re-wrote the 1968 Broadcasting Act, it thought about the idea of exempting some broadcasters from having to be regulated. Broadly speaking, Parliament told the CRTC that it should not regulate broadcasting services – if their regulation would not contribute to Parliament’s objectives for broadcasting. But here is what Parliament specifically wrote:

9(4) The Commission shall, by order, on such terms and conditions as it deems appropriate, exempt persons who carry on broadcasting undertakings of any class specified in the order from any or all of the requirements of this Part or of a regulation made under this Part where the Commission is satisfied that compliance with those requirements will not contribute in a material manner to the implementation of the broadcasting policy set out in subsection 3(1).

What a mouthful. Here is another way to look at the same subsection, with some comments about interpretation:

• The Commission shall – Parliament requires the CRTC to do this
• by order – the mechanism the CRTC must use, being an order that can be appealed
• on such terms and conditions as it deems appropriate – the CRTC can impose requirements through the exemption order
• exempt persons who carry on broadcasting undertakings of any class specified in the order - in other words, of the AM class of broadcasting undertakings
• from any or all of the requirements of this Part - being Part 2, the section that gives the CRTC its powers to license
• or of a regulation made under this Part - still Part 2, the section that gives the CRTC its powers to set regulations (i.e. on Cancon)
• where the Commission is satisfied that compliance with those requirements – for licensing, regulations
• will not contribute in a material manner to the implementation of the broadcasting policy set out in subsection 3(1).

The last bullet is the most interesting – because it sets out Parliament’s test for exemption: Parliament says that only services that “will not contribute” materially to its section 3 objectives for broadcasting are to be exempted from regulation.

The CRTC meanwhile, explains the exemption of AM stations like this: “But as you know, AM is losing market share, and it has been a long time since we had a single application for a new AM licence. The question arises: Should we still be regulating the AM market?”

Unpacking this statement, we see that the CRTC’s focus is on market share, and the lack of new applications for licences.

But under section 9(4) of the Act, the real question is different. Section 9(4) actually requires one to ask this: will AM stations’ compliance with the CRTC’s existing regulations and policies “contribute materially” to Parliament’s objectives for Canada’s broadcasting system?

That said, just how should we measure ‘material contribution’?

In broadcasting, the traditional way to approach broadcasters’ ‘material contribution’ to the broadcasting system, is through the exhibition of and expenditures on, Canadian programming. Other measures include employment, support for the development of new programming content, and ensuring that programming is accessible to Canadians with hearing or visual impairments.

Insofar as Canadian content is concerned, section 3(1)(f) of the Act states that each broadcasting undertaking – i.e., each AM station –

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

But the CRTC does not report on how much or what kind of Canadian programming is broadcast by AM radio stations. Before deciding these stations “will not contribute materially” to the exhibition of Canadian programming, shouldn’t we know what AM stations are doing now? At least that way, if the CRTC were stop regulating, it would be possible in the future to compare the AM stations’ performance now, with their performance after being exempted from regulation.

News and information ought to be a special concern. Roughly 200 towns and cities have AM, FM or TV stations, of which roughly half have AM stations. How many population centres in Canada rely entirely on AM stations? Will their radio stations' exemption from CRTC regulation meet these centres' needs? What about Canadians with visual impairments?: do they rely more on radio, than on TV, and if so, how would the deregulation of AM radio affect them?

Insofar as expenditures on Canadian programming are concerned, are AM stations capable of ‘contributing’ to Canadian programming? According to the CRTC’s 2009 financial summaries for radio, 149 private AM radio stations made $306 million in revenues in 2009, or a little more than $2 million per station. Ten years ago, AM stations were making an average of $1.3 million per station – meaning that on average, AM station revenues have increased by 56% over the past decade. Are AM stations doing more or less now, to achieve Parliament's objectives for Canada's broadcasting system?

Unfortunately, since the CRTC does not present any data about AM stations’ expenditures on or exhibition of Canadian programming , it is almost impossible to assess how AM stations are now helping to achieve Parliament’s objectives for the broadcasting system.

If the CRTC does not have answers to questions such as the ones noted above, on what evidence will it base its decision to exempt AM stations from regulation? How will it really know that regulating broadcasters who earned more than $300 million last year, will not contribute to achieving Parliament’s objectives for Canada’s broadcasting system?