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CRTC suspends regular rules so Canadians can watch Super Bowl commercials

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The CRTC, the Canadian regulator of the Canadian broadcasting industry, acknowledged last week that the Super Bowl, America’s biggest sporting event, is special—so special that the regulator is suspending its simultaneous substitution rules.

Simultaneous substitution is one of a set of policies that the regulator has put in place to generate revenue for Canadian programming services and producers of Canadian programs. Simultaneous substitution involves the temporary replacement of the signal of one TV programming service with another service that is broadcasting the same program at the same time. In practice, the former signal is typically American while the latter signal is Canadian. Hence, the Canadian signal displaces the American signal as they are carried by cable and satellite distributors in Canada. The goal of the simultaneous substitution policy is clearly to allow Canadian TV stations to maximize the audience size for their programming, which enables them to charge higher advertising rates to sponsors. While there is some uncertainty about the additional revenue created by the rule, the CRTC estimates that it could be as much as an additional $250 million for the Canadian broadcasting industry.

The CRTC has apparently come under pressure in recent years from Canadian viewers who feel deprived of the opportunity to watch American commercials that are aired on U.S. stations broadcasting the Super Bowl. In this case, the CRTC stood fast against the lobbying of Bell Media, the parent company of CTV which currently holds the Canadian broadcasting rights for the Super Bowl. A representative of Bell Media complained about a loss of advertising dollars that would have gone to Canadian content creators and broadcasters, including to CTV.

While Canadians viewers might not be as exercised about being deprived of watching American advertisements in other live events such as the Academy Awards or the World Series, this special exemption of the Super Bowl from CRTC regulations may be a harbinger of things to come. Specifically, as more people watch programming distributed over the unregulated Internet, the ability of the regulator to embed implicit taxes and pricing cross-subsidies into the regulated broadcasting sector will diminish, perhaps dramatically so. Indeed, burdensome regulations may encourage Canadians to use the Internet as a “bypass” around regulated broadcast distribution units. In this regard, Canadians are already using YouTube to view new U.S. commercials including, by his admission, the chairman of the CRTC.

The telecommunications industry offers an informative example of how bypass of the Canadian long-distance network by Canadian companies who used the lower-cost U.S. long-distance network to make toll telephone calls helped precipitate the deregulation of the Canadian long-distance telephone sector.

In a similar way, the growth of Internet broadcasting may, over time, result in a fundamental dismantling of the comprehensive regulation of the Canadian broadcasting sector.


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