National Broadband Task Force

PIAC participates in National Broadband Task Force

The National Broadband Task Force was established in 2001 by the Minister of Industry. Its mandate was to map out a strategy for achieving the federal government’s goal of making broadband services available to all Canadians by 2004. PIAC counsel Philippa Lawson was a member of the Task Force.
The Task Force’s report, issued in June 2001, is available via this link or in hard copy upon request.

Amendment to the Broadcasting Act

Amendment to the Broadcasting Act to allow the CRTC to issue cost awards to interveners in CRTC broadcasting proceedings
Hon. Sheila Finestone’s remarks in the Senate on the second reading of Bill S-24, to amend the Broadcasting Act (June 29, 2000)

Sheila Finestone’s remarks in the Senate

Bill to Amend-Second Reading-Debate Adjourned

Hon. Sheila Finestone moved the second reading of Bill S-24, to amend the Broadcasting Act.

She said: Honourable senators, the purpose of this bill is to amend the Broadcasting Act such that the CRTC has the discretionary power to award costs when warranted by clear CRTC criteria to groups, organizations or individuals who appear before the commission for proceedings involving broadcasting or cable television matters.

This amendment brings the Broadcasting Act into concordance with the Telecommunications Act, where the same rights for cost recovery have existed for years. The wording for the amendment is exactly the same as those sections of the Telecommunications Act, section 56 and section 57, that give the CRTC the authority to establish criteria for the awarding of awards costs and assess to whom and by whom the costs are to be paid. It is important that the wording be identical between the acts in order that concordance of powers and authority for the CRTC exists between the acts and in their application in proceedings. I refer honourable senators to the summary of the proposed enactment found in Bill S-24.

As a point of information, I should like to comments on and clarify for honourable senators the use of the word “taxation” in the wording of the amendment. This is exactly the same wording that is used in the Telecommunications Act. I want to make sure that we avoid any confusion that the use of the word taxation would make this a government money bill. It does not, and it is not.

The use of the word taxation is the proper use in the context of the amendment. The word in the amendment does not have anything to do with the fiscal or money-raising powers and authority of the government. As unfortunate a choice of word as this may be by lawyers, taxation is the normal and proper legal term used by the courts in four or five regulatory agencies, such as the CRTC.

The term refers to the matter of the assessment and payment of costs and charges by parties by a regulatory agency. The same term has been used by the CRTC for telecommunications proceedings for years and is written into the Telecommunications Act, using the exact same wording as you find in this proposed amendment.

This amendment is necessary and will be extremely beneficial to the Canadian public. The ability to recover significant costs that are expended as part of participation in a CRTC proceeding, when warranted, permits consumer and public interest groups, as well as individual consumers, to develop credible and substantive research and evidence that will allow them to represent more effectively the interests of citizens in broadcasting and cable television policy and regulatory proceedings. For example, such proceedings could involve national issues, such as television policy or cable television distribution regulations, or more specific issues, such as the rates consumers pay for cable television services – something we all know about around here. This level of participation in broadcasting matters, comparable to their historic level in participation in telecommunications proceedings, is something that these groups and individuals have not been able to afford to do.

With convergence and the information highway, there has been an increasing blur between telecommunications and broadcasting services used by the public, such as new media and the Internet. Obviously, this blurring has also spilled over into CRTC proceedings involving either the Telecommunications Act or the Broadcasting Act, and at times proceedings in which both acts are involved.

To this point in time, consumers and consumer groups are only able to apply to have their costs recovered under matters that are clearly telecommunications-related and that fall under the jurisdiction of the Telecommunications Act, regardless of how much a service in question straddles both acts. This amendment brings into symmetry and balance both acts, so that consumers will be fairly and equally treated in all matters in proceedings before the commission, whether conducted under the Broadcasting Act or the Telecommunications Act.

Consumer groups across the country strongly support this initiative and the importance of cost awards. There is a list of consumers involved.

In exercising its responsibility under the Broadcasting Act, the CRTC is given decision-making powers that are important for, and have a great impact on, Canadians associated with the promotion of Canadian culture, the setting of rates, the introduction of competition and the resolution of stakeholders disputes. Section 3(d)(i) of the Broadcasting Act says that the commission is instructed …to safeguard, enrich and strengthen the cultural, political, social and economic fabric of Canada.

The increasing complexity of the decisions that the CRTC has been called upon to make in pursuit of these objectives requires that it have informed participation in its proceedings.

The ability to receive a cost award when this is appropriate and warranted is very important to ensure effective citizen participation in the regulatory and policy processes. Under current CRTC procedures, anyone can make a submission to the CRTC in a proceeding. However, without adequate funding for consumers and their representative groups, there has always been an imbalance and inequality in the scope and substantiveness of the submissions made by consumer organizations, in comparison with those of media companies.

Individual Canadians and interested organizations have always been able to send letters and other information to the CRTC as part of broadcasting and cable proceedings. This has been important to allow Canadians to express their views on important regulatory, policy, pricing and other service matters. This amendment will not change this. Individual Canadians or interested organizations will still have the opportunity to make these types of submissions. However, the increasing complexity of the competitive broadcasting and telecommunications markets, and the converging policy frameworks, require that, in addition to submissions from individuals and organizations that express general views, substantive and effective participation by consumer organizations representing the interests of citizens require detailed research studies and expert assistance. It is very complex, as honourable senators know.

No non-commercial organization outside of government has the resources to intervene on a consistent basis without financial assistance. It is vital that the process of decision making is conducted in a demonstrably fair fashion. This amendment speaks to the importance of openness, transparency and fairness for users of these services.

There are many examples of how consumers have been disadvantaged in the Broadcasting Act proceedings because cost awards were not available. Moreover, this has also become a disincentive for participation by many groups. For example, in 1997, the Public Interest Law Centre in Winnipeg represented cable subscribers in rate increase proceedings. The consumers required the expertise of the law centre to effectively argue their case. In the final decision, the CRTC ruled against a rate increase. This saved consumers millions of dollars, but the law centre was unable to recover thousands of dollars spent on expert assistance.

In another example, last year the Public Interest Advocacy Centre and the Action Réseau Consommateur participated in a joint Broadcasting Act and Telecommunications Act proceeding on new media. Together the organizations incurred several thousand dollars in expenses. This was an important proceeding that dealt with the convergence of telecommunication and broadcasting services, and the impact this would have for all citizens. Because the CRTC is not permitted to award costs under the Broadcasting Act, the groups were only able to recover costs relevant to telecommunications matters in the amount of 25 per cent, and only for matters relating to telecommunications. That is the Cost Order CRTC 2000-2. The inability to recover costs not only penalizes consumers groups and their representatives financially, but it is also a barrier and a disincentive to their right to fair participation and representation. The CRTC decision, Cost Order 2000-2, stated:

By contrast, one of the questions involved in the new media proceeding was which Act to apply to this issues, and how. In this context, the Commission considers that it is very difficult to extricate and to itemize the issues raised by PIAC/ARC to be determined pursuant to the Telecommunications Act.

Who will be funded? Not everyone who appears before the CRTC in a proceeding will automatically qualify for a cost award. With the passage of this amendment, the CRTC will draw up rules of procedure that will be used to determine the criteria for awarding costs. It is expected that these will be comparable to the criteria that already exist in telecommunications. Under the telecommunications rule of procedure for costs, applicants must demonstrate to the commission that they are representative of a group of citizens or subscribers; that they have participated in the proceeding in a responsible way; and that they have contributed in a substantive way to a better understanding of the issues by the commission.

The current criteria developed for the Telecommunications Act requires a level of expertise and a substantial amount of work by applicants, and have been sufficient to prevent any abuse of the cost awards process. In addition to the above criteria, the regulated company or companies have an opportunity to respond to any requests for costs by individual consumers or consumer organizations.

Honourable senators, in broadcasting in 1997 and 1998, the CRTC processed 1,379 applications relating to television, radio, broadcasting distribution undertakings – as we have tabled – pay and specialty television undertakings. These included requests for new licences, licence amendments and renewals, applications to transfer ownership control, and cable rate filings. The commission also issued 658 broadcasting decisions and 143 public notices. Cost awards were not available for any of these.

Cost awards in broadcasting will not be a financial burden on media companies. Companies and industry associations spend from hundreds of thousands to millions of dollars on regulatory proceedings to represent their own interests. A relatively small number of public interest, consumer groups and organizations have demonstrated expertise in this area. Other groups or associations are likely to intervene on an occasional basis; that is the multicultural groups. Any of us who have worked in this field know how complex these hearings are.

Who pays for the cost of the awards? They are paid for by companies under the commission’s jurisdiction and who participated in, and have an interest in the outcome of, the proceeding. Cost awards recognize that it is important for an adjudicative tribunal to have all the relevant facts and opinions before it when it makes a decision. Without a cost award policy, only the costs of the delegation representing the interests of the shareholders of the regulated company are paid for through rates charged by the regulated company. In order for the tribunal to have before it the appropriate information that presents a fair and balanced set of arguments, independent representation of the consuming stakeholders are required. That is you and I and everyone else we know. The funding of cost awards is thus looked upon as a cost of doing business for industry players. Like the cost of the company’s representations, the funds come from the cost of service for the individual industry stakeholders. This is the practice used for telecommunications.

A principle of cost awards is to compensate a deserving intervener for the work associated with an intervention on the basis of the fair market value of the work done. The CRTC has always followed this practice in telecommunications, which was confirmed as appropriate by the Supreme Court of Canada in 1986. Many tribunals that regulate public utilities or important public services award costs of public interest interveners to reimburse them for their intervention. In addition to the CRTC, funding is available for consumer groups participating in hearings on electrical and natural gas proceedings in many provinces in Canada, such as British Columbia, Alberta, Manitoba, Ontario and Quebec. At the federal level, the Canadian Transportation Agency is another example of a tribunal with the power to award costs.

In summation, honourable senators, this process is not new or untried. The CRTC has demonstrated that it used prudence in the exercise of its discretionary powers with cost awards in telecommunications, and the same can be expected for broadcasting matters. Applications for costs face a rigorous and fair review process. They are not automatic. There is a real need for this amendment. It will bring the Broadcasting Act into concordance with the Telecommunications Act, which is critical with the convergence of our communication policies and the communication industry.

Canadians should not be denied fair and equitable participation and representation in regulatory proceedings involving the broadcasting and cable television industry. This amendment provides the means to create this balance and fairness, and let me say to honourable senators that the following are the consumer groups across this country who support the initiative: the British Columbia Public Interest Centre, the Public Interest Law Centre, the National Anti-Poverty Organization, Canadian Labour Congress, Action Réseau Consommateur, Canadian Library Association, the Manitoba branch of the Consumers Association of Canada, the Communications Workers Union, Rural Dignity of Canada, l’Association coopérative d’économie familiale, and the Public Interest Advocacy Centre.

On motion of Senator Kinsella, debate adjourned.

 

Letter to the Minister re: AOL TIME WARNER merger

VIA FAX AND MAIL
(613) 992-0302

Honourable John Manley
Minister of Industry
235 Queen Street
11th floor, East Tower
Ottawa, ON
K1A 0H5
Dear Minister Manley:
Re: AOL Time Warner Merger
The AOL acquisition of Time Warner presents serious implications for Canadian consumers of broadcasting and new media services, as well as potential problems of access for Canadian content providers. These problems are not confined to Canada. Significant and reputable consumer groups in the United States, including the Consumers Federation of America, Consumers Union, and the Consumers Project on Technology, have called for the AOL acquisition of Time Warner to be stopped. We believe that the analysis of the American consumer groups is compelling, and that a thorough review of the competitive and other implications of this deal is called for.
As you are aware, the issue of the importance of carriage/content separation is not a new one for the federal government and your department. In 1995, the Information Highway Advisory Council report entitled “The Challenge of the Information Highway” had this to say on the issue:

“The Broadcasting Act calls for programming that is varied and comprehensive, expressing a range of differing views on matters of public concern; indeed, the promotion of diversity has been a tradition in Canadian broadcasting policy and regulation. As companies merge to face global competition, maximize competitive advantage, and benefit from vertical integration, maintaining diversity will require structural measures that discourage preferential treatment based on ownership interests.”

Recommendation 7.7 of the aforesaid report provided as follows:

“The principle of carriage/content separation should be maintained at a minimum through the requirement of structural separation between programming and distribution undertakings and with other reasonable safeguards.”

The legitimacy of these concerns was acknowledged by the federal government in its later report “Building the Information Society: Moving Canada Into the 21st Century”. That report noted the dangers to Canadian content for new media services:

“More important within the emerging information industry itself, there are signs of growing vertical integration between providers of broadcasting carriage and content services. This trend could ultimately leave providers of Canadian content vulnerable to discrimination. The present policy and regulatory framework may have to take this new reality into account.”

PIAC is of the opinion that the AOL Time Warner merger may have serious and sustaining implications for access and distribution of new Canadian media services. It not only blurs the line between the desirable carriage/content separation, it potentially lessens competition. In the words of our American counterparts the deal:

”…raises the threat of discrimination among content providers effectively degrading the services offered by competitors.”

We believe that the implications for Canada and Canadian consumers are such that the government should make a formal request pursuant to Article V of the 1995 “Agreement between the government of the United States of America and the government of Canada Regarding the Application of Their Competition and Deceptive Marketing Practices Laws”
The Agreement provides that:

“If a party believes that anti-competitive activities carried out in the territory of another party adversely affect its important interest, the first party may request that the other parties competition authorities initiate appropriate enforcement activities…”

We believe that AOL’s acquisition should be afforded a rigorous review by American competition authorities. It is also our preliminary view that the merger in its current form should be stopped.
We welcome the opportunity to discuss these concerns with your office and your officials. We would be pleased to provide any further information that may be of assistance to the government in making this request.
Thank you.
Yours truly,
Michael Janigan
Executive Director/
General Counsel
cc: Konrad von Finckenstein – fax only – 953-5013
Commissioner of Competition

Media Release (AOL TIME WARNER MERGER)

THE PUBLIC INTEREST ADVOCACY CENTRE (PIAC) CALLS FOR GOVERNMENT ACTION ON AOL TIME WARNER MERGER

The Public Interest Advocacy Centre (PIAC) joined with American consumer organizations today in questioning the benefits to consumers from the AOL Time Warner Inc. blockbuster merger. The Consumers Federation of America, Consumers Union, and the Consumers Project on Technology have called for the AOL acquisition of Time Warner to be stopped.
Michael Janigan, Executive Director of PIAC noted that the AOL Time Warner merger is hardly good news:

“There is much to indicate that this deal is a win for the shareholders of the merging companies without any increase in availability of services for consumers.”

Janigan also contrasted current market reality with past predictions of the future,

“For the first part of this decade, we nourished the fiction that competition was going to build the Information Highway. Now, it seems as if the industry stakeholders think it will be built by eliminating the competition itself.”

In a letter to the Honourable John Manley, Minister of Industry, PIAC has submitted that the federal government should make a formal request pursuant to the 1995 agreement between the United States of America and Canada regarding the application of their competition and deceptive marketing practices laws. The request, pursuant to Article V of that Agreement, would be for US competition authorities to initiate appropriate enforcement activities against the anti-competitive implications of the proposed merger.
In a statement released on January 10, the American groups noted that:

“AOL is the single most important force today in advocating for open access to the cable broadband platform. If the merger is approved, AOL’s interest will be fundamentally changed.”

They further noted that:

“AOL is a direct competitor to Time Warner as an internet content provider on broadband services thereby lessening competition and raising the threat of discrimination among content providers effectively degrading the services offered by competitors.”

The Public Interest Advocacy Centre describes concerns particular to Canada. In 1995, the federal government’s Information Highway Advisory Council issued a report entitled “The Challenge of the Information Highway”. The report noted the importance of maintaining carriage/content separation:

“The Broadcasting Act calls for programming that is varied and comprehensive, expressing a range of differing views on matters of public concern; indeed, the promotion of diversity has been a tradition in Canadian broadcasting policy and regulation. As companies merge to face global competition, maximize competitive advantage, and benefit from vertical integration, maintaining diversity will require structural measures that discourage preferential treatment based on ownership interests.”

The report went on to recommend:

“The principle of carriage/content separation should be maintained at a minimum through the requirement of structural separation between programming and distribution undertakings and with other reasonable safeguards.”

The federal government acknowledged the legitimacy of these concerns in its later report “Building the Information Society: Moving Canada Into the 21st Century” in particular, the dangers to Canadian content for new media services were highlighted:

“More important within the emerging information industry itself, there are signs of growing vertical integration between providers of broadcasting carriage and content services. This trend could ultimately leave providers of Canadian content vulnerable to discrimination. The present policy and regulatory framework may have to take this new reality into account.”

The implications of the merger calls into question the “hands off” policy of the government towards the internet. AOL has indicated that they have discretion about “populating channels” on Canadian AOL where they see fit (National Post, January 12, 2000).

“We appear to be getting regulation of the internet and control of access but it is private corporate regulation not necessarily initiatives in keeping with Canadian objectives.” Janigan added.

For further information please contact
Michael Janigan
Executive Director/General Counsel
Public Interest Advocacy Centre (PIAC)
1204-ONE Nicholas Street
Ottawa, ON, K1N 7B7
(613)562-4002 ext 26 (613) 562-0007(fax)
e-mail mjanigan@web.net
web www.piac.ca
or
Andy Reddick
Director of Research
Fredericton, NB
(506)457-9115 (o) (506) 458-9140 (fax) areddick@nbnet.nb.ca

Negative Option Marketing

SPEAKING NOTES BEFORE THE HOUSE OF COMMONS STANDING COMMITTEE ON INDUSTRY – BILL C-276

BY: Michael Janigan
Executive Director/General Counsel
of the Public Interest Advocacy Centre (PIAC)
We would first like to extend our thanks to the chair and members of this committee for extending an invitation to speak to this issue which has long tried the patience of consumer advocates. We commend the efforts of the honourable member from Sarnia-Lambton for his efforts in sponsoring this legislation to address this problem.
The Public Interest Advocacy Centre (PIAC) is a non-profit corporation which provides legal services and research to vulnerable consumers and the organizations that represent them. This work primarily concerns issues involving important public services including telecommunications, broadcasting, energy, financial services and public transportation. PIAC’s members include individuals, groups and organisations representing 2.5 million Canadians.
The concern associated with the practice of negative option billing has its origins in the nature of a contract of purchase and sale, as recognized in common law. As every first year law student learns, such a contract consists of an offer and an acceptance. The history of consumer protection statutes is a chronicle of legislators attempting to ensure that the offer is conveyed without misrepresentation by the vendor to a purchaser who has an opportunity to make an informed choice to accept or refuse the offer. This is because a contract that is made with a consumer who is unaware of key elements of the contract such as price, quantity and quality of the goods to be delivered is subversive of the efficiency of the market as a whole.
We thus have seen the gradual implementation of such statutory measures as cooling off periods, penalties for misleading advertising, and contract recission for misrepresentation. Many consumer protection statutes have also tackled the problem of unsolicited goods, some barring legal remedies for collection where there has been no consent by the consumer to receipt of the goods. It is important to recognize that the intent of such measures is not simply to protect consumers, but also to eliminate any competitive advantage conferred on an unscrupulous seller by engaging in these practices.
I want to address the implied notion of the opponents of this Bill that this Bill attacks industry practices which would otherwise be unassailable in law. Whatever the requirement’s that are currently being met by these industries under the standards set out in the various governing acts and regulations, there is nothing that I’m aware of that imparts contractual status to circumstances which amount to the receipt of unsolicited goods. In effect, large industries such as cable or banking have frequently turned a common sense protection afforded to them in law into an aggressive and disreputable marketing tactic.
Common law has always recognized a “course of dealing” exception to the requirement associated with offer and acceptance. For example, a hardware or grocery store may periodically receive shipments of goods to be retailed in the store from its supplier. There is no specific consent to the delivery of individual items, but an understanding exists that the store will pay the supplier for all shipments received within some kind of reasonable limit of business custom. Similarly, no specific consent is required for deliveries of natural gas or fuel oil to the homeowner even though the quantities and time of delivery (ordinarily fundamental terms of a contract) have not been agreed to.
What’s important to note here is that the parties are delivering and paying for goods which were pretty much foreseeable under the terms of their initial agreement. In the first example I gave, depending upon the bargaining power of the retailer, he might also be able to ship back the unsold items to the supplier. In business arrangements where parties are of close to equal bargaining power, one will frequently find arrangements to deal with problems arising from an initial lack of detail.
This is a very dissimilar circumstance than that which presents itself in industries that wish to market products or services which are different in significant ways then those that were initially contracted for. Consent to the changes is not simply inferred in law because it might be difficult for the supplier to obtain the same or because a guaranteed percentage of customers must pay for the changes to make them financially viable. Whether the reason is the promotion of cultural content, or maximizing return to the shareholder, there is no blessing of contractual validity that is conferred upon such changes in contractual arrangements. What I am saying is simply this: individual consumers may still retain the legal right to demand their money back for services they did not order in the industries that are affected by this Bill regardless of this Bill’s passage or failure. It happens all the time now. It is easier for these industries to quietly give a complaining customer his or her money back and to continue to reap the rewards from the inattentative as a result of negative option practices. What this Bill seeks to do is to enlist the assistance of the Competition Act in making negative option billing review able conduct unless it conforms to the exceptions set out therein. These practices may still be subject to contractual remedies by customers misled by the practice who choose to seek a civil contractual remedy. This Bill provides a statutory means to attempt to reduce the use of this practice and the numbers of customers that may be misled by the same.
For whatever the high flown objections to statutory prohibition of this practice, two important conclusions are inescapable:

  1. The practice has meant that large numbers of consumers in these industries don’t know what they are paying for.
  2. The practice has been enormously lucrative for the industries that use it.

The cable industry, of course, is a rather obvious example of the benefits to industry of the use of negative option marketing.
In the 80’s and the earlier part of this decade, cable companies were able to add many new subscribers for additional tiers of service, many of whom were decidedly confused as to what they were getting. In 1993, for example, 66% of Canadian cable customers reported that they obtained only basic service while in actual fact only 8% subscribed to the lowest level of service. We are entering an era of provision of service through multi-media and other digital outlets where proponents will be are competing aggressively for market share. It will be possibly fatally injurious to competition if key players using their existing customer base engage in negative option marketing to artificially make demand fit the expense of supply. There will be a whole range of arguments to justify ignoring the requirement for consent in order to establish commercially viable Canadian services.
We would suggest that all of these arguments essentially amount to the supposition that the interests of the industry should be preferred to that of the right of the individual customer to consent to a contract for goods and services. The marketing principle “what consumers don’t know, cant hurt them” is very much alive and well in the submissions of the opponents to this Bill.
Bill c-276 seeks to empower Canadian’s by insisting that their right to chose be respected and that the historic relationship of vendor and purchaser be restored to industries whose products are important public services. We think this Bill is both overdue and farsighted, a unique combination that commends its passage.

Consumers Finally to Get a Say in Some Basic Cable TV Prices

On July 7, the CRTC issued a decision (Public Notice CRTC 1999-108) whereby cable companies will now be required to obtain approval from CRTC before increasing their basic monthly fee when the fee increase is the result of adding a specialty service to the basic package. Specialty services are those channels which generally offer a special theme such as news, sports, or music, etc.. Consumers have long complained to the CRTC about the cable companies arbitrarily adding channels and raising rates in basic service. The CRTC proposed to amend the Broadcasting Distribution Regulations earlier this year (Public Notice CRTC 1999-56) and asked for public comment. In its submission to the CRTC, PIAC supported the proposed amendments and argued that public participation in CRTC decision making should involve all channels which are included in the basic package, including specialty channels.
Under the new rules, cable subscribers will have to be notified about proposed price increases and will have 30 days to voice their concerns to the CRTC. The cable companies will also be required to file information with the CRTC to justify why a specialty channel should be added to basic service. With these changes, the CRTC will be able to suspend or disallow a proposed fee increase if it determines that such an increase is not justified. This is a good victory for consumers. In spite of the hype about competition, most Canadians do not have a choice of who provides their cable service, and where choice does exist, e.g., satellite tv, it is not a comparable option because it can be more expensive than the traditional wire-line cable service.