1 00:00:04,040 --> 00:00:08,800 Scott Prescott: Welcome, everyone to the broadcasting episode of the podcast on Canada US, 2 00:00:08,840 --> 00:00:11,520 Mexico trade agreement. I'm Scott Prescott. 3 00:00:11,560 --> 00:00:16,960 I'm a partner at Fasken. My practice is focused primarily on broadcasting regulation. 4 00:00:17,400 --> 00:00:25,360 Uh, with me today is Ryley was an associate in our communications practice group and works closely with me on broadcasting and media matters. 5 00:00:26,320 --> 00:00:34,120 During our episode of this podcast, we will discuss CUSMA's impact on the broadcasting industry in Canada and on the legal framework that 6 00:00:34,120 --> 00:00:39,520 governs that industry. So with that brief introduction, this segment, uh, 7 00:00:39,520 --> 00:00:45,880 maybe I can ask you, Ryley, uh, to start by explaining what CUSMA currently says about broadcasting. 8 00:00:46,920 --> 00:00:50,880 Ryley Alp: Okay. So CUSMA says three things about broadcasting. 9 00:00:50,920 --> 00:00:55,120 The first is a Canadian cultural industries exception. 10 00:00:55,120 --> 00:01:03,070 So that's an article 32.6. So that exception allows us to adopt measures to protect our cultural industries, 11 00:01:03,070 --> 00:01:09,590 which includes books, magazines, music, film, video recordings, as well as radio, 12 00:01:09,590 --> 00:01:15,270 television and cable broadcasting undertakings and satellite programming services. 13 00:01:15,270 --> 00:01:19,630 So the provision effectively exempts cultural industries from CUSMA. 14 00:01:20,230 --> 00:01:24,630 With that being said, if Canada adopts measures to protect its cultural industries, 15 00:01:24,630 --> 00:01:30,390 including measures taken under the Broadcasting Act, the US and Mexico can retaliate in two ways. 16 00:01:30,390 --> 00:01:37,550 So first, they can adopt measures targeting Canadian goods, services or content that would normally be inconsistent with the agreement, 17 00:01:37,550 --> 00:01:43,630 but are permitted here because they mirror the kind of flexibility Canada receives under the cultural exception. 18 00:01:44,030 --> 00:01:51,310 Or they can adopt measures of equivalent commercial effect, which would not necessarily have to be a cultural measure. 19 00:01:51,670 --> 00:01:58,510 So Canada can protect its cultural industries, but doing so can trigger these two types of retaliatory measures. 20 00:01:59,550 --> 00:02:05,500 A second provision in CUSMA that affects broadcasting is chapter 19, which is digital trade. 21 00:02:05,700 --> 00:02:10,740 It requires the parties to provide non-discriminatory treatment to digital products. 22 00:02:10,940 --> 00:02:16,540 This means digital digital products such as online streaming services, digital platforms, 23 00:02:16,580 --> 00:02:24,660 podcasts, online news, user generated content, and e-book retailers, um, which all benefit from non-discriminatory 24 00:02:24,660 --> 00:02:31,020 treatment. Um, the third way CUSMA impacts broadcasting is found in chapter 15, 25 00:02:31,020 --> 00:02:36,180 which has two very, very specific provisions on cross-border trade and services. 26 00:02:36,300 --> 00:02:42,300 So the first requires Canada to allow us home shopping channels to be distributed in Canada. 27 00:02:42,500 --> 00:02:46,380 And the second relates to a measure known as simultaneous substitution. 28 00:02:46,380 --> 00:02:54,980 So Canada is prevented from adopting rules that would prohibit cable and satellite distributors from substituting the Canadian signal of the Super 29 00:02:54,980 --> 00:02:58,860 Bowl over the signal transmitted by a US TV station. 30 00:02:59,260 --> 00:03:06,810 So now that we know what CUSMA says regarding broadcasting, Scott, how about you tell us about how the broadcasting sector has been affected 31 00:03:06,810 --> 00:03:10,010 historically by trade negotiations, including CUSMA. 32 00:03:10,730 --> 00:03:13,890 Scott Prescott: Okay. Thanks, Rani. Uh, the original Canada-U.S. 33 00:03:13,890 --> 00:03:16,890 free trade agreement was signed in 1988. 34 00:03:17,090 --> 00:03:21,610 It actually included the same cultural industries exception that Riley just talked about. 35 00:03:21,850 --> 00:03:29,410 It also continued to be part of NAFTA when that came into effect in 1994 and until expired or renegotiated in 2020. 36 00:03:30,250 --> 00:03:36,970 Uh, because of that provision, Canada has adopted a variety of measures over the years to protect the broadcasting industry. 37 00:03:37,290 --> 00:03:39,410 I will highlight just a few of them here. 38 00:03:40,050 --> 00:03:48,930 Um, the first is that Canada maintains a strict broadcasting licensing regime that includes a strict Canadian ownership and control requirement. 39 00:03:49,290 --> 00:03:55,610 Uh, this effectively prevents foreign companies from owning and controlling Canadian television and radio broadcasters, 40 00:03:55,890 --> 00:03:58,570 as well as cable and satellite distributors. 41 00:03:59,450 --> 00:04:06,110 Uh, a second measure, uh, is the rule that limits the number of foreign linear programming services that can be 42 00:04:06,110 --> 00:04:15,110 distributed in Canada. The purpose of this rule is to protect Canadian broadcasters from those foreign services that the CRTC has deemed to be 43 00:04:15,270 --> 00:04:19,470 directly competitive with the. With Canadian programming services. 44 00:04:20,150 --> 00:04:29,270 And the third third measure I'll mention is, is one that I just touched on briefly was that the requirement for cable and satellite distributors 45 00:04:29,270 --> 00:04:38,710 to substitute a Canadian over-the-air TV signal for a US TV signal when the programs on the two stations are the same and are broadcast 46 00:04:38,750 --> 00:04:47,230 simultaneously. Uh. This simultaneous substitution rule is intended to protect program rights and advertising revenues, 47 00:04:47,390 --> 00:04:50,390 um, of the local Canadian television stations. 48 00:04:51,550 --> 00:05:00,590 So so the cultural industry exception acts as a shield for these and a number of other long standing sort of broadcasting statutory and 49 00:05:00,590 --> 00:05:05,390 regulatory requirements, which are designed to favour Canadian broadcasting companies. 50 00:05:05,950 --> 00:05:10,780 Uh, the US has at a very various time since 1988 objected to some of Canada's measures, 51 00:05:10,780 --> 00:05:14,540 including no ownership restrictions and simultaneous substitution. 52 00:05:15,260 --> 00:05:21,860 They argue that they reduce the value of US programming and limit American companies ability to compete freely within Canada. 53 00:05:22,660 --> 00:05:27,860 Despite that, these cultural carveouts have remained in place for almost 40 years now, 54 00:05:28,700 --> 00:05:35,580 and notwithstanding that, they have been a source of of sort of semiconscious consistent tension in the 55 00:05:35,620 --> 00:05:37,020 Canada-U.S. trade relationship. 56 00:05:38,220 --> 00:05:46,580 Ryley Alp: Okay, great. So now that we kind of have that background, what do you think might be on the table for renegotiation as a part of the current 57 00:05:46,580 --> 00:05:49,500 CUSMA review in the broadcast and media sector? 58 00:05:50,380 --> 00:05:57,700 Scott Prescott: Yeah. So I think there are I mean there are two recent statutes that that are that are um have become trade irritants. 59 00:05:58,060 --> 00:06:05,140 Um and I, they will likely discuss the, at the negotiating table this summer and maybe for many summers to come. 60 00:06:05,180 --> 00:06:10,450 If, uh, if a new Consensus on CUSMA has not reached this year. 61 00:06:10,850 --> 00:06:12,730 Um the first is the online streaming act. 62 00:06:13,010 --> 00:06:20,090 It came into force in 2023. Uh it gives the Canadian the CRTC which is Canada's broadcast regulator, 63 00:06:20,530 --> 00:06:26,050 the express authority to regulate foreign and domestic online streaming services that operate in Canada. 64 00:06:27,130 --> 00:06:35,650 So among other things, the CRTC has used that new power to require large foreign streamers to contribute 5% of their annual Canadian revenues to 65 00:06:35,690 --> 00:06:38,570 support the production of Canadian and Indigenous content. 66 00:06:39,090 --> 00:06:45,370 Um, this 5% contribution has been subject to appeal and judicial review by the Federal Court of Appeal, 67 00:06:45,370 --> 00:06:49,450 and a stay is still in effect pending the court's decision on those on that appeal, 68 00:06:49,490 --> 00:06:56,290 those appeals and judicial reviews. Um, the legal challenges were brought by foreign streamers. 69 00:06:56,450 --> 00:07:04,570 Uh, they questioned the scope of the authority under the act, uh, the obligations of specific obligations imposed on foreign undertakings and 70 00:07:04,570 --> 00:07:10,080 whether mandated contributions can be directed to support specific types of Canadian content, 71 00:07:10,080 --> 00:07:18,240 such as local Canadian news, which is a sort which is a type of content that is not provided by those forms streams. 72 00:07:19,680 --> 00:07:27,160 In addition to these legal challenges, the act has also been identified by some in the US Congress as a trade irritant. 73 00:07:27,200 --> 00:07:33,960 Earlier this year, a bill was submitted to the US House of Representatives targeting Canada's online streaming act. 74 00:07:34,400 --> 00:07:38,560 It's called the the Protecting American Streaming Innovation Act. 75 00:07:39,360 --> 00:07:46,280 If passed, it would trigger an investigation into the online streaming act under the US Trade Act of 1974, 76 00:07:47,280 --> 00:07:57,160 and which allows the US Trade Representative to retaliate, most commonly with tariffs against a foreign policy or law that is deemed unfair 77 00:07:57,160 --> 00:08:02,080 to US commerce. So while Canada continues to invoke the cultural industries exception, 78 00:08:03,360 --> 00:08:08,520 uh, the bill addresses this by noting that the exception, and I quote, traces the Canada-U.S. 79 00:08:08,520 --> 00:08:15,030 Free Trade Agreement era and retains a legacy definition of cultural industry centred on traditional publishing. 80 00:08:15,270 --> 00:08:20,510 Recordings in broadcasting rather than modern means of digital digital delivery, 81 00:08:20,510 --> 00:08:26,230 end quote. So based on this, it's clear that the online streaming act is a trade irritant. 82 00:08:26,790 --> 00:08:29,990 Um, it will be raised at this summer's scheduled review of CUSMA. 83 00:08:30,070 --> 00:08:37,270 Uh, many in the US view it as a threat to trade and see it as a mechanism to force streamers to subsidise Canadian content and culture. 84 00:08:38,470 --> 00:08:43,990 Uh, Canada's perspective is that the Act levels the playing field for domestic broadcasters and protects Canadian culture. 85 00:08:44,390 --> 00:08:48,550 Given, uh, US streamers growing presence in the Canadian market. 86 00:08:48,590 --> 00:08:58,230 This issue will come to a head soon. Actually, uh, recently, Canada's minister responsible for Canada US trade indicated that the cultural 87 00:08:58,230 --> 00:09:03,950 exemption was not being has not been the focus of trade discussions, and further stated that it would not be on the table. 88 00:09:04,390 --> 00:09:09,870 He reassured Canada's cultural community that it is the government's commitment to continue along those lines in the future. 89 00:09:10,670 --> 00:09:15,620 The second Canadian statute that will likely be discussed at CUSMA review is the online news act. 90 00:09:17,220 --> 00:09:24,300 It requires two large tech companies to negotiate payments with Canadian news organisations for the use of the comment content. 91 00:09:25,380 --> 00:09:29,500 Google reached a deal to pay 100 million annually to Canadian journalism groups, 92 00:09:29,500 --> 00:09:37,700 which includes broadcasters. Uh. Meta, for its part, chose instead to block news on Facebook instead in order to avoid being governed 93 00:09:37,700 --> 00:09:44,260 by the act. So the online news action has also been flagged as an irritant by the US Trade Representative. 94 00:09:44,940 --> 00:09:50,300 Um. Last summer, however, the Canadian Prime Minister suggested that it might be he might consider rescinding the act. 95 00:09:50,780 --> 00:09:54,780 So that matter would lift its ban on news articles being shared on its platforms. 96 00:09:55,020 --> 00:09:58,780 Um, given the US concerns about these two Canadian statutes in particular, 97 00:09:58,820 --> 00:10:02,500 they will no doubt be topics of discussion at the CUSMA regime. 98 00:10:03,220 --> 00:10:07,700 So Riley, having identified the two current trade irritants related to broadcasting, 99 00:10:07,700 --> 00:10:15,450 maybe you can talk about where Canada might see new trade challenges emerge to due to technological innovations. 100 00:10:16,330 --> 00:10:22,210 Ryley Alp: Yeah for sure. So I think based off of what you just talked about going forward, 101 00:10:22,370 --> 00:10:31,890 um, the central challenge is going to be that trade rules written for traditional broadcast and media are being applied to these rapidly evolving 102 00:10:31,890 --> 00:10:40,010 digital platforms, which is creating tension between cultural policy objectives and modern digital trade principles. 103 00:10:40,330 --> 00:10:46,170 So as more and more traditional broadcasting content is streamed online and across borders, 104 00:10:46,410 --> 00:10:53,530 it's going to become more difficult to impose traditional measures pursuant to CUSMA's cultural industry exception. 105 00:10:54,330 --> 00:11:01,450 It's also becoming apparent that while Canada continues to extend cultural policy tools to digital intermediaries, 106 00:11:01,650 --> 00:11:10,130 the US is much less willing to accept these measures remain that, and that they remain defensible under the cultural exception, 107 00:11:10,130 --> 00:11:13,250 which was originally negotiated in 1988. 108 00:11:13,250 --> 00:11:17,710 So that's well before the rise of these digital platforms and streaming services. 109 00:11:18,950 --> 00:11:25,950 Scott Prescott: So another question I have is what are Canadian stakeholders saying today about CUSMA and the need to protect cultural industries? 110 00:11:26,590 --> 00:11:36,550 Ryley Alp: Yeah. So Canada's cultural industry continues to encourage preserving and modernising the cultural um exception for the digital era 111 00:11:36,710 --> 00:11:40,190 to reflect the evolving content distribution environment. 112 00:11:40,470 --> 00:11:47,470 Um, but for the most part, Canada's production industry and most domestic broadcasters continue to strongly support the 113 00:11:47,470 --> 00:11:49,670 cultural protections afforded by CUSMA. 114 00:11:49,990 --> 00:11:59,630 So viewing them as fairly essential to maintaining Canadian content production and ownership and independence in the face of massive 115 00:11:59,630 --> 00:12:06,470 global competition. Uh, there was a recent survey conducted by Pollara Strategic Insights, 116 00:12:06,750 --> 00:12:12,070 and it was commissioned by the sea MPA, which is the Canadian Media Producers Association. 117 00:12:12,230 --> 00:12:17,420 And it, it, it states that 83% of Canadians support the online streaming act. 118 00:12:17,420 --> 00:12:24,580 So, um, still lots of support there. Um, I guess to wrap things up, Scott, 119 00:12:24,700 --> 00:12:30,700 uh, what should policy makers and industry and stakeholders expect going forward? 120 00:12:32,100 --> 00:12:37,700 Scott Prescott: I think Canada's policy policy makers and stakeholders should certainly expect heightened scrutiny. 121 00:12:37,740 --> 00:12:42,580 Canada's cultural and digital policy measures as part of the 2026 review. 122 00:12:43,780 --> 00:12:48,020 While the wholesale rate renegotiation of the cultural industry exceptions is unlikely, 123 00:12:48,260 --> 00:12:55,260 uh issues linked to digital trade regulation, streaming services and funding of Canadian news programming in particular will surely be 124 00:12:55,260 --> 00:13:02,260 discussed. Um, as I said earlier on, the online streaming act and the Online News Act have already been flagged as free agents by the 125 00:13:02,300 --> 00:13:09,300 US, indicating that these specific measures will be will be part of the new CUSMA negotiations. 126 00:13:09,580 --> 00:13:16,740 Uh, on top of that, Canada's cultural industry should also be prepared for some continued legal and political uncertainty, 127 00:13:16,930 --> 00:13:25,570 particularly when domestic regulatory proceedings, uh, court challenges, trade pressures are all happening at the same time that CUSMA is being 128 00:13:25,610 --> 00:13:35,530 reviewed. That state of uncertainty and apprehension, uh, will continue to grow if the review does not result in an extension of the 129 00:13:35,570 --> 00:13:43,770 summer and the parties cannot reach agreement this year or next year becomes subject to annual reviews with a potential expiration date of 2036. 130 00:13:44,130 --> 00:13:49,290 I think everybody on the Canadian side would agree that such an outcome would be problematic, 131 00:13:49,730 --> 00:13:53,770 uh, particularly given that all the other trade related challenges that exist today. 132 00:13:55,770 --> 00:14:00,250 So that's our overview of CUSMA from the broadcasting perspective. 133 00:14:00,290 --> 00:14:03,010 Uh, we would be happy to hear from any of you that are listening. 134 00:14:03,010 --> 00:14:05,170 If you have any questions about these issues. 135 00:14:05,490 --> 00:14:13,730 Uh, we will now turn things over to Leslie Milton and Paul Burbank for episode three dealing with telecom trade issues relating to CUSMA.