CRTC’s power to regulate certain contracts narrowed

The Federal Court of Appeal’s decision in Bell Canada v. 762591 Canada Ltd. has set aside what some telecommunications lawyers have called an unprecedented effort by the Canadian Radio-television and Telecommunication Commission to regulate private parties’ commercial contracts.

CRTC’s power to regulate certain contracts narrowed
Stephen Zolf says ‘independents who were not vertically integrated were aghast because the ‘Wholesale Code’ policy was meant to level the field between big and small players.’

The Federal Court of Appeal’s decision in Bell Canada v. 762591 Canada Ltd. has set aside what some telecommunications lawyers have called an unprecedented effort by the Canadian Radio-television and Telecommunication Commission to regulate private parties’ commercial contracts.

It made the big players in the industry happy, but it worried the independent programmers, says Stephen Zolf, a communications and media law partner at Aird & Berlis LLP in Toronto.

“Independents who were not vertically integrated were aghast because the ‘Wholesale Code’ policy was meant to level the field between big and small players,” he says.

Paragraph 9(1)(h) gives the CRTC power to require carriers (that retransmit programs through cable, satellite or broadband networks) to transmit specified content and to mandate the terms and conditions of carriage of those services. But it makes no specific reference to broadcasters (content creators).

In 2015, the CRTC imposed a policy, called the Wholesale Code, that purported to govern affiliation agreements between broadcasters and carriers. It then issued an order under paragraph 9(1)(h) requiring existing licensees to abide by the code.

The new rules created parameters on the negotiation and content of affiliation agreements, including directives that constrained the parties from prohibiting the distribution of programming on a stand-alone, build-your-own package or small package basis — the type of packages that favoured independents.

“The code was a very granular and in-the-trenches approach to regulation,” Zolf says.

Although the independents welcomed the code, the big carriers and broadcasters, who saw it as an unwarranted intrusion on their power to strike private deals, objected. Bell took the lead in seeking a declaration that the orders implementing the code were beyond the jurisdiction of the CRTC.

In a 2-1 decision, the Federal Court of Appeal agreed with Bell. Justices Judith Woods and Marc Nadon held that paragraph 9(1)(h) did not confer the necessary authority on the CRTC, while Justice Donald Rennie ruled that it did.

As the majority saw it, paragraph 9(1)(h) did not entitle the CRTC to regulate the economic terms on which content-producing entities such as TV channels were carried by cable, satellite or broadband networks.

“In my view, it is not reasonable to interpret paragraph 9(1)(h) as granting the CRTC a general power to regulate the terms and conditions of affiliation agreements,” Woods wrote. “This interpretation goes far beyond the ordinary meaning of the language in paragraph 9(l)(h) and is not reasonably supported by a textual, contextual and purposive interpretation of the legislation.”

The majority decision, then, sends a clear message to the CRTC.

“The takeaway from this case is that the commission will have to watch out when it purports to exercise its authority under paragraph 9(1)(h) of the Broadcasting Act,” says Jay Kerr-Wilson, the Ottawa-based co-leader of Fasken Martineau Dumoulin LLP’s technology, media and telecommunications practice. But as Rennie saw it in dissent, the issue was whether Parliament intended to give the CRTC jurisdiction to enact measures directly affecting broadcasters as well as carriers.

“Paragraph 9(I)(h) does not expressly grant authority to the CRTC to impose terms and conditions on the negotiation of affiliation agreements and their content. This much is clear,” he wrote. “On an ordinary and literal reading of the text, paragraph 9(l)(h) only authorizes the CRTC to impose terms and conditions in respect of programming services upon BDUs [carriers], which are expressly mentioned, and not on PUs [broadcasters] which are not mentioned.”

But, according to Rennie, that didn’t end the analysis.

“The context is also to be considered,” he wrote. “A provision which confers jurisdiction cannot be read in isolation.”

Rennie went on to review other relevant provisions of the Broadcasting Act and concluded that, by implication, the CRTC acted within its jurisdiction in imposing the Wholesale Code.

However that may be, Bell’s victory has a pyrrhic element inasmuch as the majority specifically refused to comment on whether the CRTC could end-run the decision.

“As this appeal only concerns paragraph 9(l)(h), I express no view as to whether the CRTC’s objective in issuing the Order could have been achieved by some other means,” Woods wrote.

But Woods’ reasons contain a strong suggestion that there were in fact other avenues open to the CRTC.

“The ordinary meaning of [paragraph 9(1)(h)] does not encompass a general power to regulate the terms and conditions of carriage,” she wrote. “Such regulation must relate to terms and conditions of programming services that the CRTC specifies and requires to be provided by a licensee.”

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