US embassy cable - 05OTTAWA717

UNCLAS OTTAWA 000717 
 
SIPDIS 
 
SENSITIVE 
 
PASS USTR FOR CLUNE, BALASSA, BURCKY AND SCHNARE 
 
STATE FOR EB/CIP, EB/DCT AND WHA/CAN 
 
DOC FOR ITA/MAC -- OFFICE OF NAFTA 
 
FCC FOR INTERNATIONAL BUREAU 
 
E.O. 12958: N/A 
TAGS: ECPS, ETRD, CA, Communication 
SUBJECT: SUBSCRIPTION RADIO:  CANADIAN LICENSE EXPECTED SOON 
 
REF:  04 OTTAWA 2967 (BROADCAST REGULATION CHALLENGES) 
 
1.   This message is sensitive, but unclassified.  Not for 
distribution outside USG channels. 
 
2.   SUMMARY/INTRODUCTION:  Canada's broadcast regulator, 
the Canadian Radio-Television and Telecommunications 
Commission (CRTC), is considering three license applications 
for subscription radio services in Canada.  A senior GOC 
official who is close to the CRTC told us he expects that 
the CRTC will grant at least one license, the terms of which 
will "push the envelope" in terms of Canadian content 
requirements.  He said a CRTC announcement is likely in 
March or early April.  End summary/introduction. 
 
3.   BACKGROUND:  Under Canada's Broadcasting Act, the CRTC 
tightly limits access to Canadian audiences by non-Canadian 
broadcast services.  Both television and radio services 
conform to Canadian content ("Can-con") quotas as a 
condition of license.  Conventional radio stations are 
required to ensure that 35 percent of their musical 
selections qualify as "Canadian."  Technological change in 
recent years has undermined the CRTC's control of 
broadcasting.  For example, hundreds of thousands of 
Canadian households are believed to use black- or gray- 
market devices to receive U.S. television signals (reftel), 
and many radio services are distributed globally on the 
Internet. 
 
4.   KEY PLAYERS:  No subscription radio services are 
currently licensed in Canada, but two U.S.-based satellite 
players - XM and Sirius - have joined with Canadian partners 
to bring applications to the CRTC, and one Canadian 
consortium has applied to offer a subscription radio service 
from terrestrial stations.  Major auto manufacturers are 
backing the applications by XM and Sirius, since the 
carmakers want to place receivers in new vehicles.  Key 
opponents, besides the conventional radio industry, are in 
Canada's politically influential "cultural policy" lobby 
(made up of arts/nationalist groups which traditionally push 
the GOC to protect domestic entertainment and cultural 
products on "nation-building" grounds).  While these groups 
usually want protection of Canadian industries, rather than 
merely of Canadian creative products, much of their concern 
with respect to radio is that new services will undermine 
the "Canadian content" regime. 
 
5.   DECISION SOON:  Econoffs recently met with a senior GOC 
official who has close links to the CRTC.  He predicted that 
the CRTC will decide to license at least one subscription 
radio service, that this will be announced in March or 
April, and that the conditions of license will "push the 
envelope" in terms of Canadian content.  (Comment:  XM and 
Sirius have already offered to include some "Canadian" 
channels as part of their Canadian services.  We speculate 
that the CRTC could impose requirements for Canadian musical 
selections on all channels offered by the new licensee.  End 
comment). 
 
6.   CANADIAN VS. FOREIGN SATELLITES:  A key GOC interest 
for GOC communications policymakers is maintaining Canada's 
strong position in the commercial satellite business (which 
is based on Canada's acquisition during the 1960's-1970's of 
many orbital slots).  GOC policy calls for the use of 
Canadian satellites to carry Canadian programming, but the 
official told us that there is no space currently available 
for subscription radio on Canadian satellites.  The GOC is 
considering adjusting its policy to accommodate the new 
service, but he said the adjustment will probably be 
"narrowly focused" on subscription radio. 
 
 
7. DOWNLOADING RISK:  Because of their high-quality digital 
signal, the satellite radio applications have further 
intensified concern in Canada about copyright protection of 
musical works, which was already high in the wake of recent 
court decisions.  The GOC is expected to introduce 
comprehensive copyright legislation in coming months.  The 
official noted that the advent of satellite radio highlights 
the need for a "very dynamic copyright regime." 
 
CELLUCCI