SUBSCRIPTION RADIO: CANADIAN LICENSE EXPECTED SOON

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
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