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Viewing cable 05OTTAWA2745, SUBSCRIPTION RADIO:

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Reference ID Created Released Classification Origin
05OTTAWA2745 2005-09-13 14:36 2011-04-28 00:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Ottawa
This record is a partial extract of the original cable. The full text of the original cable is not available.

131436Z Sep 05
UNCLAS SECTION 01 OF 02 OTTAWA 002745 
 
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 
 
PARIS FOR USMISSION UNESCO 
 
E.O. 12958: N/A 
TAGS: ECPS ETRD CA
SUBJECT:  SUBSCRIPTION RADIO: 
     CANADA ALLOWS LICENSE DECISION TO STAND 
 
REF: (A) OTTAWA 2620  (B) OTTAWA 1865 
 
1.   (U) Sensitive, but unclassified.  Not for distribution 
outside USG channels. 
 
2.   (U) SUMMARY/INTRODUCTION:  On September 9, after 
furious lobbying from both sides, the GOC decided not to 
remand a regulatory licensing decision for subscription 
radio (ref B outlines the June decision by the broadcast 
regulator).  This allows U.S.-based XM and Sirius to extend 
their services into Canada in coming months, albeit with 
further concessions on French-language content and Canadian 
programming.  This episode may augur changes on the 
bilateral "cultural policy" front, which has been quiescent 
in recent years.  In particular, technological changes 
continue to make the regulation of content more difficult, 
which is threatening to Canada's cultural-nationalist 
groups.  END SUMMARY/INTRODUCTION 
 
3.   (U) After a week of indecision, during which the full 
Cabinet and an ad hoc committee both failed to resolve this 
issue, the government's operations committee decided on 
September 9 not/not to send the licensing decision back to 
the regulator, the Canadian Radio-Television and 
Telecommunications Commission (CRTC), for reconsideration. 
With the expiry of a 90-day review window, the CRTC 
licensing decision issued in early June now stands.  That 
decision allowed Canadian versions of both XM and Sirius 
satellite radio to operate in Canada, provided that (like 
all licensed broadcasters in Canada) they met specific 
Canadian-content and French-language-content requirements 
(on the order of 10 percent and 2.5 percent of programming 
respectively).  The CRTC also licensed one Canadian-based 
subscription radio service which, given a lack of satellite 
orbital slots, will be broadcast from terrestrial stations 
in major urban centers rather than by satellite.  All three 
services were expected to begin operation by the end of 
2005. 
 
4. (U) The two major Canadian media firms which jointly own 
the Canadian licensee - Montreal's Astral and Toronto's CHUM 
- protested the June decision on grounds that the presence 
of XM and Sirius would make their business model non-viable. 
They were joined by advocates for "Canadian culture" and 
French-language content (ref A), who were concerned that the 
effect of the licenses would be to put downward pressure on 
Canadian content regulations more generally (Canadian 
content in conventional broadcasting is regulated at 20 to 
35 percent).  In combination, these groups persuaded 
Canadian Heritage Minister Liza Frulla to bring the CRTC's 
decision to the Cabinet table for review - an option which 
is rarely exercised. 
 
5. (U) Much lobbying ensued, including full-page newspaper 
ads from various creative and business groups, and the issue 
drew far more attention in the past two weeks than during 
the licensing hearings.  A decision to remand the matter 
back to the regulator might have led to further public 
hearings and would certainly have been costly to XM and 
Sirius, their Canadian partners, and equipment suppliers 
(notably automakers).  To forestall this, the two satellite- 
radio groups offered to increase their French language and 
Canadian content somewhat beyond the terms required by the 
June decision.  Still, the matter remained unresolved in 
Cabinet for a week before the operations committee decided 
on September 9 to accept the new content offers and 
otherwise let the CRTC's original decision stand. 
 
ANALYSIS 
-------- 
 
6.    (SBU) Canada exempted "cultural industries" from 
NAFTA.  The culture/media sector saw some difficult 
bilateral issues during the 1980's-1990's but, apart from 
different views on the current development within UNESCO of 
a "cultural diversity" treaty, bilaterally it has been 
quiescent since 1999.  In our view, the recent satellite 
radio licensing episode highlights several developing 
threats to the status quo in Canada's "cultural policy" 
regime: 
-- THE MINISTRY:  Canadian Heritage Minister Frulla did not 
resolve this issue before it reached the Cabinet table. 
This prompts suggestions that she (like some previous 
Ministers in this portfolio) is too close to "creative" 
interests, hampering the government's ability to make good 
policy compromises in this and other areas.  The same 
problem arguably contributes to the GOC's difficulties in 
updating Canada's copyright law, as well as its 
telecommunications policy regime (delays in both areas have 
been frustrating to U.S. interests).  Observers say this 
must be resolved, and that the obvious solution is to re- 
create the "Department of Communications," which, prior to 
1993, combined functions since divided between the Heritage 
and Industry departments.  This would force these issues to 
be resolved within a single department and make them less 
prone to spill into Cabinet or Parliament.  On the whole, we 
believe that with good leadership, such a reform could help 
resolve longstanding problems. 
 
-- THE REGULATORY PROCESS:  For U.S.-origin broadcast 
content, such as cable channels, pay-TV channels, or XM and 
Sirius, the Canadian regulatory regime is already 
exceptionally restrictive.  At least until now, however, it 
was entirely administered by the CRTC, limiting the scope 
for politicizing decisions.  Frulla's referral of the 
subscription radio matter to Cabinet not only loosened this 
containment, but also quickly drew concessions from the 
licensees.  We see this as an unfortunate precedent, one 
which is likely to encourage further politicization of the 
telecom/broadcast regulatory process. 
 
 
-- THE CONTINENTAL AIRWAVES:  The technology on which 
satellite radio is based, like the Internet, makes the 
entire North American continent a single radio market, and 
this could profoundly change the rules of the "Canadian- 
content" game (not to mention the effort to protect the 
French language in North America).  Such change threatens 
various entrenched interests in Canada's cultural 
nationalist community who benefit from the current "cultural 
policy" regime.  During the hearing process which led to 
licensing, both Canadian Satellite Radio Inc. (the 
partnership representing XM) and Sirius Canada Inc. clearly 
felt pressure to increase the level of "Canadian content," 
not only on Canadian- and non-Canadian music channels 
offered to Canadians, but even on their U.S. services. 
According to the CRTC's introduction to the decision (para. 
47), "although neither CSR nor Sirius Canada could commit 
its US partner to broadcast a minimum level of Canadian 
content on the U.S. channels, both applicants proposed to 
employ a "Canadian ambassador" who would actively seek out 
and champion Canadian musical selections, and encourage the 
program directors of the U.S. satellite services to include 
Canadian selections on their playlists."  To our knowledge, 
this is the first instance of Canadian regulatory or 
legislative instruments/processes being contemplated to 
directly influence the content of media/entertainment 
offered to Americans by Americans (as opposed to merely 
promoting diffusion of Canadian products/services), but it 
may not be the last. 
 
WILKINS