Simultaneous Substitution on Cable TV and Satellite
U.S. television programs, and particularly drama, comedy and entertainment programs, have always been vital components in the schedules of Canadian commercial broadcasters. This quality programming, popular with advertisers, has always provided healthy revenue margins, and has helped to subsidize the production of the expensive domestic programming required of Canadian broadcasters as a condition of license.
The first Canadian commercial television stations licensed in the 1950s were CBC affiliates. In 1960 the then Board of Broadcast Governors (BBG) granted licenses for commercial stations in each of the major markets to provide an alternative service to the CBC. They began broadcasting in 1961, and all of them acquired Canadian rights to American programs. As a significant proportion of the Canadian population lived close to the US border, about 30% of Canadians could choose to watch Wagon Train, Bonanza or Gunsmoke either on a Canadian station or via a signal out of one of the many U.S. stations close to the Canadian border.
Antennas in Canadian cities bordering the U.S. were all trained to the south. Toronto viewers wanted to be able to see the programming of Buffalo N.Y. stations WGRZ-TV (NBC), WBEN-TV (later WIVB-TV) (CBS) and WKBW-TV (ABC). Montreal viewers looked to Burlington for CBS’s WCAX, to Plattsburgh N.Y for NBC’s WPTZ-TV, and to Mount Washington, New Hampshire for ABC’S WMTW-TV, whose studios were actually located in Poland Springs, Maine. London, Ontario residents watched the signals coming from CBS affiliate WFBG-TV, NBC’s WICU-TV and ABC’s WJET-TV in Erie, Pennsylvania. While the major U.S. Network affiliates in Detroit blasted clear signals into Windsor, Ontario, the situation was a little different, because the Detroit stations had the clout with their respective networks to prevent the sale of popular US network series to the Canadian Windsor station CKLW-TV.
To the west, KCND in Pembina, North Dakota was garnering a majority of its commercial revenues from Canadian advertisers aiming at the Winnipeg market, as was KVOS-TV in Bellingham, Washington doing so from the Vancouver market. According to Barry Berlin in his book “The American Trojan Horse”, by the early 1970s no less than 23 US border stations were drawing substantial advertising dollars out of Canada, with six stations, including the three Buffalo network affiliates, getting around 40% of their gross revenues from Canada, and sharing between $15,000,000 and $18,000,000 a year from Canadian advertisers.
One way Canadian broadcasters in border markets dealt with this competitive situation was by broadcasting these shows in advance of the US broadcasts (‘pre-release’), in the hope that they would at least do better by showing these programs first. But then the advent of cable offered a new challenge, but with it a new opportunity.
The challenge came because, by the early 1970s, cable television (known as CATV, or Community Antenna Television) was beginning to proliferate across Canada, and with it came the further diminution of the value of the exclusive right obtained by a Canadian station to an American program. Viewers in markets far from the U.S. border could also now watch the same US programs on either a Canadian or a US channel, thanks to the CRTC allowing cable operators to bring in distant signals by microwave. . This was prompting Canadian advertisers to buy even more time on US stations seen in Canada, a revenue outflow which was only stemmed to some degree when the Canadian Government introduced legislation limiting the degree to which these purchases could be claimed as business expenses for tax purposes.
The opportunity came in 1972 when, in response to pressure from Canadian broadcasters, the Canadian Radio-Television Commission (CRTC), introduced regulations allowing television broadcasters to ask the larger cable system operators to delete incoming US program signals where a local broadcaster owned the Canadian rights to the identical program or program episode, and substitute the Canadian signal. Thus, a Canadian tuning in to watch an American program, on either the US or the Canadian channel, would see the Canadian version, with the Canadian commercials.
Later, as direct-to-home satellite systems were licensed in Canada, virtually all Canadians were able to have access to programming from all the US Networks, as well as many speciality channels. Before long, simultaneous substitution became a requirement on these satellite services also.
For Canadian television licensees, simultaneous substitution (sometimes abbreviated by the media to "simsub") helped preserve the "logic of license". It was, however, imperfect. Anyone living close to the US border, who had a good antenna, could pick up U.S. signals with no substitution. Some Canadians went to the so-called “grey market” and bought satellite dishes from the U.S. And annually, thousands of viewers to the Super Bowl would protest that simultaneous substitution prevented them from seeing the spectacular commercials produced each year by American advertisers for exposure in this highly-rated event. (Some years later this situation would change: see below).
Secondly, and more importantly, with all Canadian broadcasters buying dozens of hours of US programming every year, it was inevitable that not every one of those programs could be scheduled in the identical time period as its US telecast. Prerelease offered some advantage, but significant numbers of viewers were still lost by the Canadian program rightsholders to American stations - and American advertisers.
The existing regulations for simultaneous substitution extended well into the 21st Century, though each year at Super Bowl time there was a renewal of suggestions/demands for the elimination of simsub, again motivated by viewers who wanted to be able to see the uniquely expensive commercials U.S. advertisers invariably produced for inclusion in this always spectacular broadcast.
In September 2014 the CRTC held a hearing on "Let's Talk TV" where both the industry and the public were invited to comment on ways they thought Canadian television could do a better job. In January 2015, much to the surprise of both the industry and the public, the CRTC announced that, ".... given the comments received from Canadians and the fact that the non-Canadian advertising produced for the Super Bowl is an integral part of this special event programming, distributors will no longer be allowed to perform simultaneous substitution for this event as of the end of the 2016 NFL season (i.e. for the January/February 2017 broadcast of the Super Bowl).
The Commission went on to say that "Despite certain reservations, the Commission will continue to allow the practice of simultaneous substitution for the time being. However, citing the number of complaints that had been received concerning what they described as "the frequency of errors made during the simultaneous substitution process", the CRTC added: "However, to ensure that simultaneous substitution is executed in a seamless fashion, the Commission is introducing meaningful consequences should broadcasters and distributors make errors. Specifically, the Commission intends to amend its regulations to deal with recurring, substantial simultaneous substitution errors as follows:
- if the errors are made by a local television broadcaster, it will lose the privilege to request simultaneous substitution for a period of time or with respect to a type or types of programming; and
- if the errors are made by the distributor, it will have to provide a compensatory rebate to its customers through a specific monetary amount.
The CRTC decision announcement noted that, during the Let's Talk TV hearings, "Bell, Channel Zero, Eastlink and Rogers (had) indicated their interest in participating in a working group to develop industry practices to reduce the quantity of substitution errors and standard language that BDUs and broadcasters would use to clearly and succinctly explain to subscribers the importance and benefits of simultaneous substitution. Channel Zero suggested that the creation of the working group was important enough that it should report to the Commission on possible solutions by no later than mid-December 2014."
The Commission then stated: "In response to a Commission letter dated 24 December 2014 requesting a status report on the progress made towards the development of a working group, the parties in question (Bell, the Canadian Cable Systems Alliance, Channel Zero, Cogeco, Eastlink, MTS, Quebecor, Rogers, SaskTel, Shaw and TELUS) replied on 9 January 2015 that they had met and had agreed to form such a working group, which would hold its first meeting that month to finalize its objectives, associated timelines and a date by which it would report back to the Commission on the actions taken and recommendations for further improvements."
Follwing the "Let's Talk TV" hearings, the Commission on January 29th 2015 reaffirmed its support for the continued implementation of simultaneous substitution of US programs when the same program was being broadcast by a Canadian rights-holder. In announcing this, the Commission again underlined the importance of U.S. programs in private Canadian broadcasters' program schedules.
However, in a controversial decision the CRTC announced that, commencing in 2017, simultaneous substitution would not be allowed for the Canadian broadcast of the Super Bowl. Bell Media, owners of the rights, announced their intention to appeal this decision. Leave to appeal was granted, and a hearing was scheduled for June 2016.
On July 23rd 2015, the CRTC issued an information bulletin setting out its planned procedure for dealing with simultaneous substitution errors, including how viewers could submit complaints. The measures set out in the document would serve to ensure that the programming Canadians watched was not disrupted when simultaneous substitution occurred. To implement the removal of simultaneous substitution for the Super Bowl, the Commission intended to use its authority pursuant to section 9(1)(h) of the Broadcasting Act to impose conditions regarding the carriage of programming services.
Subsequent to the Let's Talk TV proceeding, broadcasting industry stakeholders formed a working group to evaluate measures that could be implemented to minimize consumer disruptions during the execution of simultaneous substitutions. In doing so, the stakeholders took responsibility for ensuring that Canadians enjoyed a better viewing experience. The Commission looked forward to receiving the working group's report by August 2015, which was expected to include measures that the working group had, and planned to implement, to reduce simultaneous substitution execution errors. This report would be published on the Commission's website when available.
This report can be accessed at:http://www.crtc.gc.ca/eng/publications/reports/rp150831.htm.
On June 22nd 2016, Bell Media's appeal against the ban on simultaneous substitution of Super Bowl coverage effective 2017 was heard by the Federal Court of Appeal. A decision was promised before the end of the year.
On August 19th 2016, without waiting for the Federal Court's decision on the Bell Media appeal, the CRTC issued a distribution order affirming that BTUs should not provide simultaneous substitution for the game portion of the U.S. Super Bowl television coverage.
Accordingly, the distribution order would not apply to pre- and post-Super Bowl game components.
On August 1st 2017, with there still having been no decision handed down by the Federal Court of Appeal on BCE Inc's appeal against the CRTC's Order prohibiting simultaneous substitution of the CTV Superbowl coverage, BCE filed a new application with the CRTC, asking it to overturn its January 2015 Order rescinding Superbowl simulcast rights. BCE Inc said that the loss of simulcast rights on the Superbowl had reduced its audience by 40%, and its advertising revenue by $11,000,000.
In January, Bell Media again asked for leave to appeal the federal court ruling that upheld the CRTC policy in respect of disallowing simultaneous substitution for the Super Bowl, and for a stay of the regulator's decision, but on Friday January 26th the Supreme Court declined to take immediate action that would have allowed simultaneous substitution for the 2018 Super Bowl on February 4th. The Court however undertook to expedite the hearing of Bell Media's leave to appeal, although it appeared unlikely that there would be any action in time to permit CTV to substitute its own commercials in the February 4th broadcast. This proved to be the case, and Bell subsequently said they had lost very significant revenus as a result.
On May 10th 2018, the Supreme Court of Canada announced that Bell Media and NBC's application for leave to appeal from the judgment of the Federal Court of Appeal dated December 18, 2017, in respect of Simultaneous Substitution of commercials in the Super Bowl, had been granted with costs. The hearing of the appeal would not be expedited, but the Court statement said that it was of the view that these appeals would provide an opportunity to consider the nature and scope of judicial review of administrative action, as addressed in Dunsmuir v. New Brunswick,  1 S.C.R. 190, 2008 SCC 9, and subsequent cases. To that end, the appellants and respondent were invited to devote a substantial part of their written and oral submissions on the appeal to the question of standard of review, and that they would be allowed to file and serve a factum on appeal of at most 45 pages.
On October 1st 2018, as part of the newly negotiated USA-Mexico-Canada Agreement (USMCA) that replaced the North American Free Trade Agreement (NAFTA) after thirteen months of hard negotiations between the three countries, Annex-15 in the USMCA included this wording in reference to the television broadcast of the Super Bowl:
“Canada shall rescind Broadcasting Regulatory Policy CRTC 2016-334 and Broadcasting Order CRTC 2016-335. With respect to simultaneous substitution of commercials during the retransmission in Canada of the program referenced in those measures, Canada may not accord the program treatment less favorable than the treatment accorded to other programs originating in the United States retransmitted in Canada.” This meant that, once Broadcasting Regulatory Policy CRTC 2016-334 and Broadcasting Order CRTC 2016-335 were no longer in effect, the Canadian rightsholder (CTV) in the television broadcast would once again be entitled to have the Canadian signal, with Canadian commercials, substituted for the incoming US signal.