Montreal: A wide coalition of industry and government interests, including Canada’s largest cable companies, are supporting a Bell ExpressVu appeal to the Supreme Court of Canada against Can-Am Satellites, a small B.C. seller of DTH satellite decoders that receive U.S. signals. SCC hearings started Dec. 4 and a normal course decision is anticipated in the next few months.

Black-market DTH sales in Canada are booming.

ExpressVu estimates there are 600,000 pirated decoders in Canada, with the vast majority, as many as 500,000, in the black-market domain. Grey-market sales are fast disappearing as Canadian consumers balk at paying in U.S. dollars.

The appeal, following three recent provincial appeal court decisions unfavorable to ExpressVu, has important charter and commercial implications.

No copyright fees are paid to any party in the case of black-market transactions and no Canadian copyright or CTF contributions, or Canadian taxes, are paid in the case of grey-market sales.

‘It basically strips that chunk of the Canadian market, denying Canadian broadcasters, producers and artists of many millions of dollars a year,’ says Ian Gavaghan, general counsel for Bell ExpressVu.

In dollar terms, the loss to the broadcasting system is estimated to be in the range of $300 million a year, representing up-front CTF contributions (at least 3%) of close to $10 million. Perhaps more important is the major erosion to the subscriber base for fledgling Canadian digital specialty channels.

In charter terms, if the federal Radiocommunication Act in fact allows U.S. DTH distributors into Canada, ExpressVu says it effectively means there are two broadcasting industries in Canada, one regulated, the other not. ‘Obviously that is very detrimental to Canadian government policy,’ says Gavaghan.

But Can-Am and other distributors have successfully argued section 9(1)(c) of the Radiocommunication Act only regulates ‘lawful distributors,’ and makes no mention of foreign signals. ExpressVu’s claim that the law is not ambiguous and ‘with a purposive approach, imposes an absolute bar on the reception of signals from other jurisdictions’ was rejected in a 2-to-1 decision of the B.C. Court of Appeal, a rejection cited in a more recent Ontario Court of Appeal decision, which also rejected ExpressVu’s position. A Quebec Superior Court decision also sided with a third foreign DTH retailer.

CCTA onside

Canadian Cable Television Association senior VP, Elizabeth Roscoe, responsible for the association’s external relations, says Canada’s major cable companies are only observers at the SCC appeal, but exceptionally are supporting ExpressVu.

Roscoe says the foreign DTH signals are taking viewers away from the Canadian broadcasting system. ‘We think this is a cross-industry issue and why there is a common cause between ourselves, (Canadian) DTH, the broadcasters, program rights holders and frankly, the government.’

Intervenors in the SCC case include CMPDA, representing the Hollywood studios, and the Attorney General of Canada. Intervenors supporting the respondents, Can-Am, include the Canadian Alliance for Freedom of Information and Ideas. DirecTv, which also has intervenor status, has in the past said it was unaware of grey-market activities, it does not hold program licences allowing it to bring its product into Canada legally, and the U.S. DTH service is also a big loser in the surging black market.

ExpressVu initiated its case against Can-Am for three reasons, says Gavaghan. Can-Am was selling ExpressVu services into the U.S., known as reverse grey-marketing; selling American DTH systems in Canada with what are called ‘hacked’ or ‘pirate’ cards, which constitutes the black market; and thirdly, had been active in the grey market by selling subscriptions to U.S. satellite services to Canadians via ‘false’ U.S. border addresses.

In the fall of 2000, the B.C. Court of Appeal granted ExpressVu’s request for an injunction against Can-Am in two of the three activities: reverse grey-marketing and black-market pirating, but refused to extend the injunction to the grey market, citing legal ambiguities under section (9)(1)(c) of the Radiocommunication Act.

In its decision, the Quebec Superior Court determined the protection offered by the federal act does not extend to unlawful or unauthorized distribs such as DirecTv, effectively placing U.S. DTH signals in the public domain in Canada.

‘We immediately appealed [the B.C. Court] decision because we believe section (9)(1)(c) is an absolute prohibition against decoding of foreign satellite television programming signals in Canada,’ says Gavaghan.

Canadian Heritage hearings

The issue of foreign DTH services was raised Nov. 20 at a Canadian Heritage standing committee broadcasting review hearing.

Michael Helm, director general, telecommunications policy branch, Industry Canada, said grey- and black-market DTH sales are illegal. ‘It may be that there would be some need to change the wording of the act. That’s frankly what’s at stake before the courts. But there has never been, on the government’s part, any intention or indication or statement or any sign that there’s a willingness and an openness to see foreign service providers accessing the Canadian market when they’re not coming through the CRTC process, and they’re not conforming to our laws about the provision of Canadian content and relevant programming to Canadians.

‘We’ve been standard on that,’ says Helm. ‘The U.S., frankly, has made overtures in trade negotiations that they did want to open this up. They would like to have a means to have DirecTv and the others provide service in Canada. Our position has always been, no, we’re not open to that discussion. When the service is provided, we do our best within the law to see it stopped.’

At the Nov. 20 hearing, Michael Wernick, Canadian Heritage assistant deputy minister, cultural development, said, ‘To be very precise, these are charter challenges to keeping out U.S. dishes, and they’re going to the Supreme Court in early December. So we’ll have a very clear reading of the law that will bind all the lower courts in early December. As [Helm] said, either that will fix the situation and allow enforcement to proceed, or we’ll have to rewrite the statute fairly quickly, and both of those are being prepared for…. I’m not disagreeing that leakage around the system matters. They are dollars that are not being recycled in the Canadian system. We’re going to have to enforce the rights market as vigorously as we can.’

-www.scc-csc.gc.ca/information

-www.parl.gc.ca/InfoComDoc/