Hubert T. Lacroix: Words won't fix the CBC's business model

April 1, 2010

The following op-ed piece, penned by Hubert T. Lacroix, president and CEO, CBC/Radio-Canada, appeared in the National Post on Thrursday, April 1, 2010.

Anyone following the fallout from the CRTC’s recent decision on value-for-signal is sure to have noted CBC/Radio-Canada’s forceful reaction. Some have called it exaggerated. Others have gone further than that: “Rattling cuff links. Umbrage. Outrage.” Had I been wearing cuff links, that would indeed have been an accurate description of my reaction. Given the success we’ve enjoyed in the last few years, it was uncharacteristic and, perhaps to the uninitiated, overstated. “What’s the CBC’s problem?” the pundits ask.

So let me explain it. First, credit where credit is due. What the CRTC set out to do in this process was to propose, over the objection of powerful forces and against the colossal weight of the status quo, what amounts to the biggest structural change to the Canadian television system since the advent of cable 40 years ago. Which is also to say how rare an opportunity this process was. On March 22, they were inches from the finish line, but stopped short. When the chair of the CRTC says we’ll just deal with the public broadcaster at a later date, some hear next year. Students of our regulatory system hear next decade, if ever. We, having reviewed the policy, quickly realized that the CRTC decision contained nothing definite to support the chairman’s promise to address CBC/Radio-Canada.

The need to rebalance the broadcast system by allowing conventional broadcasters to be paid for their signal became a serious issue in the early 2000s. Indiscriminate licensing of specialty channels in the 1990s made the demise of the conventional broadcast model inevitable. Over three separate regulatory processes spanning more than five years, CBC/Radio-Canada submitted hundreds of pages of briefs, commissioned studies, brought in experts, appeared at countless hearings. The commission asked us to analyze alternatives, come up with new approaches, back off certain demands.

We also provided the commission relatively simple alternative negotiation mechanisms to ensure that we could participate in the system without threatening to withhold our signal (something that we, as the public broadcaster, cannot do).

The CRTC has acknowledged that we are subject to the same revenue pressures as private conventional broadcasters and that our financing model is unsustainable given the service that the Broadcasting Act required us to provide. This is the same conclusion that repeated parliamentary committees and commissions have also come to over the last decade. The difference is those reports have no practical effect, while the CRTC is empowered to actually make these changes.

The usual challenge to our case is to say that we receive $1.1-billion in public funding and that should be enough. The fact is we, with our billion dollars, operate 28 services and broadcast in two official languages and eight aboriginal ones across six time zones. The BBC has public funding of $7.5-billion a year, France Television and Radio France together receive $4-billion, Germany $10.7-billion and PBS and NPR in the U.S. receive $1.2-billion from government sources (Nordicity study, fiscal 2007 numbers).

To deliver what we’re mandated to offer Canadians, we also need to rely on commercial revenue. Agree with it or not, that’s the system, created by act of Parliament, that exists in Canada. The CRTC itself, in many of its decisions, actively encouraged us to continue raising revenues from our commercial activities. Commercial revenues today make up close to 40% of CBC/Radio-Canada’s overall budget. To read the analytical chapters of the CRTC’s decision, it is clear that commission recognizes both our financial reality and its precarious future.

Nonetheless, when judgment day came, and in a 50-page report, there was not a single proposal or suggestion for how the public broadcaster can continue to play its role in the system. I am, it is true, a little overheated.

We hear the CRTC chair state to the media that “there was just too much on the table to deal with in one sitting, so we decided to deal with the private broadcast system before turning to the public one.” Unfortunately, words said in a scrum will not fix our broken business model. The CRTC’s decision makes no commitment. We can only deal with what we know to be true, and that’s that we’ve been shut out. We are left with an advertising market under severe pressure, a 30-year history of stagnant public funding punctuated by periodic major cuts and a cost base that is increasing at 6.7% per year.

Over the last decade, my predecessor at CBC/Radio-Canada implemented permanent cost-reduction initiatives to generate $78-million in ongoing annual savings. Last year, I was forced to make cuts of $171-million, cancel programs and lay off nearly 10% of our workforce. This year, we’ve had to sell $155-million worth of assets to balance our budget — selling the furniture to pay the mortgage.

I think we can be forgiven for being a little skeptical of fine words and a little overheated at the thought of more delays. CBC/Radio-Canada’s business model is not sustainable. It would be irresponsible to suggest otherwise. One thing that our history proves is that words won’t fix our financing model.

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