FEDERAL COURT OF APPEAL. - and - NOTICE OF MOTION (Motion for Leave to Appeal)

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1 Court File No. FEDERAL COURT OF APPEAL B E T W E E N: BELL CANADA and BELL MEDIA INC. Applicants - and - ATTORNEY GENERAL OF CANADA Respondent NOTICE OF MOTION (Motion for Leave to Appeal) TAKE NOTICE THAT the applicants will make a motion in writing to the Court under rules 352 and 369 of the Federal Courts Rules. THE MOTION IS FOR an order (a) granting the applicants leave to appeal to this Court from Broadcasting Regulatory Policy CRTC , entitled Measures to address issues related to simultaneous substitution, which was issued by the Canadian Radio-television and Telecommunications Commission ( CRTC ) on January 29, 2015 (the Simultaneous Substitution Decision ), insofar as it sets out the decision of the CRTC to: (i) disallow simultaneous substitution for the Super Bowl effective in 2017; (ii) (iii) disallow simultaneous substitution for the benefit of specialty channels; and confer on itself the power to impose certain penalties on broadcasters and require broadcast distribution undertakings ( BDUs ) to pay

2 - 2 - compensatory rebates for making errors in the simultaneous substitution process; and (b) granting such further relief as this Court may deem just. THE GROUNDS FOR THE MOTION ARE The applicants 1. Bell Canada is the corporate parent of Bell Media Inc. Bell Media is a broadcaster that owns and operates, among other things, CTV television stations. Bell Media holds exclusive Canadian rights to certain television programs originating in the United States. Under an agreement with NFL International LLC, Bell Media holds the exclusive Canadian right to broadcast the Super Bowl for a term that extends beyond 2017 (the NFL Agreement ). 2. In addition, Bell Media owns or holds exclusive Canadian rights to numerous programs that are broadcast on licensed specialty television channels, including TSN, Discovery Channel, BNN, and The Comedy Network, which Bell Media also owns. Specialty channels, also known as specialty services, are channels that are not broadcast over the air and to which viewers subscribe through a broadcast distribution undertaking ( BDU ), such as a cable or satellite provider. 3. Bell Canada is also the parent company of Bell ExpressVu Limited Partnership, which together with the broadcast distribution operations of Bell Canada is currently marketed as Bell TV. Bell TV is a broadcast distribution undertaking which takes signals from various American, Canadian and international broadcasters and distributes those signals to its subscribers. Simultaneous substitution 4. Simultaneous substitution is a process by which the signal of a distant (usually American) station being broadcast in Canada is replaced by the signal of a local Canadian broadcaster that broadcasts comparable programming at the same time. Simultaneous substitution is performed by BDUs at the request of the broadcaster that holds the Canadian broadcast rights for the program in question. When substitution occurs, Canadian BDU subscribers who tune to the American channel at that time will see the Canadian signal with Canadian ads, instead of the American signal with American ads. This allows Canadian broadcasters that purchase exclusive

3 - 3 - Canadian program rights to monetize their investment in those rights by inserting Canadian advertising in place of American advertising. 5. Simultaneous substitution has been an integral part of the Canadian broadcasting system for more than 40 years. In deciding to implement simultaneous substitution in 1971, the CRTC stated that it saw BDUs distribution of distant and foreign programming as a threat to local broadcasters financial position and their ability to serve the areas for which they are licensed. It saw this threat as in turn threatening achievement of one of the central aims set out in the Broadcasting Act to safeguard, enrich and strengthen the cultural, political and social fabric of Canada. 6. Simultaneous substitution is now provided for in the Broadcasting Distribution Regulations, made by the CRTC under the Broadcasting Act. It requires all licensed BDUs to implement simultaneous substitution for the benefit of local Canadian television stations on a mandatory basis and for the benefit of Canadian specialty services on a non-mandatory basis. 7. The policy reasons for which simultaneous substitution was introduced apply as much, if not more, today than they did in the early 1970s. The Broadcasting Act now states that the Canadian broadcasting system should serve to safeguard, enrich and strengthen the cultural, political, social and economic fabric of Canada, that each element of the Canadian broadcasting system shall contribute in an appropriate manner to the creation and presentation of Canadian programming and that distribution undertakings should give priority to the carriage of Canadian programming services and, in particular, to the carriage of local Canadian stations. It has been estimated that the direct annual value of simultaneous substitution in the broadcasting year exceeded $250 million and its indirect annual value exceeded $450 million. The CRTC s TV Review proceeding 8. On October 24, 2013, the CRTC released Broadcast Notice of Invitation CRTC This notice invited Canadians, including TV viewers, content creators, broadcasters and others, to make comments and participate in a public proceeding regarding the future of television regulation (the TV Review ).

4 The CRTC contemplated that the TV Review proceeding would take place in three phases. During Phase I, the CRTC collected comments via the internet, telephone and mail. During Phase II, the CRTC developed an interactive questionnaire with respect to specific issues raised by the comments collected during Phase I. In Phase III, the CRTC put forward certain proposals for new approaches to Canadian television regulations and held a public hearing to discuss these proposals. 10. In Broadcast Notice of Consultation , released in advance of the public hearing during Phase III, the CRTC set out a list of proposals to be discussed during the public hearing. Two of these proposals related to simultaneous substitution: (1) a proposal to end it entirely and (2) a proposal to end it for live broadcasts, such as award shows and sporting events. Bell Media s interests during the TV Review proceedings were represented by its parent, Bell Canada. The Simultaneous Substitution Decision 11. The CRTC issued the Simultaneous Substitution Decision after the conclusion of Phase III of the TV Review. 12. In the Simultaneous Substitution Decision, the CRTC accepted that simultaneous substitution is still of significant benefit to Canadian broadcasters since it allows them to fully exploit and monetize the programming rights they have acquired, to the benefit of their overall investment in the production of Canadian programming. It accepted that the estimated direct value of advertising revenue attributable to substitution in the broadcast year alone was approximately $250 million. 13. The CRTC nonetheless singled out one program, the Super Bowl, and decided that simultaneous substitution for the Super Bowl will be disallowed starting in The CRTC also decided that simultaneous substitution will no longer be permitted for the benefit of Canadian specialty television channels. 14. In addition, the CRTC decided that simultaneous substitution errors (that is, where the process causes a part of the program to be cut off) should be penalized. Where errors are made by a local broadcaster, the CRTC will give itself the ability to disallow that broadcaster from

5 - 5 - carrying out simultaneous substitution for a period of time or with respect to certain types of programs. Where errors are made by a BDU (such as a cable or satellite provider), the CRTC will confer on itself the authority to order the BDU to pay a monetary rebate to its customers. 15. The CRTC stated that it was now preparing to promulgate proposed amendments to the regulations required to enact the policy changes in this decision. Unauthorized retrospective application and interference with vested rights 16. Under the NFL Agreement, Bell Media s networks (including CTV) are the only Canadian networks that can broadcast the Super Bowl. Bell Media s exclusive licence granted in the NFL Agreement extends beyond The NFL Agreement contemplates that Bell Media will sell and substitute Canadian advertising for American commercials broadcast during the games, including the Super Bowl. As a result, Bell Media requests BDUs to carry out simultaneous substitution on regular season, playoff and Super Bowl NFL games. 18. The CRTC s decision to disallow simultaneous substitution during the Super Bowl starting in 2017 interferes with Bell Media s rights and benefits under the NFL Agreement. The practical effect of the CRTC s Simultaneous Substitution Decision would be to retrospectively override significant terms of this agreement. 19. The power to make regulations does not include the authority to make regulations that have retrospective effect or interfere with vested contractual rights, unless that authority is conferred expressly or by necessary implication. Nothing in the Broadcasting Act or any other statute gives the CRTC this authority. The CRTC therefore erred in law or exceeded its jurisdiction. Administrative law discrimination 20. Section 10(2) of the Broadcasting Act states that a regulation made under s. 10 may be made applicable to all persons holding licences or to all persons holding licences of one or more classes. Section 10 does not authorize the making of regulations singling out a particular program or licensee. Doing so amounts to unauthorized administrative law discrimination.

6 Having found as a fact that simultaneous substitution is still of significant benefit to Canadian broadcasters, and having decided to maintain the benefit for all over-the-air television licensees, the CRTC engaged in administrative law discrimination, and erred in law or exceeded its jurisdiction, by singling out and prohibiting simultaneous substitution for the Super Bowl, and thus depriving one licensee of the benefit of simultaneous substitution for one live event program. Denial of procedural fairness 22. The proposals that the CRTC stated it was considering in Phase III of the TV Review did not include prohibiting simultaneous substitution for the benefit of Canadian specialty channels or singling out the Super Bowl as the only program for which simultaneous substitution would be prohibited on local television. 23. Further, the CRTC stated for the first time in the Simultaneous Substitution Decision that the burden of proof was on broadcasters and BDUs to show that the [simultaneous substitution] regime continues to have merit and that its execution can be seamless for Canadians. 24. The CRTC s decision to prohibit simultaneous substitution for specialty channels and prohibit simultaneous substitution for the Super Bowl impairs Bell Media s rights and interests. 25. Through its failure to give notice to Bell Media of the prohibitions that it proposed to implement with respect to specialty channels and the Super Bowl, and its after-the-fact imposition of a burden of proof on broadcasters and BDUs (for which there is no foundation in law), the CRTC denied Bell Media procedural fairness. In doing so, it erred in law or exceeded its jurisdiction. Unreasonableness of the decision 26. The CRTC recognized in the Simultaneous Substitution Decision that the practice contributes to the continued operation of local television stations and has an estimated annual direct value to Canadian broadcasters of approximately $250 million. It accepted that simultaneous substitution continues to serve the purposes for which it was adopted.

7 There was overwhelming evidence from participants in the TV Review process, including large and small broadcasters, unions, industry associations, program creators and others, that simultaneous substitution remains essential to the health of the Canadian broadcasting industry. 28. Section 5 of the Broadcasting Act requires the CRTC to regulate and supervise the Canadian broadcasting system with a view to implementing the broadcasting policy set out in s. 3(1) of the Act. The elements of that policy include that (a) (b) (c) the Canadian broadcasting system should serve to safeguard, enrich and strengthen the cultural, political, social and economic fabric of Canada (s. 3(1)(d)(i)), each element of the Canadian broadcasting system shall contribute in an appropriate manner to the creation and presentation of Canadian programming; (s. 3(1)(e); and distribution undertakings should give priority to the carriage of Canadian programming services and, in particular, to the carriage of local Canadian stations (s. 3(1)(t)(i)). 29. In deciding to prohibit simultaneous substitution for the benefit of Canadian specialty channels and prohibit simultaneous substitution for the Super Bowl, the CRTC disregarded the overwhelming evidence of the benefits of simultaneous substitution for Canadian broadcasters and the broadcasting system in general, and failed to regulate with a view to implementing the Canadian broadcasting policy set out in s. 3(1) of the Broadcasting Act. Its decision to give priority to foreign broadcasters that have not acquired the Canadian rights to broadcast programming and to the commercial programming they broadcast rather than the commercial programming of Canadian broadcasters, in particular local Canadian stations, its elevation of the desire of some Canadians to watch American advertising over considerations relevant to the Canadian broadcasting policy and its after-the-fact imposition of a burden of proof on Canadian broadcasters for which there is no justification under the Broadcasting Act, are incompatible with the Canadian broadcasting policy and unreasonable. This too constitutes an error of law or jurisdiction.

8 - 8 - No authority to impose penalties or require monetary rebates 30. The CRTC has no authority under the Broadcasting Act or otherwise to make regulations conferring on itself the power to penalize broadcasters for simultaneous substitution errors or to order BDUs to pay monetary rebates to its customers. The CRTC therefore erred in law or exceeded its jurisdiction in purporting to do so. Test for granting leave to appeal 31. By s. 31(2) of the Broadcasting Act, an appeal lies to this Court from a decision or order of the CRTC on a question of law or of jurisdiction, with leave of the Court. The Simultaneous Substitution Decision constitutes a decision of the CRTC within the meaning of this provision. 32. Leave to appeal will be granted when the proposed appeal raises an arguable error of law or jurisdiction. 33. The grounds set out above raise arguable errors of law and jurisdiction. Statutes and regulations relied on 34. The Broadcasting Act, S.C. 1991, c The Broadcasting Distribution Regulations, SOR/97-555, ss. 38, Rules 3, 4, 338, 339, 352 and 369 of the Federal Courts Rules, SOR 98/ Such further grounds as may be advised. THE FOLLOWING DOCUMENTARY EVIDENCE will be used at the hearing of the motion: (a) Broadcasting Regulatory Policy CRTC ; (b) Broadcasting Notice of Consultation CRTC ; (c) Broadcasting Notice of Consultation CRTC ; (d) (e) the affidavit of Kevin Goldstein and attached exhibits; and such further evidence as may be advised and the Court may permit.

9 - 9 - March 2, 2015 Torys LLP 79 Wellington St. W., 30th Floor Box 270, TD South Tower Toronto, ON M5K 1N2 Fax: John B. Laskin Tel: jlaskin@torys.com Vitali Berditchevski Tel: vberditchevski@torys.com Solicitors for the Applicants TO: AND TO: AND TO: The Administrator Federal Court of Appeal 180 Queen Street West Suite 200 Toronto, Ontario M5V 3L6 Attorney General of Canada c/o The Administrator Federal Court of Appeal 180 Queen Street West Suite 200 Toronto, Ontario M5V 3L6 Canadian Radio-television and Telecommunications Commission Ottawa, Ontario Canada, K1A 0N2

Broadcasting Regulatory Policy CRTC and Broadcasting Order CRTC

Broadcasting Regulatory Policy CRTC 2016-334 and Broadcasting Order CRTC 2016-335 PDF version Reference: 2016-37 Ottawa, 19 August 2016 Simultaneous substitution for the Super Bowl The Commission issues