Shaw 2010 Annual Report Download - page 24

provision of local phone service in high cost areas. It is possible that the Commission could require
Shaw to provide local telephone and high-speed broadband services and to extend its facilities to
serve unserved areas and customers. It is also possible that the Commission could require Shaw to
contribute to an expanded subsidy regime for the provision of high-speed broadband services in
addition to local telephone services.
In June 2009 the CRTC issued its decision on “new media” by extending its exemption of the
provision of new media undertakings for another five years. It also decided against imposing any
regulatory measures, including financial contribution requirements on Internet Services Providers
(“ISPs”), to support Canadian new media content.
In August 2009, the CRTC initiated a reference to the Federal Court of Appeal on the legal question
of whether the Broadcasting Act applies to ISPs. Shaw participated in the Federal Court of Appeal
Reference on June 1, 2010 and submitted that ISPs are not subject to the Broadcasting Act. In July
2010 the Federal Court of Appeal issued a decision finding that the Broadcasting Act does not apply
to ISPs. Leave to appeal that decision to the Supreme Court of Canada is now being sought by
certain cultural groups. If the Broadcasting Act is found to apply to ISPs, the CRTC could seek to
introduce regulatory measures in support of Canadian content on ISPs.
In October 2009 the CRTC issued its regulatory framework governing the internet traffic management
practices (“ITMPs”) of ISPs. The new framework recognizes that some measures are required to
manage Internet traffic on ISP networks. ISPs may continue to apply appropriate ITMPs with no
requirement for prior CRTC approval. Shaw will not be prevented from using its existing ITMPs. Under
the new framework, ISPs are required to inform consumers of their ITMPs and are encouraged to give
preference to ITMPs based on economic measures. The CRTC has also adopted special rules which
require that ISPs do not use ITMPs to cause competitive harm to their wholesale customers.
Digital transition
In July 2009 the CRTC identified the major markets where it expects conventional television
broadcasters to convert their full-power OTA analog transmitters to digital transmitters by August 31,
2011. The conversion from analog to digital is expected to free up spectrum for government auction.
The Corporation expects to have the digital transition completed in all mandatory markets by
August 31, 2011 and also currently contemplates converting transmitters in non-mandatory
markets during fiscal 2012 through 2016.
Vertical integration proceeding
Historically, the Commission has examined issues arising from vertical integration on a case-by-case
basis when assessing change of control applications. In view of increasing industry consolidation
and vertical integration, the CRTC recently initiated a review of the regulatory framework relating to
vertical integration. A decision pursuant to this proceeding is expected in the summer of 2011.
The Commission recognizes that vertical integration can be beneficial and that it also has potential
to enable preferential treatment. Accordingly, the CRTC will consider the need for new safeguards in
addition to various regulatory mechanisms that already exist. One central issue will be the
distribution of programming on an exclusive basis over both traditional distribution media and
new media, including mobile. To the extent that any new safeguards are introduced, these could
impact efficiencies made possible by the Corporation’s vertically integrated structure.
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Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2010