COMMUNICATIONS, ENERGY AND PAPERWORKERS UNION OF CANADA and

CITY-TV et al.

 

File Nos. 18031-C and 18173-C.Decision No. 22.

Canada Industrial Relations Board, Jean L. Guilbeault, Q.C.,

Vice-Chair, Patrick H. Shafer, Member and Veronique L.

Marleau, Member.

June 29, 1999

Decision of the Board: --

I. Introduction [*2]

1. These reasons deal with the question of whether the Canada Labour Code,

R.S.C. 1985, c. L-2, properly applies to the labour relations of

CityInteractive, a division of CHUM Limited ("CityInteractive"). This question

arose in the context of an application for review of an existing bargaining

certificate pursuant to s. 18 of the Canada Labour Code (Part I - Industrial

Relations), n1 filed by the Communications, Energy and Paperworkers Union of

Canada ("CEP" or "the applicant") on March 26, 1997.

2. CEP is the certified bargaining agent for a group of employees of the

employer known as CITY-TV, CHUM City Productions Limited, Much Music Network and

Bravo!, Divisions of CHUM Limited ("the respondent" or "CHUM Television"). The

predecessor of the applicant, the National Association of Broadcast Employees

and Technicians ("NABET"), was certified by the Board on June 3 1988 (File No.

555-2774) to represent a bargaining unit of employees of "CITY-TV, CHUM City

Productions Limited, and MuchMusic Network, division of CHUM [*3] Limited".

This certificate was most recently amended on July 10, 1995 to add the Bravo!

television station and to reflect other changes, including that CEP had

succeeded NABET as bargaining agent for the said unit (Files Nos. 530-2431 and

580-223).

3. In addition to seeking a review of the employer's proper designation, the

applicant requests an order clarifying the scope of the bargaining unit

described in the certificate. CEP asserts that the employer should be

redesignated in the certificate as "CHUM Limited, the television group" and that

the employees of CityInteractive, who occupy new positions, should be included

in the certificate.

4. CHUM Television opposes the application on constitutional grounds. In

contesting the Board's constitutional jurisdiction, CHUM Television argues that

CityInteractive is an economically self-sustaining operation, separate and

severable from the television operation and independent from broadcasting. It

submits that CityInteractive's primary purpose is to design, produce, market,

license and distribute interactive material (including Web sites, CD-ROMs and

related specialty products), and that the regulation of such activities is

within the provincial [*4] realm. Consequently, CityInteractive's operation is

neither itself a federal undertaking, nor an operation that is vital, essential

or integral to CHUM's broadcasting business. On the basis of

CityInteractive's alleged status as a stand-alone business of CHUM, the

respondent submits that the application must also fail because CHUM Television

does not employ the employees concerned.

5. To the contrary, CEP's position in this respect is that CityInteractive is

an integral part of CHUM's television operation, coming as such under federal

jurisdiction. According to CEP, the employees covered by this application

perform work directly for and in connection with CHUM's television operation,

and CityInteractive's nexus and relationship to television broadcasting clearly

demonstrates that this is not a separate autonomous operation, but rather an

entity very much linked to CHUM's federal broadcasting undertaking. CEP submits

that there is only one legal entity before the Board and that is CHUM Limited.

That entity, which is clearly federal, is the only employer in this case.

6. If CityInteractive is found to be a truly separate stand-alone operation,

CEP asserts, in the alternative, that it [*5] still comes under federal

jurisdiction on its own account, given the nature of its operation and what it

does as a going concern. On this point, CEP submits that CityInteractive's

Internet-related activities are completely analogous to "broadcasting" and that

they amount to communication activities that extend beyond the limits of a

province pursuant to s. 2(b) or (f) of the Code. CEP states that the question of

whether CityInteractive comes under federal jurisdiction on its own account

brings into the equation the much larger question of whether the Internet is in

itself a federal work or undertaking pursuant to s. 92(10)(a) of the

Constitution Act, 1867. The implication is that if the Internet is in itself a

work or undertaking that is subject to federal jurisdiction, it should follow

that an undertaking that engages in communications activities and/or performs

activities analogous to broadcasting over the Internet should then fall within

the federal realm.

7. Finally, if CityInteractive is found not to be a federal undertaking on

its own account, CEP asserts that it must still be found to come under federal

jurisdiction because there is a degree of integration with CHUM's television

[*6] operation that can be characterized as "vital", "essential" or "integral".

8. Since the issue raised by the respondent concerns constitutional

jurisdiction over the regulation of work involving services delivered over the

Internet, a novel subject which has not yet been considered in constitutional

jurisprudence, the Board directed the respondent to give the Attorneys-General

of Canada and of the provinces notice of these proceedings. Notice was given;

however, none chose to participate.

9. The collective agreement in force between the parties when this

application was filed expired on March 31, 1997. It was renewed for a term

running from July 1, 1997 to June 30, 2000, and the Bravo! television station

was specifically added to that collective agreement. Since these proceedings

began, CHUM launched two new channels, the Space channel and Cable Pulse 24.

Those stations were also added to the collective agreement by agreement of the

parties, even though they are not specifically mentioned in the bargaining

certificate.

10. Following its s. 18 application, CEP filed a complaint pursuant to s. 94

of the Code alleging that the respondent had committed unfair labour practices

by attempting, [*7] inter alia, to intimidate employees in the department by

altering their methods of remuneration (File No. 18173-C). The Board

consolidated the proceedings and heard joint proof in both files. However, these

reasons deal solely with the issue of the Board's constitutional jurisdiction.

II. Evidence on Record

11. These proceedings began with a one-day tour of the ChumCity building

located at 299 Queen Street West, Toronto, which houses the core of CHUM's

television operation. This tour enabled the Board to take a view of the

operations for the purpose of giving some context to the evidence it would then

hear. In the course of that visit, the Board had the opportunity to view CHUM

Television's main operation and to question staff about the nature of their work

and the manner in which various activities were performed. The tour also

included a visit to CityInteractive's offices, housed on the fifth floor of the

ChumCity building. This background gave the Board valuable insight into how and

why CityInteractive and CHUM Television operate as they do.

12. Following this visit, the Board heard oral evidence over 18 days of

hearing. The respondent called four witnesses, namely Mr. Josh Raphaelson, [*8]

CityInteractive's general manager; Mr. Mark Lewis, director of business affairs

and legal counsel for CHUM Television; Mr. Bruce Cowan, manager of engineering

for CHUM Television; and Mr. Jay Switzer, vice-president programming for CHUM

Television. Mr. Raphaelson's evidence included a two-day computer presentation

of CityInteractive's main products, with graphic descriptions of various digital

uses and applications on the Internet and America Online ("AOL"). CEP called two

witnesses, Ms. Marnie Genetti, floor director and producer of MuchMusic's Go

with the Flow program, and Mr. Raja Shankar, Citylnteractive's systems

administrator.

13. The record was completed by the filing of over 100 exhibits. These

included various charts, internal administrative forms and lists, employment

contracts, collective agreements, Canadian Radio-Television and Communications

Commission ("CRTC") documents, financial statements, promotional material

(videotapes and folders including various press releases, magazine and newspaper

articles), several videotapes of television shows, mission statements, hard

copies of Web pages from CityInteractive's Web sites (CITY-TV, MuchMusic,

Bravo!, Space, The NewVR, [*9] CablePulse24, CityStore), and hard copies of

internal e-mails. Some of these documents were admitted subject to a

confidentiality order.

14. In the course of final argument, counsel for CEP sought to file two

articles dealing with legal issues relating to the regulation of content

distributed over the Internet: M. S. Koch, Square Pegs and Round Holes: CRTC

Regulation of the Internet (Toronto: Smith Lyons, 1999); and C. Pinsky, legal

counsel, CRTC, "The Internet: Brave New World or Same Old Thing? -- A survey of

legal issues relating to the regulation of content distributed over the

Internet", 1996.

15. Counsel for the respondent objected to the filing of these documents on

the grounds that they constituted new evidence, the validity and accuracy of

which they had had no opportunity to challenge. In their view, these articles

contained factual assumptions that had not been proven before providing analysis

with respect to whether certain aspects of the Internet were subject to

regulation under the Broadcasting Act, S.C. 1991, c. 11, or the

Telecommunications Act, S.C. 1993, c. 38. They argued, moreover, that due to the

tardiness of the filing, the fair presentation of their case would [*10] be

compromised should the Board accept such material as they were not in a position

to comment on these documents. The Board took the objection under advisement and

directed the parties to review the material and to file their submissions and

comments with the Board in writing.

16. The Board, after considering the parties' written submissions, determined

that it would accept the two articles. Although s. 16(c) of the Code empowers

the Board to receive and accept such evidence and information as it sees fit,

whether admissible in a court of law or not, the purpose of these articles is

not to add to the evidence on record, but to assist the Board in its

understanding of the regulatory framework bearing upon the Internet and related

applications. It follows, therefore, that the Board may rely upon such secondary

sources, provided that, and only insofar as, the factual assumptions and

descriptions that they make, match the evidence on record.

III. Constitutional Facts

17. From the evidence on record, these are the constitutional facts before

the Board.

A. CHUM Limited's Business

18. CHUM operates a broadcasting business through ownership and operation of

some nine television and 24 [*11] radio stations across the country. All

stations operate as divisions or branches of the company and are grouped under

two umbrellas or major divisions: the CHUM Television Division (CHUM Television)

and the CHUM Radio Division (CHUM Radio). With the exception of a few stations

in which CHUM has only a partial interest, all these stations are owned and

controlled by CHUM and each station is operated pursuant to a licence issued by

the CRTC issued under CHUM's name.

19. The CHUM organization operates under one single corporate entity, CHUM

Limited, which is incorporated under the Ontario Business Corporations Act,

R.S.O. 1990, c. B.16. The various activities carried on by CHUM are structured

within the single corporate entity as departments or businesses and,

operationally, they are all grouped under either CHUM Television or CHUM Radio.

Exceptions to this are in cases where CHUM holds a minority interest in a

business. For example, CHUM, through a subsidiary (CHUM U.S.A., incorporated in

New York), operates a business under the name MuchMusic U.S.A. in partnership

with Rainbow Programming Holdings Inc., a U.S.-based corporation owned by

Cablevision Systems Corporation. The partnership's [*12] business is

distribution of MuchMusic programming on cable systems throughout the United

States and on DirecTV.

20. CHUM Limited's executive committee includes several members of the Waters

family. Mr. Alan Waters is the chairman of CHUM Limited and the principal

shareholder. Mrs. Marjorie Waters also plays an ongoing role in the company's

management. Messrs. James and Ron Waters are president of CHUM Radio and

president of CHUM Television, respectively.

21. In addition to the television and radio stations it owns and operates

across Canada, CHUM has international business interests and is actively

involved in marketing its products and brands across Canada and around the

world. CHUM is also engaged in activities related to broadcasting that require

no licensing authority from the CRTC. For example, through its division known as

CHUM Television Sales, CHUM engages in the packaging of air time, for CHUM-owned

television stations and other Canadian television broadcasters.

22. On the television side of its business, CHUM operates both general

services channels and national specialty services channels. General services

channels include CITY-TV (Toronto, Woodstock and Ottawa), The New [*13] VR

(Barrie), The New RO (Ottawa/Pembroke), CFPL-TV (London), CKNX-TV (Wingham) and

CHWI-TV (Windsor). National specialty television channels include MuchMusic,

Bravo!, Space, The Imagination Station, Cable Pulse 24, MusiquePlus and MusiMax.

At the time of these hearings, CHUM had also received CRTC approval for

additional specialty channels (MuchMoreMusic, Star Entertainment and Canadian

Learning Television), but they had not yet been launched.

23. The general broadcast operation of CITY-TV and the specialty channels of

MuchMusic, Bravo!, Space and Cable Pulse 24 are all housed in the ChumCity

building located on Queen Street West in Toronto. This building, which is owned

by CHUM, also houses a number of departments which provide support services to

the television broadcast operation. The departments providing non-operational

services to the television operation include ChumCity International and the

business and legal affairs department. Operational support departments include

the engineering and technical operations department (the "engineering

department"), the information technology department (the "IT department") and

the design department. The building also houses CityInteractive [*14] and the

CityStore, which sells various articles featuring the CHUM television brands.

24. Organizationally, CHUM has grouped the business and legal affairs

department, the "CityInteractive, Multimedia Department" and ChumCity

International under the umbrella of ChumCity Productions. ChumCity Productions

is not a separate legal entity. It was separately incorporated in the 1970s but

the company was dissolved in 1983. Mr. Lewis explained that CHUM kept the

ChumCity Productions banner for reasons of convenience. However, he could not

explain why every collective agreement still referred to ChumCity Productions

Limited, even after its dissolution.

25. The business and legal affairs department provides legal and commercial

advice to every segment of the television operation. Mr. Lewis, who heads the

department, provides legal counsel on everything from CRTC matters to production

contracting, to every regulated and non-regulated division, branch or department

of CHUM's television operation. This includes the television stations, CHUM

Television Sales, the CityStore and CityInteractive. For example, the legal

department assisted and advised Mr. Raphaelson when he hired Mr. Shankar as

technical [*15] specialist. Mr. Lewis has also advised CityInteractive on

various legal issues dealing with the Internet and he was involved in the

original negotiations for the joint venture between Unapix and CHUM that led to

the creation of CityInteractive. Mr. Lewis also drafted the documents confirming

the joint venture's dissolution, as well as the agreement formalizing CHUM's

relationship with Mr. Raphaelson.

26. Legal affairs is also involved in collective agreement negotiations. Mr.

Lewis signed the most recent collective agreement and the memorandum of

agreement that preceded it in June 1997. In cross-examination, Mr. Lewis

conceded that there is flexibility in the collective agreement to ensure

employee mobility and interchangeability, and that this reflects the informal

nature of the CHUM's operation. Moreover, Mr. Lewis confirmed that the job

classifications covered by the collective agreement include the employees

working in the IT department, those working in the CityStore, as well as

maintenance, administration and sales employees. In other words, the collective

agreement covers all CHUM employees not specifically excluded by the Board's

certificate who work at the ChumCity building, [*16] except those working in

CityInteractive.

27. ChumCity International is involved in distributing television brands and

programs across Canada and abroad. This is done through licensing the use of the

brand names, art works and trademarks that are copyrighted (such as CITY-TV or

MuchMusic), as well as production techniques (know-how).

28. As previously indicated, CityInteractive is also found under the

ChumCityProductions banner. Mr. Lewis testified that this was primarily due to

the origins of the business arrangement that preceded the formation of

CityInteractive, as it is now known. It was because the business -- then a joint

venture -- was, from a CRTC standpoint, non-regulated, that the operation was

placed under ChumCity Productions.

29. The CityStore is located on the main floor of the ChumCity building.

Counsel for the applicant adduced evidence showing that items sold included

items featuring the Web site addresses of the CHUM television brands, such as

<www.muchmusic.com> for MuchMusic. The store, like each branch located at 299

Queen Street, has a manager, employees and a budget.

30. The engineering department, which is located in the basement of the

building, is responsible [*17] for acquiring products -- any technical

equipment that is used in the broadcast operation -- such as video cameras,

production control equipment, videotape machines and broadcast transmitters. It

is also responsible for installing and maintaining all broadcast equipment at

299 Queen Street, and for setting up cameras and video monitors and other

broadcast equipment necessary for a production.

31. The IT department, which is also located in the basement, is essentially

CHUM Television's informatics division. It is responsible for the ChumCity

building's internal computer network (local area network or "LAN") and for CHUM

Television's domain name server ("DNS"). The LAN allows for desktop

applications, internal communication by e-mail and other forms of data

transmission such as spread sheets and graphic designs. The IT department

provides technical support in relation to the LAN and informatics to every

segment of CHUM located in the ChumCity building, including CityInteractive.

B. From City OnLine to CityInteractive

32. CityInteractive originated from a joint venture between CHUM and Unapix,

an American company specializing in the distribution of syndicated television

programming. [*18] The unit was originally formed in March 1994, primarily on

the recommendation of Mr. Switzer, vice-president programming for CHUM

Television. According to Mr. Raphaelson, who has been heading the unit since its

inception, the joint venture was created for the purpose of exploiting CHUM's

brands and products on the Internet and other on-line networks, such as AOL,

E-World and CompuServe. As on-line networks emerged, the digital arena was

perceived as a potentially lucrative new platform for the exploitation of brands

and products.

33. The understanding was that Unapix and CHUM would share the risks and

expenses of testing the waters of this new digital interactive world. Under the

arrangement, Unapix would pay all direct costs. In return, CHUM would give the

venture exclusive rights to use and exploit, within the interactive market, the

CHUM brands (such as CITY-TV, MuchMusic and Bravo!) and products under the

responsibility of its ChumCity Productions division. Mr. Lewis explained that

under the agreement, the joint venture would have access to the CHUM brands and

various intellectual property controlled

by CHUM, to the extent that they could be licensed for interactive use.

34. [*19] Messrs. Josh Raphaelson, David Hutchinson and Sam Zappas, who

were all then residents of the United States, were retained by the partners to

explore this new business opportunity. The new operation was initially named

"City OnLine". Approximately one year later, it was renamed

"CityInteractive" when CITY-TV's news department, CityPulse, decided to create a

television show called "CityOnline".

35. The first two employees were hired in late 1994, primarily to begin

writing code in hypertext mark-up language ("HTML") format and to design

Internet pages. They were to create Web sites based on the CHUM brands. These

employees, as all other CityInteractive employees, were paid by CHUM. A Web site

was set up, and its server (the computer used to store the content of the Web

sites) and equipment were housed on the third floor of the ChumCity building in

Toronto. CityInteractive's first Web pages were put on the server and made

available to the public in March 1995.

36. CityInteractive contracted with a large CD-ROM company in the United

States to distribute the company's titles to Canadian stores using the new brand

they had created called CITY-ROM. CD-ROMs are compact disks ("CD") with

read-only [*20] memory ("ROM") capable of storing large amounts of electronic

data. For distributing the CD-ROM product to software stores and large consumer

chain stores, CityInteractive contracted with a Canadian company involved in

home video distribution.

37. CityInteractive also concluded an agreement with AOL, a private computer

network with approximately 11 million members worldwide, to develop content

based on the CHUM brands to run on the AOL platform. As Mr. Raphaelson put it

(transcripts, pp. 26-27):

 

"Again, the relationship with AOL was essentially that we would create

content for them in an area called, I believe, MuchMusic . . . Its just not

clear to me if it's called the MuchMusic Site or the MuchMusic area. . . . And

another one that also trades off of a CHUM-CITY brand, which is CITY-TV.

In the MuchMusic one, we would provide images, information, from -- based on

the MuchMusic brand and information about artists and images of artists and some

sound files and potentially short video clips.

In the CITY area, we would provide some news and other kinds of information

relating to CITY-TV brands. AOL would charge subscribers for their time

connecting to the service, and they would share [*21] that with us, that

revenue. So our goal was to provide content that would excite people and want

them to stay connected to our area longer."

 

38. The agreement provided for revenue-sharing based on the length of time

spent by users in CityInteractive's area versus other areas on AOL.

CityInteractive would also share in revenues based on advertising sales for its

area and based on products sold within its AOL area.

39. In addition to growing rapidly in size, the Web pages became more

sophisticated with the inclusion of complex interactive elements, attractive

designs, and short video and audio segments. CityInteractive also began to sell

and develop advertising products that would appear on the Web sites, such as

games and banner ads. This involved a different type of advertising since time

is not medium currency on the Internet. As a result, the CityInteractive team

expanded. Some of the individuals engaged were already working for CHUM at the

ChumCity building, either part-time or as volunteers. This, according to Mr.

Raphaelson, was a plus since these individuals were already familiar with the

CHUM television brands.

40. In early 1996, it became clear that CHUM's interests in the [*22]

interactive and digital business were different from

those of Unapix and they came to an agreement where

CHUM bought out Unapix's interest and the joint venture was dissolved.

41. Following the joint venture's termination, CHUM's executive committee

decided to continue to operate and fund the interactive business. At this time,

the employment relationships between CHUM and Messrs. Raphaelson and Hutchinson

were formalized. Referring to the employment agreement he negotiated, Mr.

Switzer indicated "[i]t was specifically negotiated and specifically approved by

CHUM Television and by my boss [Mr. Ron Waters, president of CHUM Television]

because of the special and unusual nature of this interactive business" (p. 1334

of transcripts).

C. CityInteractive's Administrative and Operational Structure

42. At present, CityInteractive's staff consists of a general manager, an

associate general manager, an executive assistant, a system administrator

(formerly the position of technical specialist), an advertising sales manager, a

sales representative, a senior graphic designer, and approximately seven

full-time and part-time Web site designers and interactive developers.

43. CHUM's 1996 annual [*23] report describes CityInteractive's business as

follows (p. 9):

 

"Established on a small scale in 1994, CHUMCity Interactive continues to keep

the Company on the leading edge of new technologies. The operation's current

work includes distributing live audio, video and multimedia content over the

Internet and merging interactive programming into television broadcasts. Three

of Canada's most widely accessed Web sites, CITY-TV, MuchMusic and Bravo!, are

maintained by this operation. Recent alliances with America Online and

CompuServe have expanded the export market for CHUMCity content to over 12

million online subscribers worldwide."

 

44. CityInteractive's general manager reports to senior executives of CHUM

Television. Mr. Raphaelson used to report primarily to Mr. Switzer,

vice-president of programming for CHUM Television, and to Mr. Znaimer, president

and executive producer of each of the television stations. He now reports

primarily to Mr. Znaimer and to Mr. Mark Rubinstein, vice-president and general

manager of CHUM Television, whose responsibilities also include the CityStore.

45. When CityInteractive incurs an expense, the invoice submitted is paid by

CHUM using a CHUM cheque [*24] prepared and sent by CHUM's accounting people.

As far as payroll is concerned, CityInteractive is simply a separate heading in

the overall payroll for the bargaining-unit and non-bargaining-unit employees of

CHUM working at the ChumCity building. CityInteractive has been assigned its own

equipment (computer equipment and software, telephone, digital cameras, etc.),

but it is all owned by CHUM, and all items purchased by CityInteractive must

fall within the capital budget that has been approved by CHUM. Purchasing

authority is restricted and subject to approval by CHUM Television engineering

department's or CHUM Television IT department's director. Furthermore, all

computer purchases must be approved by the head of CHUM's IT department.

46. CityInteractive's budget must also be approved by CHUM Television's

vice-president of programming and CHUM Television's vice-president and general

manager. These individuals receive monthly reports from Mr. Raphaelson, who must

discuss with them any problematic or controversial issue. At the initiative of

CHUM Television's vice-president of programming, CityInteractive's budget year

was moved to a regular broadcast year budget cycle.

47. CityInteractive [*25] has its own logo and letterhead, and the employees

have their own business cards identifying themselves as such. However, the

various logos of the television stations housed in the ChumCity building also

appear on each of these materials which, incidentally, were all printed after

these hearings began. Prior to this, CityInteractive personnel used the same

business cards as the television people.

48. There is no lease or special arrangement between CityInteractive and CHUM

for the premises it occupies at the ChumCity building, and CityInteractive is

not billed by CHUM for occupying this space. Although CityInteractive has its

own telephone lines, the television stations and CityInteractive share the same

telephone system and are integrated on a common telephone list. A number of

non-CHUM entities are also located on the fifth floor. However, unlike

CityInteractive, which uses the 299 Queen Street address like any other CHUM

entity within the building, the non-CHUM entities have a different street

address -- 151 John Street -- and access the building from a different elevator.

49. Hours worked by CityInteractive personnel and television staff are not

the same because in some instances [*26] the latter are on the air 24 hours a

day. Although infrequent due to the nature of the employees' work, transfers

between CityInteractive and other departments of CHUM can and do occur. In their

day-to-day operations, CityInteractive employees are largely self-sufficient.

However, as our review of CityInteractive's activities will demonstrate, there

are also ongoing intimate interconnections between regular television station

work and CityInteractive work.

50. Like other departments of CHUM located in the ChumCity building,

CityInteractive is integrated in the ChumCity building LAN and uses the same

e-mail system. This internal computer network is protected from outside access

and interference through a firewall, a device that identifies incoming users by

their address and automatically directs the communication to the CityInteractive

server or the CITY-TV server (the television stations' server), as the case may

be.

51. The television side, which also requires outside access to Web sites or

Internet mail, shares a common Internet connection with CityInteractive. In

addition to accessing the Internet through the same Internet service provider

("ISP") server (known as the CITY-TV ISP [*27] server), CityInteractive and the

television people access the same domain name server ("DNS"). This piece of

computer equipment is the main hub of the building's computer systems. It

contains the firewall, and e-mails received from the outside first come into the

CITY-TV ISP server and are stored there until called up via computer. The

e-mails then flow through the DNS, which filters the messages and routes them

according to their destination, CityInteractive or the television stations.

52. The servers used for the LAN and the television stations' server for

Internet access are housed on IT's premises in the basement.

CityInteractive's servers are located on the fifth floor of the building. To set

up e-mail addresses, CityInteractive's system administrator must go to the IT

area. This operation is performed by IT staff. Mr. Shankar, who was trained by

the head of the IT department, must also go to the IT department to set up

pointers, the icons that create the hyperlink that links Web pages together,

whenever a new Web page has been designed by CityInteractive.

53. Even though CityInteractive's systems administrator does most of the work

related to the maintenance of the CityInteractive [*28] servers, the IT people

are also involved in the support and maintenance of CityInteractive's servers,

in addition to maintaining CityInteractive's e-mail system. IT also provides

CityInteractive with software support for business applications on desktop. If

CityInteractive runs into a technical problem with the computer equipment,

technicians from the IT department may be called upon to assist.

54. As far as CityInteractive's marketing efforts are concerned, Mr.

Raphaelson readily admitted that it is common practice for

CityInteractive's sales and marketing people to attend sales meetings with the

television sales staff. They make joint pitches, carry on joint promotional

efforts and take advantage of cross-promotional opportunities from commercials

to on-air mentions. As Mr. Raphaelson put it, they have a "co-promotional

relationship". Rather than operating as separate teams, the television sales

people and the CityInteractive sales staff give every appearance of being

thoroughly intermingled during joint promotional sessions with potential

advertisers. Sales efforts are frequently coordinated and there is ongoing

cooperation between the two groups who promote each other's platform [*29] and

refer clients to each other whenever possible. About 15% of

CityInteractive's advertising revenues come from take-outs that occur when

advertisers buy both television and Internet advertising and require a single

bill. In addition, Mr. Raphaelson testified that they often get prospects passed

on by the television side. When one of those advertisers indicates an interest

in the Web sites, CityInteractive sales people negotiate a package with them.

When asked whether this amounted to CityInteractive piggybacking on the

television stations' advertisers, Mr. Raphaelson stated: "I don't know how you

define piggyback, but certainly it is true that we have got a substantial number

of individual buys from advertisers who were also at the same time negotiating

something with the TV station" (p. 724 of transcripts).

55. This joint and cross-promotional approach is also echoed in the marketing

materials used by the television stations. For example, The NewVR promotional

booklet produced by CHUM Television Sales contains a section dealing with

CityInteractive. In cross-examination, Mr. Raphaelson admitted that this

promotional material had been prepared by CityInteractive for the NewVR: "We

[*30] prepared some information for them and gave it to the person who was

doing this for CITY-TV and NewVR" (p. 729 of transcripts). The last tab of the

booklet, which is labeled "CityInteractive", includes hard copies of CITY-TV and

The NewVR's home pages and gives examples of what they have called "integrated

advertising", that is to say, on-line advertising coordinated with on-air

sponsorship and on-line events integrated with extensive television promotion.

For details, advertisers are invited to contact CityInteractive's sales and

marketing manager. Another page of the television station's promotional booklet,

which is devoted to promoting advertising on the CITY-TV and The NewVR Web

sites, reads as follows:

 

"CityInteractive

Citytv and The New Vr

Get Interactive NOW!

"The world's most interactive broadcaster"

was Canada's first commercial TV station on the Internet in 1995.

CityInteractive helps you reach Citytv and The New VR audiences on the Net

and adds interactivity for a more impactful ad campaign.

Check us out at www.citytv.com and www.thenewvr.ca and on AOL (Keyword:

Citytv).

Enjoy the dynamic advantages of interactive advertising:

-- Direct relationships with key customers [*31]

-- Memorable brand experiences

-- Added depth to your marketing message

-- Enhanced leading-edge brand image

-- Immediate feedback, measurable results

Get interactive the easy way with CityInteractive's turn-key solutions,

including:

-- Customized brand-sell, from billboards to original promotions, contests

and in-store POS

-- Customized response forms for information gathering

-- Links to your corporate web sites

-- Integration with TV campaigns and program sponsorships.

[Emphasis in original]"

 

D. CityInteractive's Activities

56. CityInteractive's primary activity is to design, produce and maintain Web

sites based on the CHUM television brands. The sites relate to a great extent to

the programming aired on television, and the various television brands are

integrated conceptually and functionally with the content of the Web sites.

CityInteractive has what it calls an Internet product and an AOL product. The

creation, maintenance and operation of these sites involves the retrieval of

data originating from the television stations, its conversion in digital form

using appropriate codes and programming means, and its transmission on-line

using appropriate protocols via telephone and [*32] satellite linkage to users

anywhere in the world. Site content includes test images, static and moving,

audio, and integrates various interactive elements.

57. These activities consume the greatest portion of the employees' time.

According to Mr. Raphaelson's estimates, the most time-consuming activity is the

creation of original Internet content, which accounts for about 50% of

CityInteractive's total work. In addition to this, about 20% of the employees'

time is spent on on-line service content creation for AOL and other member-based

on-line services, which have their own specific code, thus requiring the

production of content in a different way from the Internet. Updating television

show pages (Web pages providing information about programming on different CHUM

channels, such as what is coming up on CITY-TV or MuchMusic), takes up

approximately 10% of the employees' time, and gathering that data from the

television stations' accounts for about 5%. Technical support and maintaining

equipment and software make up about 10% of CityInteractive's total work.

58. The work performed by CityInteractive people has also expanded beyond the

creation and maintenance of Web sites based on the [*33] CHUM brands and the

distribution of CD-ROMs. It has included for some time now interactive services

that are performed in conjunction with, or as a part of, CHUM's television

programming. Such services include the supply, to the television stations, of

live on-line chat services and other interactive products such as digital

photographs in JPEG or GIF format. From time to time, at the television

stations' request, CityInteractive also broadcasts on the Internet certain

televised events, an operation known as "netcasting" or "webcasting".

59. These interactive activities account for about 10% of the department's

total work. This figure includes out-of-office computer set-up and computer chat

monitoring, as well as the updating of systems, the installation and maintenance

of machines, and the replacement of software. Time is also spent implementing

new features on the servers.

60. CityInteractive is also involved in the design of interactive marketing

materials for the purpose of print as opposed to on-line. CityInteractive

advertises in different trade magazines and creates packaging materials for its

CD-ROMs, and the design of such materials generally begins in the

CityInteractive [*34] department with its designers. This activity accounts for

approximately 2% of CityInteractive's total work.

61. Lastly, CityInteractive is involved in e-commerce activities, through the

incorporation of retail areas on the Web sites and on its AOL areas. For

example, CityInteractive has developed a Web site for the CityStore based on the

CityStore brand, to sell CityStore items on the Internet. Although this site was

not operational at the time these hearings took place, Mr. Raphaelson testified

that it was nearly completed and would shortly offer items bearing CHUM brand

names. CityInteractive made an arrangement with the CityStore to take a 20%

commission on all sales, and the filling of orders was contracted out to a third

party. Mr. Raphaelson referred to this site as CityInteractive's "Internet

store", while pointing out that the items that had been selected for it were "a

subset of what is sold at the CityStore".

62. Approximately 20% of CityInteractive's revenues come from on-line

services such as the AOL arrangement. Another 20% comes from production fees

(MuchUSA, New VR, etc.), and about 9% from the CD-ROM sales. The balance of

revenues is derived from the sale of Internet [*35] ads. CityInteractive has

some 80 or more sponsors and was required to produce sites for the majority of

them.

63. CityInteractive does not derive any revenue from CHUM for developing and

updating the CHUM sites that market the television brands and promote the

television stations on the digital platform. Nor does CityInteractive receive

any compensation from CHUM for the interactive services it provides to the

television operation, such as the live on-line chat or webcasting televised

events.

64. According to Mr. Raphaelson's estimates, there are approximately 100,000

views of the CityInteractive home page per week, and AOL and the Internet

generate very similar amounts of overall traffic. Mr. Raphaelson believes that

in a month, in rough and ready figures, about five million Internet and AOL

pages are viewed. On the Web, approximately 70% of the audience is from Canada,

and the balance is from anywhere else around the world. On AOL, the viewers are

predominantly American.

(1) CityInteractive's Internet product

65. As Mr. Cowan put it, the Internet "is a mass of computers and

interconnections that is not easily defined, nor is it possible really to define

the exact route which information [*36] may flow on" (p. 1202 of transcripts).

In her article entitled "The Internet: Brave New World or Same Old Thing?",

supra, Ms. Carolyn Pinsky offered a similar yet more comprehensive definition of

the concept (p. 3):

 

"The Internet essentially consists of a network of computer networks

interconnected by means of telecommunication transmission facilities using

common protocol and standards that allow for the exchange of information between

each connected computer. Due to the architecture of the network, which can be

likened to a spider web, information can be routed through almost an infinite

number of paths, and thus relayed through a number of computers around the

world, before it reaches its ultimate destination. According to the Canadian

Internet Handbook [J. Carrol and R. Broadhead, 1996 Canadian Internet Handbook

(Scarborough: Prentice Hall Canada Inc., 1996)], the Internet is the world's

largest computer network, linking mainframes, minicomputers, personal computers,

and networks around the world."

 

66. The World Wide Web (the "Web") is a special Internet service that can

display information in a variety of forms, including styled text, graphics,

still and moving images and/or [*37] sound and video. The information is made

available by way of "sites" that can be accessed by end-users. Web sites usually

contain "hypertext" that provide users with direct access to other sites.

67. The Web sites developed by CityInteractive employees are made up of over

2,000 pages. All sites feature the CHUM television brands. The Web pages are

grouped together as sites and put on one of Citylnteractive's servers. These

sites are assigned a Web address or domain name, which identifies them with a

Web domain and enables end-users to access them. End-users access the Web sites

on the Internet by dialing into an ISP with a modem and telephone line or cable

modem. Once the connection to the Internet is established, end-users, using a

search program known as a "browser", can access a site by typing its address and

pulling the selected pages into their computer to look at them. For example,

typing in <www.muchmusic.com> will take the viewers to the MuchMusic Web site

and <www.citytv.com>, to the CITY-TV Web site.

68. CityInteractive's Internet-related work is not limited to developing and

updating the sites. CityInteractive is in every respect the Web master of the

sites. Although it [*38] does not itself act as an ISP, it is nevertheless

responsible for running the sites and that includes making the necessary

arrangements with an ISP to ensure that the sites are connected to the Internet.

The department has its own servers, maintains the sites and does all required

work to ensure that the sites are operational. CityInteractive is also

responsible for ensuring that the sites' content does not infringe on any

intellectual property rights and licence restrictions or violate any legislative

standard for which CHUM might be held liable. CityInteractive plays an active

role in monitoring the sites' virtual chat area to ensure that neither coarse or

obscene language, nor derogatory or heinous comments appear. When problems

occur, Mr. Raphaelson consults with Mr. Lewis at legal affairs or Mr. Switzer,

to determine how to handle the matter. Mr. Raphaelson testified that although

there are no regulatory requirements with respect to what they can advertise on

the Internet, "[i]t's really a matter of how I want to portray our brand on the

Internet" (p. 103 of transcripts). Mr. Raphaelson observed that, as ultimate

arbiter of what goes on the sites, they follow CHUM's standards [*39] to ensure

that they provide the type of environment that the CHUM audience has come to

expect.

69. The sites featuring the CHUM brands are all linked together by a central

home page, known as the "WHERE IT'S @" home page. This page, which Mr.

Raphaelson called "CityInteractive's home page", is essentially CHUM

Television's central home page. By typing any of the addresses associated with

the television brands, such as the ones listed above, or by typing

<www.chumcity.com>, or <www.cityinteractive.com>, the viewers are taken to this

central home page. There is also a specific home page and Web site address for

each brand. For example, the address providing direct access to the CITY-TV Web

site is <www.citytv.com/citytv>.

70. All the different CHUM television brands are represented on the central

home page along with their respective logos, and the page contains various

features for fans of the television stations, such as information about what is

on the television stations as well as special features on the brands. The top

portion of the WHERE IT'S @ page shows a picture of the ChumCity building on the

left, and the CityInteractive logo on the right. Immediately below

CityInteractive's [*40] logo -- a computer shaped along the lines of the

ChumCity building -- we see the labels for the CHUM brands, CITY-TV, MuchMusic,

Bravo!, Space, The NewVR and Chum Radio. They all have Web sites linked to this

central home page. Underneath the top banner, we find again reference to the

various television brands identified with their respective logos. The name of

each brand appears in a separate box, with a list of television shows associated

with that brand. All these areas are icons on which the viewer can click to

access a specific sub-site that deals with the subject-matter indicated.

71. Each Web site featuring a CHUM television brand contains information

about television programming by showcasing program line-ups, posting schedules

and providing episodic summaries. There are also pages about the programs

themselves, pages containing information on different episodes, and a retail

area where you can purchase copies of videotapes. The sites also contain various

interactive features such as virtual chat rooms. On Thursday nights a MuchMusic

video-jockey ("VJ") from the television station comes to the CityInteractive

department to visit the virtual chat room and chat with members [*41] of the

audience who come on-line to meet the VJ.

72. CityInteractive has also extended to the Internet a CITY-TV cornerstone,

Speaker's Corner, by incorporating it on the Web sites. This is both a chatting

area where people can discuss the programs and a feedback area where viewers can

make suggestions with respect to programming and other matters of interest.

Viewers can make requests such as videos they would like to see aired on

television, and they are invited to send their requests and suggestions directly

to the television stations or to someone at CityInteractive who will forward the

information to the television station concerned. E-mail addresses are provided

for that purpose. For example, the Bravo! Web site, which features the CHUM

brand for its Bravo! New Style Arts Channel, contains a feedback area with

information about e-mail addresses for response. The call for comments is worded

as follows:

 

"Please send us your comments. We would love to hear what you think of this

site and the channel itself. Your input helps us to bring you more of what you

want"!

73. The CityInteractive home page also features an icon identified as CHUM

Radio. This icon takes the viewer to a Web [*42] site for a CHUM radio station

called 1050 CHUM. That site was originally created by an outside party. CHUM

Radio then hired CityInteractive for approximately one year to maintain this

area and to add new information. CHUM Radio ultimately decided to contract with

another party for maintaining and updating the information on the site.

74. All of these sites, the home pages and the pages that are grouped under

them, are frequently and regularly updated by CityInteractive employees. Some

pages are updated every hour, others every day, or every week, depending on the

type of information displayed. Typically, someone from CityInteractive goes to

the television studio and pulls the required data. The data retrieved is then

converted into an HTML format by CityInteractive staff to display it on the Web

site. In other cases, the

Web pages are updated directly by television people without

the involvement of CityInteractive, through a feed that links

the television stations to the CityInteractive server. Some television stations

use a submitter to put information directly on the Web pages.

75. For the purpose of designing the sites, CityInteractive employees have

full access at no charge [*43] to the CHUM logos and art works done in

connection with the CHUM brands by CHUM Television's design department.

CityInteractive can obtain the graphics via e-mail, through the ChumCity

building's LAN or by picking them up at the design department located on a lower

floor of the building. The graphics are then scanned and adapted by

CityInteractive employees to fit the computer screen.

76. CityInteractive also has full access at no charge to CHUM Television

archives and videos used in television shows and can use them to the extent that

such use is not prohibited by licensing rights held by CHUM over these

materials. For the most part, these materials are stored in CHUM Television's

libraries. CityInteractive can show short clips from these videos without

infringing on licensing rights held by CHUM, and this has been its practice. The

video clip excerpts used are systematically identified with one of the CHUM

brands. According to Mr. Raphaelson, this is done to ensure that the video clip

excerpts are "identifiable with us or with one of our brands" (p. 33 of

transcripts).

77. CityInteractive has also built a Web site for the MuchMusic USA channel,

which is available in approximately [*44] 11 million households in the United

States, and receives a monthly fee from the CHUM-Rainbow joint venture to

maintain the site. Like the MuchMusic Web site, the MuchMusic USA site contains

downloads, countdowns and concert listings. It also offers interactive games and

chat areas, and provides marketing information about cable systems that carry

MuchMusic in the United States. In the U.S. market, MuchMusic competes with MTV,

and Mr. Raphaelson noted that the situation is the same in the digital market:

"We feel that in the international Internet market we also compete with MTV

Interactive, if you will" (p. 295 of transcripts).

78. CityInteractive also has a revenue-generating arrangement for The New VR,

a CHUM-owned general services television station located in Barrie, Ontario.

Pursuant to that arrangement, the station paid CityInteractive an initial

development fee to create a Web site for the station and pays a monthly fee to

maintain it. The television station shares in any advertising revenue with

CityInteractive.

(2) CityInteractive's AOL product

79. As previously indicated, CityInteractive contracted with AOL to produce

materials specifically for its network and to develop [*45] content to run on

the AOL platform. AOL subscribers can access the network's "channels" or areas

of interest by dialing into an AOL server.

80. CityInteractive has two AOL sites, one branded MuchMusic and the other

CITY-TV. The MuchMusic site takes the viewer inside the MuchMusic environment,

where there are various icons that can be used to access features, including

video and audio clips. There is a neon sign that says Rumpus Room, which takes

the viewer to a chat area and a Speakers' Corner area that operates in a way

similar to that found on the Internet sites. There is an icon with the MuchMusic

logo at the top of the picture of the ChumCity building, which provides

information about MuchMusic and MuchInteractive (another name commonly used for

the MuchMusic site).

81. The CITY-TV site is accessible by clicking on the CITY-TV logo, a

streetcar that appears under a street sign that says Queen Street. It deals with

some of the CHUM television brands like Mediatelevision and CityPulse, and it

has features that are based predominantly on CITY-TV brands. There is a link

from the CITY-TV site to a CityStore site where one can buy merchandise

featuring the CHUM brands.

(3) CityInteractive's [*46] interactive services

82. The department's interactive services cover both sides of the interactive

media spectrum. Some services, such as live on-line chat and presentation of

digital material on the air, involve taking the Internet to television, while

others, such as webcasting, involve taking television on-line. Besides on-line

chat services, CityInteractive provides the television operation with

interactive materials such as digital photographs in JPEG or GIF format that can

be aired during the television program. This operation involves arranging for

the receipt on-line of digital photographs from viewers and their subsequent

on-air transmission during a television show.

(a) On-line chat services

83. Since the early part of 1997, live on-line chat has become an integral

part of two CHUM television programs, Electric Circus, a weekly dance show on

MuchMusic and CITY-TV, and Go With the Flow, a weekly computer and video show on

MuchMusic. CityInteractive provides this element of the show and its staff take

an active part in the shows by serving on a regular basis as hosts for the chat,

which appears live on the television screen throughout the program.

CityInteractive people host [*47] and monitor the live chat from the

department's offices upstairs, as well as on location, in the television studio.

As the videotapes of Electric Circus and Go With the Flow programs filed as

exhibits reveal, CityInteractive people even appear from time to time on the

television show. Nearly everyone in the department has been involved in

monitoring the Internet chat set-up for a television show at one point or

another and, until the hearings into this case began,

CityInteractive's contribution was acknowledged as a matter of course in the

show's credits.

84. CityInteractive employees also provide technical support. Typically,

before the beginning of a show that incorporates live chat, a CityInteractive

employee will take the equipment required down to the television studio, prepare

the computers for the airing of the on-line chat by making the appropriate

connections, and ensure that the chat program runs properly. During the show, an

employee from CityInteractive will remain on stand-by to provide assistance in

case of a technical problem such as crashing of the server.

85. During Electric Circus, which has included live on-line chat as an

integral part of the show since March 7, [*48] 1987, the host, Juliette

Powell, regularly promotes and emphasizes the importance of this aspect of the

show. Throughout the program, she is heard making statements like, "this is live

interactive television", or "we are doing this live every Friday night during

the show so chat live with us here; or chat with us 24 hours a day if you want",

etc.

86. On-line chat has also been a regular feature of Go With the Flow since

the show aired for the first time on February 28, 1997. Mr. Rubinstein

acknowledged this and admitted that the show itself had been initiated by

CityInteractive's David Hutchinson. This was also confirmed by Ms. Genetti, the

show's current producer. She testified that, in the early stages, Mr. Hutchinson

had even acted as a sort of producer of the show and that he was still taking a

very active part in the show. That perception was also shared by Mr. Shankar.

The e-mail correspondence between Ms. Genetti and Mr. Hutchinson filed in

evidence also reveals the extent of Mr. Hutchinson's involvement in the

production of this particular television program. In fact, in one of these

e-mails, Mr. Hutchinson is described as the producer of the show. This

correspondence also [*49] confirms that equipment, such as a keyboard for the

television show, was obtained through the CityInteractive department, and that

Mr. Hutchinson regularly dictates the content of the show and supplies Ms.

Genetti with ideas. Furthermore, Ms. Genetti testified that when she is away, on

vacation or otherwise, it is Mr. Hutchinson who runs the show. She stated in

unequivocal terms that, in her view, CityInteractive is integral to the show Go

With the Flow to which it provides, among other things, the chat, its

monitoring, new technology, as well as ideas to improve the show.

87. The display of on-line chat on television is made possible by connecting

the Web pages running off the CityInteractive server into the television feed,

and by connecting this feed to a specially programmed computer located in the

television studio. Mr. Cowan explained that the live Internet chat could appear

on the television screen by installing a video card that generated NTSC video in

the computer. This allowed the television people to take that computer video and

provide it as a source to the switcher. The signal was patched into the

production switcher so that it could be used during the broadcast. In

cross-examination, [*50] Mr. Cowan admitted that, for on-line chat, the source

of the signal fed into the production control room was CityInteractive and that,

in such a case, CityInteractive constituted a source like any other source, such

as television cameras, that is fed to the production switcher of the television

control room in order to produce a television broadcast.

(b) Webcasts

88. CityInteractive did its first webcast of a live television show in June

1996 for a CHUM event known as the Festival North by Northeast. The next webcast

occurred in September 1996 for the MuchMusic Video Awards. Since then,

CityInteractive has done other webcasts of live television events aired by CHUM

such as the Schmoozefest. CityInteractive also did several webcasts of televised

performances from Intimate and Interactive, a series broadcast by MuchMusic

approximately once a month. Mr. Raphaelson testified that CityInteractive would

"netcast or webcast that show" if it was successful in obtaining the separate

rights for casting it on the Internet, but stressed that, given their actual

system capability, digital broadcasts could only be accessed by a small number

of viewers at any given time. In a MuchMusic press release [*51] issued on

September 29, 1997, these webcasts were advertised as a signature event of the

MuchMusic Web site:

 

"MuchInteractive produced over two dozen critically-acclaimed netcasts last

year, including performances by [emphasis ends]No Doubt, Bryan Adams, Sammy

Hagar, Moist, Age of Electric, Headstones and Wide Mouth Mason. The recent

MuchMusic Video Awards [emphasis ends] program on September 18th, showcasing top

artists including [emphasis starts] Blur, Bush, Our Lady Peace and The Tea Party

was the first MuchInteractive netcast to feature commercial insertions into a

live video program [emphasis ends] -- incorporating the spots from Motorola

Modems division. Toronto-based network service provider, iSTAR managed technical

support for the netcast.

On September 30th @ 8:00 pm ET MuchInteractive will showcase an exclusive

one-hour performance by Sarah McLachlan originally recorded last June at

MuchMusic, now to be netcast on the Much website (www.muchmusic.com). The

program will be sponsored by Microsoft and will feature commercials for the new

Internet Explorer 4.0 Browser. In addition, this MuchExclusive netcast will

utilize Microsoft's "NetShow" streaming media player for both [*52] audio and

video. [Emphasis in original]"

 

89. The following excerpt from a newspaper article on one of these Intimate

and Interactive webcasts, published on May 13, 1997, explains the nature and

purpose of webcasting from a television standpoint:

 

"When MuchMusic, Canada's music-video network, airs a live concert by the

chart-topping alternative rockers No Doubt tonight, the program will also be a

live, interactive audio-visual event on the World Wide Web. . . .

[emphasis starts] "We wanted to make it global and exotic", says Denise

Donlon, MuchMusic's director of music programming, [emphasis ends] who says Much

veejays will also report live from U.S., Australian and Far East locales during

the 90-minute Intimate and Interactive show.

[emphasis starts] Here's how it works. Fans can access the MuchMusic website

(www.muchmusic.com) and download software required to view the show online in

color and stereo. They will also be able to converse via phone, fax and

Internet. A 30-minute net chat will follow the show, too.[emphasis ends]

Donlon says the picture quality on-line will be much better than usual Net

images but won't be perfect.

"The ISDN feed is going to give use 15 frames per [*53] second, so it's not

going to look like full broadcast pictures that you're used to. It will be a

little bit stop and starty."

But she feels that will also give the event an air of excitement. [Emphasis

added]"

 

("No Doubt and MuchMusic unite in worldwide webcast", Canadian Press, May 13,

1997)

90. Broadcasting a television program on the Web entails taking the video and

audio feed from a television show and connecting it to CityInteractive's server

so that it can be transmitted on the Internet. In order to access the signal,

end-users must access the Internet through an ISP, using a telephone line or

cable. In this regard, Mr. Cowan acknowledged that there were similarities

between digital transmission and traditional broadcast. For instance, he

admitted that the notion of "server" also applied to describe the vehicle used

to bring the television signal into homes. He observed that in the case of

CITY-TV, for example (which is licensed to transmit over the air), the "server"

was the antenna. He admitted as well that, in cases where the television signal

could not be received directly with an antenna, viewers, as is the case for

access to the Internet, had to go through a licensed [*54] service to access

the signal, which, in that case was a cable television service provider rather

than an ISP.

91. Mr. Cowan testified that for webcasting, the source of the feed of the

live television show (such as a MuchMusic program) connected to the

CityInteractive system was a VCR being fed by cable television, as opposed to a

live feed provided directly by the engineering department. CityInteractive would

take the audio and video feeds out of the VCR and connect them to the

CityInteractive server in order to bring about the simultaneous broadcast of the

television program on the Web. He stated that the reason for this was that the

engineering department did not have an interconnect to feed CityInteractive

audio. In cases where CityInteractive wanted to webcast the video-only portion

of a live television broadcast, however, Mr. Cowan conceded that the video-only

live feeds of the television broadcast connected to the CityInteractive server

were provided to CityInteractive by the engineering department.

92. In cross-examination, Mr. Cowan admitted that the engineering department

provided these video feeds to CityInteractive at its request and that his staff

then made the necessary [*55] connections. For example, the engineering

department was responsible for getting three video feeds from the output of the

production control room up to the CityInteractive department for the Festival

Shmooze television program. Shmoozefest is a yearly event organized by CHUM in

the parking lot at 299 Queen Street to celebrate the Toronto film festival. In

this particular case, the video feeds came primarily from eight cameras

temporarily installed throughout the building.

93. In examination-in-chief, Mr. Raphaelson advanced the position that

webcasts were done by CityInteractive on an experimental basis and that

CityInteractive had done this less than ten times in the last two years. In

cross-examination, however, the alleged experimental nature of the webcasts

became questionable. Mr. Raphaelson conceded that his characterization of the

limited extent of CityInteractive webcasting activities ran against the

television stations' portrayal of the situation in their promotional materials.

He also acknowledged that, if webcasts occurred infrequently, it was because a

number of legal and technical conditions had to be met before they could take

place. First, CityInteractive had to be [*56] authorized by the artists

involved, music publishing companies, etc. (anyone owning separate rights in the

product), to do this special application on the Internet and, for intellectual

property considerations, authorizations to broadcast on the Internet were

difficult to secure. Second, in order to do a simultaneous webcast of a live

event aired on television, CityInteractive needed sufficient advance notice to

be technically ready to perform the service. In the case of video-only

broadcasts, the engineering department also needed advance notice in order to be

able to provide the live feed to CityInteractive in a timely manner. On the

basis of these facts, therefore, it was clear to the Board that the regularity

and continuity of webcasts depended more on these objective conditions being

met, than on some undisclosed intent to limit the performance of these services

to casual and unscheduled occurrences.

IV. Relevant Constitutional and Statutory Provisions

94. The Board's constitutional jurisdiction to deal with the labour relations

of an undertaking and the employees employed in connection with the operation of

that undertaking is set out in s. 4 of the Canada Labour Code:

 

"4. [*57] This Part applies in respect of employees who are employed on or

in connection with the operation of any federal work, undertaking or business,

in respect of the employers of all such employees in their relations with those

employees and in respect of trade unions and employers' organizations composed

of those employees or employers."

 

95. Section 2 of the Code defines "federal work, undertaking or business". Of

particular relevance are the following paragraphs:

 

"2. In this Act,

"federal work, undertaking or business" means any work, undertaking or

business that is within the legislative authority of Parliament, including,

without restricting the generality of the foregoing,

.....

(b) a railway, canal, telegraph or other work or undertaking connecting any

province with any other province, or extending beyond the limits of a province,

.....

(f) a radio broadcasting station,

.....

(i) a work, undertaking or business outside the exclusive legislative

authority of the legislatures of the provinces."

 

96. Parliament's statutory authority to enact these definitions originates

from the Constitution Act, 1867, as interpreted over the years by the Privy

Council and the Supreme Court of [*58] Canada. The provisions of the

Constitution Act, 1867, which establish that the activities listed in the above

definitions properly fall under federal jurisdiction read as follows:

 

"VI. Distribution of Legislative Powers

Powers of the Parliament

91. It shall be lawful for the Queen, by and with the Advice and Consent of

the Senate and House of Commons, to make Laws for the Peace, Order, and good

Government of Canada, in relation to all Matters not coming within the Classes

of Subjects by this Act assigned exclusively to the Legislatures of the

Provinces; and for greater Certainty, but not so as to restrict the Generality

of the foregoing Terms of this Section, it is hereby declared that (

notwithstanding anything in this Act) the exclusive Legislative Authority of the

Parliament of Canada extends to all Matters coming within the Classes of

Subjects next herein-after enumerated; that is to say, --

.....

29. Such Classes of Subjects as are expressly excepted in the Enumeration of

the Classes of Subjects by this Act assigned exclusively to the Legislatures of

the Provinces.

And any Matter coming within any of the Classes of Subjects enumerated in

this Section shall not be deemed to [*59] come within the Class of Matters of a

local or private Nature comprised in the Enumeration of the Classes of Subjects

by this Act assigned exclusively to the Legislatures of the Provinces.

Exclusive Powers of Provincial Legislatures

92. In each Province the Legislature may exclusively make Laws in relation

to Matters coming within the Classes of Subjects next herein-after enumerated;

that is to say, --

.....

10. Local Works and Undertakings other than such as are of the following

Classes: --

.....

a. Lines of Steam or other Ships, Railways, Canals, Telegraphs, and other

Works and Undertakings connecting the Province with any other or others of the

Provinces, or extending beyond the Limits of the Province."

 

V. Constitutional Tests

97. It is well established in Canadian law that primary competence over

labour relations matters rests within provincial jurisdiction as a matter of

property and civil rights. Parliament may only assert exclusive jurisdiction

over labour relations if it is shown that it is an integral part of its primary

competence over some other single federal subject: see Toronto Electric

Commissioners v. Snider, [1925] 2 D.L.R. 5, [1925] A.C. 396, [1925] 1 W.W.R.

[*60] 785 (P.C.); and Reference re Validity of the Industrial Relations and

Disputes Investigation Act (Canada), [1955] S.C.R. 529, [1955] 3 D.L.R. 721, 55

CLLC P15,223 [the "Stevedores Reference"]). In respect of works or undertakings

extending beyond the limits of a province, or connecting a province with any

other province, the combined effect of ss. 91(29) and 92(10)(a) of the

Constitution Act, 1867, creates an exception whereby Parliament has exclusive

jurisdiction over intra-provincial transportation and communication works and

undertakings.

98. There are essentially two possible bases for finding that the labour

relations of CityInteractive come within federal jurisdiction. Firstly,

CityInteractive may be subject to federal jurisdiction if it is itself found to

be a work or undertaking carrying on federal activities such as broadcasting or

communication activities that extend beyond the limits of a province (in the

broadcasting context, see Re Regulation and Control of Radio Communication in

Canada, [1932] A.C. 304, [1932] 2 D.L.R. 81, [1932] 1 W.W.R. 563, 39 C.R.C. 49

(P.C.) [the "Radio case"]; Capital Cities Communications Inc. v. Canada

(Radio-Television & Telecomunications Commission), [*61] [1978] 2 S.C.R. 141,

81 D.L.R. (3d) 609, 18 N.R. 181, 36 C.P.R. (2d) 1 ["Capital Cities

Communications"]; and Quebec (Public Service Board) v. Dionne, [1978] 2 S.C.R.

178, 83 D.L.R. (3d) 178, 18 N.R. 271, 38 C.P.R. (2d) 1 ["Dionne"].

99. CityInteractive may also be federal on its own account, and thus come

under federal jurisdiction, if it is found to be part of a broader federal

undertaking. There are two ways in which this may occur. On the one hand, the

disputed operation may be found to be a mere label for a team operating within

the core federal undertaking as a non-severable part of the federal whole. This

would occur if the initial finding is that there is no separate undertaking in

the first place: see Ontario (Attorney-General) v. Winner, [1954] A.C. 541,

[1954] 4 D.L.R. 657, 13 W.W.R. 657 sub nom. S.M.T. (Eastern) Ltd. v. Winner, 71

C.R.T.C. 225 ["Winner"]; C.A.L.E.A. v. Wardair Canada (1975) Ltd., [1979] 2 F.C.

91, 25 N.R. 613 (Fed. C.A.) ["Wardair"]; and Shamrock Television System Inc.,

CKOS-TV & CICC-TV and N.A.B.E.T. (1987), 17 CLRBR (NS) 205, 70 di 168 (CLRB No.

639) ["Shamrock Television"]. On the other hand, the disputed operation may also

be found to be part of a [*62] broader federal undertaking, notwithstanding its

structure as a distinct undertaking performing essentially local activities, if

it can be shown that it is operated in common with a federal undertaking as a

single enterprise. For a local and federal undertaking to be found to be a

single federal enterprise for constitutional purposes, there must be substantial

integration of the management and operation of the two undertakings: see

Westcoast Energy Inc. v. Canada (National Energy Board), [1998] 1 S.C.R. 322,

156 D.L.R. (4th) 456, 223 N.R. 241, 3 Admin. L.R. (3d) 163 ["Westcoast Energy"];

and Exalta Transport Corp. and General Teamsters, Local 362 (1995), 98 di 6

(CLRB No. 1117).

100. Secondly, if CityInteractive is not federal on its own account, then it

may also come under federal jurisdiction if it is found to be integral, vital or

essential to a core federal work or undertaking in a regulatory sense. This

would occur if it can be shown that an existing federal undertaking is dependent

upon the local undertaking for the performance of an essential part of its

operations: see U.T.A. v. Central Western Railway Corp., [1990] 3 S.C.R. 1112,

76 D.L.R. (4th) 1, 119 N.R. 1, 9 CLLC P14,006 [*63] ["Central Western

Railway"]; the Stevedores Reference, supra; Northern Telecom Ltd. v. C.W.O.C.,

[1980] 1 S.C.R. 115, 98 D.L.R. (3d) 1, 28 N.R. 107, 79 CLLC P14,211 ["Northern

Telecom No. 1"]; and Northern Telecom Canada Ltd. v. C.W.O.C., [1983] 1 S.C.R.

733, 147 D.L.R. (3d) 1, 48 N.R. 161, 83 CLLC P14,048 ["Northern Telecom No.

2"]). "Essential" in this context has been interpreted to include the extended

meaning of "reasonably necessary": see Wardair, supra.

101. The "single enterprise" test and the "vital and integral" test, though

not unrelated, are distinct from one another. Although in both cases, the local

operation must be joined to an interprovincial undertaking through a necessary

nexus, for the former, the emphasis must be on determining whether the separate

operation, together with the main federal undertaking, forms a single integrated

interprovincial undertaking. The single enterprise test was articulated by the

Supreme Court of Canada in Westcoast Energy, supra, at p. 359 S.C.R., as

follows:

 

"[emphasis starts] In order for several operations to be considered a single

federal undertaking for the purposes of s. 92(10)(a), they must be functionally

integrated and subject [*64] to common management, control and direction.

Professor Hogg states, at p. 22-10 that "[i]t is the degree to which the

[various business] operations are integrated in a functional or business sense

that will determine whether they constitute one undertaking or not". [emphasis

ends] He adds, at p. 22-11, that the various operations will form a single

undertaking if they are "actually operated in common as a single enterprise". In

other words, common ownership must be coupled with functional integration and

common management. A physical connection must be coupled with an operational

connection. A close commercial relationship is insufficient. See Central

Western, supra, at p. 1132. [Emphasis added]"

 

102. The key requisite elements of the single enterprise test are thus that

the two operations must be functionally integrated and subject to common

management, control and direction. Under the vital and integral test,

jurisdiction depends also partially on the manner in which the businesses are

operated and the degree to which they are integrated in a functional or business

sense. However, jurisdiction here is focused upon whether the regulation of the

subject-matter in question is integral [*65] to a core federal work or

undertaking: see Central Western Railway, supra, at pp. 1124-1125 S.C.R.; and

Westcoast Energy, supra, at p. 357 S.C.R.

103. These approaches for determining whether a disputed operation comes

within federal jurisdiction were developed primarily to address the difficulties

of assessing the constitutional character of an enterprise. Indeed, a single

corporate entity may carry on more than one undertaking, one provincial and the

other federal, and two separate corporate entities may be found to constitute

one single federal undertaking: see Canadian Pacific Railway Co. v. British

Columbia (Attorney General), [1950] A.C. 122, [1950] 1 W.W.R. 220 sub nom.

Reference re Application of Hours of Work Act (British Columbia) to Employees of

the Canadian Pacific Railway in Empress Hotel, Victoria (City), [1950] 1 D.L.R.

721, 64 C.R.T.C. 266 (P.C.) [the "Empress Hotel case"], where Canadian Pacific

Railway's Empress Hotel was found to be an undertaking separate and independent

from the railway undertaking.

104. This is the respondent's contention here. CHUM Television asserts that

CityInteractive is a separate and divisible business of CHUM, and one that is

neither in [*66] itself a federal undertaking, nor an operation that is

integral to CHUM's federal broadcasting undertaking. Focusing on

CityInteractive's activities, the respondent asserts that the pith and substance

of the department's business is production and marketing. Since such a sector

has been found in the past to be intra-provincial (see Canada (Labour Relations

Board) v. Paul L'Anglais Inc., [1983] 1 S.C.R. 147, 146 D.L.R. (3d) 202, 87 N.R.

351, 83 CLLC P14,033), CHUM Television contends that CityInteractive does not

constitute a "federal work, undertaking or business" within the meaning of the

Code.

105. CEP argues the opposite view, namely that CityInteractive is not a

stand-alone operation, but rather constitutes a non-severable part of CHUM's

television operation, which is unquestionably federally regulated.

VI. Principle of Indivisibility of the Undertaking

106. As the authorities suggest, the question of whether an undertaking is

federal, depends on the nature of the operation and, in order to determine the

nature of the operation, one must look at the normal or habitual activities of

the undertaking as those of a going concern, without regard for exceptional or

casual factors: [*67] Northern Telecom No. 1, supra, at p. 135 S.C.R.; and

Northern Telecom No. 2, supra, at p. 753 S.C.R. The decisive criterion in

determining constitutional jurisdiction is not the work performed by individual

employees, but the nature of the activities of the going concern that employs

them: see the Stevedores Reference, supra; Northern Telecom No. 1, supra, and

Alberta Government Telephones v. Canada (Canadian Radio-Television &

Telecommunications Commission), [1989] 2 S.C.R. 225, 68 Alta. L.R. (2d) 1, 61

D.L.R. (4th) 193, 98 N.R. 161 sub nom. Canadian National/Canadian Pacific

Telecommunications v. Alberta Government Telephones, [1989] 5 W.W.R. 385, 26

C.P.R. (3d) 289. Furthermore, the manner in which the undertaking is structured

is not determinative: see Westcoast Energy, supra, at p. 361 S.C.R.; and Winner,

supra, at pp. 581 - 582 A.C.

107. In the case before us, the problem does not lie in identifying the core

federal undertaking, but in determining how extensive it is: see Stern Transport

Ltd. and General Teamsters, Local 362 (1986), 12 CLRBR (NS) 236, 65 di 127 (CLRB

No. 571). The respondent does not dispute that there is a core federal

undertaking, that being CHUM's radio and [*68] television broadcasting

business. Radio and television broadcasting undertakings, including cable

television undertakings, have been found to come under federal jurisdiction

pursuant to ss. 91 and 92(10)(a) of the Constitution Act, 1867: see the Radio

case, supra; Capital Cities Communication, supra; and Dionne, supra. What the

respondent asserts is that CHUM can and should be split up for constitutional

purposes.

108. It is well established that, in the process of determining whether a

disputed operation is a severable part of a core federal undertaking, the focus

should not be on the "branch operations", to identify what portions of the

federal undertaking can be extracted without interfering with the activity

altogether. Rather, the focus should be on determining what is the undertaking

which is in fact being carried on. The principle which underlies this is the

indivisibility of the undertaking. It was originally developed in the context of

cases dealing with undertakings that carried on interprovincial as well as

interprovincial activities [sic]. The first case in which this notion was

articulated was Toronto (City) v. Bell Telephone Co. of Canada, [1905] A.C. 52

(P.C.). In that [*69] case, the Privy Council rejected the suggestion that Bell

Telephone carried on two distinct enterprises, one a long-distance telephone

service and the other a local telephone service. In so holding, their Lordships

stated (at p. 59):

 

"The undertaking authorized by the Act of 1880 was one single undertaking,

though for certain purposes its business may be regarded as falling under

different branches or heads. The undertaking of the Bell Telephone Company was

no more a collection of separate and distinct businesses than the undertaking of

a telegraph company which has a long-distance line combined with local

businesses, or the undertaking of a railway company which may have a large

suburban traffic and miles of railway communicating with distant places. The

special case contains a description of the company's business which seems to be

a complete answer to the ingenious suggestion put forward on behalf of the

appellants."

 

109. The principle against dismemberment of an undertaking according to

specific activities or job functions performed within the undertaking was

further developed in the Winner case, supra. In that case, the Privy Council

articulated the notion that the constitutional [*70] characterization attaches

to the whole of the undertaking. Their Lordships wrote (at pp. 678-680 D.L.R.):

 

"Their Lordships however cannot see any evidence of such a dual enterprise.

The same buses carried both types of passengers along the same routes; the

journeys may have been different, in that one was partly outside the Province

and the other wholly within, but it was the same undertaking which was engaged

in both activities.

The Supreme Court however approached the question from a different angle. To

them a distinction should be drawn between what was an essential and what an

incidental portion of the enterprise. In their view the portion which could be

shed without putting an end to it did not constitute an essential part of the

undertaking and therefore could be dealt with by the Province, leaving only the

essential part for the Dominion's jurisdiction.

Their Lordships are of opinion that this method of approach results from a

misapprehension of the true construction of s. 92(10)(a) of the B.N.A. Act. The

question is not what portions of the undertaking can be stripped from it without

interfering with the activity altogether: it is rather what is the undertaking

which [*71] is in fact being carried on. Is there one undertaking, and as part

of that one undertaking does the respondent carry passengers between two points

both within the Province, or are there two?

.....

 

"No doubt the taking up and setting down of passengers journeying wholly

within the Province could be severed from the rest of Mr. Winner's undertaking

but so to treat the question is not to ask is there an undertaking and does it

form a connection with other countries or other Provinces but can you emasculate

the actual undertaking and yet leave it the same undertaking or so divide it

that part of it can be regarded as interprovincial and the other part as

provincial.

[emphasis starts] The undertaking in question is in fact one and

indivisible. It is true that it might have been carried on differently and might

have been limited to activities within or without the Province, but it is not,

and their Lordships do not agree that the fact that it might be carried on

otherwise than it is makes it or any part of it any the less an interconnecting

undertaking. [emphasis ends] [Emphasis added]"

 

110. The notion that an enterprise must be viewed as the sum of its parts,

i.e., its incidental [*72] as well as its essential components, was fully

developed by the Federal Court of Appeal in Wardair, supra, where the union

sought to include the employees of a tour operator (Intervac), which handled the

sale of seats for Wardair. The court noted that if the sale of seats was done by

Wardair employees as an integral part of the air carrier's business, they would

be swept into the federal realm, as such an activity would ordinarily be

reasonably incidental to the operation of the air carrier's business. However,

since the activity was carried on by a separate undertaking, it became a local

enterprise.

111. In outlining the various types of problems that arise in the course of

assessing the constitutional character of an enterprise, the court observed

that, generally speaking, where a particular activity that may be reasonably

incidental to the operation of a federal undertaking, without being an essential

component of such operation, is carried on by the operator of the federal

undertaking as an integral part thereof, it is indeed a part of the operation of

the federal undertaking (at pp. 96-97 F.C.):

 

"[emphasis starts] A particular activity may be reasonably incidental to the

operation [*73] of a federal work, undertaking or business without being an

essential component of such operation. [emphasis ends] For example, an

interprovincial railway may have its own laundry facilities or its own

arrangement for preparing food for passengers, or, alternatively, it may send

its dirty linen to an outside laundry or buy prepared food. [emphasis starts]

Generally speaking, where such an activity is carried on by the operator of the

federal work, undertaking or business as an integral part thereof, it is indeed

a part of the operation of the federal work, undertaking or business. [emphasis

ends] Where, however, the operator of the federal work, undertaking or business

carries on the operation thereof by paying ordinary local businessmen for

performing such services or for supplying such commodities, the business of the

person performing the service or preparing the commodities does not thereby

automatically become transformed into a business subject to federal regulation.

Compare the decision of the Supreme Court of Canada in the Montcalm Construction

Inc. case (1979), 25 N.R. 1, that was delivered last December.

To sum up with reference to Classes (c) and (d), as I understand the [*74]

law, where something is done as an integral part of the operation of a federal

work, undertaking or business and that something is [emphasis starts] reasonably

incidental [emphasis ends] to such operation, it may be regulated by Parliament

as part of the regulation of that work, undertaking or business even though it

is not essential to the operation of such a work, undertaking or business; but

where such a thing is made the subject of a separate local business or

businesses, it cannot be regulated by Parliament merely because, if it were done

as an integral part of operating a federal work, undertaking or business, it

could, as such, be regulated by Parliament. [Emphasis added]"

 

112. According to that reasoning, it follows that, even if employees are

doing non-essential work as part and parcel of the main federal undertaking,

they are included in the federal undertaking, and where that same work is

performed by a subsidiary or unrelated undertaking, it may well be provincial,

unless the local operation is found to be operated together with the core

federal undertaking as a single enterprise: see Westcoast Energy, supra.

113. In looking at the normal or habitual activities of CHUM's [*75]

broadcasting undertaking as a going concern, without regard for exceptional or

casual factors, we must therefore consider all aspects of the business carried

on as non-severable parts, i.e., the essential as well as the reasonably

incidental components of CHUM's business.

VII. Analysis

A. Indivisibility of the Undertaking in the Broadcasting Context

114. The Board has been called upon to apply the principle of indivisibility

of the undertaking in the broadcasting industry in many instances. These cases

arose in the context of arguments similar to the ones made here by the

respondent. The assertion was that the broadcasting undertaking could be

segmented into provincial components on the basis that certain activities, which

were not per se essential to broadcasting, were being carried on as separate

businesses, severable from the core broadcasting undertaking.

115. When the non-essential activities were carried on by a separate company,

the Board generally found the separate operation to be outside federal

jurisdiction. For example, in CFCN Television and N.A.B.E.T. (1991), 15 CLRBR

(2d) 93, 83 di 205 (CLRB No. 844) ["CFCN Television"], CFCN-TV, a broadcaster,

had created a separate [*76] business entity, White Iron Film and Video

Productions ("White Iron"), to make film and video programs that were not

intended for broadcast. The television station maintained its own production

department separate from White Iron. The Board held that White Iron was

provincial because the constitutional facts failed to show a sufficient degree

of operational and functional integration between the two operations to support

a finding that White Iron was a part of CFCN-TV's core federal undertaking.

CFCN-TV did not depend in any way on White Iron's service and would not have

been disadvantaged vis-a-vis its broadcasting capability if White Iron had

ceased its operations.

116. What distinguishes CFCN Television, supra, from the instant case is

that, unlike CityInteractive, White Iron was a separate company whose production

work was not primarily dedicated to the broadcast operations of the core

undertaking. Moreover, unlike CityInteractive, White Iron provided no services

to the television operation. The Board observed in that case (at p. 101 CLRBR,

p. 214 di):

 

"Here, in our respectful opinion, the necessary degree of operational and

functional integration is not present. Nothing flows [*77] from White Iron to

CFCN-Television of an operational or functional nature. White Iron provides no

services to CFCN-Television. Some productions of White Iron may be aired on

television by CFCN-Television or by other television networks but this does not

make White Iron federal."

 

117. On the other hand, in cases involving production operations where there

was no distinguishable production undertaking, the Board found that these

activities came under federal jurisdiction as integral and non-severable parts

of the core broadcasting undertaking. This was the whole thrust of Shamrock

Television, supra, where an allegedly segregated production division was found

to be an integral part of a broadcasting undertaking, along with departments

involved in the sale of air time and office administration. The Board held that

these activities, secondary to the operation of a core broadcasting undertaking,

were sufficiently integrated with the federal undertaking to become subject to

the provisions of the Code. The Board looked at the activities in question

(image creative services, sale of air time and office administration of a

television station), considered the degree of functional and operational [*78]

integration (no separate lease, common telephone system, similar employment

terms, similar invoicing, etc.), and concluded that the illusion of a separate

operation was not one of substance and that the reality was that this operation

was a non-severable part of the broadcasting whole. With respect to the Image

Creative Services department ("ICS"), which carried on production work for

Shamrock, the Board observed that ICS was simply a label for a team of employees

who did some particular work, and that, while Shamrock could live and operate

without this group, it was clear that it was functionally dependent on it in the

day-to-day task of creating material for television transmission and was

dependent to a considerable degree upon the skills of individuals in the ICS

group operating the specialized equipment assigned to ICS.

118. Similarly, in Television Saint-Maurice Inc. and Syndicat des

employes(es) de Television St-Maurice Inc. (1990), 15 CLRBR (2d) 81, 83 di 179,

91 CLLC P16,041 (CLRB No. 841), the Board found that the sale of air time

properly fell within federal jurisdiction as being carried on as a non-severable

part of the employer's broadcasting operation. In Television [*79]

Saint-Maurice, supra, the employer argued that the Board had no jurisdiction

over its advertising sales service because the sale of advertising was a

provincial matter. In rejecting that argument, the Board stated (at p. 84 CLRBR,

p. 182 di, p. 14,433 CLLC):

 

"In Canadian Broadcasting Corporation and Syndicat des employes de

production du Quebec et de l'Acadie (1987), 71 di 12 (CLRB No. 646), the Board,

applying the same rules, dismissed an application precisely because the

undertaking in question was not integrated.

As was the case in Shamrock, supra, the employer sells its own advertising

through an integrated advertising sales service. This is sufficient to enable

the Board to conclude that, in this case, there is a single, integrated and

indivisible broadcasting undertaking -- in other words, a federal undertaking."

 

119. In their submissions, counsel for the respondent relied principally on

CFCN Television, supra, and the judgment of the Supreme Court of Canada in Paul

L'Anglais, supra. The Paul L'Anglais case, like the Board's decision in CFCN

Television, supra, can be easily distinguished from the facts before the Board

in this instance. In Paul L'Anglais, Tele-Metropole [*80] Inc., the core

federal broadcaster, had set up two companies, Paul L'Anglais Inc. and JPL

Productions Inc., to sell commercial air time and to produce commercials. These

wholly owned subsidiary companies had their own employees and had clients

unrelated to the parent company. Thus, as was the case in CFCN Television,

supra, in Paul L'Anglais, there were distinguishable undertakings performing

secondary activities and these activities were not primarily dedicated to the

operation of the core federal undertaking.

120. As the Board noted in Shamrock Television, supra, at p. 216 CLRBR, p.

178 di, the Supreme Court's ruling in Paul L'Anglais has limited bearing on the

situation, such as the one before us, involving the carrying on of secondary

activities by the broadcasting company in the pursuit of its broadcasting

purposes:

 

"The one question which Chouinard J. did not address is whether the

production and sale of air time, although "not indispensable" to broadcasting

are nonetheless [emphasis starts] reasonably incidental [emphasis ends] to

broadcasting [emphasis starts] when carried on by the broadcasting company

itself in pursuit of its broadcasting purposes. [emphasis ends][Emphasis [*81]

added]"

 

121. Furthermore, in the Board's respectful opinion, Paul

L'Anglais, supra, has limited bearing on the instant case as the constitutional

status of the two subsidiaries of Tele-Metropole was considered by the Supreme

Court on the basis of limited facts. The Supreme Court's assessment of the two

subsidiaries' constitutional status in Paul L'Anglais occurred in the context of

an application to overturn the granting of a motion for the issuance of a writ

of evocation in the Quebec Superior Court. As it upheld the granting of the

motion, the Supreme Court commented on the constitutional status of the three

companies on the basis of the facts alleged in the affidavits in support of the

original application, not on the basis of the facts as found by the Board, whose

decision was being challenged. The facts alleged in the affidavits were confined

to describing the subsidiaries' activities without regard to the manner in which

they were operated and managed. The next stage would have been a hearing on the

constitutional issue in Superior Court during which the sum of the evidence

adduced before the Board (including evidence pertaining to the subsidiaries'

functional and operational [*82] integration with Tele-Metropole's core federal

undertaking) would have been examined. However, this never happened and the

union eventually withdrew its applications before the Board.

122. The present case can also be distinguished from the Empress Hotel case,

supra, where the Privy Council held that the Empress Hotel in Victoria, British

Columbia, although owned by the Canadian Pacific Railway Company, was

constitutionally divisible from the company's federal railway undertaking. In so

holding, the court observed, in obiter dicta, that a hotel built by the railway

to serve its passengers could form part of the company's interprovincial railway

undertaking (at p. 144 A.C.):

 

"It appears from the facts stated in the order of reference that the

appellant has so interpreted its powers and that in the Empress Hotel it does

carry on general hotel business. [emphasis starts] It may be that, if the

appellant chose to conduct a hotel solely or even principally for the benefit of

travellers on its system, that hotel would be a part of its railway undertaking.

[emphasis ends] Their Lordships do not doubt that the provision of meals and

rest for travellers on the appellant's system may be a [*83] part of its

railway undertaking whether that provision is made in trains or at stations, and

such provision might be made in a hotel. But the Empress Hotel differs markedly

from such a hotel. Indeed, there is little, if anything, in the facts stated to

distinguish it from an independently owned hotel in a similar position. No doubt

the fact that there is a large and well-managed hotel at Victoria tends to

increase the traffic on the appellant's system; it may be that the appellant's

railway business and hotel business help each other, but that does not prevent

them from being separate businesses or undertakings. [Emphasis added]"

 

123. This distinction is directly relevant to the factual situation in the

present case and to the questions raised, that is, the employees of a department

primarily engaged in the production and marketing of Web sites as a component of

a broadcasting enterprise. The instant case comes very close to the type of

situation suggested by the Privy Council, since, in the Board's view, the

evidence shows that CityInteractive's operation is dedicated exclusively to

CHUM's television broadcasting operation.

124. In this regard, the Board's analysis in Shamrock [*84] Television,

supra, at pp. 221-222 CLRBR, pp. 183-184 di, of the distinction between the

Empress Hotel case and the three disputed Shamrock divisions fully relates to

the instant case:

 

"The employees at the Empress Hotel were employees of Canadian Pacific, a

federal undertaking at least in respect of its railway. The employees in the

ICS, the sales department and the office administration are employees of

Shamrock Television System Inc., which is within federal jurisdiction, at least

insofar as its television broadcasting business is concerned. However, the facts

suggest that this is approximately where the similarity between the two cases

ends.

[emphasis starts] The Empress Hotel's activities were such as to make it much

more than simply part of the railway undertaking. It was in fact

indistinguishable from any hotel owned by any other interest and which was

clearly within provincial jurisdiction. The three disputed divisions of Shamrock

are in fact nothing more than portions of the single broadcasting enterprise.

The instant case comes very close to the kind of situation cited by the

Federal Court of Appeal in Wardair, supra. In effect, where an airline has

another undertaking [*85] sell tickets for it, that undertaking does not

necessarily come under federal labour relations jurisdiction. But where the

airline employs people directly to sell tickets, "as an integral part" of the

airline undertaking, that group does come under federal labour relations

jurisdictions. [emphasis ends]

Jurisdiction flows, not from the actual work performed by an employee, but

rather from the work of the undertaking within which those employees function.

This principle was clearly established by the Supreme Court in Reference re

Industrial Relations and Disputes Act, [1955] S.C.R. 529, where it was

determined that office employees of stevedoring companies, although strictly

speaking not involved in loading and unloading ships, should nevertheless be

treated as necessarily and integrally related to the federal regulation of

shipping.

The Board concludes, on the basis of the facts and the law, that these three

divisions or departments of Shamrock at Yorkton -- Image Creative Services,

sales department and office administration -- are within federal labour

relations jurisdiction. [Emphasis added]"

 

125. That distinction was reiterated in Westcoast Energy, supra, where the

Supreme [*86] Court of Canada determined that even a separate corporate entity

performing secondary functions for a core federal undertaking would be subsumed

into the federal sphere if it were found to be operated in common with the

federal undertaking as a single federal enterprise.

126. In that case, some of the pipeline facilities and processing plants that

were found to be operated in common with Westcoast's main transmission pipeline

as a single federal undertaking, were owned by wholly owned subsidiaries of

Westcoast. The court held that these gathering pipelines and processing

facilities were an integral part of Westcoast's mainline pipeline because they

were under common control, direction and management, and were conducted in a

coordinated and functionally integrated manner. In so holding, the court noted

the importance of primary dedication of the secondary business to the operation

of the core federal undertaking as an indication of the type of functional

integration that is necessary for finding a single federal enterprise (Westcoast

Energy, supra, at p. 362 S.C.R.):

 

"[emphasis starts]The fact that one aspect of a business is dedicated

exclusively or even primarily to the operation [*87] of the core

interprovincial undertaking is an indication of the type of functional

integration that is necessary for a single undertaking to exist. [emphasis ends]

[Emphasis added]"

 

127. As the Board did in Shamrock Television, supra, the Supreme Court in

Westcoast Energy, supra, at p. 366 S.C.R., distinguished the Empress Hotel case

on that basis:

 

"[T]he finding that the hotel was a separate undertaking was based on the

fact that it was not dedicated primarily to the railway undertaking. It was no

different from any other hotel."

 

(See also to the same effect, Dome Petroleum Ltd. v. National Energy Board

(1987), 73 N.R. 135 at pp. 139-140 (Fed. C.A.))

B. Application of These Principles to the Constitutional Facts

128. It is against that background that we must consider the issue before us,

namely, whether CityInteractive is a non-severable part of CHUM's federal

broadcasting undertaking.

129. The Board heard a great deal of testimony designed to show that

CityInteractive was a distinct entity that stood or fell quite separately from

the activities and the fortunes of CHUM's television operation. The respondent's

counsel put their best case forward in attempting to demonstrate [*88] that

CityInteractive was a distinct and self-sufficient operation that carried on

activities completely unrelated to and independent from broadcasting. However,

as the hearing delved further into the nature of the work carried on by

CityInteractive and its relationship to the television operation, this theory

became increasingly less persuasive.

130. In support of its contention that CityInteractive is a stand-alone

operation, separate and distinct from the television operation, the respondent

adduced evidence to show that, operationally, CHUM treats all of its

departments, divisions and branches as separate businesses, each having its own

manager, budget and staff. However, once all the evidence was in, it became

clear to the Board that this was more apparent than real. In practice, the lines

between the various segments of CHUM's overall business are not so clearly

drawn. For example, although CHUM does treat each of the television stations

housed in the ChumCity building as separate businesses to monitor their relative

profitability and performance as well as to comply with CRTC licensing

requirements, in practice, they are managed in common and are under common

control and direction. [*89] The television stations are all headed by the

same individual, Mr. Moses Znaimer, and they are all under the responsibility of

Messrs. Switzer, Rubinstein and Ron Waters. The situation is no different for

CityInteractive. The department has its own general manager, Mr. Raphaelson, who

reports to Mr. Znaimer and the other television executives mentioned above. The

same holds true for the CityStore, with the exception that Messrs. Znaimer and

Switzer are not directly involved.

131. The television stations and CityInteractive are also

administratively and operationally integrated in a functional or business sense.

They share common resources and equipment and use similar support services. They

all consult the same legal affairs and business department, labour relations

department, engineering department, IT department and design department.

Similarly, they all share the same accounting and payroll system and services,

and use the same requisition forms, shipping and receiving forms, statement of

earnings and deduction sheets, bulletin boards, telephone system, receptionist

and switchboard, e-mail system, and system for access and security.

132. As revenue-generating operations of CHUM [*90] housed in the ChumCity

building and carrying on activities directly connected to the television

operation, administratively, CityInteractive and the CityStore are governed by

the same rules and administrative practices as any of the television stations

housed in that building. CityInteractive, whether viewed as a separate business

unit or as an administrative division, is as operationally integrated to CHUM's

television operation as any other CHUM division or business unit that is housed

in the ChumCity building. The logos of all CHUM television brands appear on

every document used by CityInteractive, including business cards and note pads.

133. The evidence is clear that CHUM's business is divided into television

and radio operations and that everything that CHUM does comes under either one

of these two main divisions. The alleged self-containment and uniqueness of

CityInteractive versus the television operation cannot be reconciled with the

reality of the situation, which Mr. Switzer could not have described more

explicitly when he said: "There is only radio and television inside our company,

so when we have a new project we have to decide does it go under radio master

umbrella [*91] or television master umbrella. We are too small yet to have a

true third umbrella of other things" (p. 1373 of transcripts). Mr. Switzer

confirmed that CityInteractive did not escape the organization's practice of

classifying everything it does under either one of its main divisions:

television or radio.

134. CityInteractive is grouped by CHUM under its television umbrella, like

any other department or division that is physically located at the ChumCity

building. When cross-examined about the status of CityInteractive, Mr. Switzer

compared it to the CityStore which, by the respondent's own admission, comes

under CHUM Television's umbrella and whose staff is covered by the CHUM

Television collective agreement. He observed: "[The CityStore] falls under CHUM

Television. Obviously selling cookbooks and T-shirts isn't the television

business, but we group it inside the family of businesses that are CHUM

Television in the same way we at this point decided to group the interactive

business" (page 1370 of transcripts). Mr. Switzer was also very clear on his

understanding of CityInteractive's status: "[T]his began as an experiment of a

new unit . . . it is and remains a small and not significant [*92] part of our

overall television machine" (p. 1340 of transcripts).

135. In this regard, the fact that, on the respondent's organizational

charts, CityInteractive appears under the umbrella of ChumCity Productions,

which is in turn found under a division entitled "Unregulated Entities", bears

little significance to the issue of CityInteractive's status as an integral part

of CHUM's television operation. In cross-examination, Mr. Lewis admitted that

these charts, which he had prepared for the purposes of this case, reflected

more his view of CHUM's business as structured along CRTC licensing requirement

lines, than true operational divisions. Indeed, the CityStore, whose retail

business generates for CHUM annual revenues of half a million dollars, does not

appear on the respondent's organizational charts and the same charts make no

reference either to CHUM Television's engineering department, IT department or

design department. Administrative services, such as accounting and payroll, are

also absent from the charts, thus leaving the distinct impression that the

structure they illustrate is more illusory than real.

136. In the Board's view, the employees in the CityInteractive department

[*93] are clearly CHUM employees working within its television division as much

as are the individuals whose status is not in dispute and who have been included

in the scope of the collective agreement by the certification order or with the

respondent's consent. This is evidenced not only by the facts as they relate to

the traditional criteria for determining the employer's identity, but also by

the very terms of CityInteractive staff employment contracts. For example, Mr.

Shankar's employment contract was entered into with "CityInteractive, a division

of CHUM Limited", which leaves no doubt as to CHUM's identity as the employer.

137. As in Shamrock Television, supra, none of the factors that governed the

decision in Paul L'Anglais, supra, and CFCN Television, supra, are present in

this case. The functions that are at issue here, that is, production and design

of Web sites, distribution of CD-ROMs, e-commerce activities and interactive

services, are all performed by CHUM employees. CityInteractive employees are not

slotted into narrowly defined jobs and they often perform a number of different

tasks that service, or are supportive of, more than one television station. They

are administratively [*94] and functionally integrated with the other employees

of the television operation. In some instances, the work at issue, such as the

updating of Web sites, is performed by employees who work in other CHUM

departments. In other instances, it is television station work that is performed

by CityInteractive people, as in the case of on-line chat. In such cases, CHUM

depends upon the technical skills of CityInteractive's staff in the digital

domain for the interactive elements incorporated into the television shows.

Conversely, CityInteractive also depends on the skills and technical support of

employees of various CHUM departments, such as the IT department and the

engineering department, in the performance of several functions.

138. As in Shamrock Television, supra, CityInteractive is simply a label for

a team of employees who do some particular work, but who must rely on others to

produce or update the product and who in turn are relied upon by the clearly

federal operations of CHUM for services and support. The CityInteractive team is

fully integrated to the overall CHUM organization and more particularly, to its

television operation as is, for example, the unit of IT people who provide [*95]

informatics support and services to CHUM's television operation in the ChumCity

building. Functional integration is perhaps best evidenced by the fact that

CityInteractive participates on a regular and continuous basis in two television

shows, Go With the Flow and Electric Circus, as an integral part of these shows.

139. CityInteractive and the television stations are also physically and

operationally interconnected. They share a common Internet connection and DNS,

and submitters connect the television stations to CityInteractive on a permanent

basis for the purposes of updating the Web sites. Physical connections are also

made to allow CityInteractive to provide its interactive services to the

television operation. Live feeds are provided to CityInteractive by the

engineering department in the case of video-only webcasts and, in the case of

on-line chat, CityInteractive's electronic signal is patched into the production

switcher of the television operation's production control room so that it can be

incorporated in the broadcast. CityInteractive is also physically integrated to

the television operation in an operational and practical sense through its

inclusion in the ChumCity building [*96] LAN and telephone system. In this

context, therefore, the fact that CityInteractive is assigned space on a top

floor of the building away from the bulk of the bargaining unit, and has a

separate computer system to carry on its Internet-related work, are not matters

of significance. What is significant, is that every segment of CHUM Television

housed in the ChumCity building, including CityInteractive, is physically,

functionally and operationally integrated.

140. CityInteractive's integration to CHUM's broadcasting undertaking is also

evidenced by the absence of any billing by CHUM for what would normally be

significant operational expenses, such as rent and use of valuable intellectual

property. CityInteractive is neither charged for the right to use CHUM's popular

television brands and logos, nor limited in any way in the use it makes of them.

Yet, CHUM has set up a department, ChumCity International, precisely for the

purpose of exploiting these assets and has given business and legal affairs the

responsibility for ensuring their protection.

141. Another striking feature indicating that CityInteractive's work is done

for CHUM, by employees of CHUM, as part and parcel of its core [*97] television

operation, is that none of CityInteractive's work for CHUM's core television

operation is accounted for as revenue in CityInteractive's statement of

earnings. The statement of earnings lists a number of expenses incurred by

CityInteractive for operating the Web sites, but shows no comparable entries in

the revenue category for the work done by CityInteractive to put the television

stations on the Internet and for the length of time spent by users in visiting

the sites. Yet, we know from Mr. Raphaelson that some five million Internet and

AOL pages featuring the CHUM Television brands are viewed in a month.

142. The reason for this discrepancy is that one does not pay for what one

already owns. CHUM is not a client here. CityInteractive is a department of CHUM

that exists to assist CHUM in the pursuit of its broadcasting objectives. CHUM

does not contract out, or contract in, the production of its Web sites. It pays

its own employees to do this work.

143. CityInteractive's work for CHUM's television broadcasting business

generates revenue in the case of MuchMusic USA and The New VR. However, these

special arrangements, which are clearly the exception, are justified by internal

[*98] accounting considerations, as both stations are located outside the

ChumCity building, and MuchMusic USA is a separate corporate entity.

144. The extent of the functional integration between CityInteractive and the

television operation is also reflected in CityInteractive's products. CHUM has

taken the new interactive media and made it a vehicle that converges television

and the Internet. Television viewers are accessing television programs by means

of the Internet and as a result of CityInteractive's promotion on the Web and on

AOL. The content of the Web sites is integrated conceptually and functionally

with the television broadcast operation and the sites relate mostly to the

programming aired by the television stations. There is no firewall or any other

wall between the television stations and CityInteractive. In fact, it is just

the opposite. CityInteractive is a vital extension of the television channels on

the Internet. CHUM heavily markets its popular television brands to preserve and

expand its market share and, in the television context, the Internet serves as

an essential tool for promoting broadcast offerings by showcasing program

line-ups, posting schedules and providing [*99] episodic summaries. CHUM is

clearly a Canadian broadcaster on the Internet. Interactive features, such as

CITY-TV's popular Speaker's Corner, have been extended on-line, to connect the

Web sites to the television stations on a regular and ongoing basis. The Web

sites serve to strengthen the ties between the audience and the stations by

serving as a gateway through e-mail links to on-air personalities, programs and

sales personnel.

145. Throughout his testimony, Mr. Raphaelson consistently affirmed that

CityInteractive's reliance on the CHUM brands merely served

CityInteractive's promotional efforts and that the relationship between the CHUM

Television and CityInteractive was, at best, one of mutually advantageous

cross-promotion. The television brands, he maintained, were used by

CityInteractive to generate revenues by favouring the sale of advertising

products on the Internet through their association with these brands. While we

do not dispute that this is a function served by the use of the brands, we are

not convinced that this is the main purpose of their use. On the contrary, the

evidence compellingly shows that these sites are essentially broadcasting Web

sites, whose primary [*100] function is to promote the television channels. The

main purpose of the Web sites is not to exploit the CHUM brands to generate

advertising revenues by association with them; it is to market them to promote

the television stations. This, as we have seen, is also confirmed by

CityInteractive's statement of earnings.

146. As a tool for promoting viewers' interactivity, the Web sites serve

CHUM's overall objective to preserve and increase television viewership. Mr.

Switzer confirmed it when he testified that CHUM Television's intent was to get

as much of the viewers' leisure time as possible per week. He explained that

this was achieved by establishing a vital connection between television and the

Internet. Bringing the two mediums as close together as possible, he explained,

helped maintain that connection. Viewers went to the Internet to relate to the

brands or the Internet directed them to the television programs.

147. Interactivity is unquestionably an integral part of CHUM's overall

strategy to preserve and expand its share of the television market by maximizing

communication with viewers. This is what CHUM seeks and how it sees the future

evolving in terms of remaining on the leading [*101] edge of modern television.

This objective is achieved by ensuring CHUM's presence on the Internet, where

interactivity is of the essence, and by introducing interactive elements in its

television shows. Indeed, when asked about the role played by CityInteractive

vis-a-vis the television operation and the purpose served by interactivity in

television shows such as MuchMusic's Electric Circus program, Mr. Switzer

observed (pp. 1349 and 1353 of transcripts):

 

"We use a small amount of interactivity in Electric Circus to add a little

bit of pizzazz, to add a little bit of marketing sparkle, to add a little bit of

buzz to what we are doing and to improve the communication with our viewers.

.....

[Our interactive business] helps us because it gives us the perception of

doing something that's modern, connecting with our viewers. Frankly, in part it

is defensive because if we are going to lose some viewers from our television

business to these other media, we would very much like to have a piece of these

other businesses.

Part of the reason for doing this business was defensive and part of it was

because we legitimately believe there is a business here, but to be precise,

although all money [*102] is appreciated, I would have to say it is

insignificant."

 

148. This echoes the views of Mr. Znaimer, the president and executive

producer of CITY-TV, MuchMusic and Bravo!, reproduced in a press release dated

January 31, 1996, launching the AOL sites on CITY-TV and MuchMusic. In this

regard, it is not without significance that, in referring to CHUM's involvement

in the digital platform, he described it as "interactive television":

 

"[emphasis starts] We are recognized as having been, from our very

beginnings, highly interested in interactive television . . . [emphasis ends]

AOL's global audience can now experience, in the digital domain, something of

the same innovation and participatory style of television our analog audiences

have been enjoying on City/Much/Bravo! [Emphasis added]"

 

149. Mr. Znaimer's comments in CityInteractive's promotional videotape are

also indicative of the extent of CityInteractive's involvement within CHUM's

broadcasting operation and of the importance of interactivity to the television

operation. In this case, he speaks of "media television":

 

"[emphasis starts] Our early success with audience interactivity made us that

much more keenly aware of developments [*103] in the digital domain and led

City-TV naturally to the creation of media television. [emphasis ends]

Our approach at City is to try and fuse together analogue attitude with

digital potential . . . what we are doing is creating a new genre of parallel

and simultaneous events. [Emphasis added]"

 

150. In that same promotional video, Mr. Raphaelson confirms this as well by

observing that "viewers are aware of Interactive by the TV. As this is

happening, they are also changing the TV programs and they are evolving as

well."

151. The deliberate extension of CHUM's television broadcasting operation on

the Internet is also abundantly reflected in the promotional materials filed as

exhibits, which consistently emphasize the intricate connection between the Web

sites and the television stations. For example, CityInteractive's promotional

videotape is full of statements and images that unequivocally show the

functional integration of the digital platform with the television operation.

The MuchInteractive promotional video produced by CityInteractive to promote the

MuchMusic Web site is, to all intents and purposes, a carbon copy of

CityInteractive's own promotional video, with similar presentation [*104] and

format, identical excerpts from television shows and quotes from various

individuals, including Messrs. Znaimer and Raphaelson.

152. The various press releases and advertising material found in

CityInteractive's promotional folder also abundantly illustrate the deliberate

merging of identities between CityInteractive, the CHUM brands and the

television stations. For example, the press release announcing the launch of the

AOL sites developed by CityInteractive, which features the CITY-TV and MuchMusic

brands, describes the on-line partnership with AOL as being with "CITY-TV and

MuchMusic". Yet, for further information, people are invited to contact Josh

Raphaelson of "ChumCity Interactive". Another significant example is the

MuchMusic press release announcing the launch of its Web site, where the

confusion is again complete with a reference to Mr. Raphaelson as

"MuchInteractive's General Manager":

 

""With this new capability, we can give advertisers added value to their

sponsorships on our site", said Josh Raphaelson, MuchInteractive's General

Manager. "Today, our programming provides a perfect environment for their TV

creative. In the near future, we can bring games, multimedia [*105] or any kind

of interactive ads into the mix.""

 

153. Moreover, it is not again without significance that the same press

release refers to "MuchInteractive" as the "interactive arm" of MuchMusic

("MuchInteractive To Add Commercial Television Spots To Live 'Netcast'

Programming"):

 

"September 29th, 1997 Toronto: In a move signalling the growing importance of

multimedia in internet advertising, [emphasis starts] MuchInteractive, the

interactive arm of MuchMusic, [emphasis ends] announced it will offer

advertisers audio and video commercial space in its exclusive multimedia

programs "netcast" over the internet. [Emphasis added]"

 

154. CityInteractive is clearly the "interactive arm" of the television

broadcasting operation to which it is, in every respect -- conceptually,

functionally, operationally and physically -- integrated. Furthermore,

CityInteractive's work is almost entirely dedicated to CHUM's television

operation, which, as the authorities suggest, is a clear indication of

functional integration.

155. The foregoing analysis demonstrates that CityInteractive is

unquestionably an integral part of CHUM's broadcasting operation. While this is

sufficient to dispose of the constitutional [*106] issue, one last point needs

to be addressed.

156. The respondent sought to show CityInteractive as separate from CHUM's

broadcasting business by arguing that CityInteractive was not engaged in

broadcasting. CHUM Television argued that CityInteractive's role on the Internet

was similar to that of a publisher. In support of this contention, the

respondent relied on the fact that the core of CityInteractive's work was the

design, production and marketing of Web sites and that these activities were

carried on by CityInteractive without a CRTC-issued broadcasting licence. Mr.

Lewis testified that, in his capacity as legal advisor for the CHUM

organization, he had determined that there was no class of licence presently

issued by the CRTC, nor were there any broadcasting regulations pertaining to

the operation of Internet Web sites. Mr. Lewis stated that he had reviewed the

operations of CityInteractive and determined that the operation of Web sites was

not a broadcasting undertaking, as defined in the Broadcasting Act, S.C. 1991,

c. 11. He stressed that the requirement under the Broadcasting Act for any

television station (such as CITY-TV or MuchMusic) to be licensed turned on the

threshold [*107] question of whether there was a "broadcasting undertaking"

being carried on. The relevant definitions of the Broadcasting Act [am. S.C.

1993, c. 38, s. 81] read as follows:

 

"2. (1) In this Act,

"broadcasting" means [emphasis starts] any transmission of programs,

[emphasis ends] whether or not encrypted, by radio waves or other means of

telecommunication for reception by the public by means of broadcasting receiving

apparatus, but does not include any such transmission of programs that is made

solely for performance or display in a public place;

.....

"broadcasting undertaking" includes a distribution undertaking, a programming

undertaking and a network;

.....

"distribution undertaking" means an undertaking for the reception of

broadcasting and the retransmission thereof by radio waves or other means of

telecommunication to more than one permanent or temporary residence or dwelling

unit or to another such undertaking;

.....

"licence" means a licence to carry on a broadcasting undertaking issued by

the Commission under this Act;

.....

"program" means sounds or visual images, or a combination of sounds and

visual images, that are intended to inform, enlighten or entertain, [emphasis

[*108] starts] but does not include visual images, whether or not combined with

sounds, that consist predominantly of alphanumeric text; [emphasis ends]

"programming undertaking" means an undertaking for the transmission of

programs, either directly by radio waves or other means of telecommunication or

indirectly through a distribution undertaking, for reception by the public by

means of broadcasting receiving apparatus;

.....

(2) For the purposes of this Act, [emphasis starts] "other means of

telecommunication" [emphasis ends] means any wire, cable, radio, optical or

other electromagnetic system, or any similar technical system. [Emphasis added]"

 

157. As appears from the above definitions, the determination of whether a

service is "broadcasting" under the Broadcasting Act does not depend on the type

of technology that is used for its transmission, but rather, on whether it

consists of "programs" that are "transmitted for reception by the public". In

this regard, Mr. Lewis stressed that the definition of "programs" in s. 2 of the

Broadcasting Act excluded "visual images, whether or not combined with sounds,

that consist predominantly of alphanumeric text", and there was little doubt

that [*109] the data transmitted by CityInteractive by digital means consisted

predominantly of alphanumeric text.

158. The argument that an undertaking does not exist until a licence is

granted and until the activity is carried into effect, or is capable of being

lawfully carried out, was expressly rejected by the Privy Council in Winner,

supra. Furthermore, the determination of CityInteractive's jurisdictional status

does not turn on whether it is engaged in broadcasting in a statutory sense or,

in any particular sense. It is well established that all aspects of a company's

work need not be of the same type in order to come under the same operation.

That principle was reiterated recently in Westcoast Energy, supra, in the

context of the single enterprise test. The court observed that a number of cases

stated that a single federal undertaking could exist notwithstanding that it was

engaged in different activities and one of them was not transportation or

communication (pp. 367-368 S.C.R.):

 

"In Empress Hotel, supra, the Privy Council stated in obiter dicta that a

hotel set up exclusively to serve the railway's passengers could form part of a

federal railway undertaking. In The King v. Eastern [*110] Terminal Elevator

Co., [1925] S.C.R. 434, Duff J. stated at p. 447 in obiter dicta that a grain

elevator could form part of a federal railway or shipping undertaking. In Dome

Petroleum, supra, underground storage caverns were held to form part of an

interprovincial pipeline undertaking. This was also the view of Gerard V. La

Forest in Water Law in Canada: The Atlantic Provinces (1973), at pp. 49-50:

". . . there may be situations where a single business enterprise may carry

on several undertakings. This is evident from Canadian Pacific Railway v.

Attorney-General of British Columbia where the Empress Hotel operated by the

C.P.R. like any other large hotel was held to be a separate undertaking from the

company's railway operations. [emphasis starts] This by no means indicates that

all aspects of a company's work must be of the same kind, as in Bell Telephone

Co. and Winner cases, to come within the same operation. [emphasis ends] In the

Empress Hotel case the court conceded that a hotel or restaurant maintained as

an adjunct to the company's railway business for the benefit of passengers

travelling on its lines could certainly be part of its railway undertaking.

[Emphasis added.]" [*111]

[emphasis starts] In our opinion, the fact that an activity or service is

not of a transportation or communications character does not preclude a finding

that it forms part of a single federal undertaking for the purposes of s.

92(10)(a) under the first test in Central Western, supra. The test remains a

fact-based one. [emphasis ends] [Emphasis added]"

 

159. In any event, in the Board's opinion, the argument that CityInteractive

does not broadcast is unfounded. The absence of licensing requirements for

carrying on CityInteractive's activities does not persuade us that some of

CityInteractive's activities do not amount to a form of broadcasting, i.e., the

transmission of programs by means of telecommunication for reception by the

public. Webcasts, for example, involve the transmission of audio/visual signals

to members of the public situated anywhere in the world.

160. On the other hand, to conclude that CityInteractive does not engage in

broadcasting does not fully answer the question, since some of its Internet

-related activities may amount to communication activities extending beyond the

limits of a province, pursuant to s. 92(10)(a) of the Constitution Act, 1867.

Indeed, whether [*112] CityInteractive's activities on the digital platform

meet or do not meet the existing statutory definition of broadcasting does not

necessarily mean that CityInteractive does not engage in "broadcasting" in a

non-statutory sense, or that it does not otherwise carry on interprovincial

communications activities. The general exclusion of the on-line platform from

the regulating scope of the CRTC, due to the definition of "program" in the

Broadcasting Act, reflects policy considerations, not the extent of Parliament's

constitutional jurisdiction over novel forms of telecommunications and

broadcasting. The broadcasting and telecommunications fields are being rapidly

transformed by the technological advances witnessed in the digital arena and the

emergence of new media services, and the precise nature of these services has

yet to be determined.

161. The CRTC has implicitly acknowledged this, as well as the fact that, to

date, there has been uncertainty about whether services delivered over the

Internet constitute broadcasting or telecommunications services. On July 31,

1998, in Broadcasting Public Notice CRTC 1998-2 and Telecom Public Notice CRTC

98-20 ("the public notice"), the CRTC announced [*113] that it was initiating a

proceeding under both the Broadcasting Act and the Telecommunications Act

calling for comments on the rapidly expanding and increasingly available range

of communications services collectively referred to as "new media". In the

public notice, the CRTC proposed the following working definition of the notion

of new media:

 

"New media can be described as encompassing, singly or in combination, and

whether interactive or not, services and products that make use of video, audio,

graphics and alphanumeric text; and involving, along with other, more

traditional means of distribution, digital delivery over networks interconnected

on a local or global scale."

 

162. While noting that "under such a description, virtually all services

found on the Internet could be considered as forms of new media", the CRTC

requested submissions for the purpose of answering the following questions:

 

"a) In what ways, and to what extent, do new media affect, or are they likely

to affect, the broadcasting and telecommunications undertakings now regulated by

the Commission?

b) In what ways, and to what extent, are some or any of the new media either

broadcasting or telecommunications [*114] services?

c) To the extent that any of the new media are broadcasting or

telecommunications, to what extent should the Commission regulate and supervise

them pursuant to the Broadcasting Act and the Telecommunications Act?

d) Do the new media raise any other broad policy issues of national interest?

 

163. Thus, apart from the Board's finding that CityInteractive is a

non-severable part of CHUM's federal broadcasting operation whether or not it

itself carries on broadcasting activities or communication activities that

extend beyond the limits of a province, there is more support for concluding

that CityInteractive properly falls within the federal realm.

164. Based on the evidence, in the Board's respectful opinion, there is

little doubt that, even if the respondent's interactive business could be viewed

as a separate operation, severable from CHUM's core broadcasting undertaking,

that operation would also come under federal jurisdiction on its own account. In

the Board's view, the webcasting services currently [*115] performed by

CityInteractive amount to a form of broadcasting, and the other interactive

services it provides are interprovincial in nature. All of these services are

performed on a regular and continuous basis as an integral part of

CityInteractive's new media services operation. The fact that the design and

marketing of Web sites and the posting of information on the Web constitute

CityInteractive's primary activity, and that such an activity may not itself be

federally regulated, is not determinative. What is significant, is that the

extra-provincial activities performed by CityInteractive as an integral part of

its operation are regular and continuous. Authorities have rejected a

quantitative approach which would determine the result based upon a comparison

of the extra-provincial business to the business carried on within the province:

see Ottawa-Carleton Regional Transit Commission v. A.T.U., Local 279, [1983] 4

D.L.R. (4th) 452, 44 O.R. (2d) 560, 1 O.A.C. 177, 84 CLLC P14,006, 24 M.P.L.R.

251 (C.A.).

165. The test for determining whether CityInteractive is an interprovincial

undertaking on its own account boils down to the question of "what is the

ordinary business of CityInteractive?" [*116] The answer to that question

leads to the conclusion that CityInteractive's ordinary business connects

provinces on a regular and continuous basis, rendering it federal in nature.

CityInteractive is not a mere publisher on the Web. It carries on activities

that in effect take television on-line and the Internet to the air. The scope

and complexity of the Internet as "a network of computer networks interconnected

by means of telecommunications facilities using common protocols and standards

that allow for the exchange of information between each connected computer" (C.

Pinsky, supra, p. 3), and the instantaneous, ubiquitous and borderless nature

that characterizes digital communications, lead to the natural conclusion that

these activities, viewed functionally and realistically, bear a clear

interprovincial communication stamp.

166. In the context of webcasting, CityInteractive is an essential link in

the broadcasting chain. CHUM's television operation turns to CityInteractive to

carry its signal to the world over the Internet. The reverse is also true in the

context of on-line chat. In that case, CityInteractive is an essential link in

the broadcasting chain by providing the digital [*117] signal to the television

operation and making the necessary connections to ensure its on-air

transmission. The fact that CityInteractive's signal is carried on the Internet

through an ISP does not change the nature of its day-to-day operations for

constitutional purposes.

167. In this respect, an analogy may be drawn between the present case and

The Shopping Channel and C.E.P.U. (1997), 35 CLRBR (2d) 204, 104 di 24 (CLRB No.

1200). In that case, the employer, The Shopping Channel ("TSC"), was essentially

engaged in retail sales. In order to display its goods, however, TSC relied

heavily on broadcasting images of those goods on television screens across

Canada. Viewers who wished to purchase a particular item generally did so by

telephone. Such goods were then mailed to the purchaser by TSC's warehouse

personnel.

168. Before the Board, TSC sought to separate itself from broadcasting by

arguing that it did not broadcast, but rather produced in-house infomercials,

and paid Rogers Network Services ("RNS") and other companies to distribute them.

The CRTC had earlier determined that TSC's normal activities complied with the

definition of a "programming undertaking", and regulated TSC's [*118]

operation by exempting it from licensing requirements, provided it continued to

meet certain conditions. The Board indicated that it saw no reason to disagree

with the CRTC's determination and determined that the employer's normal

activities amounted to broadcasting and was clearly a programming undertaking

for the purposes of the Broadcasting Act. In so holding, the Board relied on

Capital Cities Communications, supra, and Dionne, supra, and observed (at p. 212

CLRBR, p. 31 di):

 

"These cases endorse the proposition that, leaving aside the question of

closed-circuit television within the boundaries of a province, broadcasting is

subject to federal regulation from transmission to reception. According to that

reasoning, federal competence over broadcasting cannot be avoided by using

different corporate entities to carry out the necessary steps to broadcast

programming. Here, RNS, as a mere conduit for TSC's transmissions, is subject to

federal regulation, but not to the exclusion of TSC.

Similarly, the fact that TSC pays RNS and Rogers Cable to carry its signal

does not change the nature of its day-to-day operations for constitutional

purposes. Once it is established that TSC is [*119] an essential broadcasting

link, the particular commercial arrangements it has entered into do not make it

any less a federal undertaking. The Board sees no difference, for example,

between TSC and a licensed specialty channel which, presumably, Rogers would pay

for the privilege of carrying its programming. In both cases, the decision

whether or not to transmit and the day-to-day control over the content of the

transmission lie with the programming undertaking at the origin of the

transmission. Following the reasoning of the Supreme Court of Canada, both

undertakings would necessarily be engaged in broadcasting."

 

VIII. Conclusion

169. For all of the foregoing reasons, the Board finds that the evidence

establishes that CHUM operates its broadcasting business in an integrated

fashion and that CityInteractive is part and parcel of the CHUM whole, as a

fully integrated component of the television side of its broadcasting operation.

As in Shamrock Television, supra, the disputed operation is an indivisible part

of a broader federal undertaking. Thus, the Board concludes that CityInteractive

falls within federal jurisdiction and that the Code applies to CityInteractive

in the regulation [*120] of its labour relations.

170. Given the Board's decision that it has jurisdiction over this matter,

the Board may now proceed with the review of the bargaining unit's description

in the existing certificate, and hear the unfair labour practice complaint.

Accordingly, the normal administrative processing of these matters will follow.