Canadian broadcasters and the federal government have reached a preliminary agreement that will cap certain licence fees at $100 million a year in total, ending an eight-year-old dispute.

The deal requires the federal regulator, the Canadian Radio-television and Telecommunications Commission, to work out a new fee regime with the Canadian Association of Broadcasters and the satellite and cable firms.

The government will also waive the so-called Part 2 fees left unpaid since 2006 — an amount totalling $450 million.

In return, the CAB will drop a Supreme Court case.

Part 2 fees: Timeline
2001: Broadcasters and broadcast distributors raise the issue of Part 2 fees with Canadian Heritage, Industry Canada and Treasury Board.
2003: The CAB starts legal action against the government, claiming the fees are an illegal tax.
2005: A Federal Court judge agrees with the CAB that if the fees are considered a tax, they would be unconstitutional.
2006: The Federal Court (Trial Division) rules that Part 2 licence fees are an illegal tax.
2006: The CRTC says it won't try to collect outstanding Part 2 fees until the dispute is resolved.
2008: The Supreme Court of Canada agrees to hear the CAB's case.

Part 2 fees are levied to cover the CRTC's cost of managing the broadcast spectrum and were calculated at 1.365 per cent of gross revenues of a broadcaster.

Broadcasters argued only a small portion of the money collected actually went to regulating the spectrum and the rest went into a consolidated government revenue fund. They must pay a separate fee (Part 1 fees) to operate the CRTC itself.

"Under this settlement, our government is recommending that the CRTC develop a new, forward-looking fee regime that would be capped at $100 million per year," Heritage Minister James Moore said Wednesday in a release.

"The new fee regime is intended to provide stability and predictability for the industry and protect the interests of Canadians."

The government has waived fees that broadcasters and satellite and cable firms left unpaid since 2006, when a Federal Court first ruled the fees were an illegal tax.

However, Ottawa will not refund fees for previous years, one of the demands made by broadcasters in an appeal that was heading to the Supreme Court of Canada.

The settlement heads off a Supreme Court hearing over Part 2 fees that was scheduled for Oct. 19.

The CAB welcomed the cap on fees to broadcasters and the prospect of a new fee regime.

"The agreement represents a reasonable compromise for both sides. It resolves treatment of contested fees and reflects a fair fee regime going forward," said CAB chairwoman Charlotte Bel.

Earlier this year, CRTC chairman Konrad von Finckenstein told a parliamentary committee that reducing Part 2 fees could help the bottom lines of broadcasters, who are suffering in the current economic downturn.